Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[Markone]
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20192020
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)
Nebraska47-0648386
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Nebraska47-0648386
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
14507 Frontier Road
Post Office Box 45308
Omaha,Nebraska68145-0308
(Address of principal executive offices)(Zip Code)
(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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    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 Filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
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  ☒
As of July 29, 2019, 69,195,003 31, 2020, 69,097,033 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

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WERNER ENTERPRISES, INC.
INDEX
 
PAGE
Item 1.
3
4
5
6
7
8
9
Item 2.
1918
Item 3.
28
Item 4.
28
Item 1.
30
Item 1A.
30
Item 2.
30
Item 6.
31

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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 Item 1A (Risk Factors) of Part I of our Annual Report on Form 10-K for the year ended December 31, 20182019 (“20182019 Form 10-K”)., in Item 1A (Risk Factors) of Part II of our Form 10-Q for the period ended March 31, 2020, and in Item 1A (Risk Factors) of Part II of this Form 10-Q. 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.

Item 1. Financial Statements.
The interim consolidated financial statements contained herein reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the financial condition, results of operations and cash flows for the periods presented. The interim consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and were also prepared without audit. The interim consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America 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 six-month periods ended June 30, 2019,2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020. 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 20182019 Form 10-K.

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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
June 30,		 Six Months Ended
June 30,
Three Months Ended
June 30,		Six Months Ended
June 30,
(In thousands, except per share amounts)2019 2018 2019 2018(In thousands, except per share amounts)2020201920202019
(Unaudited) (Unaudited)
Operating revenues$627,533
 $619,130
 $1,223,650
 $1,181,814
Operating revenues$568,959  $627,533  $1,161,662  $1,223,650  
Operating expenses:    
 
Operating expenses:
Salaries, wages and benefits206,001
 196,115
 408,800
 378,909
Salaries, wages and benefits194,981  206,001  400,978  408,800  
Fuel61,064
 65,665
 117,202
 124,697
Fuel30,677  61,064  79,448  117,202  
Supplies and maintenance44,371
 45,681
 90,056
 91,420
Supplies and maintenance43,343  44,371  89,064  90,056  
Taxes and licenses23,643
 22,651
 46,544
 45,144
Taxes and licenses23,953  23,643  46,803  46,544  
Insurance and claims20,992
 30,689
 43,701
 51,847
Insurance and claims25,789  20,992  61,853  43,701  
Depreciation61,437
 56,551
 122,196
 112,057
Depreciation67,670  61,437  136,507  122,196  
Rent and purchased transportation146,176
 151,433
 279,012
 287,355
Rent and purchased transportation120,704  146,176  247,146  279,012  
Communications and utilities3,903
 3,928
 7,914
 8,035
Communications and utilities3,536  3,903  7,344  7,914  
Other1,504
 (4,366) 1,764
 (3,548)Other5,488  1,504  8,635  1,764  
Total operating expenses569,091
 568,347
 1,117,189
 1,095,916
Total operating expenses516,141  569,091  1,077,778  1,117,189  
Operating income58,442
 50,783
 106,461
 85,898
Operating income52,818  58,442  83,884  106,461  
Other expense (income):    
 
Other expense (income):
Interest expense1,429
 490
 2,287
 972
Interest expense1,161  1,429  2,752  2,287  
Interest income(989) (693) (1,892) (1,433)Interest income(377) (989) (1,003) (1,892) 
Other58
 78
 (58) 131
Other23  58  68  (58) 
Total other expense (income)498
 (125) 337
 (330)Total other expense (income)807  498  1,817  337  
Income before income taxes57,944
 50,908
 106,124
 86,228
Income before income taxes52,011  57,944  82,067  106,124  
Income taxes14,626
 12,644
 26,720
 20,157
Income taxes12,879  14,626  19,877  26,720  
Net income$43,318
 $38,264
 $79,404
 $66,071
Net income$39,132  $43,318  $62,190  $79,404  
Earnings per share:       Earnings per share:
Basic$0.62
 $0.53
 $1.14
 $0.91
Basic$0.57  $0.62  $0.90  $1.14  
Diluted$0.62
 $0.53
 $1.13
 $0.91
Diluted$0.56  $0.62  $0.89  $1.13  
Weighted-average common shares outstanding:       Weighted-average common shares outstanding:
Basic69,593
 72,144
 69,932
 72,289
Basic69,093  69,593  69,173  69,932  
Diluted69,893
 72,376
 70,229
 72,522
Diluted69,435  69,893  69,531  70,229  
See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
Three Months Ended
June 30,		 Six Months Ended
June 30,
Three Months Ended
June 30,		Six Months Ended
June 30,
(In thousands)2019 2018 2019 2018(In thousands)2020201920202019
(Unaudited) (Unaudited)
Net income$43,318
 $38,264
 $79,404
 $66,071
Net income$39,132  $43,318  $62,190  $79,404  
Other comprehensive income (loss):    
 
Other comprehensive income (loss):
Foreign currency translation adjustments526
 (2,537) 1,144
 (212)Foreign currency translation adjustments929  526  (8,964) 1,144  
Change in fair value of interest rate swap, net of tax(106) 94
 (211) 372
Other comprehensive income420
 (2,443) 933
 160
Change in fair value of interest rate swaps, net of taxChange in fair value of interest rate swaps, net of tax(623) (106) (6,220) (211) 
Other comprehensive income (loss)Other comprehensive income (loss)306  420  (15,184) 933  
Comprehensive income$43,738
 $35,821
 $80,337
 $66,231
Comprehensive income$39,438  $43,738  $47,006  $80,337  
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,
2019		 December 31,
2018		(In thousands, except share amounts)June 30,
2020		December 31,
2019
(Unaudited)   (Unaudited) 
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$46,420
 $33,930
Cash and cash equivalents$65,389  $26,418  
Accounts receivable, trade, less allowance of $8,409 and $8,613, respectively331,239
 337,927
Accounts receivable, trade, less allowance of $8,720 and $7,921, respectively
Accounts receivable, trade, less allowance of $8,720 and $7,921, respectively
299,383  322,846  
Other receivables23,635
 26,545
Other receivables24,060  52,221  
Inventories and supplies10,282
 10,060
Inventories and supplies8,713  9,243  
Prepaid taxes, licenses and permits8,008
 16,619
Prepaid taxes, licenses and permits7,900  16,757  
Other current assets33,717
 31,577
Other current assets26,142  38,849  
Total current assets453,301
 456,658
Total current assets431,587  466,334  
Property and equipment2,312,594
 2,247,577
Property and equipment2,368,543  2,343,536  
Less – accumulated depreciation787,214
 760,015
Less – accumulated depreciation868,379  817,260  
Property and equipment, net1,525,380
 1,487,562
Property and equipment, net1,500,164  1,526,276  
Other non-current assets149,936
 139,284
Other non-current assets147,962  151,254  
Total assets$2,128,617
 $2,083,504
Total assets$2,079,713  $2,143,864  
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Accounts payable$92,713
 $97,781
Accounts payable$84,263  $94,634  
Current portion of long-term debt—
 75,000
Current portion of long-term debt—  75,000  
Insurance and claims accruals70,483
 67,304
Insurance and claims accruals80,857  69,810  
Accrued payroll37,432
 40,271
Accrued payroll42,199  38,347  
Income taxes payableIncome taxes payable15,706  —  
Other current liabilities27,942
 30,004
Other current liabilities26,598  31,049  
Total current liabilities228,570
 310,360
Total current liabilities249,623  308,840  
Long-term debt, net of current portion390,000
 50,000
Long-term debt, net of current portion175,000  225,000  
Other long-term liabilities17,424
 10,911
Other long-term liabilities39,338  21,129  
Insurance and claims accruals, net of current portion225,997
 214,030
Insurance and claims accruals, net of current portion234,819  228,218  
Deferred income taxes234,282
 233,450
Deferred income taxes244,545  249,669  
Commitments and contingencies   Commitments and contingencies
Stockholders’ equity:   Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 shares authorized; 80,533,536 shares   Common stock, $0.01 par value, 200,000,000 shares authorized; 80,533,536 shares
issued; 69,195,003 and 70,441,973 shares outstanding, respectively805
 805
issued; 69,097,033 and 69,244,525 shares outstanding, respectivelyissued; 69,097,033 and 69,244,525 shares outstanding, respectively805  805  
Paid-in capital110,102
 107,455
Paid-in capital111,634  112,649  
Retained earnings1,219,529
 1,413,746
Retained earnings1,344,361  1,294,608  
Accumulated other comprehensive loss(15,140) (16,073)Accumulated other comprehensive loss(29,912) (14,728) 
Treasury stock, at cost; 11,338,533 and 10,091,563 shares, respectively(282,952) (241,180)
Treasury stock, at cost; 11,436,503 and 11,289,011 shares, respectivelyTreasury stock, at cost; 11,436,503 and 11,289,011 shares, respectively(290,500) (282,326) 
Total stockholders’ equity1,032,344
 1,264,753
Total stockholders’ equity1,136,388  1,111,008  
Total liabilities and stockholders’ equity$2,128,617
 $2,083,504
Total liabilities and stockholders’ equity$2,079,713  $2,143,864  
See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,		 Six Months Ended
June 30,
(In thousands)2019 2018(In thousands)20202019
(Unaudited) (Unaudited)
Cash flows from operating activities:   Cash flows from operating activities:
Net income$79,404
 $66,071
Net income$62,190  $79,404  
Adjustments to reconcile net income to net cash provided by operating activities:��  Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation122,196
 112,057
Depreciation136,507  122,196  
Deferred income taxes1,088
 16,269
Deferred income taxes(2,896) 1,088  
Gain on disposal of property and equipment(10,383) (11,346)Gain on disposal of property and equipment(3,411) (10,383) 
Non-cash equity compensation4,365
 3,389
Non-cash equity compensation3,544  4,365  
Insurance and claims accruals, net of current portion11,967
 14,081
Insurance and claims accruals, net of current portion6,601  11,967  
Other(3,365) (2,795)Other11,036  (3,365) 
Changes in certain working capital items:   Changes in certain working capital items:
Accounts receivable, net6,688
 (28,960)Accounts receivable, net23,463  6,688  
Other current assets7,028
 3,791
Other current assets14,515  7,028  
Accounts payable5,554
 10,745
Accounts payable(1,323) 5,554  
Other current liabilities(4,206) (851)Other current liabilities37,116  (4,206) 
Net cash provided by operating activities220,336
 182,451
Net cash provided by operating activities287,342  220,336  
Cash flows from investing activities:   Cash flows from investing activities:
Additions to property and equipment(239,289) (256,202)Additions to property and equipment(170,235) (239,289) 
Proceeds from sales of property and equipment76,936
 81,367
Proceeds from sales of property and equipment62,626  76,936  
Issuance of notes receivable—
 (3,300)
Decrease in notes receivable6,505
 11,727
Decrease in notes receivable4,392  6,505  
Net cash used in investing activities(155,848) (166,408)Net cash used in investing activities(103,217) (155,848) 
Cash flows from financing activities:   Cash flows from financing activities:
Repayments of short-term debtRepayments of short-term debt(75,000) —  
Repayments of long-term debtRepayments of long-term debt(50,000) —  
Proceeds from issuance of long-term debt265,000
 20,000
Proceeds from issuance of long-term debt—  265,000  
Change in net checks issued in excess of cash balances—
 (7,842)
Dividends on common stock(273,734) (10,140)Dividends on common stock(12,450) (273,734) 
Repurchases of common stock(42,301) (22,884)Repurchases of common stock(8,798) (42,301) 
Tax withholding related to net share settlements of restricted stock awards(1,189) (679)Tax withholding related to net share settlements of restricted stock awards(3,935) (1,189) 
Stock options exercised—
 248
Net cash used in financing activities(52,224) (21,297)Net cash used in financing activities(150,183) (52,224) 
Effect of exchange rate fluctuations on cash226
 47
Effect of exchange rate fluctuations on cash(1,995) 226  
Net increase (decrease) in cash, cash equivalents and restricted cash12,490
 (5,207)
Net increase in cash, cash equivalents and restricted cashNet increase in cash, cash equivalents and restricted cash31,947  12,490  
Cash, cash equivalents and restricted cash, beginning of period33,930
 15,131
Cash, cash equivalents and restricted cash, beginning of period33,442  33,930  
Cash, cash equivalents and restricted cash, end of period$46,420
 $9,924
Cash, cash equivalents and restricted cash, end of period$65,389  $46,420  
Supplemental disclosures of cash flow information:   Supplemental disclosures of cash flow information:
Interest paid$1,830
 $972
Interest paid$2,996  $1,830  
Income taxes paid36,805
 5,463
Income taxes paid2,992  36,805  
Supplemental schedule of non-cash investing and financing activities:   Supplemental schedule of non-cash investing and financing activities:
Notes receivable issued upon sale of property and equipment$3,732
 $3,816
Notes receivable issued upon sale of property and equipment$1,429  $3,732  
Change in fair value of interest rate swap(211) 372
Change in fair value of interest rate swapsChange in fair value of interest rate swaps(6,220) (211) 
Property and equipment acquired included in accounts payable6,126
 7,697
Property and equipment acquired included in accounts payable12,090  6,126  
Property and equipment disposed included in other receivables—
 265
Property and equipment disposed included in other receivables1,982  —  
Dividends accrued but not yet paid at end of period6,227
 6,466
 Dividends accrued but not yet paid at end of period6,219  6,227  
   
