Third Quarter 2021 Highlights (all metrics compared to third quarter 2020)
- Total revenues of $702.9 million, up 19%
- Operating income of $71.3 million, up 15%; non-GAAP adjusted operating income of $73.9 million, up 15%
- Operating margin of 10.1%, down 40 bps; non-GAAP adjusted operating margin of 10.5%, down 40 bps
- Diluted EPS of $0.94, up 41%; non-GAAP adjusted diluted EPS of $0.79, up 14%
OMAHA, Neb., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Werner Enterprises, Inc. (Nasdaq: WERN), a premier transportation and logistics provider, today reported third quarter operating income, net income attributable to Werner and diluted earnings per share for the quarter ended September 30, 2021.
“Werner once again achieved record third quarter earnings per share in a strong freight market with unprecedented supply chain and labor challenges,” said Derek J. Leathers, Chairman, President and Chief Executive Officer. “We made strategic investments in driver pay and driver sourcing that enabled us to organically grow our Werner fleet this quarter in an ultra-competitive driver market. At the same time, we are successfully integrating the ECM truckload fleet acquisition we made at the beginning of the quarter, and ECM is performing very well.
“While there were some unusual cost and mileage productivity challenges in the quarter, I am confident that our strategic actions are positioning Werner for long-term success. We remain committed to growing revenues, expanding margins, generating free cash flow and providing superior safety and service to our customers across our diversified North America truckload and logistics portfolio.”
Total revenues for the quarter were $702.9 million, an increase of $112.7 million compared to the prior year quarter, due primarily to Truckload Transportation Services revenues growth of $69.4 million and Logistics revenues growth of $40.6 million.
Operating income of $71.3 million increased $9.2 million, or 15%, while operating margin of 10.1% decreased 40 basis points. On a non-GAAP basis, adjusted operating income of $73.9 million increased $9.6 million, or 15%. Adjusted operating margin of 10.5% declined 40 basis points from 10.9% for the same quarter last year.
Operating income increased as a result of significantly higher revenues per total mile and gains on sales of trucks and trailers, both due to improved pricing. Our Logistics segment also achieved significant growth in revenues and expanded its operating margin. Operating income for our Truckload Transportation Services segment was flat, as significant pricing improvement was offset by cost increases for driver pay, driver sourcing, insurance and claims and health insurance.
Interest expense of $1.3 million increased from $0.9 million due to higher average borrowings. The effective income tax rate was 24.6% in both third quarter 2021 and third quarter 2020.
During third quarter 2021, our strategic minority equity investments in Mastery, a transportation management systems company, and TuSimple, an autonomous technology company, had market valuation changes. As a result, we recognized a net gain on investments in equity securities of $16.1 million, or $0.18 per share, which resulted in higher non-operating income in third quarter 2021.
Net income attributable to Werner of $63.8 million increased 38%. On a non-GAAP basis, adjusted net income attributable to Werner of $53.5 million increased 12%. Diluted earnings per share (“EPS”) for the quarter of $0.94 increased 41%. On a non-GAAP basis, adjusted diluted EPS of $0.79 increased 14%.
