WERN Werner Enterprises Inc

Third Quarter 2023 Highlights (all metrics compared to third quarter 2022)

• Total revenues of $817.7 million, down 1%
• Operating income of $37.9 million, down 50%; non-GAAP adjusted operating income of $41.9 million, down 47%
• Operating margin of 4.6%, down 460 basis points; non-GAAP adjusted operating margin of 5.1%, down 450 basis points
• Diluted EPS of $0.37, down 57%; non-GAAP adjusted diluted EPS of $0.42, down 53%

Werner Enterprises, Inc. (Nasdaq: WERN), a premier transportation and logistics provider, today reported results for the third quarter ended September 30, 2023.

“Despite a continued challenging economic backdrop and soft freight market, in the third quarter 2023, we grew total revenue net of fuel year-over-year led by our Logistics segment that grew revenues for the 12th-straight quarter, and our Dedicated business that remained steady with near-flat year-over-year revenue-per-truck,” said Derek J. Leathers, Chairman, President and CEO. “Pricing and margin pressures persist in Logistics, while soft freight demand has reduced overall fleet size in Truckload Transportation Services (“TTS”) and we are seeing lower equipment gains. Offsetting these impacts and ongoing inflationary headwinds are certain moderating expense categories from our cost saving efforts. Our results continue to reflect a business model that is durable, diversified and resilient despite an extraordinary and extended down cycle. The combination of our talented associates, cycle-tested management team, scale, reputation, and innovation positions us well to navigate, grow and expand margin as the freight market strengthens.”

Total revenues for the quarter were $817.7 million, a decrease of $9.9 million compared to the prior year quarter, due to a $49.7 million decrease in TTS revenues, partially offset by Logistics revenues growth of $43.1 million or 23% including the ReedTMS acquisition. The TTS revenue decline was largely due to $28.4 million lower fuel surcharge revenues. Net of fuel surcharges, consolidated total revenues grew during the quarter by $18.6 million or 3%.

Operating income of $37.9 million decreased $38.4 million, or 50%, while operating margin of 4.6% decreased 460 basis points. On a non-GAAP basis, adjusted operating income of $41.9 million decreased $37.6 million, or 47%. Adjusted operating margin of 5.1% declined 450 basis points from 9.6% for the same quarter last year.

TTS operating income decreased by $35.3 million, and TTS adjusted operating income decreased by $34.7 million. Logistics operating income decreased $3.1 million and adjusted operating income decreased by $2.5 million. Corporate and Other (including driving schools) operating income remained flat.

Net interest expense of $6.9 million increased $4.5 million primarily due to higher interest rates for variable rate debt and an increase in average debt outstanding. The effective income tax rates during the third quarter and year to date 2023 were 23.0% and 24.3%, respectively.

During third quarter 2023, we had net losses on our strategic investments of $0.1 million compared to net gains of $0.1 million in third 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 $23.7 million decreased 57%. On a non-GAAP basis, adjusted net income attributable to Werner of $26.6 million decreased 53%. Diluted EPS of $0.37 decreased 57%. On a non-GAAP basis, adjusted diluted EPS of $0.42 decreased 53%.

 

Key Consolidated Financial Metrics

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands, except per share amounts)

2023

 

2022

 

Y/Y Change

 

2023

 

2022

 

Y/Y Change

Total revenues

$

817,744

 

 

$

827,606

 

 

(1

)%

 

$

2,461,554

 

 

$

2,428,487

 

 

1

%

Truckload Transportation Services revenues

 

572,195

 

 

 

621,866

 

 

(8

)%

 

 

1,730,717

 

 

 

1,793,899

 

 

(4

)%

Werner Logistics revenues

 

230,252

 

 

 

187,138

 

 

23

%

 

 

683,470

 

 

 

580,007

 

 

18

%

Operating income

 

37,900

 

 

 

76,261

 

 

(50

)%

 

 

138,484

 

 

 

234,695

 

 

(41

)%

Operating margin

 

4.6

%

 

9.2

%

(460) bps

 

5.6

%

 

9.7

%

(410) bps

Net income attributable to Werner

 

23,704

 

 

 

55,051

 

 

(57

)%

 

 

88,809

 

 

 

181,090

 

 

(51

)%

Diluted earnings per share

 

0.37

 

 

 

0.86

 

 

(57

)%

 

 

1.39

 

 

 

2.79

 

 

(50

)%

Adjusted operating income (1)

 

41,851

 

 

 

79,453

 

 

(47

)%

 

 

150,499

 

 

 

243,247

 

 

(38

)%

Adjusted operating margin (1)

 

5.1

%

 

9.6

%

(450) bps

 

6.1

%

 

10.0

%

(390) bps

Adjusted net income attributable to Werner (1)

 

26,626

 

 

 

57,226

 

 

(53

)%

 

 

98,113

 

 

 

176,324

 

 

(44

)%

Adjusted diluted earnings per share (1)

 

0.42

 

 

 

0.90

 

 

(53

)%

 

 

1.54

 

 

 

2.72

 

 

(43

)%

(1) See attached Reconciliation of Non-GAAP Financial Measures - Consolidated.