See Notes to Consolidated Financial Statements (Unaudited).
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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)
Common
Stock
 
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Total
Stockholders’
Equity
(In thousands, except share and per share amounts)Common
Stock		Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
Stockholders’
Equity
(Unaudited)
BALANCE, December 31, 2019BALANCE, December 31, 2019$805  $112,649  $1,294,608  $(14,728) $(282,326) $1,111,008  
Comprehensive incomeComprehensive income—  —  23,058  (15,490) —  7,568  
Purchases of 282,992 shares of common stockPurchases of 282,992 shares of common stock—  —  —  —  (8,798) (8,798) 
Dividends on common stock ($0.09 per share)Dividends on common stock ($0.09 per share)—  —  (6,218) —  —  (6,218) 
Equity compensation activity, 125,203 sharesEquity compensation activity, 125,203 shares—  (4,360) —  —  430  (3,930) 
Non-cash equity compensation expenseNon-cash equity compensation expense—  2,406  —  —  —  2,406  
BALANCE, March 31, 2020BALANCE, March 31, 2020805  110,695  1,311,448  (30,218) (290,694) 1,102,036  
Comprehensive incomeComprehensive income—  —  39,132  306  —  39,438  
Dividends on common stock ($0.09 per share)Dividends on common stock ($0.09 per share)—  —  (6,219) —  —  (6,219) 
Equity compensation activity, 10,297 sharesEquity compensation activity, 10,297 shares—  (199) —  —  194  (5) 
Non-cash equity compensation expenseNon-cash equity compensation expense—  1,138  —  —  —  1,138  
BALANCE, June 30, 2020BALANCE, June 30, 2020$805  $111,634  $1,344,361  $(29,912) $(290,500) $1,136,388  
(Unaudited)
BALANCE, December 31, 2018$805
 $107,455
 $1,413,746
 $(16,073) $(241,180) $1,264,753
BALANCE, December 31, 2018$805  $107,455  $1,413,746  $(16,073) $(241,180) $1,264,753  
Comprehensive income—
 —
 36,086
 513
 —
 36,599
Comprehensive income—  —  36,086  513  —  36,599  
Purchases of 600,000 shares of common stock—
 —
 —
 —
 (20,545) (20,545)Purchases of 600,000 shares of common stock—  —  —  —  (20,545) (20,545) 
Dividends on common stock ($0.09 per share)—
 —
 (6,290) —
 —
 (6,290)Dividends on common stock ($0.09 per share)—  —  (6,290) —  —  (6,290) 
Equity compensation activity, 46,129 shares—
 (1,578) —
 —
 399
 (1,179)Equity compensation activity, 46,129 shares—  (1,578) —  —  399  (1,179) 
Non-cash equity compensation expense—
 2,051
 —
 —
 —
 2,051
Non-cash equity compensation expense—  2,051  —  —  —  2,051  
BALANCE, March 31, 2019805
 107,928
 1,443,542
 (15,560) (261,326) 1,275,389
BALANCE, March 31, 2019805  107,928  1,443,542  (15,560) (261,326) 1,275,389  
Comprehensive income—
 —
 43,318
 420
 —
 43,738
Comprehensive income—  —  43,318  420  —  43,738  
Purchases of 700,000 shares of common stock—
 —
 —
 —
 (21,756) (21,756)Purchases of 700,000 shares of common stock—  —  —  —  (21,756) (21,756) 
Dividends on common stock ($3.84 per share)—
 —
 (267,331) —
 —
 (267,331)Dividends on common stock ($3.84 per share)
—  —  (267,331) —  —  (267,331) 
Equity compensation activity, 6,901 shares—
 (140) —
 —
 130
 (10)Equity compensation activity, 6,901 shares
—  (140) —  —  130  (10) 
Non-cash equity compensation expense—
 2,314
 —
 —
 —
 2,314
Non-cash equity compensation expense
—  2,314  —  —  —  2,314  
BALANCE, June 30, 2019$805
 $110,102
 $1,219,529
 $(15,140) $(282,952) $1,032,344
BALANCE, June 30, 2019$805  $110,102  $1,219,529  $(15,140) $(282,952) $1,032,344  
           
BALANCE, December 31, 2017$805
 $102,563
 $1,267,871
 $(15,835) $(170,622) $1,184,782
Comprehensive income—
 —
 27,807
 2,603
 —
 30,410
Dividends on common stock ($0.07 per share)—
 —
 (5,071) —
 —
 (5,071)
Equity compensation activity, 44,980 shares—
 (1,069) —
 —
 631
 (438)
Non-cash equity compensation expense—
 1,410
 —
 —
 —
 1,410
Cumulative effect of accounting change—
 —
 2,011
 —
 —
 2,011
BALANCE, March 31, 2018805
 102,904
 1,292,618
 (13,232) (169,991) 1,213,104
Comprehensive income—
 —
 38,264
 (2,443) —
 35,821
Purchases of 627,652 shares of common stock—
 —
 —
 —
 (22,884) (22,884)
Dividends on common stock ($0.09 per share)—
 —
 (6,466) —
 —
 (6,466)
Equity compensation activity, 4,935 shares—
 (84) —
 —
 91
 7
Non-cash equity compensation expense—
 1,979
 —
 —
 —
 1,979
BALANCE, June 30, 2018$805
 $104,799
 $1,324,416
 $(15,675) $(192,784) $1,221,561
See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
(1) Accounting Policies

New Accounting Pronouncements Adopted
In FebruaryJune 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases,” to increase transparency and comparability by recognizing a right-of-use asset and a lease liability on the balance sheet and disclosing key information about leasing arrangements. The Company adopted ASU No. 2016-02 and related amendments as of January 1, 2019, using the optional transition method. See Note 3 - Leases for additional adoption information and disclosures required by Accounting Standards Codification (“ASC”) Topic 842.
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 Company adopted ASU 2017-12 as of January 1, 2019. Upon adoption, this update had no effect on our financial position, results of operations and cash flows.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The Company adopted ASU No. 2018-02 as of January 1, 2019. Upon adoption, this update had no effect on our financial position, results of operations and cash flows.

Accounting Standards Updates Not Yet Effective
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements,” which requires measurement and recognition of expected versus incurred credit losses for financial assets. The provisionsCompany adopted ASU 2016-13 as of January 1, 2020. Upon adoption, this update are effective for fiscal years beginning after December 15, 2019. We are evaluating the impact of adopting ASU No. 2016-13had no effect on our financial position, results of operations and cash flows.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements. As part of its disclosure framework project, the FASB has eliminated, amended and added disclosure requirements for fair value measurements in Topic 820, Fair Value Measurement. The provisionsCompany adopted ASU 2018-13 as of January 1, 2020. Upon adoption, this update are effective for fiscal years beginning after December 15, 2019. Although we are evaluating the impact of adopting ASU No. 2018-13had no effect on our consolidated financial position, results of operations and cash flows, we do not expect a material effect upon adoption because we do not currently disclose any fair value measurements subject to the amendments.statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force),” which updates the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract to align with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15 as of January 1, 2020. Upon adoption, this update had no effect on our financial position, results of operations and cash flows.

Accounting Standards Updates Not Yet Effective
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which reduces complexity in accounting for income taxes by removing certain exceptions to the general principles stated in Topic 740 and by clarifying and amending existing guidance to improve consistent application of and simplify other areas of Topic 740. The provisions of this update are effective for fiscal years beginning after December 15, 2019. We2020. Although we are evaluating the impact of adopting ASU No. 2018-152019-12 on our financial position, results of operations and cash flows.flows, we do not expect a material effect upon adoption.


In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848)” which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The provisions of this update are effective for all entities as of March 12, 2020 through December 31, 2022 and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We are evaluating the impact of the optional expedients in this update and their applicability to modifications of our existing credit facilities and hedging relationships that reference LIBOR.
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(2) Revenue

Revenue Recognition
Revenues are recognized over time as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

The following table presents our revenues disaggregated by revenue source (in thousands):
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2020201920202019
Truckload Transportation Services$445,053  $479,959  $909,916  $942,850  
Werner Logistics110,163  130,883  222,327  248,253  
Inter-segment eliminations(14) (34) (25) (239) 
   Transportation services555,202  610,808  1,132,218  1,190,864  
Other revenues13,757  16,725  29,444  32,786  
Total revenues$568,959  $627,533  $1,161,662  $1,223,650  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2019 2018 2019 2018
Truckload Transportation Services$479,959
 $470,277
 $942,850
 $901,833
Werner Logistics130,883
 134,012
 248,253
 251,432
Inter-segment eliminations(34) (212) (239) (670)
   Transportation services610,808
 604,077
 1,190,864
 1,152,595
Other revenues16,725
 15,053
 32,786
 29,219
Total revenues$627,533
 $619,130
 $1,223,650
 $1,181,814


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,
 2020201920202019
United States$516,425  $554,261  $1,046,496  $1,080,853  
Mexico31,045  51,958  74,466  104,772  
Other21,489  21,314  40,700  38,025  
Total revenues$568,959  $627,533  $1,161,662  $1,223,650  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2019 2018 2019 2018
United States$554,261
 $540,284
 $1,080,853
 $1,028,305
Mexico51,958
 59,741
 104,772
 116,151
Other21,314
 19,105
 38,025
 37,358
Total revenues$627,533
 $619,130
 $1,223,650
 $1,181,814


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, 20192020 and December 31, 2018,2019, the accounts receivable, net, balance was $331.2$299.4 million and $337.9$322.8 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, 20192020 and December 31, 2018,2019, the balance of contract assets was $9.4$7.1 million and $7.4$5.9 million, respectively. The Company hasWe have recognized contract assets within the other current assets financial statement caption on the balance sheet. 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. At June 30, 2019 and December 31, 2018, theThe balance of contract liabilities was $2.3$1.3 million as of June 30, 2020 and $1.7 million, respectively.December 31, 2019. The amount of revenues recognized in the six months ended June 30, 20192020 that was included in the December 31, 20182019 contract liability balance was $1.7$1.3 million. The Company hasWe have recognized contract liabilities within the accounts payable and other current liabilities financial statement captions on the balance sheet. 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 ASC Topic 606 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, 20192020 and June 30, 2018,2019, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material.


