WERN 10-K & 10-Q changes, risk factors and insider trading

We are sensitive to economic or geopolitical conditions, in particular, those that impact customer shipping volumes, industry freight demand, and industry truck capacity. Such conditions can include, among others, employment levels, business conditions, fuel and energy costs, public health crises, interest rates, tax rates, political conflict, and global trade policy. Tariffs or trade regulations may impact the cost or availability of materials, equipment, goods, and fuel. On February 20, 2026, the U.S. Supreme Court ruled that the U.S. government cannot use the International Emergency Economic Powers Act to impose tariffs, overturning certain recent tariffs announced throughout 2025, including those on global imports from China, Canada and Mexico. This decision creates uncertainty about the immediate path forward for many supply chains. Not all tariffs announced throughout 2025 will be impacted by this U.S. Supreme Court decision since many tariffs were imposed under other legal authorities that remain in effect and new tariffs may continue to be implemented through these other legal authorities. Impacts from any of the foregoing on (i) our suppliers could affect pricing or availability of needed goods and services and (ii) our customers could weaken their financial condition, increase our risk of bad debt losses, and decrease demand for our services (even if preceded by increased demand in anticipation of a trade regulation or other change). When conditions cause a decline in shipping volumes or an increase in available truck capacity, freight pricing generally becomes more competitive as carriers compete for loads to maintain truck productivity. Any of the foregoing may impact our results of operations and financial condition.

Our mitigation of these risks includes, without limitation, using certain redundant computer hardware, tools and protocols to monitor and respond to threats, the work of a dedicated internal cybersecurity team, incident and crisis response plans, enterprise-wide information security policies and trainings, and the use of artificial intelligence. However, the security risks associated with information technology systems have increased in recent years because of the evolving sophistication, activities and methods of cyber attackers, including the use of artificial intelligence. As we implement artificial intelligence solutions, we limit liability by ensuring that vendors’ indemnity obligations extend to artificial intelligence solutions and require such vendors to undertake commercially reasonable measures to prevent hallucinations and bias. In addition, we take a proactive approach to understand how our data will be used by the artificial intelligence solution to prevent and mitigate competitive concerns. The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be difficult to detect, and often are not recognized until launched against a target, and we may be unable or fail to anticipate them or to implement adequate preventative measures. We may incur costs in responding to a specific event. Fortifying our systems after a cybersecurity event may be cost prohibitive. Our investments in cybersecurity may not be successful against an attack or malicious action.

Increasing scrutinyScrutiny from investors and other stakeholders regarding ESG related matters may have a negative impact on our business.

Companies across all industries are facing increasingface scrutiny from investors and other stakeholders related to ESG matters, including practices and disclosures related to sustainability. Organizations that provide information to stakeholders (including customers and investors) on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some customers to evaluate their relationship with us and by some investors to inform their investment and proxy statement voting decisions. Unfavorable ESG ratings may lead to negative sentiment toward us by stakeholders, which could have a negative impact on our revenues, stock price and access to and costs of capital. While we believe our sustainability programs are balanced in the context of our business and stakeholder demands, we could draw criticism related to all or a portion of our sustainability initiatives.

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 20242025 to 2023,2024, 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, changing used truck and trailer pricing, compliance with new or proposed regulations and tightening of the commercial truck liability insurance market. Our main fixed costs include depreciation expense for tractors and trailers and non-driver salaries, wages and benefits. 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 facility,facilities, as management deems necessary.

We provide non-trucking services primarily through the three operating unitsdivisions within our Werner Logistics segment (Truckload Logistics, Intermodal, 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, as well as depreciation and amortization, supplies and maintenance, and other general expenses. We evaluate the Werner Logistics segment’s financial performance by reviewing operating expenses and operating income expressed as a percentage of revenues. Purchased transportation expenses as a percentage of revenues can be impacted by the rates charged to customers and the costs of securing third-party capacity. We have a mix of contracted long-term rates and variable rates for the cost of third-party capacity, and we cannot assure that our operating results will not be adversely impacted in the future if our ability to obtain qualified third-party capacity providers changes or the rates of such providers increase.