Truckload Transportation Services (TTS) Segment

• Revenues of $572.2 million decreased $49.7 million; Trucking revenues, net of fuel surcharges, decreased 4%
• Operating income of $38.8 million decreased $35.3 million; non-GAAP adjusted operating income of $41.6 million decreased $34.7 million due to a lower rate per mile in One-Way Truckload, smaller overall fleet size, and lower gains on the sale of property and equipment
• Operating margin of 6.8% decreased 510 basis points from 11.9%
• Non-GAAP adjusted operating margin, net of fuel surcharges, of 8.5% decreased 640 basis points from 14.9%
• Average segment trucks in service totaled 8,226, a decrease of 287 trucks year over year, or 3%
• Dedicated unit trucks at quarter end totaled 5,260, or 64% of the total TTS segment fleet, compared to 5,430 trucks, or 63%, a year ago
• Average revenues per truck per week, net of fuel surcharges, decreased 0.9% for TTS and decreased 0.4% for Dedicated

During third quarter 2023, Dedicated experienced modest net reduction in fleet, down 2.0% year over year and down 0.4% sequentially. Dedicated revenue per truck per week remained nearly unchanged year over year (down 0.4%), and pipeline opportunities remain strong, while seeing delays in implementing price increases with certain customers. One-Way Truckload customer freight demand during third quarter 2023 reflected a softer freight market with year-over-year reductions in rate per mile (down 4.8%), fleet size (down 5.8%) and total miles (down 2.7%), despite the second consecutive quarter of higher total miles per truck.

 

Key Truckload Transportation Services Segment Financial Metrics

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands)

2023

 

2022

 

Y/Y Change

 

2023

 

2022

 

Y/Y Change

Trucking revenues, net of fuel surcharge

$

482,169

 

 

$

503,677

 

 

(4

)%

 

$

1,462,037

 

 

$

1,464,246

 

 

0

%

Trucking fuel surcharge revenues

 

82,735

 

 

 

111,173

 

 

(26

)%

 

 

247,713

 

 

 

309,629

 

 

(20

)%

Non-trucking and other revenues

 

7,291

 

 

 

7,016

 

 

4

%

 

 

20,967

 

 

 

20,024

 

 

5

%

Total revenues

$

572,195

 

 

$

621,866

 

 

(8

)%

 

$

1,730,717

 

 

$

1,793,899

 

 

(4

)%

Operating income

 

38,846

 

 

 

74,117

 

 

(48

)%

 

 

134,991

 

 

 

214,214

 

 

(37

)%

Operating margin

 

6.8

%

 

 

11.9

%

 

(510) bps

 

 

7.8

%

 

 

11.9

%

 

(410) bps

Operating ratio

 

93.2

%

 

 

88.1

%

 

510 bps

 

 

92.2

%

 

 

88.1

%

 

410 bps

Adjusted operating income (1)

 

41,648

 

 

 

76,341

 

 

(45

)%

 

 

143,288

 

 

 

220,798

 

 

(35

)%

Adjusted operating margin (1)

 

7.3

%

 

12.3

%

(500) bps

 

8.3

%

 

12.3

%

(400) bps

Adjusted operating margin, net of fuel surcharge (1)

 

8.5

%

 

 

14.9

%

 

(640) bps

 

 

9.7

%

 

 

14.9

%

 

(520) bps

Adjusted operating ratio (1)

 

92.7

%

 

 

87.7

%

 

500 bps

 

 

91.7

%

 

 

87.7

%

 

400 bps

Adjusted operating ratio, net of fuel surcharge (1)

 

91.5

%

 

 

85.1

%

 

640 bps

 

 

90.3

%

 

 

85.1

%

 

520 bps

(1) See attached Reconciliation of Non-GAAP Financial Measures - Truckload Transportation Services (TTS) Segment.