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(3) Leases

Adoption of ASC Topic 842, “Leases”
On January 1, 2019, the Company adopted ASC Topic 842, “Leases”, which requires lessees to recognize most leases in the consolidated balance sheet as a right-of-use asset and a lease obligation. Expenses are recognized in the consolidated statement of income in a manner similar to previous accounting guidance. The Company adopted the accounting standard using the optional transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented.

The Company elected the following practical expedients upon adoption: not to reassess whether any existing contracts are or contain leases, not to reassess the lease classification for any existing leases, not to reassess initial direct costs for any existing leases and not to separately identify lease and non-lease components for all underlying classes of assets. Additionally, the Company made a short-term lease accounting policy election to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less.

Adoption of the new standard resulted in recognition of right-of-use assets and corresponding lease liabilities of $8.7 million as of January 1, 2019. The new standard did notWe have a significant impact on the consolidated statement of income.

The Company has entered into operating leases primarily for real estate. The leases have terms which range from 1 year to 11 years, and some include options to renew. Renewal terms are included in the lease term when it is reasonably certain that the Companywe will exercise the option to renew.

Operating leases are included in the 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 the Company’sour incremental borrowing rate because the rate implicit in each lease inis not readily determinable. The Company hasWe have certain contracts for real estate that may contain lease and non-lease components which it haswe 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 purchasepurchased transportation on the consolidated statements of income.


The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’sour operating leases as of June 30, 2019.2020.

(In thousands)June 30, 2020
Maturity of Lease Liabilities
2020 (remaining)$1,752  
20213,176  
20222,343  
20231,521  
20241,404  
Thereafter1,442  
Total undiscounted operating lease payments$11,638  
Less: Imputed interest(830) 
Present value of operating lease liabilities$10,808  
Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)$10,465  
Current lease liabilities (recorded in other current liabilities)3,100  
Long-term lease liabilities (recorded in other long-term liabilities)7,708  
Total operating lease liabilities$10,808  
Other Information
Weighted-average remaining lease term for operating leases4.26 years
Weighted-average discount rate for operating leases3.45 %
(In thousands)June 30, 2019
Maturity of Lease Liabilities 
2019 (remaining)$1,619
20202,829
20212,005
20221,171
2023331
Thereafter749
Total undiscounted operating lease payments$8,704
Less: Imputed interest(523)
Present value of operating lease liabilities$8,181
  
Balance Sheet Classification 
Right-of-use assets (recorded in other non-current assets)$7,910
  
Current lease liabilities (recorded in other current liabilities)$2,892
Long-term lease liabilities (recorded in other long-term liabilities)5,289
Total operating lease liabilities$8,181
  
Other Information 
Weighted-average remaining lease term for operating leases3.55 years
Weighted-average discount rate for operating leases3.5%


Cash Flows
An initial right-of-use asset of $8.7 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard. AdditionalDuring the six months ended June 30, 2020 and June 30, 2019, additional right-of-use assets of $1.5 million and $0.8 million, respectively, were recognized as non-cash asset additions that resulted from new operating lease liabilities during the six months ended June 30, 2019.liabilities. Cash paid for amounts included in the present value of operating lease liabilities was $2.1 million and $1.8 million during the six months ended June 30, 2020 and June 30, 2019, respectively, and is included in operating cash flows.

Operating Lease Expense
Operating lease expense was $2.0$2.1 million and $4.1 million for the three and six months ended June 30, 2020, respectively, and $2.0 million and $4.3 million duringfor the three and six months ended June 30, 2019, respectively. This expense included $0.9 million and $1.9 million for the three and six months ended June 30, 2020, respectively, and $0.9 million and $1.8 million for the three and six months ended June 30, 2019, 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 2 to 10 years. We recognize revenue for such leases on a straight-line basis over the term of the lease,lease. Revenues were $3.0 million and revenues$6.3 million for the three and six months ended June 30, 2019 were2020, respectively, and $3.5 million and $6.8 million for the three and six months ended June 30, 2019, respectively. The following table presents information about the maturities of these operating leases as of June 30, 2019.2020.

(In thousands)June 30, 2020
2020 (remaining)$5,275  
20214,771  
202254  
2023—  
2024—  
Thereafter—  
Total$10,100  
(In thousands)June 30, 2019
2019 (remaining)$6,145
20205,162
2021248
202262
2023—
Thereafter—
Total$11,617


(4) Credit Facilities
On May 14, 2019,
As of June 30, 2020, we entered into new five-year,had unsecured revolvingcommitted credit facilities with three banks. We had with Wells Fargo Bank, N.A. and BMO Harris Bank N.A., replacing the previous credit facilities with both lenders. We replaced our previous $100.0 million credit facility and $75.0 million term commitment with Wells Fargo Bank, N.A. with a $300.0 million credit facility which will expire on May 14, 2024. Also on May 14, 2019, we replaced our previous $75.02024. We had a $200.0 million credit facility with BMO Harris Bank N.A. with a $200.0 million credit facility which will expire on May 14, 2024.2024. We also havehad an unsecured line of credit of $75.0 million with U.S. Bank, N.A., which will expire on with an expiration date of July 13, 2020,. and we repaid the outstanding balance in June 2020 prior to the expiration date. Borrowings under these credit facilities bear variable interest based on the London Interbank Offered Rate (“LIBOR”).

As of June 30, 20192020 and December 31, 2018,2019, our outstanding debt totaled $390.0$175.0 million and $125.0$300.0 million, respectively. We had $315.0$25.0 million outstanding under the credit facilities at a weighted average variable interest rate of 3.07%0.86% as of June 30, 2019, and we2020. We had (i) an additional $75.0 million outstanding under the Wells Fargo Bank, N.A. credit facility at a variable rate of 2.99%0.85% as of June 30, 2019,2020, which is effectively fixed at 2.5%2.32% with an interest rate swap agreement through September 15, 2019. On July 2, 2019, we (i) terminated our previousMay 14, 2024 and (ii) an additional $75.0 million outstanding under the BMO Harris Bank N.A. credit facility at a variable rate of 0.88% as of June 30, 2020, which is effectively fixed at 2.36% with an interest rate swap agreement with Wells Fargo Bank, N.A., (ii) entered into a $75.0 million interest rate swap agreement with Wells Fargo Bank, N.A., that effectively fixes our interest rate at 2.32% through May 14, 2024, and (iii) entered into a $75.0 million interest rate swap agreement with BMO Harris Bank N.A. that effectively fixes our interest rate at 2.36% through May 14, 2024.2024. The $575.0 million of borrowing capacity under our credit facilities at June 30, 2019,2020, is further reduced by $30.0by $44.6 million in stand-by letters of credit under which we are obligated. Each of the debt agreements includes, among other things, financial covenants requiring us (i) to exceed a minimum ratio of earnings before interest, income taxes, depreciation and amortization to interest expense and/or (ii) not to exceed a maximum ratio of total funded debt to earnings before interest, income taxes, depreciation and amortization (as such terms are defined in each credit facility). At June 30, 2019,2020, we were in compliance with these covenants.

At June 30, 2019,2020, the aggregate future maturities of long-term debt by year are as follows (in thousands):
2020$—  
2021—  
2022—  
2023—  
2024175,000  
Total$175,000  
2019$—
202075,000
2021—
2022—
2023—
2024315,000
Total$390,000


The carrying amounts of our long-term debt approximate fair value due to the duration of the notes and the variable interest rates.

(5) Commitments and Contingencies

As of June 30, 2019,2020, we have committed to property and equipment purchases of approximately $176.5 million. $214.7 million.


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
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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 Werner Enterprises, Inc. (the “Company”) in a lawsuit arising from a December 30, 2014 accident between a Werner tractor-trailer and a passenger vehicle. On July 30, 2018, the court entered a final judgment against Werner for $92$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 $17.1$21.2 million as of June 30, 2019,2020, and $15.2$18.8 million as of December 31, 2018.2019. 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 balance sheets as of June 30, 20192020 and December 31, 2018.2019.

The Company is pursuing an appeal of this verdict. No assurances can be given regarding the outcome of any such appeal.

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”) 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 various post-trial motions, the court has awarded $0.5 million to the plaintiffs for attorney fees and costs. As of June 30, 2019,2020, we had accrued for the jury’s award, attorney fees and costs in the short break matter and had not accrued for the sleeper berth matter. Plaintiffs have appealed the post-verdict amounts awarded by the trial court for fees, costs and liquidated damages.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.

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.

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(6) Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income 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. There are no differences in the numerators of our computations of basic and diluted earnings per share for any periods presented.

The computation of basic and diluted earnings per share is shown below (in thousands, except per share amounts).
 Three Months Ended
June 30,		 Six Months Ended
June 30,		 
 2019 2018 2019 2018 
Net income$43,318
 $38,264
 $79,404
 $66,071
 
Weighted average common shares outstanding69,593
 72,144
 69,932
 72,289
 
Dilutive effect of stock-based awards300
 232
 297
 233
 
Shares used in computing diluted earnings per share69,893
 72,376
 70,229
 72,522
 
Basic earnings per share$0.62
 $0.53
 $1.14
 $0.91
 
Diluted earnings per share$0.62
 $0.53
 $1.13
 $0.91
 

 Three Months Ended
June 30,		Six Months Ended
June 30,
 2020201920202019
Net income$39,132  $43,318  $62,190  $79,404  
Weighted average common shares outstanding69,093  69,593  69,173  69,932  
Dilutive effect of stock-based awards342  300  358  297  
Shares used in computing diluted earnings per share69,435  69,893  69,531  70,229  
Basic earnings per share$0.57  $0.62  $0.90  $1.14  
Diluted earnings per share$0.56  $0.62  $0.89  $1.13  

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.

(7) 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 June 30, 2019,2020, there were 6,777,5466,683,155 shares available for granting additional awards.

Equity compensation expense is included in salaries, wages and benefits within the Consolidated Statements of Income. As of June 30, 2019,2020, the total unrecognized compensation cost related to non-vested equity compensation awards was approximately $13.8$12.5 million and is expected to be recognized over a weighted average period of 2.0 years.1.9 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
June 30,		Six Months Ended
June 30,
 2020201920202019
Restricted awards:
Pre-tax compensation expense$1,090  $1,313  $2,488  $2,476  
Tax benefit278  334  634  631  
Restricted stock expense, net of tax$812  $979  $1,854  $1,845  
Performance awards:
Pre-tax compensation expense$53  $1,001  $1,063  $1,897  
Tax benefit13  256  271  484  
Performance award expense, net of tax$40  $745  $792  $1,413  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2019 2018 2019 2018
Restricted awards:       
Pre-tax compensation expense$1,313
 $1,127
 $2,476
 $2,063
Tax benefit334
 287
 631
 526
Restricted stock expense, net of tax$979
 $840
 $1,845
 $1,537
Performance awards:    
 
Pre-tax compensation expense$1,001
 $842
 $1,897
 $1,327
Tax benefit256
 214
 484
 338
Performance award expense, net of tax$745
 $628
 $1,413
 $989


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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 2019.2020.

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 summarizesNo stock option activity for the six months endedawards were outstanding as of June 30, 2019:

 
Number of
Options
(in thousands)
 
Weighted
Average
Exercise
Price ($)
 
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Aggregate
Intrinsic Value
(in thousands)
Outstanding at beginning of period9
 $19.02
 
 
Granted—
 —
 
 
Exercised—
 —
 
 
Forfeited—
 —
 
 
Expired—
 —
 
 
Outstanding at end of period9
 19.02
 0.43 $109
Exercisable at end of period9
 19.02
 0.43 $109


We did not grant any2020, and no stock options duringoption awards were granted or exercised in the six-month periods ended June 30, 20192020 and June 30, 2018. The fair value of stock option grants is estimated using a Black-Scholes valuation model. There were no stock options exercised in the six-month period ended June 30, 2019, and the total intrinsic value of stock options exercised in the six-month period ended June 30, 2018 was $235 thousand.2019.

