Second Quarter 2023 Highlights (all metrics compared to
second quarter 2022)
- Total revenues of $811.1 million, down 3%
- Operating income of $47.2 million, down 37%; non-GAAP adjusted
operating income of $51.1 million, down 34%
- Operating margin of 5.8%, down 320 basis points; non-GAAP
adjusted operating margin of 6.3%, down 300 basis points
- Diluted EPS of $0.47, down 58%; non-GAAP adjusted diluted EPS
of $0.52, down 40%
Werner Enterprises, Inc. (Nasdaq: WERN), a premier
transportation and logistics provider, today reported results for
the second quarter ended June 30, 2023.
“While macroeconomic conditions and continued softness in the
freight market remained challenging in the second quarter 2023, we
grew total revenue net of fuel year-over-year led by our Logistics
segment that grew for the 11th-straight quarter, and our Dedicated
business that remained steady with continued revenue-per-truck
growth,” said Derek J. Leathers, Chairman, President and CEO. “We
are progressing our cost savings program with moderating expense
trends emerging. Our results continue to reflect a business model
that is durable, diversified and resilient. The combination of our
talented associates, operational scale, reputation for service
excellence and innovation positions us well as the freight market
strengthens.”
Total revenues for the quarter were $811.1 million, a decrease
of $25.2 million compared to the prior year quarter, due to a $43.4
million decrease in Truckload Transportation Services (“TTS”)
revenues, partially offset by Logistics revenues growth of $20.7
million or 10%. The TTS revenue decline was largely due to $42.0
million lower fuel surcharge revenues. Net of fuel surcharges,
consolidated total revenues grew during the quarter by $16.8
million or 2%.
Operating income of $47.2 million decreased $27.7 million, or
37%, while operating margin of 5.8% decreased 320 basis points. On
a non-GAAP basis, adjusted operating income of $51.1 million
decreased $26.5 million, or 34%. Adjusted operating margin of 6.3%
declined 300 basis points from 9.3% for the same quarter last
year.
TTS operating income decreased by $18.8 million and TTS adjusted
operating income decreased by $18.3 million. Logistics operating
income decreased $8.1 million and adjusted operating income
decreased by $7.5 million. Corporate and Other (including driving
schools) operating income decreased by $0.7 million.
Net interest expense of $6.2 million increased $4.8 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 25.2%, compared to 24.4% in second
quarter 2022.
During second quarter 2023, we had net losses on our strategic
investments of $0.8 million, or $0.01 per share, compared to net
gains of $24.1 million, or $0.28 per share, in second quarter 2022.
Consistent with prior reporting, increases or decreases to the
values of these strategic investments are adjusted out for
determining non-GAAP adjusted net income and non-GAAP adjusted
earnings per share.
Net income attributable to Werner of $29.9 million decreased
59%. On a non-GAAP basis, adjusted net income attributable to
Werner of $33.2 million decreased 41%. Diluted EPS of $0.47
decreased 58%. On a non-GAAP basis, adjusted diluted EPS of $0.52
decreased 40%.
Key Consolidated Financial Metrics
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except per share
amounts)
2023
2022
Y/Y
Change
2023
2022
Y/Y
Change
Total revenues
$
811,096
$
836,276
(3
)%
$
1,643,810
$
1,600,881
3
%
Truckload Transportation Services
revenues
570,192
613,616
(7
)%
1,158,522
1,172,033
(1
)%
Werner Logistics revenues
224,549
203,861
10
%
453,218
392,869
15
%
Operating income
47,198
74,923
(37
)%
100,584
158,434
(37
)%
Operating margin
5.8
%
9.0
%
(320) bps
6.1
%
9.9
%
(380) bps
Net income attributable to Werner
29,881
72,290
(59
)%
65,105
126,039
(48
)%
Diluted earnings per share
0.47
1.12
(58
)%
1.02
1.93
(47
)%
Adjusted operating income (1)
51,103
77,603
(34
)%
108,648
163,794
(34
)%
Adjusted operating margin (1)
6.3
%
9.3
%
(300) bps
6.6
%
10.2
%
(360) bps
Adjusted net income attributable to Werner
(1)
33,243
56,132
(41
)%
71,508
119,098
(40
)%
Adjusted diluted earnings per share
(1)
0.52
0.87
(40
)%
1.12
1.82
(38
)%
(1) See attached Reconciliation of
Non-GAAP Financial Measures - Consolidated.