Werner Logistics Segment

• Revenues of $230.3 million increased $43.1 million, or 23%, including ReedTMS acquisition which closed in November 2022
• Operating income of $2.0 million decreased $3.1 million
• Operating margin of 0.9% decreased 180 basis points from 2.7%
• Adjusted operating income of $3.2 million decreased $2.5 million
• Adjusted operating margin of 1.4% decreased 160 basis points from 3.0%

Truckload Logistics revenues (77% of Logistics revenues) increased 48%, 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 $3.7 million and 16%.

Intermodal revenues (11% of Logistics revenues) decreased 40%, due primarily to lower revenues per shipment and a modest decline in shipments.

Logistics operating income decreased $3.1 million and adjusted operating income decreased $2.5 million in third quarter 2023, due to a competitive freight and rate market in third quarter 2023 despite generally stronger volume and load growth.

 

Key Werner Logistics Segment Financial Metrics

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands)

2023

 

2022

 

Y/Y Change

 

2023

 

2022

 

Y/Y Change

Total revenues

$

230,252

 

 

$

187,138

 

 

23

%

 

$

683,470

 

 

$

580,007

 

 

18

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation expense

 

194,921

 

 

 

154,960

 

 

26

%

 

 

568,816

 

 

 

478,722

 

 

19

%

Other operating expenses

 

33,319

 

 

 

27,033

 

 

23

%

 

 

103,350

 

 

 

74,969

 

 

38

%

Total operating expenses

 

228,240

 

 

 

181,993

 

 

25

%

 

 

672,166

 

 

 

553,691

 

 

21

%

Operating income

$

2,012

 

 

$

5,145

 

 

(61

)%

 

$

11,304

 

 

$

26,316

 

 

(57

)%

Operating margin

 

0.9

%

 

 

2.7

%

 

(180) bps

 

 

1.7

%

 

 

4.5

%

 

(280) bps

Adjusted operating income (1)

$

3,161

 

 

$

5,645

 

 

(44

)%

 

$

15,022

 

 

$

27,816

 

 

(46

)%

Adjusted operating margin (1)

 

1.4

%

 

 

3.0

%

 

(160) bps

 

 

2.2

%

 

 

4.8

%

 

(260) bps

(1) See attached Reconciliation of Non-GAAP Financial Measures - Werner Logistics Segment.

Cash Flow and Capital Allocation

Cash flow from operations in third quarter 2023 was $74.2 million compared to $65.2 million in third quarter 2022, an increase of 14%. Operating cash flow margins improved greater than 100 basis points for third quarter 2023 to 9% of operating revenues and are up 75 basis points year to date 2023 to 14% of operating revenues.

Net capital expenditures in third quarter 2023 were $120.0 million compared to $100.6 million in third quarter 2022, an increase of 19%. 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 2.0 years and 5.1 years, respectively, as of September 30, 2023.

Gains on sales of property and equipment in third quarter 2023 were $9.1 million, or $0.11 per share, compared to $21.5 million, or $0.25 per share, in third 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 third quarter 2023. As of September 30, 2023, we had 2.3 million shares remaining under our share repurchase authorization.

As of September 30, 2023, we had $43 million of cash and cash equivalents and $1.5 billion of stockholders’ equity. Total debt outstanding was $690 million at September 30, 2023. After considering letters of credit issued, we had available liquidity consisting of cash and cash equivalents and available borrowing capacity as of September 30, 2023 of $452 million.

 

2023 Guidance Metrics and Assumptions

The following table summarizes our updated 2023 guidance and assumptions:

 

 

Prior (as of 8/3/23)

Actual (as of 9/30/23)

New (as of 11/1/23)

Commentary

TTS truck count from BoY to EoY

(4)% to (2)% (annual)

(5)% (YTD23)

(5)% to (3)% (annual)

• Adjusting One-Way fleet size to adapt to softer freight market

Net capital expenditures

$400M to $450M (annual)

$374M (YTD23)

$425M to $450M (annual)

• Greater pace of refreshing the fleet to reduce average equipment age

TTS Guidance

 

 

 

 

Dedicated RPTPW* growth

0% to 3% (annual)

1.8% (YTD23)

 

0% to 3% (annual)

 

• One fewer working day in 3Q23 vs. 3Q22 negatively impacted year-over-year comparison

One-Way Truckload RPTM* growth

(7)% to (4)% (3Q23 vs. 3Q22)

(4.8)% (3Q23 vs. 3Q22)

(9)% to (7)% (4Q23 vs. 4Q22)

• Stable OWT freight conditions in 4Q, but minimal impact from peak season

* Net of fuel surcharge revenues

Assumptions

• Effective income tax rate of 23.0% and 24.3% in third quarter and year to date 2023, respectively. Expect full year 2023 effective tax rate in the range of 24.0% to 25.0%.
• Average truck age of 2.0 years and average trailer age of 5.1 years as of 9/30/23. Expect average truck and trailer ages of 2.1 years and 5.0 years, respectively, as of 12/31/23.