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 60 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 six months ended June 30, 2019:2020:

Number of
Restricted
Awards (in
thousands)		Weighted
Average Grant
Date Fair
Value ($)
Nonvested at beginning of period369  $32.83  
Granted147  38.30  
Vested(86) 32.85  
Forfeited(37) 35.94  
Nonvested at end of period393  34.57  
 
Number of
Restricted
Awards (in
thousands)
 
Weighted
Average Grant
Date Fair
Value ($)
Nonvested at beginning of period326
 $31.93
Granted145
 32.54
Vested(52) 33.04
Forfeited(5) 30.94
Nonvested at end of period414
 32.02


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 six-month periods ended June 30, 20192020 and June 30, 20182019 was $1.8$3.4 million and $0.8$1.8 million, respectively. We withheld shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations were 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 six months ended June 30, 2019:2020:

Number of
Performance
Awards (in
thousands)		Weighted
Average Grant
Date Fair
Value ($)
Nonvested at beginning of period327  $28.75  
Granted100  37.65  
Vested(151) 23.61  
Forfeited(47) 34.44  
Nonvested at end of period229  34.68  
 
Number of
Performance
Awards (in
thousands)
 
Weighted
Average Grant
Date Fair
Value ($)
Nonvested at beginning of period207
 $27.92
Granted97
 32.88
Vested(35) 27.07
Forfeited—
 —
Nonvested at end of period269
 29.83
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The 20192020 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, 20192020 to December 31, 2020.2021. 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, 2021.2022. The 20192020 performance awards will vest in one installment on the third anniversary from the grant date. In January 2020, the Compensation Committee determined the 2017 fiscal year performance objectives were achieved at a level above the target level; the additional shares earned above the target level were included in 2019 shares granted.

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 six-month periods ended June 30, 20192020 and June 30, 20182019 was $1.2$5.8 million and $1.3$1.2 million, respectively. We withheld shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations were recorded as treasury stock.


(8) Segment Information

We have two reportable segments – Truckload Transportation Services (“TTS”) and Werner Logistics.

The TTS segment consists of two operating units, Dedicated and One-Way Truckload. These units are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting. Dedicated provides truckload services dedicated to a specific customer, generally for a retail distribution center or manufacturing facility, utilizing either dry van or specialized trailers. One-Way Truckload is comprised of the following operating fleets: (i) the medium-to-long-haul van (“Van”) fleet transports a variety of consumer nondurable products and other commodities in truckload quantities over irregular routes using dry van trailers, including Mexico cross-border routes; (ii) the expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams; and (iii) the regional short-haul (“Regional”) fleet provides comparable truckload van service within geographic regions across the United States; and (iv) the Temperature Controlled fleet provides truckload services for temperature sensitive products over irregular routes utilizing temperature-controlled trailers. Revenues for the TTS segment include a small amount of non-trucking revenues which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico where we utilize a third-party capacity provider.

The Werner Logistics segment generates the majority of our non-trucking revenues through four operating units that provide non-trucking services to our customers. These four Werner Logistics operating units are as follows: (i) Truckload Logistics, which uses contracted carriers to complete shipments for brokerage customers and freight management customers for which we offer a full range of single-source logistics management services and solutions; (ii) the intermodal (“Intermodal”) unit offers rail transportation through alliances with rail and drayage providers as an alternative to truck transportation; (iii) 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 (iv) Werner Final Mile (“Final Mile”) offers home and business deliveries of large or heavy items using third-party agents with two associates operating a liftgate straight truck.

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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 table 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. Inter-segment eliminations in the table below represent transactions between reporting segments that are eliminated in consolidation.

The following table summarizes our segment information (in thousands):
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2020201920202019
Revenues
Truckload Transportation Services$445,053  $479,959  $909,916  $942,850  
Werner Logistics110,163  130,883  222,327  248,253  
Other13,315  16,096  28,383  31,568  
Corporate442  629  1,061  1,218  
  Subtotal568,973  627,567  1,161,687  1,223,889  
Inter-segment eliminations(14) (34) (25) (239) 
Total$568,959  $627,533  $1,161,662  $1,223,650  
Operating Income
Truckload Transportation Services$51,225  $51,665  $80,314  $94,618  
Werner Logistics3,139  5,182  4,224  9,893  
Other(534) 2,293  2,366  3,472  
Corporate(1,012) (698) (3,020) (1,522) 
Total$52,818  $58,442  $83,884  $106,461  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2019 2018 2019 2018
Revenues       
Truckload Transportation Services$479,959
 $470,277
 $942,850
 $901,833
Werner Logistics130,883
 134,012
 248,253
 251,432
Other16,096
 14,422
 31,568
 27,681
Corporate629
 631
 1,218
 1,538
  Subtotal627,567
 619,342
 1,223,889
 1,182,484
Inter-segment eliminations(34) (212) (239) (670)
Total$627,533
 $619,130
 $1,223,650
 $1,181,814
        
Operating Income       
Truckload Transportation Services$51,665
 $43,432
 $94,618
 $76,854
Werner Logistics5,182
 5,602
 9,893
 8,359
Other2,293
 243
 3,472
 (143)
Corporate(698) 1,506
 (1,522) 828
Total$58,442
 $50,783
 $106,461
 $85,898


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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
•Critical Accounting Estimates
The MD&A should be read in conjunction with our 20182019 Form 10-K.

Overview:
We have two reportable segments, Truckload Transportation Services (“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 global 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 TTS 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, we may also be affected by our customers’ financial failures or loss of customer business.

Revenues for our TTS segment operating units (Dedicated and 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 from our customers additional fuel surcharge revenues 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 TTS 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 TTS 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 TTS 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 TTS 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 second quarter 20192020 to second quarter 2018,2019, 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, tightening of the commercial trucking liability insurance market and a weak used equipment market. Our main fixed costs include depreciation expense for tractors and trailers and equipment licensing fees (included in taxes and licenses
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expense). The TTS 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.


We provide non-trucking services primarily through the four operating units within our Werner Logistics segment (Truckload Logistics, Intermodal, WGL and Final Mile). Unlike our TTS 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. We evaluate the Werner Logistics segment’s financial performance by reviewing the gross margin percentage (revenues less rent and purchased transportation expenses expressed as a percentage of revenues) and the operating income percentage. The gross margin percentage 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, declared March 11, 2020, has profoundly impacted the U.S. economy. 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 working hard to stay healthy while safely delivering our customers’ freight on time. Our leadership team meets frequently to address issues related to customers, freight, drivers, safety, staffing, human resources, and costs, and provides regular updates to all our associates. 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), including hygiene and distancing. We made significant investments in personal protective products to keep our associates safe, and over half of our office associates continue working from home. We introduced Werner-specific associate relief plans to provide rapid and needed assistance to those Werner associates affected by the virus.

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, is enabling us to more effectively manage through the difficult economic environment created by the pandemic. Revenues from our top 100 customers were 86% of our total revenues in the first half of 2020, and 64% of those revenues were from the discount retail, home improvement retail, food and beverage and consumer packaged goods verticals.

Our results in second quarter 2020 reflect freight demand that was lower than the same period a year ago. In April 2020, the impact of some customers closing or significantly curtailing their businesses caused a weakness in freight volumes. By mid-May and into June, many of these customers began to reopen their businesses which improved freight volumes as the quarter progressed. We believe we proactively managed and adapted our fleet and cost structure without compromising service. These actions enabled us to minimize the impact of the softer freight market on our results.
Our third quarter and 2020 results could be further impacted by the disruptive effects of COVID-19, although the degree of disruption is difficult to predict. Freight demand in our One-Way Truckload unit in July 2020 was relatively strong and higher than July 2019. Our Dedicated truck count temporarily declined by 150 trucks from first quarter 2020 to second quarter 2020 due to customers impacted by COVID-19, a lack of new business implementations in second quarter 2020 and lower driver availability. We currently expect Dedicated new business implementations to begin to pick up in third quarter 2020 as businesses reopen.We continue to address discretionary controllable costs wherever possible, including voluntary pay reductions for all members of the executive team for second quarter 2020 and the independent members of the Board of Directors for the second half of 2020 and implementing hiring freezes for nearly all non-driver open positions. We performed a customer industry and financial risk assessment on our 100 largest customers shortly after the pandemic declaration. While our financial risk has clearly increased since the pandemic began, we believe we have a relatively lower level of financial risk with the predominance of financially stronger companies in our customer base as well as a lower overall industry risk due to our focus on industries delivering essential products.

At the end of second quarter 2020, we believe we are well positioned with a strong balance sheet and sufficient liquidity. We paid off $75 million of debt in the second quarter under a line of credit that subsequently expired on July 13, 2020. Our debt is low at $175 million, or a net debt ratio of 0.2 times earnings before interest, income taxes, depreciation and amortization for the last twelve months. We had available liquidity of $345 million, considering cash on hand and available credit of $280.4 million under our two facilities that expire in May 2024. We also have sufficient cushion with our two debt covenants. We currently plan to continue paying our quarterly dividend, which we have paid for 34 consecutive years. This capital outlay currently
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results in slightly more than $6 million per quarter. Net capital expenditures in 2020 currently are expected to be in the range of $260 million to $300 million. We continue to expect free cash flow (net cash provided by operating activities less net cash used for capital expenditures) to exceed $150 million in 2020.

We do not currently expect the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted in March 2020, to have a material impact on our consolidated financial statements. Under the CARES Act, we are deferring payment of certain employer payroll taxes for the remainder of 2020, with 50% due December 31, 2021 and 50% due December 31, 2022. We also expect to utilize a provision allowing accelerated income tax depreciation for certain assets, which will not impact our effective tax rate. There have been a number of regulatory actions and waivers related to the COVID-19 pandemic, in an effort to keep the supply chain moving. We do not currently expect these collective changes to have a material impact on our consolidated financial statements.