At the end of 2024,2025, we believe we are well positioned with a strong balance sheet and sufficient liquidity. Our debt is at $650$752 million, or a net debt ratio (debt less cash) of 1.62.0 times earnings before interest, income taxes, depreciation and amortizationamortization, and restructuring and impairment for the year ended December 31, 2024.2025. We had available liquidity of $460$702 million, considering cash and cash equivalents on hand and available borrowing capacity of $419$642 million. As of December 31, 2024,2025, we were in compliance with our debt covenants and expect to continue to be in compliance in 2025.2026. We currently plan to continue paying our quarterly dividend, which we have paid quarterly since 1987. This cash outlay currently results in approximately $9$8.4 million per quarter. Net capital expenditures (primarily revenue equipment) in 20252026 currently are expected to be in the range of $185 million to $235$225 million.

The following tables set forth the Werner Logistics segment’s revenues, purchased transportation expense, other operating expenses (primarily salaries, wages and benefits expense), total operating expenses, and operating income,income (loss), as well as certain statistical data regarding the Werner Logistics segment.

Management believes our financial position at December 31, 20242025 is strong. As of December 31, 2024,2025, we had $40.8$59.9 million of cash and cash equivalents and $1.5$1.4 billion of stockholders’ equity. Cash is invested primarily in short-term money market funds. In addition, we have a $1.075maximum borrowing capacity of $1.4 billion under our credit facility,facilities, for which our total available borrowing capacity was $419.1$702.0 million as of December 31, 2024.2025. We believe the six commercial banks in our $1.075 billion syndicated credit facility all have strong tier-one capital ratios and good loan-to-deposit ratios. We believe our liquid assets, cash generated from operating activities, and borrowing capacity under our existing credit facilityfacilities will provide sufficient funds to meet our cash requirements and our planned stockholder returns for the foreseeable future.

Our most significant resource requirements are company drivers, independent contractors, tractors, and trailers with respect to our TTS segmentsegment, and qualified third-party capacity providers with respect to our Werner Logistics segment. 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 firstsecond quarter 2026 to firstsecond quarter 2025, 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, changing used truck and trailer pricing, compliance with new or proposed regulations and tightening of the commercial truck liability insurance market. Our main fixed costs include depreciation expense for tractors and trailers and non-driver salaries, wages and benefits. 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.

The following tables set forth the operating revenues, operating expenses and operating income (loss) for the TTS segment and certain statistical data regarding our TTS segment operations, as well as statistical data for One-Way Truckload and Dedicated operations within TTS.

The following tables set forth the Werner Logistics segment’s revenues, purchased transportation expense, other operating expenses (primarily salaries, wages and benefits expense), total operating expenses, and operating loss,income (loss), as well as certain statistical data regarding the Werner Logistics segment.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

In January 2026, we expanded our Dedicated offering through the acquisition of FirstFleet, adding scale, density and exposure to what we believe are more resilient customer verticals,markets, including grocery and food & beverage. At the same time, we also restructured our One-Way Truckload business to create a more balanced and higher-producing network to deliver improvedimprove profitability. WeOur Dedicated business remains strong as customer retention remains high, and we have been successful in continuing to secure rate increases on renewals. In addition, Dedicated customers are alsoexpanding noticingexisting strongfleets, momentumand we continue to have success with customers in new markets. Werner Logistics,Logistics Intermodalprofitability and Final Mile. As a result, we believe we are better positionedcontinues to capitalizebe onimpacted anby improvedongoing market.pricing pressure. Industry capacity has continued to contract driven by regulatory enforcement actions related to non-domiciled commercial driver's licenses (“CDLs”), B1 Visas, and English Language Proficiency standards. AsIn challengingaddition, operatingincreased conditionscompetition continue,for carrierhigh-quality bankruptciesdrivers, incombined thewith truckingrising industryfuel, insurance and equipment replacement costs, may further limit capacity. SpotWe anticipate further capacity attrition, along with seasonal peak volumes, to improve freight rates remained elevated duringthrough the firstremainder quarterof 2026 and throughout April 2026, defying seasonal norms. We expect seasonal improvement in spot freight rates throughout the year as capacity attrition continues.2026.