Call Information

Werner Enterprises, Inc. will conduct a conference call to discuss third 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 November 1, 2023 at approximately 6:00 p.m. CT through December 1, 2023 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and using the access code 1330561. 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, nearly 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 September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

$

 

%

 

$

 

%

 

$

 

%

 

$

 

%

Operating revenues

$

817,744

 

 

100.0

 

 

$

827,606

 

 

100.0

 

 

$

2,461,554

 

 

100.0

 

 

$

2,428,487

 

 

100.0

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

268,054

 

 

32.8

 

 

 

264,443

 

 

32.0

 

 

 

802,742

 

 

32.6

 

 

 

760,078

 

 

31.3

 

Fuel

 

90,369

 

 

11.0

 

 

 

111,985

 

 

13.5

 

 

 

259,523

 

 

10.5

 

 

 

325,852

 

 

13.4

 

Supplies and maintenance

 

60,181

 

 

7.4

 

 

 

68,009

 

 

8.2

 

 

 

193,370

 

 

7.9

 

 

 

187,690

 

 

7.7

 

Taxes and licenses

 

25,852

 

 

3.2

 

 

 

25,016

 

 

3.0

 

 

 

76,685

 

 

3.1

 

 

 

72,640

 

 

3.0

 

Insurance and claims

 

31,261

 

 

3.8

 

 

 

34,501

 

 

4.2

 

 

 

104,552

 

 

4.2

 

 

 

103,064

 

 

4.2

 

Depreciation and amortization

 

74,586

 

 

9.1

 

 

 

70,397

 

 

8.5

 

 

 

223,797

 

 

9.1

 

 

 

206,097

 

 

8.5

 

Rent and purchased transportation

 

224,556

 

 

27.5

 

 

 

187,449

 

 

22.6

 

 

 

661,866

 

 

26.9

 

 

 

569,802

 

 

23.5

 

Communications and utilities

 

4,555

 

 

0.6

 

 

 

3,720

 

 

0.5

 

 

 

13,957

 

 

0.6

 

 

 

11,427

 

 

0.5

 

Other

 

430

 

 

—

 

 

 

(14,175

)

 

(1.7

)

 

 

(13,422

)

 

(0.5

)

 

 

(42,858

)

 

(1.8

)

Total operating expenses

 

779,844

 

 

95.4

 

 

 

751,345

 

 

90.8

 

 

 

2,323,070

 

 

94.4

 

 

 

2,193,792

 

 

90.3

 

Operating income

 

37,900

 

 

4.6

 

 

 

76,261

 

 

9.2

 

 

 

138,484

 

 

5.6

 

 

 

234,695

 

 

9.7

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

8,661

 

 

1.1

 

 

 

2,778

 

 

0.3

 

 

 

24,716

 

 

1.0

 

 

 

6,004

 

 

0.3

 

Interest income

 

(1,727

)

 

(0.2

)

 

 

(392

)

 

—

 

 

 

(5,178

)

 

(0.2

)

 

 

(980

)

 

—

 

Loss (gain) on investments in equity securities, net

 

34

 

 

—

 

 

 

(114

)

 

—

 

 

 

36

 

 

—

 

 

 

(14,403

)

 

(0.6

)

Loss from equity method investment

 

110

 

 

—

 

 

 

—

 

 

—

 

 

 

954

 

 

—

 

 

 

—

 

 

—

 

Other

 

284

 

 

—

 

 

 

77

 

 

—

 

 

 

377

 

 

—

 

 

 

276

 

 

—

 

Total other expense (income)

 

7,362

 

 

0.9

 

 

 

2,349

 

 

0.3

 

 

 

20,905

 

 

0.8

 

 

 

(9,103

)

 

(0.3

)

Income before income taxes

 

30,538

 

 

3.7

 

 

 

73,912

 

 

8.9

 

 

 

117,579

 

 

4.8

 

 

 

243,798

 

 

10.0

 

Income tax expense

 

7,034

 

 

0.8

 

 

 