Results of Operations:
The following table sets forth the Consolidated Statements of Income 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
20202019202020193ME6ME
(Amounts in thousands)$%$%$%$%%%
Operating revenues$568,959  100.0  $627,533  100.0  $1,161,662  100.0  $1,223,650  100.0  (9.3) (5.1) 
Operating expenses:
Salaries, wages and benefits194,981  34.3  206,001  32.8  400,978  34.5  408,800  33.4  (5.3) (1.9) 
Fuel30,677  5.4  61,064  9.7  79,448  6.8  117,202  9.6  (49.8) (32.2) 
Supplies and maintenance43,343  7.6  44,371  7.1  89,064  7.7  90,056  7.4  (2.3) (1.1) 
Taxes and licenses23,953  4.2  23,643  3.8  46,803  4.0  46,544  3.8  1.3  0.6  
Insurance and claims25,789  4.5  20,992  3.4  61,853  5.3  43,701  3.6  22.9  41.5  
Depreciation67,670  11.9  61,437  9.8  136,507  11.8  122,196  10.0  10.1  11.7  
Rent and purchased transportation120,704  21.2  146,176  23.3  247,146  21.3  279,012  22.8  (17.4) (11.4) 
Communications and utilities3,536  0.6  3,903  0.6  7,344  0.6  7,914  0.6  (9.4) (7.2) 
Other5,488  1.0  1,504  0.2  8,635  0.8  1,764  0.1  264.9  389.5  
Total operating expenses516,141  90.7  569,091  90.7  1,077,778  92.8  1,117,189  91.3  (9.3) (3.5) 
Operating income52,818  9.3  58,442  9.3  83,884  7.2  106,461  8.7  (9.6) (21.2) 
Total other expense (income)807  0.1  498  0.1  1,817  0.1  337  —  62.0  439.2  
Income before income taxes52,011  9.2  57,944  9.2  82,067  7.1  106,124  8.7  (10.2) (22.7) 
Income taxes12,879  2.3  14,626  2.3  19,877  1.7  26,720  2.2  (11.9) (25.6) 
Net income$39,132  6.9  $43,318  6.9  $62,190  5.4  $79,404  6.5  (9.7) (21.7) 

20
 Three Months Ended (3ME)
June 30,		 Six Months Ended (6ME)
June 30,		 Percentage Change in Dollar Amounts
 2019 2018 2019 2018 3ME6ME
(Amounts in thousands)$% $% $% $% %%
Operating revenues$627,533
100.0 $619,130
100.0
 $1,223,650
100.0 $1,181,814
100.0
 1.4
3.5
              

Operating expenses:             

Salaries, wages and benefits206,001
32.8 196,115
31.7
 408,800
33.4 378,909
32.1
 5.0
7.9
Fuel61,064
9.7 65,665
10.6
 117,202
9.6 124,697
10.5
 (7.0)(6.0)
Supplies and maintenance44,371
7.1 45,681
7.4
 90,056
7.4 91,420
7.7
 (2.9)(1.5)
Taxes and licenses23,643
3.8 22,651
3.7
 46,544
3.8 45,144
3.8
 4.4
3.1
Insurance and claims20,992
3.4 30,689
4.9
 43,701
3.6 51,847
4.4
 (31.6)(15.7)
Depreciation61,437
9.8 56,551
9.1
 122,196
10.0 112,057
9.5
 8.6
9.0
Rent and purchased transportation146,176
23.3 151,433
24.5
 279,012
22.8 287,355
24.3
 (3.5)(2.9)
Communications and utilities3,903
0.6 3,928
0.6
 7,914
0.6 8,035
0.7
 (0.6)(1.5)
Other1,504
0.2 (4,366)(0.7) 1,764
0.1 (3,548)(0.3) (134.4)(149.7)
Total operating expenses569,091
90.7 568,347
91.8
 1,117,189
91.3 1,095,916
92.7
 0.1
1.9
        
  

 



Operating income58,442
9.3 50,783
8.2
 106,461
8.7 85,898
7.3
 15.1
23.9
Total other expense (income)498
0.1 (125)—
 337
— (330)—
 498.4
202.1
Income before income taxes57,944
9.2 50,908
8.2
 106,124
8.7 86,228
7.3
 13.8
23.1
Income taxes14,626
2.3 12,644
2.0
 26,720
2.2 20,157
1.7
 15.7
32.6
Net income$43,318
6.9 $38,264
6.2
 $79,404
6.5 $66,071
5.6
 13.2
20.2
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The following tables set forth the operating revenues, operating expenses and operating income for the TTS segment, as well as certain statistical data regarding our TTS segment operations for the periods indicated.
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2020201920202019
Truckload Transportation Services segment (amounts in thousands)$%$%$%$%
Trucking revenues, net of fuel surcharge$406,834  $411,460  $815,932  $809,151  
Trucking fuel surcharge revenues34,208  62,533  85,249  120,710  
Non-trucking and other operating revenues4,011  5,966  8,735  12,989  
Operating revenues445,053  100.0  479,959  100.0  909,916  100.0  942,850  100.0  
Operating expenses393,828  88.5  428,294  89.2  829,602  91.2  848,232  90.0  
Operating income$51,225  11.5  $51,665  10.8  $80,314  8.8  $94,618  10.0  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2019 2018 2019 2018
Truckload Transportation Services segment (amounts in thousands)$ % $ % $ % $ %
Trucking revenues, net of fuel surcharge$411,460
   $395,094
   $809,151
   $759,282
  
Trucking fuel surcharge revenues62,533
   68,042
   120,710
   128,792
  
Non-trucking and other operating revenues5,966
   7,141
   12,989
   13,759
  
Operating revenues479,959
 100.0 470,277
 100.0 942,850
 100.0 901,833
 100.0
Operating expenses428,294
 89.2 426,845
 90.8 848,232
 90.0 824,979
 91.5
Operating income$51,665
 10.8 $43,432
 9.2 $94,618
 10.0 $76,854
 8.5

Three Months Ended
June 30,		Six Months Ended
June 30,
Truckload Transportation Services segment20202019% Change20202019% Change
Average tractors in service7,762  7,937  (2.2)%7,812  7,912  (1.3)%
Average revenues per tractor per week (1)
$4,032  $3,988  1.1 %$4,017  $3,934  2.1 %
Total tractors (at quarter end)
  Company7,165  7,350  (2.5)%7,165  7,350  (2.5)%
  Independent contractor485  585  (17.1)%485  585  (17.1)%
  Total tractors7,650  7,935  (3.6)%7,650  7,935  (3.6)%
Total trailers (at quarter end)21,820  23,235  (6.1)%21,820  23,235  (6.1)%
One-Way Truckload
Trucking revenues, net of fuel surcharge (in 000’s)$167,984  $184,279  (8.8)%$345,833  $364,413  (5.1)%
Average tractors in service3,149  3,379  (6.8)%3,210  3,368  (4.7)%
Total tractors (at quarter end)3,115  3,355  (7.2)%3,115  3,355  (7.2)%
Average percentage of empty miles13.01 %12.18 %6.8 %12.41 %11.90 %4.3 %
Average revenues per tractor per week (1)
$4,103  $4,195  (2.2)%$4,143  $4,161  (0.4)%
Average % change in revenues per total mile (1)
(1.9)%(2.7)%(2.7)%1.8 %
Average % change in total miles per tractor per week(0.3)%(3.4)%2.3 %(3.4)%
Average completed trip length in miles (loaded)813  834  (2.5)%838  844  (0.7)%
Dedicated
Trucking revenues, net of fuel surcharge (in 000’s)$238,850  $227,181  5.1 %$470,099  $444,738  5.7 %
Average tractors in service4,613  4,558  1.2 %4,602  4,544  1.3 %
Total tractors (at quarter end)4,535  4,580  (1.0)%4,535  4,580  (1.0)%
Average revenues per tractor per week (1)
$3,983  $3,833  3.9 %$3,928  $3,764  4.4 %

(1)Net of fuel surcharge revenues.
21
 Three Months Ended
June 30,		   Six Months Ended
June 30,		  
Truckload Transportation Services segment2019 2018 % Change 2019 2018 % Change
Average tractors in service7,937
 7,548
 5.2 % 7,912
 7,488
 5.7 %
Average revenues per tractor per week (1)
$3,988
 $4,027
 (1.0)% $3,934
 $3,900
 0.9 %
Total tractors (at quarter end)    
     

  Company7,350
 7,075
 3.9 % 7,350
 7,075
 3.9 %
  Independent contractor585
 625
 (6.4)% 585
 625
 (6.4)%
  Total tractors7,935
 7,700
 3.1 % 7,935
 7,700
 3.1 %
Total trailers (at quarter end)23,235
 22,870
 1.6 % 23,235
 22,870
 1.6 %
           

One-Way Truckload          

Trucking revenues, net of fuel surcharge (in 000’s)$184,279
 $193,080
 (4.6)% $364,413
 $371,046
 (1.8)%
Average tractors in service3,379
 3,329
 1.5 % 3,368
 3,369
 — %
Total tractors (at quarter end)3,355
 3,320
 1.1 % 3,355
 3,320
 1.1 %
Average percentage of empty miles12.18 % 10.94% 11.3 % 11.90 % 11.08% 7.4 %
Average revenues per tractor per week (1)
$4,195
 $4,461
 (6.0)% $4,161
 $4,236
 (1.8)%
Average % change in revenues per total mile (1)
(2.7)% 15.6% 
 1.8 % 13.5% 

Average % change in total miles per tractor per week(3.4)% 0.4% 
 (3.4)% 0.3% 

Average completed trip length in miles (loaded)834
 828
 0.7 % 844
 824
 2.4 %
           

Dedicated          

Trucking revenues, net of fuel surcharge (in 000’s)$227,181
 $202,014
 12.5 % $444,738
 $388,236
 14.6 %
Average tractors in service4,558
 4,219
 8.0 % 4,544
 4,119
 10.3 %
Total tractors (at quarter end)4,580
 4,380
 4.6 % 4,580
 4,380
 4.6 %
Average revenues per tractor per week (1)
$3,833
 $3,683
 4.1 % $3,764
 $3,625
 3.8 %

(1)Table of Contents
Net of fuel surcharge revenues.


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) and operating income, as well as certain statistical data regarding the Werner Logistics segment.
 Three Months Ended
June 30,		Six Months Ended
June 30,
  2020201920202019
Werner Logistics segment (amounts in thousands)$%$%$%$%
Operating revenues$110,163  100.0  $130,883  100.0  $222,327  100.0  $248,253  100.0  
Rent and purchased transportation expense92,842  84.3  109,836  83.9  188,774  84.9  206,856  83.3  
Gross margin17,321  15.7  21,047  16.1  33,553  15.1  41,397  16.7  
Other operating expenses14,182  12.9  15,865  12.1  29,329  13.2  31,504  12.7  
Operating income$3,139  2.8  $5,182  4.0  $4,224  1.9  $9,893  4.0  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
  2019 2018 2019 2018
Werner Logistics segment (amounts in thousands)$ % $ % $ % $ %
Operating revenues$130,883
 100.0 $134,012
 100.0 $248,253
 100.0 $251,432
 100.0
Rent and purchased transportation expense109,836
 83.9 112,918
 84.3 206,856
 83.3 213,194
 84.8
Gross margin21,047
 16.1 21,094
 15.7 41,397
 16.7 38,238
 15.2
Other operating expenses15,865
 12.1 15,492
 11.5 31,504
 12.7 29,879
 11.9
Operating income$5,182
 4.0 $5,602
 4.2 $9,893
 4.0 $8,359
 3.3
Three Months Ended
June 30,		   Six Months Ended
June 30,		   Three Months Ended
June 30,		Six Months Ended
June 30,
Werner Logistics segment2019 2018 % Change 2019 2018 % ChangeWerner Logistics segment20202019% Change20202019% Change
Average tractors in service37
 40
 (7.5)% 38
 42
 (9.5)%Average tractors in service31  37  (16.2)%32  38  (15.8)%
Total tractors (at quarter end)35
 43
 (18.6)% 35
 43
 (18.6)%Total tractors (at quarter end)30  35  (14.3)%30  35  (14.3)%
Total trailers (at quarter end)1,670
 1,620
 3.1 % 1,670
 1,620
 3.1 %Total trailers (at quarter end)1,635  1,670  (2.1)%1,635  1,670  (2.1)%

Three Months Ended June 30, 20192020 Compared to Three Months Ended June 30, 20182019
Operating Revenues
Operating revenues increased 1.4%decreased 9.3% for the three months ended June 30, 2019,2020, compared to the same period of the prior year. When comparing second quarter 20192020 to second quarter 2018,2019, TTS segment revenues increased $9.7decreased $34.9 million, or 2.1%7.3%, and Werner Logistics revenues decreased $3.1$20.7 million, or 2.3%15.8%.