Truckload Transportation Services (TTS) Segment
- Revenues of $570.2 million decreased $43.4 million; Trucking
revenues, net of fuel surcharges, decreased less than 1%
- Operating income of $45.2 million decreased $18.8 million;
non-GAAP adjusted operating income of $47.9 million decreased $18.3
million due to a lower rate per mile, higher salaries, wages and
benefits, and lower gains on the sale of property and
equipment
- Operating margin of 7.9% decreased 250 basis points from 10.4%;
non-GAAP adjusted operating margin of 8.4% decreased 240 basis
points from 10.8%
- Non-GAAP adjusted operating margin, net of fuel, of 9.7%
decreased 370 basis points from 13.4%
- Average segment trucks in service totaled 8,351, an increase of
65 trucks year over year, or 0.8%
- Dedicated unit trucks at quarter end totaled 5,260, or 63% of
the total TTS segment fleet, compared to 5,320 trucks, or 63%, a
year ago
- Average revenues per truck per week decreased 1.1% for TTS and
increased 1.5% for Dedicated
During second quarter 2023, Dedicated experienced steady freight
demand from our customers. One-Way Truckload customer freight
demand during second quarter 2023 began to stabilize as the quarter
progressed in terms of revenue per truck and loaded miles, but was
much weaker than normal compared to a seasonally strong freight
market in second quarter 2022.
Key Truckload Transportation Services Segment Financial
Metrics
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands)
2023
2022
Y/Y
Change
2023
2022
Y/Y
Change
Trucking revenues, net of fuel
surcharge
$
486,626
$
488,208
0
%
$
979,868
$
960,569
2
%
Trucking fuel surcharge revenues
76,677
118,641
(35
)%
164,978
198,456
(17
)%
Non-trucking and other revenues
6,889
6,767
2
%
13,676
13,008
5
%
Total revenues
$
570,192
$
613,616
(7
)%
$
1,158,522
$
1,172,033
(1
)%
Operating income
45,159
64,004
(29
)%
96,145
140,097
(31
)%
Operating margin
7.9
%
10.4
%
(250) bps
8.3
%
12.0
%
(370) bps
Operating ratio
92.1
%
89.6
%
250 bps
91.7
%
88.0
%
370 bps
Adjusted operating income (1)
47,915
66,184
(28
)%
101,640
144,457
(30
)%
Adjusted operating margin (1)
8.4
%
10.8
%
(240) bps
8.8
%
12.3
%
(350) bps
Adjusted operating margin, net of fuel
surcharge (1)
9.7
%
13.4
%
(370) bps
10.2
%
14.8
%
(460) bps
Adjusted operating ratio (1)
91.6
%
89.2
%
240 bps
91.2
%
87.7
%
350 bps
Adjusted operating ratio, net of fuel
surcharge (1)
90.3
%
86.6
%
370 bps
89.8
%
85.2
%
460 bps
(1) See attached Reconciliation of
Non-GAAP Financial Measures - Truckload Transportation Services
(TTS) Segment.
Werner Logistics Segment
- Revenues of $224.5 million increased $20.7 million, or 10%
- Operating income of $4.4 million decreased $8.1 million
- Operating margin of 1.9% decreased 420 basis points from
6.1%
- Adjusted operating income of $5.5 million decreased $7.5
million
- Adjusted operating margin of 2.4% decreased 400 basis points
from 6.4%
Truckload Logistics revenues (77% of Logistics revenues)
increased 30%, driven by an increase in shipments due to the
November 2022 ReedTMS acquisition, partially offset by a decline in
revenues per shipment.
