First Quarter 2023 Highlights (all metrics compared to
first quarter 2022)
- Total revenues of $832.7 million, up 9%
- Operating income of $53.4 million, down 36%; non-GAAP adjusted
operating income of $57.5 million, down 33%
- Operating margin of 6.4%, down 450 basis points; non-GAAP
adjusted operating margin of 6.9%, down 440 basis points
- Diluted EPS of $0.55, down 32%; non-GAAP adjusted diluted EPS
of $0.60, down 37%
Werner Enterprises, Inc. (Nasdaq: WERN), a premier
transportation and logistics provider, today reported results for
the first quarter ended March 31, 2023.
“While macroeconomic conditions and continued softness in the
freight market were increasingly challenging in the first quarter,
we achieved our third highest revenue quarter driven by revenue per
truck increases in our Dedicated business and our growing Logistics
business,” said Derek J. Leathers, Chairman, President and CEO. “We
are seeing a more direct impact from inflation on multiple cost
categories, which has constrained margins. However, we remain
confident in the durability and resilience of our diversified
business model, combined with our operational scale, reputation for
service excellence, innovation and the efforts of our determined
and talented team.”
Total revenues for the quarter were $832.7 million, an increase
of $68.1 million compared to the prior year quarter, due to
Truckload Transportation Services (“TTS”) revenues growth of $29.9
million and Logistics revenues growth of $39.7 million.
Operating income of $53.4 million decreased $30.1 million, or
36%, while operating margin of 6.4% decreased 450 basis points. On
a non-GAAP basis, adjusted operating income of $57.5 million
decreased $28.6 million, or 33%. Adjusted operating margin of 6.9%
declined 440 basis points from 11.3% for the same quarter last
year.
TTS operating income decreased by $25.1 million and adjusted
operating income decreased by $24.5 million. Logistics operating
income decreased $3.7 million and adjusted operating income
decreased by $2.8 million. Corporate and Other (including driving
schools) operating income decreased by $1.3 million.
Net interest expense of $6.4 million increased $5.2 million
primarily due to higher interest rates for variable rate debt and
an increase in average debt outstanding. The effective income tax
rate during the quarter was 24.3%, compared to 24.1% in first
quarter 2022.
During first quarter 2023, our strategic minority equity
investments had market valuation changes causing an unrealized loss
on equity securities of $0.1 million, compared to an unrealized
loss of $9.8 million, or $0.11 per share, in first quarter 2022.
Consistent with prior reporting, market value increases or
decreases for these strategic minority investments are adjusted out
for determining non-GAAP adjusted net income and non-GAAP adjusted
earnings per share.
Net income attributable to Werner of $35.2 million decreased
34%. On a non-GAAP basis, adjusted net income attributable to
Werner of $38.3 million decreased 39%. Diluted EPS of $0.55
decreased 32%. On a non-GAAP basis, adjusted diluted EPS of $0.60
decreased 37%.
Key Consolidated Financial Metrics
Three Months Ended
March 31,
(In thousands, except per share
amounts)
2023
2022
Y/Y
Change
Total revenues
$
832,714
$
764,605
9
%
Truckload Transportation Services
revenues
588,330
558,417
5
%
Werner Logistics revenues
228,669
189,008
21
%
Operating income
53,386
83,511
(36
)%
Operating margin
6.4
%
10.9
%
(450) bps
Net income attributable to Werner
35,224
53,749
(34
)%
Diluted earnings per share
0.55
0.82
(32
)%
Adjusted operating income (1)
57,545
86,191
(33
)%
Adjusted operating margin (1)
6.9
%
11.3
%
(440) bps
Adjusted net income attributable to Werner
(1)
38,265
62,966
(39
)%
Adjusted diluted earnings per share
(1)
0.60
0.96
(37
)%
(1) See attached Reconciliation of
Non-GAAP Financial Measures - Consolidated.