In the TTS segment, trucking revenues, net of fuel surcharge, increased 17.4%26.9% in firstsecond quarter 2026 compared to firstsecond quarter 2025 due to a 14.0%16.3% increase in the average number of tractors in service and a 2.9%9.1% increase in average revenues per tractor per week, net of fuel surcharge. The TTS segment average number of tractors in service increase was due primarily to a 32.4%43.7% increase in Dedicated average tractors in service, which was mostly due to the addition of FirstFleet, partially offset by a 19.4%34.1% decrease in One-Way Truckload average tractors in service as a result of our One-Way Truckload restructuring plan.plan, and slightly lower legacy Dedicated tractors. The result of our One-Way Truckload restructuring is showing early gains, with firstsecond quarter 2026 One-Way Truckload average total miles per tractor per week up 5.7% over prior year despite disruption from winter storms, and One-Way Truckload revenues per total mile, net of fuel surcharge increasing 3.6%. Execution of these initiatives led to One-Way Truckload average revenues per tractor per week, net of fuel surcharge increasing 9.6%,27.7%, average total miles per tractor per week up 15.7%, and One-Way Truckload revenues per total mile, net of fuel surcharge increasing 10.4%, compared to second quarter 2025, reflecting the combined effect of our restructuring and pricing actions. We expect One-Way Truckload fleet average revenues per total mile, net of fuel surcharge, to increase 1%10% to 4%13% in secondthird quarter 2026 compared to secondthird quarter 2025.2025, as we expect ongoing pricing improvement as more contract renewals become effective, alongside anticipated seasonal demand later in the year. The increase in TTS average revenues per tractor per week, net of fuel surcharge was also due to a 0.8%5.4% increase in Dedicated average revenues per tractor per week, net of fuel surcharge. We are updatingraising our full-year 2026 guidance for Dedicated average revenues per tractor per week, net of fuel surcharge, from a range of a decrease of 1% to an increase up to 2%, to be flat or increase up to 3%, to a range of an increase of 3% to 5%, as we have been successful in securing price increases in contract renewals for both our legacy Dedicated fleet and FirstFleet business.

The average number of tractors in service in the TTS segment increased 14.0%16.3% to 8,4548,712 in firstsecond quarter 2026 from 7,4157,489 in firstsecond quarter 2025. We ended firstsecond quarter 2026 with 9,0408,695 tractors in the TTS segment, an increase of 1,6001,150 tractors compared to the end of firstsecond quarter 2025, and a sequential increasedecrease of 1,940345 tractors compared to the end of the fourthfirst quarter 2025.2026. Within TTS, Dedicated ended firstsecond quarter 2026 with 7,0806,960 tractors (or 78%80% of our total TTS segment fleet) compared to 4,8354,890 tractors (or 65%) a year ago. We continueour to expectrevising our full-year 2026 guidance for TTS average tractors in service from up 23% to increase28% into a range of 23%up 16% to 28%18% when compared to the same period in 2025. TheA Dedicatedportion pipelineof isour strongpreviously and we expect truckanticipated growth in the second half may be delayed beyond year end, in part from further productivity gains we are realizing with our revenue equipment across the TTS segmentsegment, coupled with a slower pace of driver hiring, as there are currently fewer quality drivers available across the year progresses. We cannot predict whether future driver shortages, if any, would have a further adverse effect on our fleet size. If such a driver market shortage were to occur, it could result in further fleet size reductions, and our results of operations could be adversely affected.industry.

