First Quarter 2022 Highlights (all metrics compared to first quarter 2021)
- Total revenues of $764.6 million, up 24%
- Operating income of $83.5 million, up 34%; non-GAAP adjusted operating income of $86.2 million, up 37%
- Operating margin of 10.9%, up 80 bps; non-GAAP adjusted operating margin of 11.3%, up 110 bps
- Diluted EPS of $0.82, up 20%; non-GAAP adjusted diluted EPS of $0.96, up 40%
OMAHA, Neb., May 03, 2022 (GLOBE NEWSWIRE) -- Werner Enterprises, Inc. (Nasdaq: WERN), a premier transportation and logistics provider, today reported results for the first quarter ended March 31, 2022.
“The Werner team once again achieved strong first quarter results in our Truckload Transportation Services and Logistics segments,” said Derek J. Leathers, Chairman, President and Chief Executive Officer. “This was our seventh consecutive quarter of record quarterly adjusted earnings per share. We are delivering superior service with valued capacity solutions for our winning customers. Our durable and resilient business model is performing well, and Werner is built to thrive over the long-term regardless of the economic and freight environments.”
Total revenues for the quarter were $764.6 million, an increase of $148.2 million compared to the prior year quarter, due to Truckload Transportation Services (“TTS”) revenues growth of $95.5 million and Logistics revenues growth of $51.2 million.
Operating income of $83.5 million increased $21.0 million, or 34%, while operating margin of 10.9% increased 80 basis points. On a non-GAAP basis, adjusted operating income of $86.2 million increased $23.5 million, or 37%. Adjusted operating margin of 11.3% increased 110 basis points from 10.2% for the same quarter last year.
Operating income in the Truckload Transportation Services segment increased $18.5 million due to fleet growth, higher freight rates and increased gains on sale of equipment, offset by cost increases for driver pay and driver sourcing, equipment maintenance and insurance and claims. On a non-GAAP basis, adjusted operating income in TTS increased $19.4 million, or 33%. Werner Logistics operating income increased $4.1 million resulting from improved revenue growth and an expanded operating margin. On a non-GAAP basis, adjusted operating income in Logistics increased $5.6 million, or 158%.
Interest expense of $1.4 million increased from $0.8 million due to an increase in average debt outstanding, partially offset by a decrease in the average effective interest rate incurred on our debt. The effective income tax rate during the quarter was 24.1%, compared to 24.9% in first quarter 2021.
During first quarter 2022, our strategic minority equity investments in autonomous technology companies had market valuation changes causing an unrealized loss on equity securities, which resulted in lower non-operating income of $9.8 million, or $0.11 per share. Consistent with prior reporting, market value increases or decreases for these strategic minority investments are adjusted for determining non-GAAP adjusted net income and non-GAAP adjusted earnings per share.
Net income attributable to Werner of $53.7 million increased 16%. On a non-GAAP basis, adjusted net income attributable to Werner of $63.0 million increased 35%. Diluted earnings per share (“EPS”) for the quarter of $0.82 increased 20%. On a non-GAAP basis, adjusted diluted EPS of $0.96 increased 40%.
Key Consolidated Financial Metrics
| Three Months Ended March 31, | ||||||||||
| (In thousands, except per share amounts) | 2022 | 2021 | Y/Y Change | |||||||
| Total revenues | $ | 764,605 | $ | 616,446 | 24 | % | ||||
| Truckload Transportation Services revenues | 558,417 | 462,949 | 21 | % | ||||||
| Werner Logistics revenues | 189,008 | 137,853 | 37 | % | ||||||
| Operating income | 83,511 | 62,471 | 34 | % | ||||||
| Operating margin | 10.9 | % | 10.1 | % | 80 bps | |||||
| Net income attributable to Werner | 53,749 | 46,492 | 16 | % | ||||||
| Diluted earnings per share | 0.82 | 0.68 | 20 | % | ||||||
| Adjusted operating income (1) | 86,191 | 62,716 | 37 | % | ||||||
| Adjusted operating margin (1) | 11.3 | % | 10.2 | % | 110 bps | |||||
| Adjusted net income attributable to Werner (1) | 62,984 | 46,676 | 35 | % | ||||||
| Adjusted diluted earnings per share (1) | 0.96 | 0.68 | 40 | % | ||||||
(1) See attached Reconciliation of Non-GAAP Financial Measures - Consolidated.