Truckload Transportation Services (TTS) Segment
- Revenues of $588.3 million increased $29.9 million
- Operating income of $51.0 million decreased $25.1 million;
non-GAAP adjusted operating income of $53.7 million decreased $24.5
million due to a much softer freight market, higher operating
expenses for supplies and maintenance and insurance and claims
- Operating margin of 8.7% decreased 490 basis points from 13.6%;
non-GAAP adjusted operating margin of 9.1% decreased 490 basis
points from 14.0%
- Non-GAAP adjusted operating margin, net of fuel, of 10.7%
decreased 570 basis points from 16.4%
- Average segment trucks in service totaled 8,561, an increase of
323 trucks year over year, or 3.9%
- Dedicated unit trucks at quarter end totaled 5,345, or 63% of
the total TTS segment fleet, compared to 5,185 trucks, or 63%, a
year ago
- 0.5% increase in TTS average revenues per truck per week
During first quarter 2023, Dedicated experienced solid and
steady freight demand from our customers. One-Way Truckload
customer freight demand during first quarter 2023 was seasonally
weaker than normal compared to a seasonally strong freight market
in first quarter 2022.
Key Truckload Transportation Services Segment Financial
Metrics
Three Months Ended
March 31,
(In thousands)
2023
2022
Y/Y
Change
Trucking revenues, net of fuel
surcharge
$
493,242
$
472,361
4
%
Trucking fuel surcharge revenues
88,301
79,815
11
%
Non-trucking and other revenues
6,787
6,241
9
%
Total revenues
$
588,330
$
558,417
5
%
Operating income
$
50,986
$
76,093
(33
)%
Operating margin
8.7
%
13.6
%
(490) bps
Operating ratio
91.3
%
86.4
%
490 bps
Adjusted operating income (1)
$
53,725
$
78,273
(31
)%
Adjusted operating margin (1)
9.1
%
14.0
%
(490) bps
Adjusted operating margin, net of fuel
surcharge (1)
10.7
%
16.4
%
(570) bps
Adjusted operating ratio (1)
90.9
%
86.0
%
490 bps
Adjusted operating ratio, net of fuel
surcharge (1)
89.3
%
83.6
%
570 bps
(1) See attached Reconciliation of
Non-GAAP Financial Measures - Truckload Transportation Services
(TTS) Segment.
Werner Logistics Segment
- Revenues of $228.7 million increased $39.7 million, or 21%
- Operating income of $4.9 million decreased $3.7 million
- Operating margin of 2.2% decreased 240 basis points from
4.6%
- Adjusted operating income of $6.4 million decreased $2.8
million
- Adjusted operating margin of 2.8% decreased 210 basis points
from 4.9%
Truckload Logistics revenues (78% of Logistics revenues)
increased 41%, driven by an increase in shipments due to the
ReedTMS acquisition and growth in our organic volumes, partially
offset by a decline in revenues per shipment.
Intermodal revenues (12% of Logistics revenues) decreased 33%,
due primarily to a decline in shipments.
Final Mile revenues (10% of Logistics revenues) increased $2.4
million.
Logistics operating income decreased $3.7 million and adjusted
operating income decreased $2.8 million in first quarter 2023, due
to a seasonally soft freight market in first quarter 2023 compared
to a seasonally strong freight market in first quarter 2022.
Key Werner Logistics Segment Financial Metrics
Three Months Ended
March 31,
(In thousands)
2023
2022
Y/Y
Change
Total revenues
$
228,669
$
189,008
21
%
Operating expenses:
Purchased transportation expense
188,498
157,521
20
%
Other operating expenses
35,234
22,806
54
%
Total operating expenses
223,732
180,327
24
%
Operating income
$
4,937
$
8,681
(43
)%
Operating margin
2.2
%
4.6
%
(240) bps
Adjusted operating income (1)
$
6,357
$
9,181
(31
)%
Adjusted operating margin (1)
2.8
%
4.9
%
(210) bps
(1) See attached Reconciliation of
Non-GAAP Financial Measures - Werner Logistics Segment.
Cash Flow and Capital Allocation
Cash flow from operations in first quarter 2023 was $166.8
million compared to $155.0 million in first quarter 2022, an
increase of 8%.
Net capital expenditures in first quarter 2023 were $102.7
million compared to $37.1 million in first quarter 2022, an
increase of 177%. We plan to continue to invest in new trucks and
trailers and our terminals to improve our driver experience,
optimize operational efficiency and more effectively manage our
maintenance, safety and fuel costs. The average ages of our truck
and trailer fleets were 2.2 years and 5.1 years, respectively, as
of March 31, 2023.