Trucking fuel surcharge revenues increased 36.1%118.4% to $78.5$120.6 million in firstsecond quarter 2026 from $57.6$55.2 million in firstsecond quarter 2025 due primarily to the impact of 17.6 million more company tractor miles and higher average diesel fuel prices in firstsecond quarter 2026.2026 and the impact of the FirstFleet acquisition. 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 tractor 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 three divisions. Werner Logistics recorded a minimal amount of revenue and brokered freight expense of $0.1 million in firstsecond quarter 2026 and $4.1$4.7 million in firstsecond quarter 2025 for certain shipments 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 firstsecond quarter 2026, Werner Logistics revenues increaseddecreased $0.3$9.4 million, or flat4.3%, compared to firstsecond quarter 2025. Truckload Logistics revenues (72% of total Werner Logistics segment revenues) decreased $6.5$17.8 million, or 4%,10%, in firstsecond quarter 2026, driven by a decrease in shipments of 9%,29%, partially offset by a 5%26% increase in revenue per shipment. The revenue per load improvement from disciplined pricing and load acceptance was more than offset by higher purchased transportation costs. Intermodal revenues (17%16% of total Werner Logistics segment revenues) increased $5.1$5.4 million, or 18%, due to 22%an moreincrease shipments,in partiallyshipments offsetof by17% and a 3%2% declineincrease in revenue per shipment. Final Mile revenues (11%12% of total Werner Logistics segment revenues) increased $1.7$3.0 million, or 8%,14%, in firstsecond quarter 2026, and decreasedincreased 7%13% sequentially.

Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 99.5%98.2% in firstsecond quarter 2026 compared to 100.8%91.2% in firstsecond quarter 2025. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 2631 through 2732 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 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 $36.4$60.5 million, or 15.0%,24.2%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and increased 0.4%0.1% as a percentage of operating revenues. The higher dollar amount of salaries, wages and benefits expense in the first quarter of 2026 was due primarily to increased driver and non-driver pay, the impact of 17.6 million more company tractor miles,pay and higher benefit costs.costs, Theas increasewe in non-driver and driver pay was due primarily tohad a higher average number of non-driver and driver employees. These increases were mostlydue dueprimarily to the impact of the FirstFleet acquisition. Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment increaseddecreased 5%1.7% in firstsecond quarter 2026 compared to firstsecond quarter 2025.

We anticipate a tightening marketCompetition for high-quality drivers.drivers has increased. A competitive driver market presents labor challenges for customers and carriers alike. Several factors impacting the driver market include a declining number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck safety regulations. We continue to take significant actions to strengthen our driver recruiting and retention as we strive to be the truckload employer of choice, including competitive driver pay, providing a modern tractor and trailer fleet with the latest safety equipment and technology, investing in our driver training school network and offering a wide variety of driving positions including daily and weekly home time opportunities. We are unable to predict whether we will experience future driver shortages or maintain our current driver retention rates. If such a driver shortage were to occur and 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.

Fuel increased $19.4$59.5 million, or 30.7%,98.5%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and increased 1.3%4.8% as a percentage of operating revenues, due primarily to the impact of 17.6 million more company tractor miles and higher average diesel fuel prices in firstsecond quarter 2026.2026 and the impact of the FirstFleet acquisition. Average diesel fuel prices were 46 cents$1.67 per gallon higher in firstsecond quarter 2026 than in firstsecond quarter 2025, and were 50 cents$1.08 per gallon higher than in fourthfirst quarter 2025.2026.

For AprilJuly 2026, the average diesel fuel price per gallon was $1.87$1.31 higher than the average diesel fuel price per gallon in AprilJuly 2025, and $1.85$1.38 higher than in secondthird quarter 2025.

Shortages of fuel, increases in fuel prices and petroleum product rationing can have a material adverse effect on our operations and profitability. We are unable to predict whether fuel price levels will increase or decrease in the future or the extent to which fuel surcharges will be collected from customers. As of MarchJune 31,30, 2026, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

Supplies and maintenance increased $7.8$15.4 million, or 12.9%,24.7%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and was flat as a percentage of operating revenues. The expense increase was driven by an increase in over-the-road tractor and trailer maintenance, higherin-house tollstractor costs,maintenance, and thehigher impacttoll ofand 17.6tire million more company tractor milescosts in firstsecond quarter 2026, resulting primarily from the FirstFleet acquisition.