Key Consolidated Financial Metrics
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
| (In thousands, except per share amounts) | 2021 | 2020 | Y/Y Change | 2021 | 2020 | Y/Y Change | |||||||||||||||
| Total revenues | $ | 702,891 | $ | 590,214 | 19 | % | $ | 1,969,151 | $ | 1,751,876 | 12 | % | |||||||||
| Truckload Transportation Services revenues | 527,697 | 458,256 | 15 | % | 1,481,846 | 1,368,172 | 8 | % | |||||||||||||
| Werner Logistics revenues | 157,968 | 117,351 | 35 | % | 437,494 | 339,678 | 29 | % | |||||||||||||
| Operating income | 71,324 | 62,103 | 15 | % | 210,658 | 145,987 | 44 | % | |||||||||||||
| Operating margin | 10.1 | % | 10.5 | % | (40) bps | 10.7 | % | 8.3 | % | 240 bps | |||||||||||
| Net income attributable to Werner | 63,761 | 46,332 | 38 | % | 182,285 | 108,522 | 68 | % | |||||||||||||
| Diluted earnings per share | 0.94 | 0.67 | 41 | % | 2.68 | 1.56 | 71 | % | |||||||||||||
| Adjusted operating income (1) | 73,850 | 64,262 | 15 | % | 215,679 | 159,235 | 35 | % | |||||||||||||
| Adjusted operating margin (1) | 10.5 | % | 10.9 | % | (40) bps | 11.0 | % | 9.1 | % | 190 bps | |||||||||||
| Adjusted net income attributable to Werner (1) | 53,474 | 47,941 | 12 | % | 158,814 | 118,392 | 34 | % | |||||||||||||
| Adjusted diluted earnings per share (1) | 0.79 | 0.69 | 14 | % | 2.33 | 1.70 | 37 | % | |||||||||||||
(1) See attached Reconciliation of Non-GAAP Financial Measures - Consolidated.
Noteworthy Developments
- On July 1, 2021, Werner acquired an 80% equity ownership interest in ECM Transport Group (“ECM”) for a purchase price of $141.3 million after net working capital changes. The purchase price allocation to assets and liabilities is preliminary and may be adjusted. ECM consists of ECM Transport and Motor Carrier Service, which are elite regional truckload carriers that together operate nearly 500 trucks and 2,000 trailers in the Mid-Atlantic, Ohio and Northeast regions of the U.S. During third quarter, ECM had strong financial performance, and integration is proceeding on schedule. ECM’s financial results are reported in the One-Way Truckload business unit within the Truckload Transportation Services segment.
- Werner issued its inaugural Corporate Social Responsibility report on July 27, 2021 which is accessible from the Company’s website at werner.com.
Truckload Transportation Services (TTS) Segment
- Revenues of $527.7 million increased $69.4 million
- Operating income of $62.9 million decreased $0.2 million; non-GAAP adjusted operating income of $65.4 million increased $0.1 million
- Operating margin of 11.9% decreased 190 basis points from 13.8%; non-GAAP adjusted operating margin of 12.4% decreased 180 basis points from 14.2%
- Non-GAAP adjusted operating margin, net of fuel, of 14.0% decreased 150 basis points from 15.5%
- Average segment trucks in service totaled 8,161, an increase of 546 trucks year over year, or 7.2%
- Dedicated unit trucks at quarter end totaled 5,120 or 62% of the total TTS segment fleet, compared to 4,715 trucks, or 61%, a year ago
- 3.2% increase in TTS average revenues per truck per week
In our Dedicated and One-Way Truckload fleets, freight demand was strong during third quarter 2021. Freight demand has continued to be strong so far in fourth quarter 2021.
Total miles decreased 8.2 million miles in third quarter 2021, caused by fleet mix changes, trucks down due to equipment parts shortages, more drivers unavailable to work due to COVID quarantine protocols and other factors, partially offset by 7.2% higher average trucks in service. TTS company truck miles decreased by approximately 2.3 million miles, and independent contractor miles decreased by approximately 5.9 million miles.
Comparisons of key financial metrics for the TTS segment, including operating ratios (actual and net of fuel surcharge revenues), are shown in the table that follows.