Truckload Transportation Services (TTS) Segment
- Revenues of $558.4 million increased $95.5 million
- Operating income of $76.1 million increased $18.5 million; non-GAAP adjusted operating income of $78.3 million increased $19.4 million
- Operating margin of 13.6% increased 120 basis points from 12.4%; non-GAAP adjusted operating margin of 14.0% increased 130 basis points from 12.7%
- Non-GAAP adjusted operating margin, net of fuel, of 16.4% increased 220 basis points from 14.2%
- Average segment trucks in service totaled 8,238, an increase of 448 trucks year over year, or 5.8%
- Dedicated unit trucks at quarter end totaled 5,185 or 63% of the total TTS segment fleet, compared to 4,920 trucks, or 64%, a year ago
- 8.8% increase in TTS average revenues per truck per week
During first quarter 2022, Dedicated continued to experience strong freight demand from its customers. One-Way Truckload experienced customer freight demand during first quarter 2022 that was strong in January and February and moderated in March from strong to very good, relative to March freight demand over the last five years. During April, Dedicated freight demand remained strong and One-Way Truckload demand remained very good.
Comparisons of key financial metrics for the TTS segment, including operating ratios (actual and net of fuel surcharge revenues), are shown in the table below.
Key Truckload Transportation Services Segment Financial Metrics
| Three Months Ended March 31, | ||||||||||
| (In thousands) | 2022 | 2021 | Y/Y Change | |||||||
| Trucking revenues, net of fuel surcharge | $ | 472,361 | $ | 410,652 | 15 | % | ||||
| Trucking fuel surcharge revenues | 79,815 | 47,459 | 68 | % | ||||||
| Non-trucking and other revenues | 6,241 | 4,838 | 29 | % | ||||||
| Total revenues | $ | 558,417 | $ | 462,949 | 21 | % | ||||
| Operating income | $ | 76,093 | $ | 57,628 | 32 | % | ||||
| Operating margin | 13.6 | % | 12.4 | % | 120 bps | |||||
| Operating ratio | 86.4 | % | 87.6 | % | (120) bps | |||||
Adjusted operating income (1) | $ | 78,273 | $ | 58,886 | 33 | % | ||||
| Adjusted operating margin (1) | 14.0 | % | 12.7 | % | 130 bps | |||||
| Adjusted operating margin, net of fuel surcharge (1) | 16.4 | % | 14.2 | % | 220 bps | |||||
| Adjusted operating ratio (1) | 86.0 | % | 87.3 | % | (130) bps | |||||
| Adjusted operating ratio, net of fuel surcharge (1) | 83.6 | % | 85.8 | % | (220) bps | |||||
(1) See attached Reconciliation of Non-GAAP Financial Measures - Truckload Transportation Services (TTS) Segment.
Werner Logistics Segment
- Revenues of $189.0 million increased $51.2 million, or 37%
- Operating income of $8.7 million increased $4.1 million
- Operating margin of 4.6% increased 130 bps
- Non-GAAP adjusted operating margin of 4.9% increased 230 bps from 2.6%
Logistics revenues of $189.0 million increased 37%. Logistics revenues increased 55%, when excluding Werner Global Logistics (WGL) revenues from first quarter 2021. Werner sold WGL in first quarter 2021.
Truckload Logistics revenues (67% of total Logistics revenues) increased 46%, driven by a 24% increase in revenues per shipment and a 19% increase in shipments.
Intermodal revenues (23% of Logistics revenues) increased 29%, supported by a 37% increase in revenues per shipment, partially offset by a 6% decrease in shipments.
Final Mile revenues (10% of Logistics revenues) increased $18.1 million, primarily due to growth from the November NEHDS acquisition.
Logistics adjusted operating income improved $5.6 million in first quarter due to the 37% revenue growth and 230 bps of operating margin expansion.