Insurance and claims decreasedincreased $1.8$48.2 million, or 4.2%,708.0%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and decreasedincreased 1.0%5.3% as a percentage of operating revenues. We had lower expense for small dollar liability claims, resulting primarily from lower expense for new claims and favorable reserve development in first quarter 2026 compared to unfavorable reserve development in first quarter 2025. Our expense for large dollar liability claims was also lower,revenues, due primarily to athe lower amountimpact of unfavorablea reserve$45.7 developmentmillion andliability lowerreversal expense for new claims. The expense for new claims was impacted by decreased cost per claim in first quarter 2026 compared to the same period in 2025. We also incurredthrough insurance and claims expense ofin $1.5 million for firstsecond quarter 2025 as a result of thea priorfavorable year for accrued interestdecision related to thean adverse jury verdict rendered on May 17, 2018. We continued to accrue pre-tax insurance and claims expense2018 for interesta atDecember $0.52014 millionaccident, pereffectively month (excluding months whereending the plaintiffslawsuit requestedin an extensionfavor of time to respond to our petition for review) until our appeal was finalized in second quarter 2025.Werner. The impact of these decreases was partially offset by the addition of insurance and claims expense in connection with the FirstFleet acquisition in January 2026.2026 is also contributing to the increase in insurance and claims expense year over year. These increases were partially offset by lower unfavorable reserve development in second quarter 2026 compared to the same period in 2025. 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 believe our elevated insurance and claims expense is generally a reflection of the ongoing unprecedented rise in verdicts and litigation settlements across the industry, particularly for larger carriers.

We renewed our liability insurance policies on August 1, 2025,2026, and are responsible for the first $15.0 million per claim on all claims with an annual $7.5 million aggregate for claims between $15.0 million and $20.0 million.million, Forconsistent with the policyprior year that began August 1, 2024 we were responsible for the first $15.0 million per claim on all claims with an annual $7.5 million aggregate for claims between $15.0 million and $20.0 million.year. We maintain liability insurance coverage with insurance carriers in excess of the $15.0 million per claim. Our liability insurance premiums per mile for the policy year that began August 1, 20252026 areincreased slightlyapproximately highersix thanpercent premiums forfrom the previous policy year.

Depreciation and amortization expense increased $6.1$8.1 million, or 8.8%,11.4%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and decreased 0.4%1.0% as a percentage of operating revenues due primarily to depreciation and amortization of tangible and intangible assets recorded in the FirstFleet acquisition. These increases were partially offset by lower intangible amortization driven by a restructuring of our One-Way Truckload operating segment during the fourth quarter 2025 that impaired certain customer relationships and trade names.

The average age of our tractor fleet remains low by industry standards and was 2.93.0 years as of MarchJune 31,30, 2026, and the average age of our trailers was 6.3 years. We are continuing to invest in new tractors and trailers, technology, and our terminal network in 2026 to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs.

Rent and purchased transportation expense increased $15.0$20.6 million, or 7.3%,9.0%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and decreased 1.6%3.6% 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, payments to independent contractors in the TTS segment, and cloud-based technology fees. 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 recorded a minimal amount of revenue and brokered freight expense of $0.1 million in firstsecond quarter 2026 and $4.1$4.7 million in firstsecond quarter 2025 for certain shipments performed by the TTS segment (also recorded as trucking revenue by the TTS segment), and these transactions between reporting segments are eliminated in consolidation. Werner Logistics purchased transportation expense increaseddecreased $1.4$2.6 million in firstsecond quarter 2026, and increased to 86.1%87.7% as a percentage of Werner Logistics revenues in firstsecond quarter 2026 from 85.5%85.1% in firstsecond quarter 2025. The increase in the percentage of Werner Logistics revenues was due primarily to higher capacity costs year over year.