Key Truckload Transportation Services Segment Financial Metrics
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
| (In thousands) | 2021 | 2020 | Y/Y Change | 2021 | 2020 | Y/Y Change | |||||||||||||||
| Trucking revenues, net of fuel surcharge | $ | 461,380 | $ | 417,335 | 11 | % | $ | 1,300,555 | $ | 1,233,267 | 5 | % | |||||||||
| Trucking fuel surcharge revenues | 60,765 | 36,799 | 65 | % | 165,663 | 122,048 | 36 | % | |||||||||||||
| Non-trucking and other revenues | 5,552 | 4,122 | 35 | % | 15,628 | 12,857 | 22 | % | |||||||||||||
| Total revenues | $ | 527,697 | $ | 458,256 | 15 | % | $ | 1,481,846 | $ | 1,368,172 | 8 | % | |||||||||
| Operating income | 62,856 | 63,080 | 0 | % | 193,592 | 143,394 | 35 | % | |||||||||||||
| Operating margin | 11.9 | % | 13.8 | % | (190) bps | 13.1 | % | 10.5 | % | 260 bps | |||||||||||
| Operating ratio | 88.1 | % | 86.2 | % | 190 bps | 86.9 | % | 89.5 | % | (260) bps | |||||||||||
| Adjusted operating income (1) | 65,382 | 65,239 | 0 | % | 198,634 | 156,642 | 27 | % | |||||||||||||
| Adjusted operating margin (1) | 12.4 | % | 14.2 | % | (180) bps | 13.4 | % | 11.4 | % | 200 bps | |||||||||||
| Adjusted operating margin, net of fuel surcharge (1) | 14.0 | % | 15.5 | % | (150) bps | 15.1 | % | 12.6 | % | 250 bps | |||||||||||
| Adjusted operating ratio (1) | 87.6 | % | 85.8 | % | 180 bps | 86.6 | % | 88.6 | % | (200) bps | |||||||||||
| Adjusted operating ratio, net of fuel surcharge (1) | 86.0 | % | 84.5 | % | 150 bps | 84.9 | % | 87.4 | % | (250) bps | |||||||||||
(1) See attached Reconciliation of Non-GAAP Financial Measures - Truckload Transportation Services (TTS) Segment.
Werner Logistics Segment
- Revenues of $158.0 million increased $40.6 million, or 35%
- Operating income of $7.7 million increased $8.5 million
- Operating margin of 4.8% increased 550 bps
Logistics revenues of $158.0 million increased 35%. Logistics revenues increased 50%, if you exclude Werner Global Logistics (WGL) revenues from third quarter 2020. Werner sold WGL in first quarter 2021.
Truckload Logistics revenues (73% of total Logistics revenues) increased 63%, driven by a 33% increase in revenues per shipment and a 23% increase in shipments.
Intermodal revenues (25% of Logistics revenues) increased 19%, supported by a 25% increase in revenues per shipment while shipments declined 5%.
Logistics produced outstanding operating income improvement of $8.5 million in a strong freight market.
Key Werner Logistics Segment Financial Metrics
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
| (In thousands) | 2021 | 2020 | Y/Y Change | 2021 | 2020 | Y/Y Change | |||||||||||||||
| Total revenues | $ | 157,968 | $ | 117,351 | 35 | % | $ | 437,494 | $ | 339,678 | 29 | % | |||||||||
| Operating expenses: | |||||||||||||||||||||
| Rent and purchased transportation expense | 134,972 | 104,626 | 29 | % | 379,887 | 293,400 | 29 | % | |||||||||||||
| Other operating expenses | 15,346 | 13,577 | 13 | % | 41,456 | 42,906 | (3 | %) | |||||||||||||
| Total operating expenses | 150,318 | 118,203 | 27 | % | 421,343 | 336,306 | 25 | % | |||||||||||||
| Operating income (loss) | $ | 7,650 | $ | (852 | ) | 998 | % | $ | 16,151 | $ | 3,372 | 379 | % | ||||||||
| Operating margin | 4.8 | % | (0.7 | %) | 550 bps | 3.7 | % | 1.0 | % | 270 bps | |||||||||||
Cash Flow and Capital Allocation
Cash flow from operations in third quarter 2021 was $63.9 million compared to $59.1 million in third quarter 2020, an increase of 8%.
Net capital expenditures in third quarter 2021 were $59.8 million compared to $79.7 million in third quarter 2020, a decrease of 25%. 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 remain low by industry standards and were 2.1 years and 4.4 years, respectively, as of September 30, 2021.
Gains on sales of equipment in third quarter 2021 were $15.3 million, or $0.17 per share, compared to $3.9 million, or $0.04 per share, in third quarter 2020. 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. As a reminder, gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.