Key Werner Logistics Segment Financial Metrics
| Three Months Ended March 31, | ||||||||||
| (In thousands) | 2022 | 2021 | Y/Y Change | |||||||
| Total revenues | $ | 189,008 | $ | 137,853 | 37 | % | ||||
| Operating expenses: | ||||||||||
| Purchased transportation expense | 157,521 | 120,527 | 31 | % | ||||||
| Other operating expenses | 22,806 | 12,752 | 79 | % | ||||||
| Total operating expenses | 180,327 | 133,279 | 35 | % | ||||||
| Operating income | $ | 8,681 | $ | 4,574 | 90 | % | ||||
| Operating margin | 4.6 | % | 3.3 | % | 130 bps | |||||
| Adjusted operating income (1) | $ | 9,181 | $ | 3,561 | 158 | % | ||||
| Adjusted operating margin (1) | 4.9 | % | 2.6 | % | 230 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 2022 was $155.0 million compared to $135.9 million in first quarter 2021, an increase of 14%.
Net capital expenditures in first quarter 2022 were $37.1 million compared to $37.9 million in first quarter 2021, a decrease of 2%. 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 2.3 years and 4.6 years, respectively, as of March 31, 2022.
Gains on sales of equipment in first quarter 2022 were $20.5 million, or $0.23 per share, compared to $10.5 million, or $0.11 per share, in first quarter 2021. Year over year, we sold fewer trucks and trailers and realized substantially higher average gains per truck and trailer due to the significantly improved pricing market for our used equipment. Gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.
During the quarter, we repurchased 845,100 shares of common stock for a total cost of $36.2 million, or an average price of $42.81 per share. As of March 31, 2022, we had 4.2 million shares remaining under our share repurchase authorization.
As of March 31, 2022, we had $126 million of cash and over $1.3 billion of stockholders’ equity. Total debt outstanding was $426 million at March 31, 2022. After considering letters of credit issued, we had available liquidity consisting of cash and available borrowing capacity as of March 31, 2022 of $442 million.
2022 Guidance Metrics and Assumptions
The following table summarizes our updated 2022 guidance and assumptions:
2022 Guidance | Prior (as of 2/3/22) | Actual (as of 3/31/22) | New (as of 5/3/22) | Commentary |
| TTS truck growth from BoY to EoY | 2% to 5% (annual) | (1)% (1Q22) | 2% to 5% (annual) | Subject to driver availability and timing of delivery of new trucks from OEM’s |
| Net capital expenditures | $275M to $325M (annual) | $37.1M (1Q22) | $250M to $300M (annual) | Subject to timing of delivery of new trucks and trailers from OEM’s |
| TTS Guidance | ||||
| Dedicated RPTPW* growth | 3% to 5% (annual) | 7.3% (1Q22 vs. 1Q21) | 4% to 6% (annual) | Strong rate levels partially offset by lower miles per truck |
| One-Way Truckload RPTM* growth | 16% to 19% (1H22 vs. 1H21) | 20.8% (1Q22 vs. 1Q21) | 14% to 17% (2Q22 vs. 2Q21) | Continued strong contractual rate increases, moderating spot rates combined with fleet mix changes |
| Assumptions | ||||
| Effective income tax rate | 24.5% to 25.5% (annual) | 24.1% (1Q22) | 24.5% to 25.5% (annual) | |
| Truck age Trailer age | 2.2 years 4.8 years | 2.3 years 4.6 years | 2.2 years 4.8 years | Subject to availability and timing of delivery of new trucks and trailers from OEM’s |
* Net of fuel surcharge revenues
Call Information
Werner Enterprises, Inc. will conduct a conference call to discuss first quarter 2022 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, 2022 at approximately 6:00 p.m. CT through June 3, 2022 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and using the access code 4137463. 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 2021 revenues of $2.7 billion, an industry-leading modern truck and trailer fleet, over 13,500 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, 2021.
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.
Contact:
John J. Steele
Executive Vice President, Treasurer
and Chief Financial Officer
(402) 894-3036
Source: Werner Enterprises, Inc.