Gains on sales of property and equipment in first quarter 2023
were $18.3 million, or $0.22 per share, compared to $20.5 million,
or $0.23 per share, in first quarter 2022. Year over year, we sold
significantly more trucks and trailers and realized substantially
lower average gains per truck and trailer. Gains on sales of
property and equipment are reflected as a reduction of Other
Operating Expenses in our income statement.
We did not repurchase shares of our common stock in first
quarter 2023. As of March 31, 2023, we had 2.3 million shares
remaining under our share repurchase authorization.
As of March 31, 2023, we had $130 million of cash and cash
equivalents and over $1.4 billion of stockholders’ equity. Total
debt outstanding was $691 million at March 31, 2023. After
considering letters of credit issued, we had available liquidity
consisting of cash and cash equivalents and available borrowing
capacity as of March 31, 2023 of $544 million.
2023 Guidance Metrics and Assumptions
The following table summarizes our updated 2023 guidance and
assumptions:
Prior
(as of 2/7/23)
Actual
(as of 3/31/23)
New
(as of 5/3/23)
Commentary
TTS truck growth from BoY to
EoY
1% to 4%
(annual)
(1)%
(1Q23)
(2)% to 1%
(annual)
- Adjusting fleet size to adapt to softer freight market
Net capital expenditures
$350M to $400M
(annual)
$103M
(1Q23)
$350M to $400M
(annual)
TTS Guidance
Dedicated RPTPW* growth
0% to 3%
(annual)
4.6%
(1Q23 vs 1Q22)
0% to 3%
(annual)
- Expect low single-digit increase YoY with difficult
comparisons
One-Way Truckload RPTM*
growth
(3)% to (6)%
(1H23 vs. 1H22)
(3.2)%
(1Q23 vs 1Q22)
(3)% to (6)%
(1H23 vs. 1H22)
- Expect weak OWT freight conditions in 2Q and 3Q, then improving
in 4Q
* Net of fuel surcharge
revenues
Assumptions
- Effective income tax rate of 24.3% in 1Q23 compared to 1Q22 of
24.1%. Expect annual effective tax rate in the range of 24.0% to
25.0%.
- Average truck age of 2.2 years and average trailer age of 5.1
years as of 3/31/23. Expect average truck and trailer ages of 2.2
years and 5.0 years, respectively, as of 12/31/23.
Call Information
Werner Enterprises, Inc. will conduct a conference call to
discuss first quarter 2023 earnings today beginning at 4:00 p.m.
CT. The news release, live webcast of the earnings conference call,
and accompanying slide presentation will be available at werner.com
in the “Investors” section under “News & Events” and then
“Events Calendar.” To participate in the conference call, please
dial (844) 701-1165 (domestic) or (412) 317-5498 (international).
Please mention to the operator that you are dialing in for the
Werner Enterprises call.
A replay of the conference call will be available on May 3, 2023
at approximately 6:00 p.m. CT through June 3, 2023 by dialing (877)
344-7529 (domestic) or (412) 317-0088 (international) and using the
access code 4255949. A replay of the webcast will also be available
at werner.com in the “Investors” section under “News & Events”
and then “Events Calendar.”
About Werner Enterprises
Werner Enterprises, Inc. (Nasdaq: WERN) delivers superior
truckload transportation and logistics services to customers across
the United States, Mexico and Canada. With 2022 revenues of $3.3
billion, an industry-leading modern truck and trailer fleet, over
14,000 talented associates and our innovative Werner EDGE
technology, we are an essential solutions provider for customers
who value the integrity of their supply chain and require safe and
exceptional on-time service. Werner provides Dedicated and One-Way
Truckload services as well as Logistics services that include
truckload brokerage, freight management, intermodal and final mile.
As an industry leader, Werner is deeply committed to promoting
sustainability and supporting diversity, equity and inclusion.
This press release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, as amended. Such
forward-looking statements are based on information presently
available to the Company’s management and are current only as of
the date made. Actual results could also differ materially from
those anticipated as a result of a number of factors, including,
but not limited to, those discussed in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2022.