During the quarter, we repurchased 1,049,120 shares of common stock for a total cost of $47.8 million, or an average price of $45.52 per share. As of September 30, 2021, we had 1.6 million shares remaining under our share repurchase authorization.
As of September 30, 2021, we had $45 million of cash and over $1.3 billion of stockholders’ equity. Total debt outstanding increased $50 million during the quarter to $350 million at September 30, 2021. After considering letters of credit issued, we had available liquidity consisting of cash and available borrowing capacity as of September 30, 2021 of $199 million.
2021 Guidance Metrics and Assumptions
The following table summarizes our updated 2021 guidance and assumptions:
2021 Guidance | Prior (as of 7/29/21) | Actual (as of 9/30/21) | New (as of 10/28/21) | Commentary |
| TTS truck growth from BoY to EoY | 1% to 4% (annual) | 5% (YTD21) | 3% to 5% (annual) | Flat to slightly lower fleet expected in 4Q21 |
| Gains on sales of equipment | $9M to $13M (3Q21) | $15.3M (3Q21) | $10M to $12M (4Q21) | Expect lower unit sales due to lower new truck and trailer deliveries |
| Net capital expenditures | $275M to $300M (annual) | $162.7M (YTD21) | $250M to $275M (annual) | Lower range due to lower new truck and trailer deliveries |
| TTS Guidance | ||||
| Dedicated RPTPW* growth | 3% to 5% (annual) | 0.3% (3Q21 vs. 3Q20) | 1% to 2% (4Q21 vs 4Q20) | Lower miles per truck in 4Q21 due to fleet mix but improving from 3Q21 |
| One-Way Truckload (OWT) RPTM* growth | 16% to 19% (2H21 vs. 2H20) | 21.8% (3Q21 vs. 3Q20) | 17% to 19% (4Q21 vs. 4Q20) | Strong start to peak shipping season combined with fleet mix changes |
| Assumptions | ||||
| Effective income tax rate | 24.5% to 25.5% (annual) | 24.6% (3Q21) | 24.5% to 25.5% (annual) | |
| Truck age Trailer age | 2.0 years Low-to-mid “4” years | 2.1 years 4.4 years | 2.2 years 4.4 years | Reinvesting to maintain young fleet advantage, subject to timing of OEM deliveries |
* Net of fuel surcharge revenues
Conference Call Information
Werner Enterprises, Inc. will conduct a conference call to discuss third quarter 2021 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 October 28, 2021 at approximately 6:00 p.m. CT through November 28, 2021 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and using the access code 10150334. 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 2020 revenues of $2.4 billion, an industry-leading modern truck and trailer fleet, over 13,000 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, 2020.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||
| $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||
| Operating revenues | $ | 702,891 | 100.0 | $ | 590,214 | 100.0 | $ | 1,969,151 | 100.0 | $ | 1,751,876 | 100.0 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||
| Salaries, wages and benefits | 234,250 | 33.3 | 197,151 | 33.4 | 649,198 | 33.0 | 598,129 | 34.1 | |||||||||||||||||||
| Fuel | 64,692 | 9.2 | 37,933 | 6.4 | 174,033 | 8.8 | 117,381 | 6.7 | |||||||||||||||||||
| Supplies and maintenance | 57,067 | 8.1 | 44,015 | 7.5 | 152,628 | 7.7 | 133,079 | 7.6 | |||||||||||||||||||
| Taxes and licenses | 24,419 | 3.5 | 24,032 | 4.1 | 71,396 | 3.6 | 70,835 | 4.1 | |||||||||||||||||||