Consolidated Financial Information
| INCOME STATEMENT | |||||||||||||
| (Unaudited) | |||||||||||||
| (In thousands, except per share amounts) | |||||||||||||
| Three Months Ended March 31, | |||||||||||||
| 2022 | 2021 | ||||||||||||
| $ | % | $ | % | ||||||||||
| Operating revenues | $ | 764,605 | 100.0 | $ | 616,446 | 100.0 | |||||||
| Operating expenses: | |||||||||||||
| Salaries, wages and benefits | 241,996 | 31.6 | 204,853 | 33.2 | |||||||||
| Fuel | 88,421 | 11.6 | 50,838 | 8.2 | |||||||||
| Supplies and maintenance | 57,025 | 7.5 | 46,147 | 7.5 | |||||||||
| Taxes and licenses | 23,833 | 3.1 | 23,233 | 3.8 | |||||||||
| Insurance and claims | 27,492 | 3.6 | 22,056 | 3.6 | |||||||||
| Depreciation and amortization | 67,229 | 8.8 | 63,951 | 10.4 | |||||||||
| Rent and purchased transportation | 185,237 | 24.2 | 146,493 | 23.8 | |||||||||
| Communications and utilities | 3,926 | 0.5 | 3,022 | 0.5 | |||||||||
| Other | (14,065 | ) | (1.8 | ) | (6,618 | ) | (1.1 | ) | |||||
| Total operating expenses | 681,094 | 89.1 | 553,975 | 89.9 | |||||||||
| Operating income | 83,511 | 10.9 | 62,471 | 10.1 | |||||||||
| Other expense (income): | |||||||||||||
| Interest expense | 1,439 | 0.2 | 838 | 0.1 | |||||||||
| Interest income | (275 | ) | (0.1 | ) | (297 | ) | — | ||||||
| Loss on investments in equity securities | 9,806 | 1.3 | — | — | |||||||||
| Other | 73 | — | 42 | — | |||||||||
| Total other expense (income) | 11,043 | 1.4 | 583 | 0.1 | |||||||||
| Income before income taxes | 72,468 | 9.5 | 61,888 | 10.0 | |||||||||
| Income tax expense | 17,433 | 2.3 | 15,396 | 2.5 | |||||||||
| Net income | 55,035 | 7.2 | 46,492 | 7.5 | |||||||||
| Net income attributable to noncontrolling interest | (1,286 | ) | (0.2 | ) | — | — | |||||||
| Net income attributable to Werner | $ | 53,749 | 7.0 | $ | 46,492 | 7.5 | |||||||
| Diluted shares outstanding | 65,878 | 68,223 | |||||||||||
| Diluted earnings per share | $ | 0.82 | $ | 0.68 | |||||||||
| CONDENSED BALANCE SHEET | |||||||
| (In thousands, except share amounts) | |||||||
| March 31, 2022 | December 31, 2021 | ||||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 125,949 | $ | 54,196 | |||
| Accounts receivable, trade, less allowance of $9,539 and $9,169, respectively | 449,602 | 460,518 | |||||
| Other receivables | 25,907 | 24,449 | |||||
| Inventories and supplies | 12,105 | 11,140 | |||||
| Prepaid taxes, licenses and permits | 13,716 | 17,549 | |||||
| Other current assets | 51,075 | 63,361 | |||||
| Total current assets | 678,354 | 631,213 | |||||
| Property and equipment | 2,600,896 | 2,557,825 | |||||
| Less – accumulated depreciation | 991,296 | 944,582 | |||||
| Property and equipment, net | 1,609,600 | 1,613,243 | |||||
| Goodwill | 74,404 | 74,618 | |||||
| Intangible assets, net | 53,956 | 55,315 | |||||
| Other non-current assets (1) | 232,712 | 229,324 | |||||
| Total assets | $ | 2,649,026 | $ | 2,603,713 | |||
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 113,657 | $ | 93,987 | |||
| Current portion of long-term debt | 5,000 | 5,000 | |||||
| Insurance and claims accruals | 66,818 | 72,594 | |||||
| Accrued payroll | 50,367 | 44,333 | |||||
| Accrued expenses | 30,061 | 28,758 | |||||
| Other current liabilities | 24,368 | 24,011 | |||||
| Total current liabilities | 290,271 | 268,683 | |||||
| Long-term debt, net of current portion | 421,250 | 422,500 | |||||
| Other long-term liabilities | 47,757 | 43,314 | |||||