17,987

 

 

2.1

 

 

 

28,521

 

 

1.2

 

 

 

59,229

 

 

2.4

 

Net income

 

23,504

 

 

2.9

 

 

 

55,925

 

 

6.8

 

 

 

89,058

 

 

3.6

 

 

 

184,569

 

 

7.6

 

Net loss (income) attributable to noncontrolling interest

 

200

 

 

—

 

 

 

(874

)

 

(0.1

)

 

 

(249

)

 

—

 

 

 

(3,479

)

 

(0.1

)

Net income attributable to Werner

$

23,704

 

 

2.9

 

 

$

55,051

 

 

6.7

 

 

$

88,809

 

 

3.6

 

 

$

181,090

 

 

7.5

 

Diluted shares outstanding

 

63,737

 

 

 

 

 

63,782

 

 

 

 

 

63,703

 

 

 

 

 

64,819

 

 

 

Diluted earnings per share

$

0.37

 

 

 

 

$

0.86

 

 

 

 

$

1.39

 

 

 

 

$

2.79

 

 

 

 

CONDENSED BALANCE SHEET

(In thousands, except share amounts)

 

 

 

 

 

September 30, 2023

 

December 31, 2022

 

(Unaudited)

 

 

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

42,754

 

 

$

107,240

 

Accounts receivable, trade, less allowance of $10,636 and $10,271, respectively

 

449,786

 

 

 

518,815

 

Other receivables

 

26,417

 

 

 

29,875

 

Inventories and supplies

 

17,251

 

 

 

14,527

 

Prepaid taxes, licenses and permits

 

7,931

 

 

 

17,699

 

Other current assets

 

100,669

 

 

 

74,459

 

Total current assets

 

644,808

 

 

 

762,615

 

Property and equipment

 

2,952,430

 

 

 

2,885,641

 

Less – accumulated depreciation

 

965,540

 

 

 

1,060,365

 

Property and equipment, net

 

1,986,890

 

 

 

1,825,276

 

Goodwill

 

129,104

 

 

 

132,717

 

Intangible assets, net

 

88,994

 

 

 

81,502

 

Other non-current assets (1)

 

344,666

 

 

 

295,145

 

Total assets

$

3,194,462

 

 

$

3,097,255

 

 

 

 

 

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Checks issued in excess of cash balances

$

14,659

 

 

$

—

 

Accounts payable

 

129,008

 

 

 

124,483

 

Current portion of long-term debt

 

3,750

 

 

 

6,250

 

Insurance and claims accruals

 

73,206

 

 

 

78,620

 

Accrued payroll

 

48,851

 

 

 

49,793

 

Accrued expenses

 

27,719

 

 

 

20,358

 

Other current liabilities

 

32,471

 

 

 

30,016

 

Total current liabilities

 

329,664

 

 

 

309,520

 

Long-term debt, net of current portion

 

686,250

 

 

 

687,500

 

Other long-term liabilities

 

52,579

 

 

 

59,677

 

Insurance and claims accruals, net of current portion (1)

 

238,080

 

 

 

244,946

 

Deferred income taxes

 

336,726

 

 

 

313,278

 

Total liabilities

 

1,643,299

 

 

 

1,614,921

 

Temporary equity - redeemable noncontrolling interest

 

38,948

 

 

 

38,699

 

Stockholders’ equity:

 

 

 

Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 shares issued; 63,390,516 and 63,223,003 shares outstanding, respectively

 

805

 

 

 

805

 

Paid-in capital

 

133,038

 

 

 

129,837

 

Retained earnings

 

1,938,694

 

 

 

1,875,873

 

Accumulated other comprehensive loss

 

(8,650

)

 

 

(11,292

)

Treasury stock, at cost; 17,143,020 and 17,310,533 shares, respectively

 

(551,672

)

 

 

(551,588

)

Total stockholders’ equity

 

1,512,215

 

 

 

1,443,635

 

Total liabilities, temporary equity and stockholders’ equity

$

3,194,462

 

 

$

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 September 30, 2023 and December 31, 2022.