Other operating expenses increased $3.1 million,$12.3, or 63.7%,230.9%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, and increased 0.3%1.5% as a percentage of operating revenues due primarily to increasedthe costsimpact associatedof witha professional$7.9 servicesmillion net favorable change to the contingent earnout liability related to the Baylor Trucking, Inc. acquisition in the second quarter 2025. The increase in other operating expenses was also due to acquisition expenses of $4.3 million in connection with the FirstFleet acquisition,acquisition partiallyand offsetcontinued byintegration higherefforts and a decrease in net gains on sales of property and equipment (primarily used tractors and trailers) and decreased bad debt expense.. Gains on sales of property and equipment 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 property and equipment were $3.8$1.5 million in firstsecond quarter 2026 compared to $2.8$5.9 million in firstsecond quarter 2025. We sold more tractors and fewer trailers in firstsecond quarter 2026 compared to firstsecond quarter 2025, and realized lower average sale prices for our used equipment. We continue to anticipate stableincreasing used equipment demand and resale values through the remainder of 2026. Increased supply of used equipment from regulatory enforcement is likely to be offset by equipment manufacturers production constraints, aging fleets, and higher-priced 2027 engines, which may be an incentive towards high quality used assets. As a result, we are narrowing our anticipated gains on our used equipment for full-year 2026 arefrom expected toa range between $8 million and $18 million to a range between $10 million and $14 million.

Other expense, net of other income, increased $2.4 millionmillion, or 32.5%, in firstsecond quarter 2026 compared to firstsecond quarter 2025, due primarily to a $2.1$2.2 million increase in net interest expense. Net interest expense increased due primarily due to an increase in average debt outstanding, partially offset by a decrease in average interest rates. NetWe continue to expect net interest expense for full-year 2026 is expected to be between $40 million and $45 million.million for full-year 2026.

Income Tax Expense (Benefit)

We had an incomeIncome tax benefitexpense ofdecreased $1.5$13.5 million in firstsecond quarter 2026 compared to second quarter 2025 due to lower pre-tax income, partially offset by an increase in the effective income tax benefit of $3.2 million in first quarter 2025.rate. Our effective income tax rate (income taxes expressed as a percentage of income (loss) before income taxes) increased to 24.9%27.3% in firstsecond quarter 2026 compared to 23.7%26.2% in firstsecond quarter 2025. We continue to estimate our full-year 2026 effective income tax rate to be approximately 25.5% to 26.5%.

Management believes our financial position at MarchJune 31,30, 2026 is strong. As of MarchJune 31,30, 2026, we had $61.5$57.0 million of cash and cash equivalents and $1.4 billion of stockholders’ equity. Cash is invested primarily in short-term money market funds. In addition, we have a maximum amount of funding available of $1.4 billion under our Credit Facilities, for which our total available borrowing capacity was $451.1$599.9 million as of MarchJune 31,30, 2026 (see Note 9 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding our credit facilities). We believe the six commercial banks in our $1.075 billion syndicated credit facility all have strong tier-one capital ratios and good loan-to-deposit ratios. We believe our liquid assets, cash generated from operating activities, and borrowing capacity under our existing credit facilities will provide sufficient funds to meet our cash requirements and our planned stockholder returns for the foreseeable future.

Item 7 of Part II of our 2025 Form 10-K includes our disclosure of material cash requirements as of December 31, 2025. Except as described below, there were no other material changes in the nature of these items during the threesix months ended MarchJune 31,30, 2026.

•Debt Obligations and Interest Payments – As of MarchJune 31,30, 2026, we had outstanding debt under the Credit Facilities with an aggregate principal amount of $878.2$793.0 million, with $8.6no millionprincipal amount expected to be paid within 12 months. As of MarchJune 31,30, 2026, future interest payments associated with the Credit Facilities are estimated to be $81.1$57.5 million through 2027, with $46.8$41.7 million payable within 12 months. See Note 9 in the Notes to Consolidated Financial Statements under Item 1 of Part I of this Form 10-Q for further detail of the Credit Facilities and the timing of expected future principal payments.