Final Mile revenues (12% of Logistics revenues) increased $3.5
million and 15%.
Intermodal revenues (11% of Logistics revenues) decreased 49%,
due to a decline in shipments and lower revenues per shipment.
Logistics operating income decreased $8.1 million and adjusted
operating income decreased $7.5 million in second quarter 2023, due
to a seasonally soft and competitive freight and rate market in
second quarter 2023 compared to a seasonally strong freight market
in second quarter 2022.
Key Werner Logistics Segment Financial Metrics
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands)
2023
2022
Y/Y
Change
2023
2022
Y/Y
Change
Total revenues
$
224,549
$
203,861
10
%
$
453,218
$
392,869
15
%
Operating expenses:
Purchased transportation expense
185,397
166,241
12
%
373,895
323,762
15
%
Other operating expenses
34,797
25,130
38
%
70,031
47,936
46
%
Total operating expenses
220,194
191,371
15
%
443,926
371,698
19
%
Operating income
$
4,355
$
12,490
(65
)%
$
9,292
$
21,171
(56
)%
Operating margin
1.9
%
6.1
%
(420) bps
2.1
%
5.4
%
(330) bps
Adjusted operating income (1)
$
5,504
$
12,990
(58
)%
$
11,861
$
22,171
(47
)%
Adjusted operating margin (1)
2.4
%
6.4
%
(400) bps
2.6
%
5.6
%
(300) bps
(1) See attached Reconciliation of
Non-GAAP Financial Measures - Werner Logistics Segment.
Cash Flow and Capital Allocation
Cash flow from operations in second quarter 2023 was $114.9
million compared to $112.6 million in second quarter 2022, an
increase of 2%.
Net capital expenditures in second quarter 2023 were $151.4
million compared to $116.3 million in second quarter 2022, an
increase of 30%. We plan to continue to invest in new trucks,
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 2.1 years and 5.1 years, respectively, as
of June 30, 2023.
Gains on sales of property and equipment in second quarter 2023
were $11.9 million, or $0.14 per share, compared to $20.7 million,
or $0.24 per share, in second 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 second
quarter 2023. As of June 30, 2023, we had 2.3 million shares
remaining under our share repurchase authorization.
As of June 30, 2023, we had $47 million of cash and cash
equivalents and $1.5 billion of stockholders’ equity. Total debt
outstanding was $640 million at June 30, 2023. After considering
letters of credit issued, we had available liquidity consisting of
cash and cash equivalents and available borrowing capacity as of
June 30, 2023 of $511 million.
2023 Guidance Metrics and Assumptions
The following table summarizes our updated 2023 guidance and
assumptions:
Prior
(as of 5/3/23)
Actual
(as of 6/30/23)
New
(as of 8/3/23)
Commentary
TTS truck count from BoY to
EoY
(2)% to 1%
(annual)
(4)%
(YTD23)
(4)% to (2)%
(annual)
- Adjusting fleet size to adapt to softer freight market
Net capital expenditures
$350M to $400M
(annual)
$254M
(YTD23)
$400M to $450M
(annual)
- Greater pace of refreshing the fleet to reduce average
equipment age
TTS Guidance
Dedicated RPTPW* growth
0% to 3%
(annual)
3.0%
(1H23 vs 1H22)
0% to 3%
(annual)
- Expect low single-digit percent increase YoY with difficult
comparisons
One-Way Truckload RPTM*
growth
(6)% to (3)%
(1H23 vs. 1H22)
(4.2)%
(1H23 vs 1H22)
(7)% to (4)%
(3Q23 vs. 3Q22)
- Stabilizing OWT freight conditions in 3Q, then modest seasonal
improvement in 4Q
* Net of fuel surcharge revenues
Assumptions
- Effective income tax rate of 25.2% in 2Q23 compared to 2Q22 of
24.4%. Expect annual effective tax rate in the range of 24.0% to
25.0%.