 

SUPPLEMENTAL INFORMATION

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Capital expenditures, net

$

119,970

 

 

$

100,649

 

 

$

374,161

 

 

$

254,072

 

Cash flow from operations

 

74,229

 

 

 

65,189

 

 

 

356,019

 

 

 

322,716

 

Return on assets (annualized)

 

3.0

%

 

 

7.8

%

 

 

3.8

%

 

 

9.0

%

Return on equity (annualized)

 

6.1

%

 

 

15.9

%

 

 

7.8

%

 

 

17.7

%

 

Segment Financial and Operating Statistics Information

SEGMENT INFORMATION

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

Truckload Transportation Services

$

572,195

 

 

$

621,866

 

 

$

1,730,717

 

 

$

1,793,899

 

Werner Logistics

 

230,252

 

 

 

187,138

 

 

 

683,470

 

 

 

580,007

 

Other (1)

 

19,212

 

 

 

18,469

 

 

 

59,089

 

 

 

54,928

 

Corporate

 

487

 

 

 

535

 

 

 

1,463

 

 

 

1,402

 

Subtotal

 

822,146

 

 

 

828,008

 

 

 

2,474,739

 

 

 

2,430,236

 

Inter-segment eliminations (2)

 

(4,402

)

 

 

(402

)

 

 

(13,185

)

 

 

(1,749

)

Total

$

817,744

 

 

$

827,606

 

 

$

2,461,554

 

 

$

2,428,487

 

Operating Income (Loss)

 

 

 

 

 

 

 

Truckload Transportation Services

$

38,846

 

 

$

74,117

 

 

$

134,991

 

 

$

214,214

 

Werner Logistics

 

2,012

 

 

 

5,145

 

 

 

11,304

 

 

 

26,316

 

Other (1)

 

(150

)

 

 

(1,091

)

 

 

313

 

 

 

(185

)

Corporate

 

(2,808

)

 

 

(1,910

)

 

 

(8,124

)

 

 

(5,650

)

Total

$

37,900

 

 

$

76,261

 

 

$

138,484

 

 

$

234,695

 

(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 September 30,

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

2022

 

% Chg

 

2023

 

2022

 

% Chg

Truckload Transportation Services segment

 

 

 

 

 

 

 

 

 

 

 

Average trucks in service

 

8,226

 

 

 

8,513

 

 

(3.4

)%

 

 

8,379

 

 

 

8,346

 

 

0.4

%

Average revenues per truck per week (1)

$

4,509

 

 

$

4,551

 

 

(0.9

)%

 

$

4,474

 

 

$

4,499

 

 

(0.6

)%

Total trucks (at quarter end)

 

 

 

 

 

 

 

 

 

 

 

Company

 

7,905

 

 

 

8,335

 

 

(5.2

)%

 

 

7,905

 

 

 

8,335

 

 

(5.2

)%

Independent contractor

 

265

 

 

 

245

 

 

8.2

%

 

 

265

 

 

 

245

 

 

8.2

%

Total trucks

 

8,170

 

 

 

8,580

 

 

(4.8

)%

 

 

8,170

 

 

 

8,580

 

 

(4.8

)%

Total trailers (at quarter end)

 

27,150

 

 

 

25,825

 

 

5.1

%

 

 

27,150

 

 

 

25,825

 

 

5.1

%

One-Way Truckload

 

 

 

 

 

 

 

 

 

 

 

Trucking revenues, net of fuel surcharge (in 000’s)

$

175,690

 

 

$

189,620

 

 

(7.3

)%

 

$

535,644

 

 

$

564,553

 

 

(5.1

)%

Average trucks in service

 

2,972

 

 

 

3,154

 

 

(5.8

)%

 

 

3,079

 

 

 

3,107

 

 

(0.9

)%

Total trucks (at quarter end)

 

2,910

 

 

 

3,150

 

 

(7.6

)%

 

 

2,910

 

 

 

3,150

 

 

(7.6

)%

Average percentage of empty miles

 

14.43

%

 

 

13.00

%

 

11.0

%

 

 

14.18

%

 

 

12.39

%

 

14.4

%

Average revenues per truck per week (1)

$

4,548

 

 

$

4,624

 

 

(1.6

)%

 

$

4,460

 

 

$

4,659

 

 

(4.3

)%

Average % change YOY in revenues per total mile (1)

 

(4.8

)%

 

 

2.5

%

 

 

 

 

(4.4

)%

 

 

11.7

%

 

 

Average % change YOY in total miles per truck per week

 

3.3

%

 

 

(4.2

)%

 

 

 

 

0.1

%

 

 

(8.3

)%

 

 

Average completed trip length in miles (loaded)

 

564

 

 

 

668

 

 

(15.6

)%

 

 

595

 

 

 

691

 

 

(13.9

)%

Dedicated

 

 

 

 

 

 

 

 

 

 

 

Trucking revenues, net of fuel surcharge (in 000’s)