| Insurance and claims | 27,702 | 4.0 | 23,307 | 4.0 | 70,497 | 3.6 | 85,160 | 4.9 | |||||||||||||||||||
| Depreciation and amortization | 68,615 | 9.8 | 62,980 | 10.7 | 196,431 | 10.0 | 199,487 | 11.4 | |||||||||||||||||||
| Rent and purchased transportation | 161,061 | 22.9 | 131,843 | 22.3 | 458,474 | 23.3 | 378,989 | 21.6 | |||||||||||||||||||
| Communications and utilities | 3,598 | 0.5 | 3,797 | 0.6 | 9,953 | 0.5 | 11,141 | 0.6 | |||||||||||||||||||
| Other | (9,837 | ) | (1.4 | ) | 3,053 | 0.5 | (24,117 | ) | (1.2 | ) | 11,688 | 0.7 | |||||||||||||||
| Total operating expenses | 631,567 | 89.9 | 528,111 | 89.5 | 1,758,493 | 89.3 | 1,605,889 | 91.7 | |||||||||||||||||||
| Operating income | 71,324 | 10.1 | 62,103 | 10.5 | 210,658 | 10.7 | 145,987 | 8.3 | |||||||||||||||||||
| Other expense (income): | |||||||||||||||||||||||||||
| Interest expense | 1,284 | 0.2 | 887 | 0.2 | 2,823 | 0.1 | 3,639 | 0.2 | |||||||||||||||||||
| Interest income | (287 | ) | (0.1 | ) | (323 | ) | (0.1 | ) | (918 | ) | — | (1,326 | ) | (0.1 | ) | ||||||||||||
| Gain on investments in equity securities, net | (16,090 | ) | (2.3 | ) | — | — | (36,281 | ) | (1.8 | ) | — | — | |||||||||||||||
| Other | 50 | — | 55 | — | 146 | — | 123 | — | |||||||||||||||||||
| Total other expense (income) | (15,043 | ) | (2.2 | ) | 619 | 0.1 | (34,230 | ) | (1.7 | ) | 2,436 | 0.1 | |||||||||||||||
| Income before income taxes | 86,367 | 12.3 | 61,484 | 10.4 | 244,888 | 12.4 | 143,551 | 8.2 | |||||||||||||||||||
| Income tax expense | 21,278 | 3.0 | 15,152 | 2.5 | 61,275 | 3.1 | 35,029 | 2.0 | |||||||||||||||||||
| Net income | 65,089 | 9.3 | 46,332 | 7.9 | 183,613 | 9.3 | 108,522 | 6.2 | |||||||||||||||||||
| Net income attributable to noncontrolling interest | (1,328 | ) | (0.2 | ) | — | — | (1,328 | ) | — | — | — | ||||||||||||||||
| Net income attributable to Werner | $ | 63,761 | 9.1 | $ | 46,332 | 7.9 | $ | 182,285 | 9.3 | $ | 108,522 | 6.2 | |||||||||||||||
| Diluted shares outstanding | 67,834 | 69,449 | 68,136 | 69,500 | |||||||||||||||||||||||
| Diluted earnings per share | $ | 0.94 | $ | 0.67 | $ | 2.68 | $ | 1.56 | |||||||||||||||||||
| CONDENSED BALANCE SHEET | |||||||
| (In thousands, except share amounts) | |||||||
| September 30, 2021 | December 31, 2020 | ||||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 45,428 | $ | 29,334 | |||
| Accounts receivable, trade, less allowance of $9,233 and $8,686, respectively | 426,346 | 341,104 | |||||
| Other receivables | 26,524 | 23,491 | |||||
| Inventories and supplies | 11,787 | 12,062 | |||||
| Prepaid taxes, licenses and permits | 8,140 | 17,231 | |||||
| Other current assets | 51,566 | 33,694 | |||||
| Total current assets | 569,791 | 456,916 | |||||
| Property and equipment | 2,515,378 | 2,405,335 | |||||
| Less – accumulated depreciation | 908,852 | 862,077 | |||||
| Property and equipment, net | 1,606,526 | 1,543,258 | |||||
| Goodwill | 44,710 | — | |||||
| Intangible assets, net | 50,974 | — | |||||
| Other non-current assets (1) | 207,140 | 156,502 | |||||
| Total assets | $ | 2,479,141 | $ | 2,156,676 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 92,425 | $ | 83,263 | |||