| Insurance and claims accruals, net of current portion (1) | 241,690 | 237,220 | |||||
| Deferred income taxes | 269,361 | 268,499 | |||||
| Total liabilities | 1,270,329 | 1,240,216 | |||||
| Temporary equity - redeemable noncontrolling interest | 37,233 | 35,947 | |||||
| Stockholders’ equity: | |||||||
| Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 | |||||||
| shares issued; 65,057,763 and 65,790,112 shares outstanding, respectively | 805 | 805 | |||||
| Paid-in capital | 121,157 | 121,904 | |||||
| Retained earnings | 1,713,046 | 1,667,104 | |||||
| Accumulated other comprehensive loss | (15,820 | ) | (20,604 | ) | |||
| Treasury stock, at cost; 15,475,773 and 14,743,424 shares, respectively | (477,724 | ) | (441,659 | ) | |||
| Total stockholders’ equity | 1,341,464 | 1,327,550 | |||||
| Total liabilities, temporary equity and stockholders’ equity | $ | 2,649,026 | $ | 2,603,713 | |||
(1) Under the terms of our insurance policies, we are the primary obligor of the damage award in the previously mentioned 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, 2022 and December 31, 2021.
| SUPPLEMENTAL INFORMATION | |||||||
| (Unaudited) | |||||||
| (In thousands) | |||||||
| Three Months Ended March 31, | |||||||
| 2022 | 2021 | ||||||
| Capital expenditures, net | $ | 37,074 | $ | 37,866 | |||
| Cash flow from operations | 154,957 | 135,867 | |||||
| Return on assets (annualized) | 8.4 | % | 8.6 | % | |||
| Return on equity (annualized) | 16.0 | % | 15.4 | % | |||
Segment Financial and Operating Statistics Information
| SEGMENT INFORMATION | |||||||
| (Unaudited) | |||||||
| (In thousands) | |||||||
| Three Months Ended March 31, | |||||||
| 2022 | 2021 | ||||||
| Revenues | |||||||
| Truckload Transportation Services | $ | 558,417 | $ | 462,949 | |||
| Werner Logistics | 189,008 | 137,853 | |||||
| Other (1) | 17,513 | 15,399 | |||||
| Corporate | 389 | 379 | |||||
| Subtotal | 765,327 | 616,580 | |||||
| Inter-segment eliminations (2) | (722 | ) | (134 | ) | |||
| Total | $ | 764,605 | $ | 616,446 | |||
| Operating Income | |||||||
| Truckload Transportation Services | $ | 76,093 | $ | 57,628 | |||
| Werner Logistics | 8,681 | 4,574 | |||||
| Other (1) | 445 | 866 | |||||
| Corporate | (1,708 | ) | (597 | ) | |||
| Total | $ | 83,511 | $ | 62,471 | |||
(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, | ||||||||||
| 2022 | 2021 | % Chg | ||||||||
| Truckload Transportation Services segment | ||||||||||
| Average trucks in service | 8,238 | 7,790 | 5.8 | % | ||||||
| Average revenues per truck per week (1) | $ | 4,411 | $ | 4,055 | 8.8 | % | ||||
| Total trucks (at quarter end) | ||||||||||
| Company | 7,960 | 7,360 | 8.2 | % | ||||||
| Independent contractor | 265 | 375 | (29.3)% | |||||||
| Total trucks | 8,225 | 7,735 | 6.3 | % | ||||||
| Total trailers (at quarter end) | 26,185 | 22,710 | 15.3 | % | ||||||
| One-Way Truckload | ||||||||||
| Trucking revenues, net of fuel surcharge (in 000’s) | $ | 186,760 | $ | 156,839 | 19.1 | % | ||||
| Average trucks in service | 3,064 | 2,856 | 7.3 | % | ||||||
| Total trucks (at quarter end) | 3,040 | 2,815 | 8.0 | % | ||||||
| Average percentage of empty miles | 11.75 | % | 11.35 | % | 3.5 | % | ||||
| Average revenues per truck per week (1) | $ | 4,690 | $ | 4,224 | 11.0 | % | ||||
| Average % change YOY in revenues per total mile (1) | 20.8 | % | 9.5 | % | ||||||