- Average truck age of 2.1 years and average trailer age of 5.1
years as of 6/30/23. 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 second 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 August 3,
2023 at approximately 6:00 p.m. CT through September 3, 2023 by
dialing (877) 344-7529 (domestic) or (412) 317-0088 (international)
and using the access code 2120201. 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 and subsequently
filed Quarterly Reports on Form 10-Q.
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
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
$
%
$
%
$
%
$
%
Operating revenues
$
811,096
100.0
$
836,276
100.0
$
1,643,810
100.0
$
1,600,881
100.0
Operating expenses:
Salaries, wages and benefits
266,373
32.9
253,639
30.3
534,688
32.5
495,635
31.0
Fuel
77,740
9.6
125,446
15.0
169,154
10.3
213,867
13.3
Supplies and maintenance
64,964
8.0
62,656
7.5
133,189
8.1
119,681
7.4
Taxes and licenses
25,408
3.1
23,791
2.8
50,833
3.1
47,624
3.0
Insurance and claims
36,806
4.5
41,071
4.9
73,291
4.4
68,563
4.3
Depreciation and amortization
74,898
9.2
68,471
8.2
149,211
9.1
135,700
8.5
Rent and purchased transportation
217,086
26.8
197,116
23.6
437,310
26.6
382,353
23.9
Communications and utilities
4,669
0.6
3,781
0.4
9,402
0.6
7,707
0.5
Other
(4,046
)
(0.5
)
(14,618
)
(1.7
)
(13,852
)
(0.8
)
(28,683
)
(1.8
)
Total operating expenses
763,898
94.2
761,353
91.0
1,543,226
93.9
1,442,447
90.1
Operating income
47,198
5.8
74,923
9.0
100,584
6.1
158,434
9.9
Other expense (income):
Interest expense
8,139
1.0
1,787
0.2
16,055
1.0
3,226
0.2
Interest income
(1,899
)
(0.2
)
(313
)
—
(3,451
)
(0.2
)
(588
)
—
Loss (gain) on investments in equity
securities, net
(79
)
—
(24,095
)
(2.8
)
2
—
(14,289
)
(0.9
)
Loss from equity method investment
844
0.1
—
—
844
—
—
—
Other
86
—
126
—
93
—
199
—
Total other expense (income)
7,091
0.9
(22,495
)
(2.6
)
13,543
0.8
(11,452
)
(0.7
)
Income before income taxes
40,107
4.9
97,418
11.6
87,041
5.3
169,886
10.6
Income tax expense
10,087
1.2
23,809
2.8
21,487
1.3
41,242
2.6
Net income
30,020
3.7
73,609
8.8
65,554
4.0
128,644
8.0
Net income attributable to noncontrolling
interest
(139
)
—
(1,319
)
(0.2
)
(449
)
—
(2,605
)
(0.1
)
Net income attributable to Werner
$
29,881
3.7
$
72,290
8.6
$
65,105
4.0
$
126,039
7.9
Diluted shares outstanding
63,687
64,726
63,689
65,327
Diluted earnings per share
$
0.47
$
1.12
$
1.02
$
1.93
CONDENSED BALANCE SHEET
(In thousands, except share
amounts)
June 30, 2023
December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
46,502
$
107,240
Accounts receivable, trade, less allowance
of $10,360 and $10,271, respectively
437,644
518,815
Other receivables
33,312
29,875
Inventories and supplies
16,026
14,527
Prepaid taxes, licenses and permits
8,687
17,699
Other current assets
67,164
74,459
Total current assets
609,335
762,615
Property and equipment
2,976,274
2,885,641
Less – accumulated depreciation
1,031,850
1,060,365
Property and equipment, net
1,944,424
1,825,276
Goodwill
129,104
132,717
Intangible assets, net
91,512
81,502
Other non-current assets (1)
330,818
295,145
Total assets
$
3,105,193
$
3,097,255
LIABILITIES, TEMPORARY EQUITY AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Checks issued in excess of cash