| Current portion of long-term debt | 6,250 | 25,000 | |||||
| Insurance and claims accruals | 70,073 | 76,917 | |||||
| Accrued payroll | 43,397 | 35,594 | |||||
| Accrued expenses | 27,574 | 25,032 | |||||
| Other current liabilities | 21,509 | 28,208 | |||||
| Total current liabilities | 261,228 | 274,014 | |||||
| Long-term debt, net of current portion | 343,750 | 175,000 | |||||
| Other long-term liabilities | 43,656 | 43,114 | |||||
| Insurance and claims accruals, net of current portion (1) | 234,000 | 231,638 | |||||
| Deferred income taxes | 253,335 | 237,870 | |||||
| Stockholders’ equity: | |||||||
| Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 | |||||||
| shares issued; 66,884,251 and 67,931,726 shares outstanding, respectively | 805 | 805 | |||||
| Paid-in capital | 119,776 | 116,039 | |||||
| Retained earnings | 1,598,232 | 1,438,916 | |||||
| Accumulated other comprehensive loss | (21,592 | ) | (22,833 | ) | |||
| Treasury stock, at cost; 13,649,285 and 12,601,810 shares, respectively | (390,664 | ) | (337,887 | ) | |||
| Total Werner stockholders’ equity | 1,306,557 | 1,195,040 | |||||
| Noncontrolling Interest | 36,615 | — | |||||
| Total stockholders’ equity | 1,343,172 | 1,195,040 | |||||
| Total liabilities and stockholders’ equity | $ | 2,479,141 | $ | 2,156,676 | |||
(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 September 30, 2021 and December 31, 2020.
| SUPPLEMENTAL INFORMATION | |||||||||||||||
| (Unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Capital expenditures, net | $ | 59,783 | $ | 79,654 | $ | 162,730 | $ | 187,263 | |||||||
| Cash flow from operations | 63,880 | 59,054 | 253,344 | 346,396 | |||||||||||
| Return on assets (annualized) | 10.8 | % | 8.8 | % | 10.8 | % | 6.9 | % | |||||||
| Return on equity (annualized) | 19.9 | % | 16.0 | % | 19.4 | % | 12.8 | % | |||||||
Segment Financial and Operating Statistics Information
| SEGMENT INFORMATION | |||||||||||||||
| (Unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenues | |||||||||||||||
| Truckload Transportation Services | $ | 527,697 | $ | 458,256 | $ | 1,481,846 | $ | 1,368,172 | |||||||
| Werner Logistics | 157,968 | 117,351 | 437,494 | 339,678 | |||||||||||
| Other (1) | 17,004 | 14,156 | 49,128 | 42,539 | |||||||||||
| Corporate | 434 | 481 | 1,222 | 1,542 | |||||||||||
| Subtotal | 703,103 | 590,244 | 1,969,690 | 1,751,931 | |||||||||||
| Inter-segment eliminations (2) | (212 | ) | (30 | ) | (539 | ) | (55 | ) | |||||||
| Total | $ | 702,891 | $ | 590,214 | $ | 1,969,151 | $ | 1,751,876 | |||||||
| Operating Income | |||||||||||||||
| Truckload Transportation Services | $ | 62,856 | $ | 63,080 | $ | 193,592 | $ | 143,394 | |||||||
| Werner Logistics | 7,650 | (852 | ) | 16,151 | 3,372 | ||||||||||
| Other (1) | 1,406 | 566 | 3,935 | 2,932 | |||||||||||
| Corporate | (588 | ) | (691 | ) | (3,020 | ) | (3,711 | ) | |||||||
| Total | $ | 71,324 | $ | 62,103 | $ | 210,658 | $ | 145,987 | |||||||
(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, | |||||||||||||||||||||||||
| 2021 | 2020 | % Chg | 2021 | 2020 | % Chg | |||||||||||||||||||||
| Truckload Transportation Services segment | ||||||||||||||||||||||||||