During second quarter 2019,2020, freight demand in our One-Way Truckload fleet was seasonally below averagelower than the same period a year ago. In April 2020, the impact of some customers closing or significantly curtailing their businesses caused a weakness in freight volumes. By mid-May and well below the unusually strong freight demandinto June, many of second quarter 2018,these customers began to reopen their businesses which was aided by two December 2017 mandates. Tax reform incentives strengthened second quarter 2018improved freight volumes whileas the electronic hours of service requirement limited truck and driver capacity in second quarter 2018. In the first five weeks of third quarter 2019, freightprogressed. Freight demand in our One-Way Truckload unit hasin July 2020 was relatively strong and higher than July 2019. In our Dedicated fleet, freight demand remained strong in second quarter 2020. Approximately three-quarters of our Dedicated revenues are with essential products customers, and their freight volumes were generally strong during second quarter 2020. A few Dedicated customers were more significantly impacted by COVID-19 and had lower than average compared to the same five-week periods in prior third quarters.volumes.

Trucking revenues, net of fuel surcharge, increased 4.1%decreased 1.1% in second quarter 20192020 compared to second quarter 20182019 due to a 5.2% increase2.2% decrease in the average number of tractors in service, partially offset by a 1.0% decrease1.1% increase in average revenues per tractor per week, net of fuel surcharge, whichsurcharge. The increase in average revenues per tractor was due primarily to a decrease in average miles per tractor, partially offset by an increase in average revenues per total mile.mile, partially offset by a decline in average miles per tractor. The increase in average revenues per total mile was due primarily to higher contractual rates, dedicated fleet expansionrelative strength in Dedicated pricing, mostly offset by a 1.9% decrease in One-Way Truckload pricing. The percentage decrease in One-Way Truckload average revenues per total mile was lower than anticipated due to the improving freight market in May and lane mix changes.June 2020. We currently expect the percentage change in average revenues per total mile for the One-Way Truckload fleet for 2019 compared to 2018the second half of 2020 to be in thea range of flat1% lower to 3% lower. While year-to-date 2019 contract pricing increases are approximately 4% on average with recent contracts renewed in the flat-to-low single digit range, the lackluster 2019 freight market has provided few project and surge freight opportunities with premium rates, significantly lower spot rates and2% higher empty miles. As such, we are currently assuming the current freight trend will continue into third quarter, with an expectation that there will be a normal seasonal pickup in freight and rates during the fourth quarter holiday shipping season. Third and fourth quarter One-Way Truckload revenues per total mile is expected to be lower than the same quarters in 2018, due to significant rate increases and project activity that occurred in the last two quarters of 2018.The following factors all contributed to lower average miles per truck: (i) below average seasonal freight market in second quarter 2019when compared to an unusually strong seasonal freight market inthe second quarter 2018, (ii) growth in Dedicated which has lower miles per truck and a shorter lengthhalf of haul, (iii) fewer team driver trucks and (iv) southern U.S. border security crossing delays affecting about one quarter of our One-Way Truckload revenues.2019.

The average number of tractors in service in the TTS segment increased 5.2%decreased 2.2% to 7,762 in second quarter 2020 from 7,937 in second quarter 2019 from 7,548 in second quarter 2018.2019. We ended second quarter 20192020 with 7,9357,650 trucks in the TTS segment, a year-over-year increasedecrease of 235285 trucks compared to the end of second quarter 2018,2019, and a sequential decrease of 10185 trucks compared to the end of first quarter 2019.2020. The sequential fleet decline was anticipated in the early stages of COVID-19 as (i) we aligned our fleet to adjust to reduced demand, (ii) we had delayed implementations of Dedicated fleet start-ups, and (iii) we expected lower numbers of students at driving schools due to social distancing requirements and state licensing agency closings and cutbacks of services, which limits the number of placement drivers entering our career track program. We currently expect growth in our truck fleet from year-end 2018 to be incount at the low end of the2020 to decrease in a range of 1% to 3% when compared to 5% in 2019, with growth primarily in Dedicated and occurring in the first three quarters offleet size at year-end 2019. We currently expect approximately 100 truck growthto begin growing our Dedicated fleet in third quarter, 2019 and no truck growth in fourth quarter 2019.based on anticipated start-ups. We cannot predict whether future driver shortages, if any, will

adversely affect our ability to maintain 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.

22
Table of Contents
Trucking fuel surcharge revenues decreased 8.1%45.3% to $34.2 million in second quarter 2020 from $62.5 million in second quarter 2019 from $68.0 million in second quarter 2018 due to lower average fuel prices in the 2019second 2020 quarter. 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 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 truck 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 four operating units and exclude revenues for full truckload shipments transferred to the TTS segment, which are recorded as trucking revenues by the TTS segment. Werner Logistics also recorded revenue and brokered freight expense of $14 thousand in second quarter 2020 and $34 thousand in second quarter 2019 and $212 thousand in second quarter 2018 for Intermodal drayage movements performed by the TTS segment (also recorded as trucking revenue by the TTS segment), and these transactions between reporting segments are eliminated in consolidation. In second quarter 2019,2020, Werner Logistics revenues decreased $3.1$20.7 million, or 2.3%15.8%, primarily due to fewer projectlower Truckload Logistics revenues (60% of total Logistics revenues) in a softer freight opportunities, significantly lower year-over-year spot pricing trendsmarket, which reduced volumes by 9%. Lower rates and lower fuel prices reduced all-in Truckload Logistics revenue per load by 15%. Intermodal revenues declined 10%, and International revenues increased 20%. In July 2020, the Truckload Logistics gross margin percentage was lower due to the higher capacity costs, and volumes in second quarter 2019.were also lower year-over-year. The Werner Logistics gross margin percentage in second quarter 20192020 of 16.1% increased15.7% decreased from 15.7%16.1% in second quarter 20182019 due primarily to a softer freight market and contractual pricingbrokerage sustaining a rising cost of capacity in May and improved capacity procurement in Truckload Logistics (formerly our Brokerage and Freight Management units within Werner Logistics).June 2020. The Werner Logistics operating income percentagemargin in second quarter 2019 of2020 declined to 2.8% from 4.0% decreased from second quarter 2018 of 4.2%, andas the 18% decline in gross profit exceeded the 11% decline in other operating income dollars decreased $0.4 million, or 7.5%, compared to second quarter 2018.expenses.

Operating Expenses
Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 90.7% for both the three months ended June 30, 2019, compared to 91.8% for the three months ended2020 and June 30, 2018.2019. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 20 through 22 show the Consolidated Statements of Income 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 quarter of the prior year, as well as the operating ratios, operating margins, and certain statistical information for our two reportable segments, TTS and Werner Logistics.

Salaries, wages and benefits increased $9.9decreased $11.0 million or 5.0%5.3% in second quarter 20192020 compared to second quarter 20182019 and increased 1.1%1.5% as a percentage of operating revenues to 32.8%34.3%. The higherlower dollar amount of salaries, wages and benefits expense in the 20192020 second quarter was due primarily to higher driverlower fringe benefits and student pay rates and 4.8 million more company truck miles,having fewer placement drivers, both of which also resulted in an increased amount of payroll taxeswere impacted by COVID-19. Our workers’ compensation costs improved, and other payroll-related fringe benefits. When evaluated on the basis of company truck miles, driver salaries, wages and benefits also increased,we incurred lower group health insurance costs which we primarily attribute to nearly 5% higher driver pay per company truck mile in second quarter 2019 compared to second quarter 2018. The ratebelieve is a temporary effect of year-over-year percentage increases in driver pay began to moderate when compared to the larger driver pay increases from the first half of 2018.COVID-19. Non-driver salaries, wages and benefits in the non-trucking Werner Logistics segment decreased 0.5%13.4%.

We renewed our workers’ compensation insurance coverage on April 1, 2020 and took on additional risk exposure by increasing our self-insurance retention from $1.0 million to $2.0 million per claim as of April 1, 2020. As a result of the higher self-insured retention, our workers’ compensation insurance premiums for the policy year beginning April 1, 2019. Our coverage levels2020 are the same as the prior policy year. We continue to maintain a self-insurance retention of $1.0$0.8 million per claim. Our workers’ compensation insurance premium rate for the policy year beginning April 2019 is 5% higherlower than the ratepremiums for the previous policy year.

The driver recruiting market is extremely competitive. Several ongoing market factors persisted including a declining number of, and increased competition for, driver training school graduates, an historically low national unemployment rate,particularly considering COVID-19 constraints, aging truck driver demographics and increased truck safety regulations including the regulation changes for electronic logging devices.regulations. We continue to take significant actions to strengthen our driver recruiting and retention to make Werner a preferred choice for the best drivers, including raising driver pay, maintaining a new truck and trailer fleet, purchasing best-in-class safety and training features for all new trucks, investing in our driver training school network and collaborating with customers to improve or eliminate unproductive freight. These efforts continue to have positive results on our driver retention. We are unable to predict whether we will experience

future driver shortages or continue to 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.

23
Table of Contents
Fuel decreased $4.6$30.4 million or 7.0%49.8% in second quarter 20192020 compared to second quarter 20182019 and decreased 0.9%4.3% as a percentage of operating revenues due to lower average diesel fuel prices despite 4.8and approximately 2.5 million morefewer company truck miles in second quarter 2019.2020. Average diesel fuel prices were 17 centswere $1.05 per gallon lower in second quarter 20192020 than in second quarter 20182019 and were 1160 cents per gallon higherlower than in first quarter 2019.2020.

We continue to employ measures to improve our fuel mpg such as (i) limiting truck 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, more aerodynamic truck 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. 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 July 2019,2020, the average diesel fuel price per gallon was approximately 2569 cents lower than the average diesel fuel price per gallon in July 20182019 and approximately 2868 cents lower than in third quarter 2018.2019.

Shortages of fuel, increases in fuel prices and petroleum product rationing can have a materially adverse effect on our operations and profitability. We are unable to predictpredict 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 June 30, 2019,2020, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

Supplies and maintenance decreased $1.3$1.0 million or 2.9%2.3% in second quarter 20192020 compared to second quarter 20182019 and decreased 0.3%increased 0.5% as a percentage of operating revenues. The lower dollar amount of supplies and maintenance expense was due primarily to lower tractor maintenancetravel and entertainment costs resulting from more effective management of theseCOVID-19 restrictions as well as lower driver and placement driver recruiting costs. These decreases were partially offset by the increased costs relating to COVID-19 safety items.

Insurance and claims increased $4.8 million or 22.9% in second quarter 20192020 compared to second quarter 2018, despite 4.8 million more company truck miles.

Insurance2019 and claims decreased $9.7 million or 31.6% in second quarter 2019 compared to second quarter 2018 and decreased 1.5%increased 1.1% as a percentage of operating revenues. Duringrevenues due primarily to unfavorable reserve development on large dollar claims in the 2020 second quarter 2018, we accrued $11.3 million ofquarter. We also incurred insurance and claims expense includingof $1.2 million in second quarter 2020 and $0.8 million in second quarter 2019 for accrued interest related to a previously-disclosed adverse jury verdict rendered May 17, 2018, which we are appealing (see Note 5 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part 1I of this report). During third quarter 2018, the court entered the final judgment on the apportionment of fault related to this verdict, which we are appealing. We incurred insurance and claims expense of $0.8 million in second quarter 2019 for accrued interest related to this matter. Interest is accrued at $0.4 million per month, until such time as the outcome of our appeal is finalized, excluding months where the plaintiffs have requested an extension of time to respond to our appeal. To date the plaintiffs have requested extensions for the months of June and July 2019.finalized. 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 renewed our liability insurance policies on August 1, 20192020 and are now responsible for the first $10.0 million per claim on all claims with no annual aggregates.For the same deductibles and aggregates as thepolicy year that began August 1, 2018 renewal. We continue to be2019, we were 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 havemillion and 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 $6.0 million aggregate for claims between $3.0 million and $5.0 million. We maintain liability insurance coverage with insurance carriers substantially in excess of the $10.0 million per claim. Our liability insurance premiums for the policy year that began August 1, 20192020 are 11% higher, or $0.7 $7.8million higher than premiums for the previous policy year.