| Average % change YOY in total miles per truck per week | (8.1)% | (7.7)% | ||||||||
| Average completed trip length in miles (loaded) | 716 | 853 | (16.1)% | |||||||
| Dedicated | ||||||||||
| Trucking revenues, net of fuel surcharge (in 000’s) | $ | 285,601 | $ | 253,813 | 12.5 | % | ||||
| Average trucks in service | 5,174 | 4,934 | 4.9 | % | ||||||
| Total trucks (at quarter end) | 5,185 | 4,920 | 5.4 | % | ||||||
| Average revenues per truck per week (1) | $ | 4,247 | $ | 3,957 | 7.3 | % | ||||
Werner Logistics segment | ||||||||||
| Average trucks in service | 53 | 39 | 35.9 | % | ||||||
| Total trucks (at quarter end) | 54 | 39 | 38.5 | % | ||||||
| Total trailers (at quarter end) | 1,605 | 1,440 | 11.5 | % | ||||||
(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, | |||||||||||||
| 2022 | 2021 | ||||||||||||
| Non-GAAP Adjusted Operating Income and Non-GAAP Adjusted Operating Margin (1) | $ | % of Op. Rev. | $ | % of Op. Rev. | |||||||||
| Operating income and operating margin – (GAAP) | $ | 83,511 | 10.9 | % | $ | 62,471 | 10.1 | % | |||||
| Non-GAAP adjustments: | |||||||||||||
| Insurance and claims (2) | 1,321 | 0.2 | % | 1,258 | 0.2 | % | |||||||
| Gain on sale of Werner Global Logistics (3) | — | — | % | (1,013 | ) | (0.1)% | |||||||
| Amortization of intangible assets (4) | 1,359 | 0.2 | % | — | — | % | |||||||
| Non-GAAP adjusted operating income and non-GAAP adjusted operating margin | $ | 86,191 | 11.3 | % | $ | 62,716 | 10.2 | % | |||||
| Three Months Ended March 31, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| 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) | $ | 53,749 | $ | 0.82 | $ | 46,492 | $ | 0.68 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Insurance and claims (2) | 1,321 | 0.02 | 1,258 | 0.02 | ||||||||||||
| Gain on sale of Werner Global Logistics (3) | — | — | (1,013 | ) | (0.02 | ) | ||||||||||
| Amortization of intangible assets, net of amount attributable to noncontrolling interest (4) | 1,187 | 0.02 | — | — | ||||||||||||
| Loss on investments in equity securities (5) | 9,806 | 0.15 | — | — | ||||||||||||
| Income tax effect of above adjustments (6) | (3,079 | ) | (0.05 | ) | (61 | ) | — | |||||||||
| Non-GAAP adjusted net income attributable to Werner and non-GAAP adjusted diluted EPS | $ | 62,984 | $ | 0.96 | $ | 46,676 | $ | 0.68 | ||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – TRUCKLOAD TRANSPORTATION SERVICES (TTS) SEGMENT
(unaudited)
(In thousands)
| Three Months Ended March 31, | ||||||||||||
| 2022 | 2021 | |||||||||||
| Non-GAAP Adjusted Operating Income and Non-GAAP Adjusted Operating Margin (1) | $ | % of Op. Rev. | $ | % of Op. Rev. | ||||||||
| Operating income and operating margin – (GAAP) | $ | 76,093 | 13.6 | % | $ | 57,628 | 12.4 | % | ||||
| Non-GAAP adjustments: | ||||||||||||
| Insurance and claims (2) | 1,321 | 0.2 | % | 1,258 | 0.3 | % | ||||||
| Amortization of intangible assets (4) | 859 | 0.2 | % | — | — | % | ||||||
| Non-GAAP adjusted operating income and non-GAAP adjusted operating margin | $ | 78,273 | 14.0 | % | $ | 58,886 | 12.7 | % | ||||
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Non-GAAP Adjusted Operating Expenses and Non-GAAP Adjusted Operating Ratio (1) | $ | % of Op. Rev. | $ | % of Op. Rev. | ||||||||||
| Operating expenses and operating ratio – (GAAP) | $ | 482,324 | 86.4 | % | $ | 405,321 | 87.6 | % | ||||||
| Non-GAAP adjustments: | ||||||||||||||