•Finance Leases – We assumed finance leases in connection with our FirstFleet acquisition. As of MarchJune 31,30, 2026, we had finance lease payment obligations of $53.6$48.3 million, with $26.7$25.1 million payable within 12 months. See Note 6 in the Notes to Consolidated Financial Statements under Item 1 of Part I of this Form 10-Q for further detail of our finance lease obligations and the timing of expected future payments.

During the threesix months ended MarchJune 31,30, 2026, we generated cash flow from operations of $83.5$167.3 million, a 184.1%121.8% or $54.1$91.9 million increase in cash flows compared to the same three-monthsix-month period a year ago. The increase in net cash provided by operating activities was due primarily to an increase in earnings adjusted for various noncash items, and an increase in cash provided by working capital changes for the three-monthsix-month period ended MarchJune 31,30, 2026. We were able to make net capital expenditures, make strategic investments, and pay dividends with the net cash provided by operating activities, supplemented by borrowings under our existing credit facilities.

Net investing activities used $194.0$185.8 million and $63.9 million for the three-monthsix-month periodperiods ended MarchJune 31,30, 2026,2026 and provided2025, $2.4 million during the same period in 2025.respectively. Net cash invested in our FirstFleet acquisition was $184.8 million. Net property and equipment additions (primarily revenue equipment) were $2.0 million for the three-monthsix-month period ended MarchJune 31,30, 2026,2026. compared to netNet proceeds from the sales of property and equipment (primarily revenue equipment) were $8.6 million for the six-month period ended June 30, 2026, compared to net property and equipment additions of $7.6$58.1 million during the same period of 2025. WeThe currentlydecrease estimatein net capital expenditures during the first half of 2026 was due to several factors, including selling more equipment and purchasing less following our One-Way Truckload segment restructuring efforts, modest incremental use of operating leases, and a decline in technology-related capital spending as we near completion of building the technology infrastructure for our future. We are raising our full-year 2026 estimated net capital expenditure range (primarily revenue equipment) in 2026 to be in the range offrom $185 million to $225 million to $215 million to $250 million, compared to net capital expenditures in 2025 of $162.7 million. The higher capital expenditures is expected to accelerate fleet modernization and reduce the average age of our tractor fleet. The increase in expenditures also reflects a strategic pre-buy of certain 2026 model-year tractors ahead of the 2027 emissions standards. These investments are expected to improve reliability, lower repair and maintenance costs, enhance driver satisfaction and customer service, and support higher equipment gains in future years. We intend to fund these net capital expenditures through cash flows from operations and financing available under our existing credit facilities, if necessary. As of MarchJune 31,30, 2026, we were committed to property and equipment purchases of approximately $18.1$139.8 million.

Net financing activities provided $112.1$15.2 million during the threesix months ended MarchJune 31,30, 2026, and used $20.5$1.8 million during the same period in 2025. We had net borrowings on our debt under our Credit Facilities of $126.2$41.0 million during the threesix months ended MarchJune 31,30, 2026, increasing our outstanding debt to $878.2$793.0 million at MarchJune 31,30, 2026. We had net repaymentsborrowings on our debt under our Credit Facilities of $10.0$75.0 million during the threesix months ended MarchJune 31,30, 2025. We paid dividends of $8.4$16.8 million during the threesix months ended MarchJune 31,30, 2026 and $8.7$17.3 million during the same period in 2025. We currently plan to continue paying a quarterly dividend.

We did not repurchase any shares of common stock during the threesix months ended MarchJune 31,30, 20262026. Financing activities for the same period in 2025 included common stock repurchases of 2,113,007 shares at a cost of $55.6 million, including broker commissions and 2025.excise taxes. As of MarchJune 31,30, 2026, the Company had not purchased any shares pursuant to our current Board of Directors repurchase authorization and had 5,000,000 shares remaining available for repurchase. The Company has repurchased, and may continue to repurchase, shares of the Company’s common stock. The timing and amount of such purchases depend upon economic and stock market conditions and other factors.