Depreciation expense increased $4.9$6.2 million or 8.6%10.1% in second quarter 20192020 compared to second quarter 20182019 and increased 0.7%2.1% as a percentage of operating revenues. A larger companyDuring first quarter 2020, we changed the estimated life of certain trucks currently expected to be sold in 2020 to more rapidly depreciate these trucks to their estimated residual values due to the weak used truck and trailer fleet,market. The effect of this change in accounting estimate increased second quarter 2020 depreciation expense by $3.7 million. The remaining trucks will continue to depreciate at the same higher cost of newrate per truck and trailer equipment, and informationuntil the trucks are sold. Information technology and communications infrastructure upgrades resulted inalso added to the higher depreciation expense in second quarter 2019.

We are continuing to invest in newer trucks and trailers in 2019 to improve our driver experience, raise operational efficiency and more effectively manage our maintenance, safety and fuel costs. We currently intend to maintain the average age of our truck and

2020.
trailer fleet at or near current levels.
The average age of our truck fleet remains low by industry standards and was 1.82.0 years as of June 30, 2019,2020, and the average age of our trailers was 4.1 years.We are continuing to invest in new trucks and trailers and our terminals in 2020 to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs. During the remainder of 2020, we expect the average age of our truck and trailer fleet to remain at or near current levels.

Rent and purchased transportation expense decreased $5.3$25.5 million or 3.5%17.4% in second quarter 20192020 compared to second quarter 20182019 and decreased 1.2%2.1% 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
24
Table of Contents
payments to independent contractors in the TTS 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 $3.1$17.0 million as a result of lower logistics revenues, andbut as a percentage of Werner Logistics revenues decreasedincreased to 84.3% in second quarter 2020 from 83.9% in second quarter 2019, from 84.3% in second quarter 2018 due primarily to a softer freight market and contractual pricingbrokerage sustaining an increasing cost of capacity as the freight market began to improve in May and improved capacity procurement.June 2020.

Rent and purchased transportation expense for the TTS segment decreased $2.3$8.6 million in second quarter 20192020 compared to second quarter 2018.2019. Independent contractor miles were slightly lowerdecreased approximately 3.9 million miles in second quarter 2019,2020 and the per-mile settlement rate for certain independent contractors increased in June 2018. Independent contractor miles as a percentage of total miles were 8.5% in second quarter 2020 compared to 10.0% in second quarter 2019 compared to 10.4%2019. The per-mile settlement rate for independent contractors also decreased in second quarter 2018.2020 compared to second quarter 2019, due to lower diesel fuel prices. 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 were to occur,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 increased $5.9$4.0 million in second quarter 20192020 compared to second quarter 20182019 and increased 0.9%0.8% as a percentage of operating revenues. Gains on sales of assets (primarily used trucks 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 $0.9 million in second quarter 2020 compared to $4.5 million in second quarter 2019 compared to $8.6 million in second quarter 2018, which included a $3.5 million gain from the sale of real estate.2019. We realized highersignificantly lower average gains per truck and slightly lower average gains per trailer in second quarter 20192020 compared to second quarter 20182019 and sold 7%20% fewer trucks and 17%23% fewer trailers. Pricing in the market for our used trucks and trailers began to moderatewas weak in the latter part of second quarter 2019. We currently expect gains on sales of equipment in 20192020 due to be in the low end of the range of $18 million to $20 million and to moderate in the second half of 2019. Increased costs associated with professional and software consulting services also contributed to the increase in other operating expenses.demand.

Other Expense (Income)
Other expense (income) increased $0.6$0.3 million in second quarter 20192020 compared to second quarter 2018. Higher interest expense2019. Interest income decreased in second quarter 20192020 compared to second quarter 20182019, and we had lower interest expense due to higherlower average outstanding debt in the 2019second quarter was partially offset by higher interest income in the 2019 quarter. We currently expect interest expense to increase in third quarter 2019 to approximately $2.7 million per quarter, based on our current debt level and interest rates, including the $150 million of our debt for which we fixed the interest rate in early July 2019 at an average rate of 2.34% with two $75 million interest rate swap agreements.2020.

Income Taxes
Our effective income tax rate (income taxes expressed as a percentage of income before income taxes) was 24.8% in second quarter 2020 compared to 25.2% in second quarter 2019 and 24.8% in second quarter 2018.2019. The lower income tax rate in second quarter 20182020 was attributed primarily to favorable discrete state income tax items. We currently expect our 2019 effective income tax rate to beitems in the range of 25% to 26%.second quarter 2020.

Six Months Ended June 30, 20192020 Compared to Six Months Ended June 30, 20182019
Operating Revenues
Operating revenues increased 3.5%decreased 5.1% for the six months ended June 30, 2019,2020, compared to the same period of the prior year. In the TTS segment, trucking revenues, net of fuel surcharge, increased 6.6% in the 2019 year-to-date period compared to the 2018 year-to-date period$6.8 million, or 0.8%, due primarily to a 5.7% increase in the average number of tractors in service and a 0.9%2.1% increase in average revenues per tractor per week.week partially offset by a 1.3% decrease in average tractors in service. Average revenues per total mile, net of fuel surcharge, increased 4.3%1.3% in the first six months of 20192020 compared to the same period in 2018, and average monthly miles per tractor decreased by 3.3%.2019. TTS segment fuel surcharge revenues for

the six months ended June 30, 20192020 decreased $8.1$35.5 million or 6.3%29.4% when compared to the six months ended June 30, 20182019 due to lower average fuel prices in the 20192020 period. Werner Logistics revenues decreased 1.3%$25.9 million, or 10.4%, primarily due to $248.3 millionlower Truckload Logistics revenues in the first six months of 2019 compared to $251.4 million in the same 2018 period.a softer freight market.

Operating Expenses

Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 92.8% for the six months ended June 30, 2020, compared to 91.3% for the six months ended June 30, 2019, compared to 92.7% for the six months ended June 30, 2018.2019. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 20 through 22 show the Consolidated Statements of Income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those
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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, TTS and Werner Logistics.

Salaries, wages and benefits increased $29.9decreased $7.8 million or 7.9%1.9% in the first six months of 20192020 compared to the first six months of 20182019 and increased 1.1% as a percentage of operating revenues to 33.4%34.5%. The higherlower dollar amount of salaries, wages and benefits expense was due primarily to lower fringe benefits, and having fewer placement drivers, both of which were impacted by COVID-19. We incurred lower group health insurance expense which we believe is a temporary effect of COVID-19, and our workers’ compensation cost improved. These decreases were partially offset by higher driver and student pay rates, approximately 9.5 million more company truck miles and higher non-driverdriver pay all of which resulted in higher payroll taxes and payroll-related fringe benefits, and increases in health insurance costsrates in the 2019 period. When evaluated on the basisfirst six months of company truck miles, driver pay increased by about 7%.2020. Non-driver salaries, wages and benefits in the non-trucking Werner Logistics segment increased 3.7%decreased 11.3% compared to 1.3%10.4% lower revenues.

Fuel decreased $7.5$37.8 million or 6.0%32.2% in the first six months of 20192020 compared to the same period in 20182019 and decreased 0.9%2.8% as a percentage of operating revenues due primarily to lower average diesel fuel prices in 2019,2020, partially offset by increasedapproximately 3.9 million more company truck miles. Average diesel fuel prices were 1270 cents per gallon lower in the first six months of 20192020 than in the same 20182019 period.

Supplies and maintenance decreased $1.4$1.0 million or 1.5% despite higher truck miles driven1.1% in the first six months of 20192020 compared to the same period in 20182019 and decreasedincreased 0.3% as a percentage of operating revenues. The lower dollar amount of supplies and maintenance expense was due primarily to lower travel and entertainment costs resulting from COVID-19 restrictions, as well as lower driver and placement driver recruiting and other driver-related expenses. These decreases were partially offset by the increased costs related to COVID-19 safety items, higher company truck miles in 2020 and increased tractor maintenance costscosts.

Insurance and claims increased $18.2 million or 41.5% in the first six months of 2019 compared to the first six months of 2018, partially the result of more effective management of winter weather conditions and lower weather-related maintenance costs in early 2019.
Insurance and claims expense decreased $8.1 million or 15.7% in the first six months of 20192020 compared to the same period in 2018 and decreased 0.8% as a percentage of operating revenues. The lower expense in the 2019 year-to-date period was due primarily to the $11.3 million accrual in the 2018 period versus $2.0 million accrued in the 2019 period related to the aforementioned adverse jury verdict.
Depreciation expense increased $10.1 million or 9.0% in the first six months of 2019 compared to the same 2018 period and increased 0.5%1.7% as a percentage of operating revenues due primarily to higher expense for new large dollar claims and unfavorable reserve development on large dollar claims. In January 2020, one of our trucks was involved in a serious accident. We self-insure for the first $10.0 million of liability coverage for this policy period and have appropriate excess liability insurance coverage with insurance carriers above this amount. As a result, we accrued $10.0 million of insurance and claims expense in first quarter 2020 for this accident.

Depreciation expense increased $14.3 million or 11.7% in the first six months of 2020 compared to the 2019 period and increased 1.8% as a percentage of operating revenues. During first quarter 2020, we changed the estimated life of certain trucks currently expected to be sold in 2020 to more rapidly depreciate these trucks to their estimated residual values due to the weak used truck market. The effect of this change in accounting estimate increased depreciation expense by $8.7 million in the first six months of 2020. These trucks will continue to depreciate at the same higher cost of new equipment, a larger companyrate per truck and trailer fleet, and informationuntil the trucks are sold. Information technology and communications infrastructure upgrades.upgrades also added to the higher depreciation expense in the first half of 2020.

Rent and purchased transportation expense decreased $8.3$31.9 million or 2.9%11.4% in the first six months of 20192020 compared to the same 20182019 period and decreased 1.5% as a percentage of operating revenues. Rent and purchased transportation for the TTS segment decreased $2.4$14.2 million in the first six months of 20192020 compared to the same 2018 period. This decrease is2019 period due primarily to 1.7%lower diesel fuel prices and having 5.8 million fewer independent contractor miles driven in the first six months of 2019 compared to the same period in 2018. Independent contractor miles as a percentage of total miles were 10.0% and 10.4% in the first six months of 2019 and 2018, respectively.ended June 30, 2020. Werner Logistics rent and purchased transportation expense decreased $6.3$18.1 million andas a result of lower logistics revenues, but as a percentage of Werner Logistics revenues decreasedincreased to 84.9% in the 2020 period from 83.3% in the 2019 period from 84.8% in the 2018 period.

Other operating expenses increased $5.3$6.9 million in the first six months of 20192020 compared to the same period in 20182019 and increased 0.4%0.7% as a percentage of operating revenues. Gains on sales of assets (primarily used trucks and trailers) decreasedwere $3.4 million in the first six months ended June 30, 2020 compared to $10.4 million in the six months ended June 30, 2019, compared to $11.3 million in the six months ended June 30, 2018, which included a $3.5 million gain on the sale of real estate.2019. In the 20192020 year-to-date period, we sold 9%31% fewer trucks and 8%13% fewer trailers and realized highersignificantly lower average gains per truck and slightly lower average gains per trailer when compared to same period of 2018. Increased costs associated with professional and software consulting services for the six months ended June 30, 2019, compared to the same period in 2018, also contributed to the increase of other operating expenses.trailer.

Other Expense (Income)
Other expense (income) increased $0.7$1.5 million in the first six months of 20192020 compared to the same 20182019 period. Higher interest expenseInterest income decreased in the first six months of 2020 compared to the first six months of 2019 compared to the same period in 2018 due to higherlower variable interest rates in the 2020 period. The decreased interest income was partially offset by lower interest expense due to lower average outstanding debt in the 2019 period was partially offset by higher interest income in the 2019 period.first half of 2020.