| Insurance and claims (2) | (1,321 | ) | (0.2)% | (1,258 | ) | (0.3)% | ||||||||
| Amortization of intangible assets (4) | (859 | ) | (0.2)% | — | — | % | ||||||||
| Non-GAAP adjusted operating expenses and non-GAAP adjusted operating ratio | $ | 480,144 | 86.0 | % | $ | 404,063 | 87.3 | % | ||||||
| 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) | 2022 | 2021 | ||||||
| $ | $ | |||||||
| Operating revenues – (GAAP) | $ | 558,417 | $ | 462,949 | ||||
| Less: Trucking fuel surcharge (7) | (79,815 | ) | (47,459 | ) | ||||
| Operating revenues, net of fuel surcharge – (Non-GAAP) | 478,602 | 415,490 | ||||||
| Operating expenses – (GAAP) | 482,324 | 405,321 | ||||||
| Non-GAAP adjustments: | ||||||||
| Trucking fuel surcharge (7) | (79,815 | ) | (47,459 | ) | ||||
| Insurance and claims (2) | (1,321 | ) | (1,258 | ) | ||||
| Amortization of intangible assets (4) | (859 | ) | — | |||||
| Non-GAAP adjusted operating expenses, net of fuel surcharge | 400,329 | 356,604 | ||||||
| Non-GAAP adjusted operating income | $ | 78,273 | $ | 58,886 | ||||
| Non-GAAP adjusted operating margin, net of fuel surcharge | 16.4 | % | 14.2 | % | ||||
| Non-GAAP adjusted operating ratio, net of fuel surcharge | 83.6 | % | 85.8 | % | ||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – WERNER LOGISTICS SEGMENT
(unaudited)
(In thousands)
| Three Months Ended March 31, | |||||||||||||
| 2022 | 2021 | ||||||||||||
| Non-GAAP Adjusted Operating Income and Non-GAAP Adjusted Operating Margin (1) | $ | % of Op. Rev. | $ | % of Op. Rev. | |||||||||
| Operating income and operating margin – (GAAP) | $ | 8,681 | 4.6 | % | $ | 4,574 | 3.3 | % | |||||
| Non-GAAP adjustments: | |||||||||||||
| Gain on sale of Werner Global Logistics (3) | — | — | % | (1,013 | ) | (0.7)% | |||||||
| Amortization of intangible assets (4) | 500 | 0.3 | % | — | — | % | |||||||
| Non-GAAP adjusted operating income and non-GAAP adjusted operating margin | $ | 9,181 | 4.9 | % | $ | 3,561 | 2.6 | % | |||||
(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 $0.4 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 the Truckload Transportation Services segment in our Segment Information table.
(3) During first quarter 2021, we sold Werner Global Logistics (“WGL”) freight forwarding services for international ocean and air shipments to Scan Global Logistics Group, which resulted in the pre-tax gain on sale. Management believes excluding the effect of this unusual and infrequent item provides a more useful comparison of our performance from period to period. This item is included in our Werner Logistics segment in our Segment Information table.
(4) Amortization expense related to intangible assets acquired in the ECM Associated, LLC (“ECM”) and NEHDS Logistics, LLC (“NEHDS”) acquisitions on July 1, 2021 and November 22, 2021, respectively, is excluded because management does not believe it is indicative of our core operating performance. Amortization expense for ECM and NEHDS is included in our Truckload Transportation Services and Werner Logistics segments, respectively, 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 ASC 321, Investments - Equity Securities. We record changes in the value of our investments in equity securities in other expense (income) in our Income Statement. 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.
(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 2021 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.