balances
$
11,530
$
—
Accounts payable
119,744
124,483
Current portion of long-term debt
3,750
6,250
Insurance and claims accruals
81,932
78,620
Accrued payroll
47,375
49,793
Accrued expenses
18,831
20,358
Other current liabilities
31,967
30,016
Total current liabilities
315,129
309,520
Long-term debt, net of current portion
636,250
687,500
Other long-term liabilities
55,802
59,677
Insurance and claims accruals, net of
current portion (1)
239,897
244,946
Deferred income taxes
321,897
313,278
Total liabilities
1,568,975
1,614,921
Temporary equity - redeemable
noncontrolling interest
39,148
38,699
Stockholders’ equity:
Common stock, $.01 par value, 200,000,000
shares authorized; 80,533,536
shares issued; 63,389,496 and 63,223,003
shares outstanding, respectively
805
805
Paid-in capital
130,694
129,837
Retained earnings
1,923,865
1,875,873
Accumulated other comprehensive loss
(6,623
)
(11,292
)
Treasury stock, at cost; 17,144,040 and
17,310,533 shares, respectively
(551,671
)
(551,588
)
Total stockholders’ equity
1,497,070
1,443,635
Total liabilities, temporary equity and
stockholders’ equity
$
3,105,193
$
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 June 30, 2023 and December
31, 2022.
SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Capital expenditures, net
$
151,448
$
116,349
$
254,191
$
153,423
Cash flow from operations
114,943
112,570
281,790
267,527
Return on assets (annualized)
3.9
%
10.9
%
4.2
%
9.7
%
Return on equity (annualized)
7.9
%
21.3
%
8.7
%
18.7
%
Segment Financial and Operating Statistics
Information
SEGMENT INFORMATION
(Unaudited)
(In thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Revenues
Truckload Transportation Services
$
570,192
$
613,616
$
1,158,522
$
1,172,033
Werner Logistics
224,549
203,861
453,218
392,869
Other (1)
19,376
18,946
39,877
36,459
Corporate
501
478
976
867
Subtotal
814,618
836,901
1,652,593
1,602,228
Inter-segment eliminations (2)
(3,522
)
(625
)
(8,783
)
(1,347
)
Total
$
811,096
$
836,276
$
1,643,810
$
1,600,881
Operating
Income
Truckload Transportation Services
$
45,159
$
64,004
$
96,145
$
140,097
Werner Logistics
4,355
12,490
9,292
21,171
Other (1)
(86
)
461
463
906
Corporate
(2,230
)
(2,032
)
(5,316
)
(3,740
)
Total
$
47,198
$
74,923
$
100,584
$
158,434
(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
June 30,
Six Months Ended
June 30,
2023
2022
% Chg
2023
2022
% Chg
Truckload
Transportation Services segment
Average trucks in service
8,351
8,286
0.8
%
8,456
8,262
2.3
%
Average revenues per truck per week
(1)
$
4,483
$
4,532
(1.1
)%
$
4,457
$
4,472
(0.3
)%
Total trucks (at quarter end)
Company
8,000
8,145
(1.8
)%
8,000
8,145
(1.8
)%
Independent contractor
285
255
11.8
%
285
255
11.8
%
Total trucks
8,285
8,400
(1.4
)%
8,285
8,400
(1.4
)%
Total trailers (at quarter end)
27,110
25,905
4.7
%
27,110
25,905
4.7
%
One-Way
Truckload
Trucking revenues, net of fuel surcharge
(in 000’s)
$
176,824
$
188,173
(6.0
)%
$
359,954
$
374,933
(4.0
)%
Average trucks in service
3,075
3,102
(0.9
)%
3,133
3,083
1.6
%
Total trucks (at quarter end)
3,025
3,080
(1.8
)%
3,025
3,080
(1.8
)%
Average percentage of empty miles
14.01
%
12.39
%
13.1
%
14.05
%
12.07
%
16.4
%