For those reasons, undue reliance should not be placed on any
forward-looking statement. The Company assumes no duty or
obligation to update or revise any forward-looking statement,
although it may do so from time to time as management believes is
warranted or as may be required by applicable securities law. Any
such updates or revisions may be made by filing reports with the
U.S. Securities and Exchange Commission (“SEC”), through the
issuance of press releases or by other methods of public
disclosure.
Consolidated Financial Information
INCOME STATEMENT
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended
March 31,
2023
2022
$
%
$
%
Operating revenues
$
832,714
100.0
$
764,605
100.0
Operating expenses:
Salaries, wages and benefits
268,315
32.2
241,996
31.6
Fuel
91,414
11.0
88,421
11.6
Supplies and maintenance
68,225
8.2
57,025
7.5
Taxes and licenses
25,425
3.1
23,833
3.1
Insurance and claims
36,485
4.4
27,492
3.6
Depreciation and amortization
74,313
8.9
67,229
8.8
Rent and purchased transportation
220,224
26.4
185,237
24.2
Communications and utilities
4,733
0.6
3,926
0.5
Other
(9,806
)
(1.2
)
(14,065
)
(1.8
)
Total operating expenses
779,328
93.6
681,094
89.1
Operating income
53,386
6.4
83,511
10.9
Other expense (income):
Interest expense
7,916
1.0
1,439
0.2
Interest income
(1,552
)
(0.2
)
(275
)
(0.1
)
Loss on investments in equity
securities
81
—
9,806
1.3
Other
7
—
73
—
Total other expense, net
6,452
0.8
11,043
1.4
Income before income taxes
46,934
5.6
72,468
9.5
Income tax expense
11,400
1.3
17,433
2.3
Net income
35,534
4.3
55,035
7.2
Net income attributable to noncontrolling
interest
(310
)
(0.1
)
(1,286
)
(0.2
)
Net income attributable to Werner
$
35,224
4.2
$
53,749
7.0
Diluted shares outstanding
63,695
65,878
Diluted earnings per share
$
0.55
$
0.82
CONDENSED BALANCE SHEET
(In thousands, except share
amounts)
March 31, 2023
December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
129,591
$
107,240
Accounts receivable, trade, less allowance
of $10,240 and $10,271, respectively
460,999
518,815
Other receivables
29,400
29,875
Inventories and supplies
14,926
14,527
Prepaid taxes, licenses and permits
13,956
17,699
Other current assets
60,904
74,459
Total current assets
709,776
762,615
Property and equipment
2,875,063
2,885,641
Less – accumulated depreciation
1,020,469
1,060,365
Property and equipment, net
1,854,594
1,825,276
Goodwill
129,104
132,717
Intangible assets, net
94,030
81,502
Other non-current assets (1)
328,812
295,145
Total assets
$
3,116,316
$
3,097,255
LIABILITIES, TEMPORARY EQUITY AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
128,955
$
124,483
Current portion of long-term debt
5,000
6,250
Insurance and claims accruals
80,738
78,620
Accrued payroll
43,541
49,793
Accrued expenses
20,057
20,358
Other current liabilities
25,038
30,016
Total current liabilities
303,329
309,520
Long-term debt, net of current portion
686,250
687,500
Other long-term liabilities
58,567
59,677
Insurance and claims accruals, net of
current portion (1)
245,900
244,946
Deferred income taxes
312,724
313,278
Total liabilities
1,606,770
1,614,921
Temporary equity - redeemable
noncontrolling interest
39,009
38,699
Stockholders’ equity:
Common stock, $.01 par value, 200,000,000
shares authorized; 80,533,536
shares issued; 63,376,934 and 63,223,003
shares outstanding, respectively
805
805
Paid-in capital
128,050
129,837
Retained earnings
1,902,858
1,875,873
Accumulated other comprehensive loss
(9,264
)
(11,292
)
Treasury stock, at cost; 17,156,602 and
17,310,533 shares, respectively
(551,912
)
(551,588
)
Total stockholders’ equity
1,470,537
1,443,635
Total liabilities, temporary equity and
stockholders’ equity
$
3,116,316
$
3,097,255
(1) Under the terms of our insurance
policies, we are the primary obligor of the damage award in a
previously disclosed adverse jury verdict, and as such, we have
recorded a $79.2 million receivable from our 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 unaudited condensed balance sheets as of March 31,
2023 and December 31, 2022.
SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands)
Three Months Ended
March 31,
2023
2022
Capital expenditures, net
$
102,743
$
37,074
Cash flow from operations
166,847
154,957
Return on assets (annualized)
4.5
%
8.4
%
Return on equity (annualized)
9.4
%
16.0
%
Segment Financial and Operating Statistics
Information
SEGMENT INFORMATION
(Unaudited)
(In thousands)
Three Months Ended
March 31,
2023
2022
Revenues
Truckload Transportation Services
$
588,330
$
558,417
Werner Logistics
228,669
189,008
Other (1)
20,501
17,513
Corporate
475
389
Subtotal
837,975
765,327
Inter-segment eliminations (2)
(5,261
)
(722
)
Total
$
832,714
$
764,605
Operating
Income
Truckload Transportation Services
$
50,986
$
76,093
Werner Logistics
4,937
8,681
Other (1)
549
445
Corporate
(3,086
)
(1,708
)
Total
$
53,386
$
83,511
(1) Other includes our driver training
schools, transportation-related activities such as third-party
equipment maintenance and equipment leasing, and other business
activities.
(2) Inter-segment eliminations represent
transactions between reporting segments that are eliminated in
consolidation.
OPERATING STATISTICS BY
SEGMENT
(Unaudited)
Three Months Ended
March 31,
2023
2022
% Chg
Truckload
Transportation Services segment
Average trucks in service
8,561
8,238
3.9
%
Average revenues per truck per week
(1)
$
4,432
$
4,411
0.5
%
Total trucks (at quarter end)
Company
8,170
7,960
2.6
%
Independent contractor
305
265
15.1
%
Total trucks
8,475
8,225
3.0
%
Total trailers (at quarter end)
27,440
26,185
4.8
%
One-Way
Truckload
Trucking revenues, net of fuel surcharge
(in 000’s)
$
183,130
$
186,760
(1.9
)%
Average trucks in service
3,191
3,064
4.1
%
Total trucks (at quarter end)
3,130
3,040
3.0
%
Average percentage of empty miles
14.09
%
11.75
%
19.9
%
Average revenues per truck per week
(1)
$
4,414
$
4,690
(5.9
)%
Average % change YOY in revenues per total
mile (1)
(3.2
)%
20.8
%
Average % change YOY in total miles per
truck per week
(2.8
)%
(8.1
)%
Average completed trip length in miles
(loaded)
620
716
(13.4
)%
Dedicated
Trucking revenues, net of fuel surcharge
(in 000’s)
$
310,112
$
285,601
8.6
%
Average trucks in service
5,370
5,174
3.8
%
Total trucks (at quarter end)
5,345
5,185
3.1
%
Average revenues per truck per week
(1)
$
4,441
$
4,247
4.6
%
Werner Logistics
segment
Average trucks in service
39
53
(26.4
)%
Total trucks (at quarter end)
32
54
(40.7
)%
Total trailers (at quarter end)
2,580
1,605
60.7
%
(1) Net of fuel surcharge revenues
Non-GAAP Financial Measures and Reconciliations
To supplement our financial results presented in accordance with
generally accepted accounting principles in the United States of
America (“GAAP”), we provide certain non-GAAP financial measures as
defined by the SEC Regulation G, including non-GAAP adjusted
operating income; non-GAAP adjusted operating margin; non-GAAP
adjusted operating margin, net of fuel surcharge; non-GAAP adjusted
net income attributable to Werner; non-GAAP adjusted diluted
earnings per share; non-GAAP adjusted operating revenues, net of
fuel surcharge; non-GAAP adjusted operating expenses; non-GAAP
adjusted operating expenses, net of fuel surcharge; non-GAAP
adjusted operating ratio; and non-GAAP adjusted operating ratio,
net of fuel surcharge. We believe these non-GAAP financial measures
provide a more useful comparison of our performance from period to
period because they exclude the effect of items that, in our
opinion, do not reflect our core operating performance. Our
non-GAAP financial measures are not meant to be considered in
isolation or as substitutes for their comparable GAAP measures and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP. There are limitations
to using non-GAAP financial measures. Although we believe that they
improve comparability in analyzing our period to period
performance, they could limit comparability to other companies in
our industry if those companies define these measures differently.