$

306,479

 

 

$

314,057

 

 

(2.4

)%

 

$

926,393

 

 

$

899,693

 

 

3.0

%

Average trucks in service

 

5,254

 

 

 

5,359

 

 

(2.0

)%

 

 

5,300

 

 

 

5,239

 

 

1.2

%

Total trucks (at quarter end)

 

5,260

 

 

 

5,430

 

 

(3.1

)%

 

 

5,260

 

 

 

5,430

 

 

(3.1

)%

Average revenues per truck per week (1)

$

4,488

 

 

$

4,508

 

 

(0.4

)%

 

$

4,482

 

 

$

4,404

 

 

1.8

%

Werner Logistics segment

 

 

 

 

 

 

 

 

 

 

 

Average trucks in service

 

37

 

 

 

54

 

 

(31.5

)%

 

 

36

 

 

 

55

 

 

(34.5

)%

Total trucks (at quarter end)

 

41

 

 

 

50

 

 

(18.0

)%

 

 

41

 

 

 

50

 

 

(18.0

)%

Total trailers (at quarter end)

 

2,865

 

 

 

2,045

 

 

40.1

%

 

 

2,865

 

 

 

2,045

 

 

40.1

%

(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 September 30,

 

Nine Months Ended September 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)

 

$

37,900

 

4.6

%

 

$

76,261

 

9.2

%

 

$

138,484

 

5.6

%

 

$

234,695

 

9.7

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance and claims (2)

 

 

1,433

 

0.2

%

 

 

1,365

 

0.2

%

 

 

4,207

 

0.2

%

 

 

4,007

 

0.1

%

Amortization of intangible assets (3)

 

 

2,518

 

0.3

%

 

 

1,359

 

0.2

%

 

 

7,808

 

0.3

%

 

 

4,077

 

0.2

%

Acquisition expenses (4)

 

 

—

 

—

%

 

 

468

 

—

%

 

 

—

 

—

%

 

 

468

 

—

%

Non-GAAP adjusted operating income and non-GAAP adjusted operating margin

 

$

41,851

 

5.1

%

 

$

79,453

 

9.6

%

 

$

150,499

 

6.1

%

 

$

243,247

 

10.0

%

   

 

Three Months Ended September 30,

 

Nine Months Ended September 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)

$

23,704

 

 

$

0.37

 

 

$

55,051

 

 

$

0.86

 

 

$

88,809

 

 

$

1.39

 

 

$

181,090

 

 

$

2.79

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance and claims (2)

 

1,433

 

 

 

0.02

 

 

 

1,365

 

 

 

0.02

 

 

 

4,207

 

 

 

0.07

 

 

 

4,007

 

 

 

0.06

 

Amortization of intangible assets, net of amount attributable to noncontrolling interest (3)

 

2,346

 

 

 

0.04

 

 

 

1,187

 

 

 

0.02

 

 

 

7,292

 

 

 

0.11

 

 

 

3,561

 

 

 

0.06

 

Acquisition expenses (4)

 

—

 

 

 

—

 

 

 

468

 

 

 

0.01

 

 

 

—

 

 

 

—

 

 

 

468

 

 

 

0.01

 

Loss (gain) on investments in equity securities, net (5)

 

34

 

 

 

—

 

 

 

(114

)

 

 

—

 

 

 

36

 

 

 

—

 

 

 

(14,403

)

 

 

(0.22

)

Loss from equity method investment (6)

 

110

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

954

 

 

 

0.02

 

 

 

—

 

 

 

—

 

Income tax effect of above adjustments (7)

 

(1,001

)

 

 

(0.01

)

 

 

(731

)

 

 

(0.01

)

 

 

(3,185

)

 

 

(0.05

)

 

 

1,601

 

 

 

0.02

 

Non-GAAP adjusted net income attributable to Werner and non-GAAP adjusted diluted EPS

$

26,626

 

 

$

0.42

 

 

$

57,226

 

 

$

0.90

 

 

$

98,113

 

 

$

1.54

 

 

$

176,324

 

 

$

2.72

 

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – TRUCKLOAD TRANSPORTATION SERVICES (TTS) SEGMENT

(unaudited)

(In thousands)

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 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)

 

$

38,846

 

6.8

%

 

$

74,117

 

11.9

%

 

$

134,991

 

7.8

%

 

$

214,214

 

11.9

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance and claims (2)

 

 

1,433

 

0.3

%

 

 

1,365

 

0.2

%

 

 

4,207

 