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Income Taxes
Our effective income tax rate (income taxes expressed as a percentage of income before income taxes) increasedwas 24.2% for the first six months of 2020 compared to 25.2% for the first six months of 2019 from 23.4% for the first six months of 2018.2019. The lower income tax rate in the year-to-date 20182020 period iswas attributed primarily to the benefit offavorable discrete federal and state income tax items in the 20182020 period.


Liquidity and Capital Resources:
During the six months ended June 30, 2019,2020, we generated cash flow from operations of $220.3$287.3 million, a 20.8%30.4% or $37.9$67.0 million increase in cash flows compared to the same six-month period a year ago. The increase in net cash provided by operating activities resulted primarily from increased cash flows froman improvement in certain working capital items, primarilyitems. The improvements in working capital included accounts receivable and higher net income.$33.8 million related to the temporary deferral of federal and state income tax payments for the first half of 2020, which were paid in third quarter 2020. We were able to make net capital expenditures, repay debt, pay dividends and repurchase company stock with the net cash provided by operating activities and existing cash balances, supplemented by net borrowings under our credit facilities.balances.

Net cash used in investing activities decreased to $103.2 million for the six-month period ended June 30, 2020 from $155.8 million for the six-month period ended June 30, 2019 from $166.42019. Net property additions (primarily revenue equipment) were $107.6 million for the six-month period ended June 30, 2018. Net property additions (primarily revenue equipment) were $162.4 million for the six-month period ended June 30, 2019,2020, compared to $174.8$162.4 million during the same period of 2018.2019. The decrease was due in part to new truck delivery delays resulting from temporary closures of manufacturing plants. As of June 30, 2019,2020, we were committed to property and equipment purchases of approximately $176.5$214.7 million. We currently estimate net capital expenditures (primarily revenue equipment) in 20192020 to be in the low end of the range of $275$260 million to $300 million, compared to net capital expenditures in 20182019 of $349.0$283.9 million. We intend to fund these net capital expenditures through cash flow from operations and financing available under our existing credit facilities, if necessary.

Net financing activities used $52.2$150.2 million during the six months ended June 30, 2019,2020, and used $21.3$52.2 million during the same period in 2018.2019. We borrowed $265.0repaid $125.0 million of long-term debt during the six months ended June 30, 2019,2020, bringing our outstanding debt at June 30, 20192020 to $390.0 million, and borrowed $20.0$175.0 million. We paid dividends of $12.5 million in the six monthssix-month period ended June 30, 2018. The proceeds from the additional borrowings in 2019 were used to pay the $261.1 million special dividend. We paid dividends of2020 and $273.7 million in the six-month period ended June 30, 2019 and $10.1 million in the six-month period ended June 30, 2018.2019. In May 2019, we declared a special dividend of $3.75 per share, or $261.1 million, which was paid on June 7, 2019. Beginning with the quarterly dividend paid in July 2018, we increased our quarterly dividend rate by $0.02 per share, or 29%, to the current rate of $0.09. Financing activities for the six months ended June 30, 2019,2020, also included common stock repurchases of 282,992 shares at a cost of $8.8 million. In the six-month period ended June 30, 2019, we repurchased 1,300,000 shares at a cost of $42.3 million. 627,652 shares were repurchased in the six months ended June 30, 2018 at a cost of $22.9 million. From time to time, theThe 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. On May 14, 2019,As of June 30, 2020, the Company had purchased 982,992 shares pursuant to our current Board of Directors approved a new stock repurchase program under which the Company is authorized to repurchase up to 5,000,000 shares of its common stock. On the same day, the Board of Directors withdrew the previous stock repurchase authorization whichand had 2,035,6084,017,008 shares remaining available for repurchase. As of June 30, 2019, the Company had purchased 700,000 shares pursuant to the new authorization and had 4,300,000 shares remaining available for repurchase. We also had financing net outflows of $7.8 million in the six months ended June 30, 2018 related to the change in net checks issued in excess of cash balances.

Management believes our financial position at June 30, 20192020 is strong. As of June 30, 2019,2020, we had $46.4$65.4 million of cash and cash equivalents and over $1$1.1 billion of stockholders’ equity. Cash is invested primarily in government portfolio money market funds. As of June 30, 2019,2020, we had a total of $575.0$175.0 million of debt outstanding, after repaying $75.0 million of debt in second quarter 2020 under a line of credit that subsequently expired on July 13, 2020. We had total borrowing capacity of $500.0 million under threeour two remaining credit facilities that expire in May 2024 (see Note 4 in the Notes to Consolidated Financial Statements (Unaudited) under Item 1I of Part I of this Form 10-Q), of which we had borrowed $390.0 million. The remaining $185.0$280.4 million is available for future borrowing as of June 30, 2020, after considering the $175.0 million of credit available under these facilities at June 30, 2019 is reduced by the $30.0outstanding debt and $44.6 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 onWe believe our strong financial position, management does not foresee any significant barriers to obtainingliquid assets, cash generated from operating activities, and borrowing capacity under our credit facilities will provide sufficient financing, if necessary.funds for our operating and capital needs for the foreseeable future.

Contractual Obligations and Commercial Commitments:
Item 7 of Part II of our 20182019 Form 10-K includes our disclosure of contractual obligations and commercial commitments as of December 31, 2018. Except for entering into new debt agreements with additional borrowings under such agreements, and the associated future interest expense, as disclosed in Note 4 in the Notes to Consolidated Financial Statements (Unaudited) under Item I of Part I of this Form 10-Q, there2019. There were no material changes in the nature of these items during the six months ended June 30, 2019.2020.

Regulations:
Item 1 of Part I of our 20182019 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. ThereExcept as described below, there have been no material changes in the status of thesethe proposed regulations previously disclosed in the 20182019 Form 10-K.


On June 1, 2020, the Federal Motor Carrier Safety Administration published revisions to the Hours of Service (“HOS”) requirements. The HOS final rule increases driver flexibility and introduces modifications to the existing rule set, including
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changes to the 30-minute break requirement, split sleeper berth, adverse driving conditions, and the short-haul exception. The final rule compliance date is September 29, 2020.

All three countries ratified the United States-Mexico-Canada Agreement (“USMCA”) to replace the North American Free Trade Agreement (“NAFTA”). The effective date of USMCA is July 1, 2020.

Critical Accounting Estimates:
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 Estimates can be found in our 20182019 Form 10-K. Estimates of accrued liabilities for insurance and claims for liability and physicalbodily injury, property damage losses and workers’ 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 this critical accounting estimate from that discussed in our 20182019 Form 10-K.

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, 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 June 30, 2019, 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, and China. 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 gains were $0.9 million for second quarter 2020 and $0.5 million for second quarter 2019 and losses were $2.5 million for second quarter 2018.2019. These were recorded in accumulated other comprehensive loss within stockholders’ equity in the Consolidated Balance Sheets.

Interest Rate Risk
We manage interest rate exposure through a mix of variable rate debt and interest rate swap agreements. We had $75$150 million of debt outstanding at June 30, 2019,2020, for which the interest rate is effectively fixed at 2.5%2.34% through September 2019May 2024 with antwo interest rate swap agreementagreements to reduce our exposure to interest rate increases. We had $315$25 million of variable rate debt outstanding at June 30, 2019.2020. Interest rates on the variable rate debt and our unused credit facilities are based on the LIBOR. Assuming this level of borrowing, a hypothetical one-percentage point increase in the LIBOR interest rate would increase our annual interest expense by approximately $3.2 million. In early July 2019, we entered into two interest$250,000.

Due to uncertainty surrounding the suitability and sustainability of LIBOR, central banks and global regulators have called for financial market participants to prepare for the discontinuation of LIBOR by the end of 2021. LIBOR is a widely-referenced benchmark rate, swap agreementsand our unsecured credit facilities are referenced to fixLIBOR. We are communicating with our banks regarding the interest rate on $150 million of our debt that was outstanding as of June 30, 2019 at an average interest rate of 2.34% through May 2024, and we terminated the $75 million interest rate swap agreement that would have ended in September 2019.eventual transition to a new benchmark rate.

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
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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 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.

Information regarding the May 17, 2018 adverse jury verdict and subsequent final judgment on July 30, 2018 in Harris County District Court in Houston, Texas, is incorporated by reference from Note 5 in our Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report.

Item 1A. Risk Factors
Except as noted below, there have been no material changes to our risk factors as previously disclosed in Item 1A of Part I of our 2019 Form 10-K.

The COVID-19 pandemic has adversely impacted our business, as well as the operations of our customers and suppliers.
The COVID-19 pandemic has resulted in a slowdown of economic activity and a disruption in supply chains. Our business is sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand and industry truck capacity. Such conditions may also impact the financial condition of our customers, resulting in a greater risk of bad debt losses, and that of our suppliers, which may affect the availability or pricing of needed goods and services. We currently expect our third quarter and full year 2020 results could be further impacted by the disruptive effects of COVID-19, including but not limited to adverse effects on freight volumes and pricing. The degree of disruption is difficult to predict because of many factors, including the uncertainty surrounding the magnitude and duration of the pandemic, governmental actions that have been and may continue to be imposed, as well as the rate of economic recovery after the pandemic subsides. The unpredictable nature and uncertainty of the current COVID-19 pandemic could also magnify other risk factors that we disclosed in our 2019 Form 10-K and makes it impractical to identify all potential risks.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On May 14, 2019, our Board of Directors approved and announced a new stock repurchase program under which the Company is authorized to repurchase up to 5,000,000 shares of its common stock. On the same day, the Board of Directors withdrew the previous stock repurchase authorization that was approved in October 2007, which had 2,035,608 shares remaining available for repurchase. As of June 30, 2019,2020, the Company had purchased 700,000982,992 shares pursuant to the newthis authorization and had 4,300,000 shares4,017,008 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.

The following table summarizes ourNo shares of common stock repurchaseswere repurchased during second quarter 2019. The Company did not purchase any shares during second quarter 2019 other than pursuant to the new authorization approved in May 2019. All stock repurchases were made2020 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
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Contents
Period
Total Number of Shares
(or Units) Purchased
Average Price Paid per
Share (or Unit)
Total Number of Shares
(or Units) Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Number (or
Approximate Dollar
 Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
April 1-30, 2019—
$—
—
2,035,608
May 1-31, 2019700,000
$31.08
700,000
4,300,000
June 1-30, 2019—
$—
—
4,300,000
Total700,000
$31.08
700,000
4,300,000


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 August 14, 2018
10.1
Filed herewith


10.2
Filed herewith


11
31.1
31.2
32.1
32.2
101The following unaudited financial information from Werner Enterprises’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2019,2020, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Consolidated Statements of Income for the three and six months ended June 30, 20192020 and June 30, 2018,2019, (ii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20192020 and June 30, 2018,2019, (iii) Consolidated Condensed Balance Sheets as of June 30, 20192020 and December 31, 2018,2019, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 20192020 and June 30, 2018,2019, (v) Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020, March 31, 2020, June 30, 2019, and June 30, 2018,March 31, 2019, and (vi) the Notes to Consolidated Financial Statements (Unaudited) as of June 30, 2019.2020.
104The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (included as Exhibit 101).
 

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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: August 6, 2020
WERNER ENTERPRISES, INC.By:/s/ John J. Steele
John J. Steele
Executive Vice President, Treasurer and
Chief Financial Officer
Date: August 7, 20196, 2020
By:/s/ John J. Steele
John J. Steele
Executive Vice President, Treasurer and
Chief Financial Officer
Date: August 7, 2019
By:/s/ James L. Johnson
James L. Johnson
Executive Vice President, Chief Accounting

Officer and Corporate Secretary

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