Average revenues per truck per week
(1)
$
4,423
$
4,665
(5.2
)%
$
4,419
$
4,677
(5.5
)%
Average % change YOY in revenues per total
mile (1)
(5.2
)%
13.7
%
(4.2
)%
17.1
%
Average % change YOY in total miles per
truck per week
0.1
%
(12.9
)%
(1.3
)%
(10.5
)%
Average completed trip length in miles
(loaded)
604
692
(12.7
)%
612
704
(13.1
)%
Dedicated
Trucking revenues, net of fuel surcharge
(in 000’s)
$
309,802
$
300,035
3.3
%
$
619,914
$
585,636
5.9
%
Average trucks in service
5,276
5,184
1.8
%
5,323
5,179
2.8
%
Total trucks (at quarter end)
5,260
5,320
(1.1
)%
5,260
5,320
(1.1
)%
Average revenues per truck per week
(1)
$
4,517
$
4,452
1.5
%
$
4,479
$
4,349
3.0
%
Werner Logistics
segment
Average trucks in service
33
58
(43.1
)%
36
55
(34.5
)%
Total trucks (at quarter end)
32
57
(43.9
)%
32
57
(43.9
)%
Total trailers (at quarter end)
2,885
1,920
50.3
%
2,885
1,920
50.3
%
(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 June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Non-GAAP Adjusted Operating Income
and
Non-GAAP Adjusted
Operating Margin (1)
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
Operating income and operating margin –
(GAAP)
$
47,198
5.8
%
$
74,923
9.0
%
$
100,584
6.1
%
$
158,434
9.9
%
Non-GAAP adjustments:
Insurance and claims (2)
1,387
0.2
%
1,321
0.1
%
2,774
0.2
%
2,642
0.1
%
Amortization of intangible assets (3)
2,518
0.3
%
1,359
0.2
%
5,290
0.3
%
2,718
0.2
%
Non-GAAP adjusted operating income and
non-GAAP adjusted operating margin
$
51,103
6.3
%
$
77,603
9.3
%
$
108,648
6.6
%
$
163,794
10.2
%
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Non-GAAP Adjusted Net Income
Attributable to Werner and
Non-GAAP
Adjusted Diluted
EPS (1)
$
Diluted EPS
$
Diluted EPS
$
Diluted EPS
$
Diluted EPS
Net income attributable to Werner and
diluted EPS – (GAAP)
$
29,881
$
0.47
$
72,290
$
1.12
$
65,105
$
1.02
$
126,039
$
1.93
Non-GAAP adjustments:
Insurance and claims (2)
1,387
0.02
1,321
0.02
2,774
0.04
2,642
0.04
Amortization of intangible assets, net of
amount attributable to noncontrolling interest (3)
2,346
0.04
1,187
0.02
4,946
0.08
2,374
0.04
Loss (gain) on investments in equity
securities, net (4)
(79
)
—
(24,095
)
(0.37
)
2
—
(14,289
)
(0.22
)
Loss from equity method investment (5)
844
0.01
—
—
844
0.01
—
—
Income tax effect of above adjustments
(6)
(1,136
)
(0.02
)
5,429
0.08
(2,163
)
(0.03
)
2,332
0.03
Non-GAAP adjusted net income attributable
to
Werner and non-GAAP adjusted diluted
EPS
$
33,243
$
0.52
$
56,132
$
0.87
$
71,508
$
1.12
$
119,098
$
1.82
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES – TRUCKLOAD TRANSPORTATION SERVICES (TTS)
SEGMENT
(unaudited)
(In thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Non-GAAP Adjusted Operating Income
and
Non-GAAP Adjusted
Operating Margin (1)
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
Operating income and operating margin –
(GAAP)
$
45,159
7.9
%
$
64,004
10.4
%
$
96,145
8.3
%
$
140,097
12.0
%
Non-GAAP adjustments:
Insurance and claims (2)
1,387
0.3
%
1,321
0.2
%
2,774
0.3
%
2,642
0.2
%
Amortization of intangible assets (3)
1,369
0.2
%
859
0.2
%
2,721
0.2
%
1,718
0.1
%
Non-GAAP adjusted operating income and
non-GAAP adjusted operating margin
$
47,915
8.4
%
$
66,184