Because of these limitations, our non-GAAP financial measures
should not be considered measures of income generated by our
business. Management compensates for these limitations by primarily
relying on GAAP results and using non-GAAP financial measures on a
supplemental basis.
The following tables present reconciliations of each non-GAAP
financial measure to its most directly comparable GAAP financial
measure as required by SEC Regulation G. In addition, information
regarding each of the excluded items as well as our reasons for
excluding them from our non-GAAP results is provided below.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES – CONSOLIDATED
(unaudited)
(In thousands, except per share
amounts)
Three Months Ended March 31,
2023
2022
Non-GAAP Adjusted Operating Income
and
Non-GAAP Adjusted
Operating Margin (1)
$
% of Op. Rev.
$
% of Op. Rev.
Operating income and operating margin –
(GAAP)
$
53,386
6.4
%
$
83,511
10.9
%
Non-GAAP adjustments:
Insurance and claims (2)
1,387
0.2
%
1,321
0.2
%
Amortization of intangible assets (3)
2,772
0.3
%
1,359
0.2
%
Non-GAAP adjusted operating income and
non-GAAP adjusted operating margin
$
57,545
6.9
%
$
86,191
11.3
%
Three Months Ended March 31,
2023
2022
Non-GAAP Adjusted Net Income
Attributable to Werner and
Non-GAAP
Adjusted Diluted
EPS (1)
$
Diluted EPS
$
Diluted EPS
Net income attributable to Werner and
diluted EPS – (GAAP)
$
35,224
$
0.55
$
53,749
$
0.82
Non-GAAP adjustments:
Insurance and claims (2)
1,387
0.02
1,321
0.02
Amortization of intangible assets, net of
amount attributable to noncontrolling interest (3)
2,600
0.04
1,187
0.02
Loss on investments in equity securities
(4)
81
—
9,806
0.15
Income tax effect of above adjustments
(5)
(1,027
)
(0.01
)
(3,097
)
(0.05
)
Non-GAAP adjusted net income attributable
to
Werner and non-GAAP adjusted diluted
EPS
$
38,265
$
0.60
$
62,966
$
0.96
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES – TRUCKLOAD TRANSPORTATION SERVICES (TTS)
SEGMENT
(unaudited)
(In thousands)
Three Months Ended March 31,
2023
2022
Non-GAAP Adjusted Operating Income
and
Non-GAAP Adjusted
Operating Margin (1)
$
% of Op. Rev.
$
% of Op. Rev.
Operating income and operating margin –
(GAAP)
$
50,986
8.7
%
$
76,093
13.6
%
Non-GAAP adjustments:
Insurance and claims (2)
1,387
0.2
%
1,321
0.2
%
Amortization of intangible assets (3)
1,352
0.2
%
859
0.2
%
Non-GAAP adjusted operating income and
non-GAAP adjusted operating margin
$
53,725
9.1
%
$
78,273
14.0
%
Three Months Ended March 31,
2023
2022
Non-GAAP Adjusted Operating Expenses
and
Non-GAAP Adjusted
Operating Ratio (1)
$
% of Op. Rev.
$
% of Op. Rev.
Operating expenses and operating ratio –
(GAAP)
$
537,344
91.3
%
$
482,324
86.4
%
Non-GAAP adjustments:
Insurance and claims (2)
(1,387
)
(0.2
)%
(1,321
)
(0.2
)%
Amortization of intangible assets (3)
(1,352
)
(0.2
)%
(859
)
(0.2
)%
Non-GAAP adjusted operating expenses
and
non-GAAP adjusted operating ratio
$
534,605
90.9
%
$
480,144
86.0
%
Three Months Ended
March 31,
Non-GAAP Adjusted Operating Expenses,
Net of Fuel Surcharge;
Non-GAAP Adjusted Operating Margin, Net
of Fuel Surcharge;
and Non-GAAP
Adjusted Operating Ratio, Net of Fuel Surcharge (1)
2023
2022
$
$
Operating revenues – (GAAP)
$
588,330
$
558,417
Less: Trucking fuel surcharge (6)
(88,301
)
(79,815
)
Operating revenues, net of fuel surcharge
– (Non-GAAP)
500,029
478,602
Operating expenses – (GAAP)
537,344
482,324
Non-GAAP adjustments:
Trucking fuel surcharge (6)
(88,301
)
(79,815
)
Insurance and claims (2)
(1,387
)
(1,321
)
Amortization of intangible assets (3)
(1,352
)
(859
)
Non-GAAP adjusted operating expenses, net
of fuel surcharge
446,304
400,329
Non-GAAP adjusted operating income
$
53,725
$
78,273
Non-GAAP adjusted operating margin, net of
fuel surcharge
10.7
%
16.4
%
Non-GAAP adjusted operating ratio, net of
fuel surcharge
89.3
%
83.6
%
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES – WERNER LOGISTICS SEGMENT
(unaudited)
(In thousands)
Three Months Ended March 31,
2023
2022
Non-GAAP Adjusted Operating Income
and
Non-GAAP Adjusted
Operating Margin (1)
$
% of Op. Rev.