0.3

%

 

 

4,007

 

0.2

%

Amortization of intangible assets (3)

 

 

1,369

 

0.2

%

 

 

859

 

0.2

%

 

 

4,090

 

0.2

%

 

 

2,577

 

0.2

%

Non-GAAP adjusted operating income and non-GAAP adjusted operating margin

 

$

41,648

 

7.3

%

 

$

76,341

 

12.3

%

 

$

143,288

 

8.3

%

 

$

220,798

 

12.3

%

   

 

 

Three Months Ended September 30,

 

Nine Months Ended September 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)

 

$

533,349

 

 

93.2

%

 

$

547,749

 

 

88.1

%

 

$

1,595,726

 

 

92.2

%

 

$

1,579,685

 

 

88.1

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance and claims (2)

 

 

(1,433

)

 

(0.3

)%

 

 

(1,365

)

 

(0.2

)%

 

 

(4,207

)

 

(0.3

)%

 

 

(4,007

)

 

(0.2

)%

Amortization of intangible assets (3)

 

 

(1,369

)

 

(0.2

)%

 

 

(859

)

 

(0.2

)%

 

 

(4,090

)

 

(0.2

)%

 

 

(2,577

)

 

(0.2

)%

Non-GAAP adjusted operating expenses and non-GAAP adjusted operating ratio

 

$

530,547

 

 

92.7

%

 

$

545,525

 

 

87.7

%

 

$

1,587,429

 

 

91.7

%

 

$

1,573,101

 

 

87.7

%

   

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 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)

 

$

572,195

 

 

$

621,866

 

 

$

1,730,717

 

 

$

1,793,899

 

Less: Trucking fuel surcharge (8)

 

 

(82,735

)

 

 

(111,173

)

 

 

(247,713

)

 

 

(309,629

)

Operating revenues, net of fuel surcharge – (Non-GAAP)

 

 

489,460

 

 

 

510,693

 

 

 

1,483,004

 

 

 

1,484,270

 

Operating expenses – (GAAP)

 

 

533,349

 

 

 

547,749

 

 

 

1,595,726

 

 

 

1,579,685

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Trucking fuel surcharge (8)

 

 

(82,735

)

 

 

(111,173

)

 

 

(247,713

)

 

 

(309,629

)

Insurance and claims (2)

 

 

(1,433

)

 

 

(1,365

)

 

 

(4,207

)

 

 

(4,007

)

Amortization of intangible assets (3)

 

 

(1,369

)

 

 

(859

)

 

 

(4,090

)

 

 

(2,577

)

Non-GAAP adjusted operating expenses, net of fuel surcharge

 

 

447,812

 

 

 

434,352

 

 

 

1,339,716

 

 

 

1,263,472

 

Non-GAAP adjusted operating income

 

$

41,648

 

 

$

76,341

 

 

$

143,288

 

 

$

220,798

 

Non-GAAP adjusted operating margin, net of fuel surcharge

 

 

8.5

%

 

 

14.9

%

 

 

9.7

%

 

 

14.9

%

Non-GAAP adjusted operating ratio, net of fuel surcharge

 

 

91.5

%

 

 

85.1

%

 

 

90.3

%

 

 

85.1

%

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – WERNER LOGISTICS SEGMENT

(unaudited)

(In thousands)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 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)

 

$

2,012

 

0.9

%

 

$

5,145

 

2.7

%

 

$

11,304

 

1.7

%

 

$

26,316

 

4.5

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets (3)

 

 

1,149

 

0.5

%

 

 

500

 

0.3

%

 

 

3,718

 

0.5

%

 

 

1,500

 

0.3

%

Non-GAAP adjusted operating income and non-GAAP adjusted operating margin

 

$

3,161

 

1.4

%

 

$

5,645

 

3.0

%

 

$

15,022

 

2.2

%

 

$

27,816

 

4.8

%

 

(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) We incurred business acquisition-related expenses including legal and professional fees. Acquisition-related expenses are excluded as management believes these costs are not representative of the costs of managing our on-going business. The expenses are included within other operating expenses in our Income Statement and in Corporate operating income in our Segment Information table.

(5) 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.

(6) 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.

(7) The income tax effect of the non-GAAP adjustments is calculated using the incremental income tax rate excluding discrete items, and the income tax effects for 2022 and 2023 have been updated to reflect the annual incremental income tax rates.

(8) 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.

 

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Christopher D. Wikoff Executive Vice President, Treasurer and Chief Financial Officer (402) 894-3700