10.8
%
$
101,640
8.8
%
$
144,457
12.3
%
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Non-GAAP Adjusted Operating Expenses
and
Non-GAAP Adjusted
Operating Ratio (1)
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
Operating expenses and operating ratio –
(GAAP)
$
525,033
92.1
%
$
549,612
89.6
%
$
1,062,377
91.7
%
$
1,031,936
88.0
%
Non-GAAP adjustments:
Insurance and claims (2)
(1,387
)
(0.3
)%
(1,321
)
(0.2
)%
(2,774
)
(0.3
)%
(2,642
)
(0.2
)%
Amortization of intangible assets (3)
(1,369
)
(0.2
)%
(859
)
(0.2
)%
(2,721
)
(0.2
)%
(1,718
)
(0.1
)%
Non-GAAP adjusted operating expenses
and
non-GAAP adjusted operating ratio
$
522,277
91.6
%
$
547,432
89.2
%
$
1,056,882
91.2
%
$
1,027,576
87.7
%
Three Months Ended
June 30,
Six Months Ended
June 30,
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
2023
2022
$
$
$
$
Operating revenues – (GAAP)
$
570,192
$
613,616
$
1,158,522
$
1,172,033
Less: Trucking fuel surcharge (7)
(76,677
)
(118,641
)
(164,978
)
(198,456
)
Operating revenues, net of fuel surcharge
– (Non-GAAP)
493,515
494,975
993,544
973,577
Operating expenses – (GAAP)
525,033
549,612
1,062,377
1,031,936
Non-GAAP adjustments:
Trucking fuel surcharge (7)
(76,677
)
(118,641
)
(164,978
)
(198,456
)
Insurance and claims (2)
(1,387
)
(1,321
)
(2,774
)
(2,642
)
Amortization of intangible assets (3)
(1,369
)
(859
)
(2,721
)
(1,718
)
Non-GAAP adjusted operating expenses, net
of fuel surcharge
445,600
428,791
891,904
829,120
Non-GAAP adjusted operating income
$
47,915
$
66,184
$
101,640
$
144,457
Non-GAAP adjusted operating margin, net of
fuel surcharge
9.7
%
13.4
%
10.2
%
14.8
%
Non-GAAP adjusted operating ratio, net of
fuel surcharge
90.3
%
86.6
%
89.8
%
85.2
%
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES –
WERNER LOGISTICS SEGMENT
(unaudited)
(In thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Non-GAAP Adjusted Operating Income
and
Non-GAAP Adjusted
Operating Margin (1)
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
$
% of Op. Rev.
Operating income and operating margin –
(GAAP)
$
4,355
1.9
%
$
12,490
6.1
%
$
9,292
2.1
%
$
21,171
5.4
%
Non-GAAP adjustments:
Amortization of intangible assets (3)
1,149
0.5
%
500
0.3
%
2,569
0.5
%
1,000
0.2
%
Non-GAAP adjusted operating income and
non-GAAP adjusted operating margin
$
5,504
2.4
%
$
12,990
6.4
%
$
11,861
2.6
%
$
22,171
5.6
%
(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 (“ASC”) 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) Represents earnings/losses from our equity method
investment, which we account for under ASC 323, Investments -
Equity Method and Joint Ventures. Management believes excluding the
effect of earnings/losses from our equity method investment
provides a more useful comparison of our performance from period to
period. We record earnings/losses from our equity method investment
in other expense (income) in our Income Statement.
(6) 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.
(7) 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/20230803184286/en/
Christopher D. Wikoff Executive Vice President, Treasurer and
Chief Financial Officer (402) 894-3700
Werner Enterprises (NASDAQ:WERN)
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