$
% of Op. Rev.
Operating income and operating margin –
(GAAP)
$
4,937
2.2
%
$
8,681
4.6
%
Non-GAAP adjustments:
Amortization of intangible assets (3)
1,420
0.6
%
500
0.3
%
Non-GAAP adjusted operating income and
non-GAAP adjusted operating margin
$
6,357
2.8
%
$
9,181
4.9
%
(1) Non-GAAP adjusted operating income;
non-GAAP adjusted operating margin; non-GAAP adjusted operating
margin, net of fuel surcharge; non-GAAP adjusted net income
attributable to Werner; non-GAAP adjusted diluted earnings per
share; non-GAAP adjusted operating revenues, net of fuel surcharge;
non-GAAP adjusted operating expenses; non-GAAP adjusted operating
expenses, net of fuel surcharge; non-GAAP adjusted operating ratio;
and non-GAAP adjusted operating ratio, net of fuel surcharge should
be considered in addition to, rather than as substitutes for, GAAP
operating income; GAAP operating margin; GAAP net income
attributable to Werner; GAAP diluted earnings per share; GAAP
operating revenues; GAAP operating expenses; and GAAP operating
ratio, which are their most directly comparable GAAP financial
measures.
(2) We accrued pre-tax insurance and
claims expense for interest related to a previously disclosed
excess adverse jury verdict rendered on May 17, 2018 in a lawsuit
arising from a December 2014 accident. The Company is appealing
this verdict. Additional information about the accident was
included in our Current Report on Form 8-K dated May 17, 2018.
Under our insurance policies in effect on the date of this
accident, our maximum liability for this accident is $10.0 million
(plus pre-judgment and post-judgment interest) with premium-based
insurance coverage that exceeds the jury verdict amount. We
continue to accrue pre-tax insurance and claims expense for
interest at $0.5 million per month until such time as the outcome
of our appeal is finalized. Management believes excluding the
effect of this item provides a more useful comparison of our
performance from period to period. This item is included in our
Truckload Transportation Services segment in our Segment
Information table.
(3) Amortization expense related to
intangible assets acquired in our business acquisitions is excluded
because management does not believe it is indicative of our core
operating performance. This item is included in our Truckload
Transportation Services and Werner Logistics segments.
(4) Represents non-operating
mark-to-market adjustments for unrealized gains/losses on our
minority equity investments, which we account for under Accounting
Standards Codification 321, Investments – Equity Securities.
Management believes excluding the effect of gains/losses on our
investments in equity securities provides a more useful comparison
of our performance from period to period. We record changes in the
value of our investments in equity securities in other expense
(income) in our Income Statement.
(5) The income tax effect of the non-GAAP
adjustments is calculated using the incremental income tax rate
excluding discrete items, and the income tax effect for 2022 has
been updated to reflect the annual incremental income tax rate.
(6) Fluctuating fuel prices and fuel
surcharge revenues impact the total company operating ratio and the
TTS segment operating ratio when fuel surcharges are reported on a
gross basis as revenues versus netting the fuel surcharges against
fuel expenses. Management believes netting fuel surcharge revenues,
which are generally a more volatile source of revenue, against fuel
expenses provides a more consistent basis for comparing the results
of operations from period to period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005630/en/
Christopher D. Wikoff Executive Vice President, Treasurer and
Chief Financial Officer (402) 894-3700
Werner Enterprises (NASDAQ:WERN)
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