| Average trucks in service | 8,161 | 7,615 | 7.2 | % | 7,872 | 7,746 | 1.6 | % | ||||||||||||||||||
| Average revenues per truck per week (1) | $ | 4,349 | $ | 4,216 | 3.2 | % | $ | 4,236 | $ | 4,082 | 3.8 | % | ||||||||||||||
| Total trucks (at quarter end) | ||||||||||||||||||||||||||
| Company | 7,905 | 7,245 | 9.1 | % | 7,905 | 7,245 | 9.1 | % | ||||||||||||||||||
| Independent contractor | 315 | 465 | (32.3 | ) | % | 315 | 465 | (32.3 | ) | % | ||||||||||||||||
| Total trucks | 8,220 | 7,710 | 6.6 | % | 8,220 | 7,710 | 6.6 | % | ||||||||||||||||||
| Total trailers (at quarter end) | 25,245 | 22,350 | 13.0 | % | 25,245 | 22,350 | 13.0 | % | ||||||||||||||||||
| One-Way Truckload | ||||||||||||||||||||||||||
| Trucking revenues, net of fuel surcharge (in 000’s) | $ | 190,314 | $ | 173,021 | 10.0 | % | $ | 513,324 | $ | 518,854 | (1.1 | ) | % | |||||||||||||
| Average trucks in service | 3,110 | 3,048 | 2.0 | % | 2,894 | 3,156 | (8.3 | ) | % | |||||||||||||||||
| Total trucks (at quarter end) | 3,100 | 2,995 | 3.5 | % | 3,100 | 2,995 | 3.5 | % | ||||||||||||||||||
| Average percentage of empty miles | 11.17 | % | 11.70 | % | (4.5 | ) | % | 11.08 | % | 12.18 | % | (9.0 | ) | % | ||||||||||||
| Average revenues per truck per week (1) | $ | 4,708 | $ | 4,366 | 7.8 | % | $ | 4,549 | $ | 4,215 | 7.9 | % | ||||||||||||||
| Average % change YOY in revenues per total mile (1) | 21.8 | % | 2.9 | % | 16.2 | % | (0.9 | ) | % | |||||||||||||||||
| Average % change YOY in total miles per truck per week | (11.4 | ) | % | 1.4 | % | (7.2 | ) | % | 2.0 | % | ||||||||||||||||
| Average completed trip length in miles (loaded) | 731 | 866 | (15.6 | ) | % | 814 | 847 | (3.9 | ) | % | ||||||||||||||||
| Dedicated | ||||||||||||||||||||||||||
| Trucking revenues, net of fuel surcharge (in 000’s) | $ | 271,066 | $ | 244,314 | 10.9 | % | $ | 787,231 | $ | 714,413 | 10.2 | % | ||||||||||||||
| Average trucks in service | 5,051 | 4,567 | 10.6 | % | 4,978 | 4,590 | 8.5 | % | ||||||||||||||||||
| Total trucks (at quarter end) | 5,120 | 4,715 | 8.6 | % | 5,120 | 4,715 | 8.6 | % | ||||||||||||||||||
| Average revenues per truck per week (1) | $ | 4,129 | $ | 4,115 | 0.3 | % | $ | 4,055 | $ | 3,990 | 1.6 | % | ||||||||||||||
| Werner Logistics segment | ||||||||||||||||||||||||||
| Average trucks in service | 41 | 31 | 32.3 | % | 38 | 31 | 22.6 | % | ||||||||||||||||||
| Total trucks (at quarter end) | 50 | 32 | 56.3 | % | 50 | 32 | 56.3 | % | ||||||||||||||||||
| Total trailers (at quarter end) | 1,515 | 1,325 | 14.3 | % | 1,515 | 1,325 | 14.3 | % | ||||||||||||||||||
(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 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. The income tax effect of the non-GAAP adjustments is calculated using the incremental income tax rate excluding discrete items.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – CONSOLIDATED
(unaudited)
(In thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| 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) | $ | 71,324 | 10.1 | % | $ | 62,103 | 10.5 | % | $ | 210,658 | 10.7 | % | $ | 145,987 | 8.3 | % | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||
| Insurance and claims (2) | 1,300 | 0.2 | % | 1,238 | 0.2 | % | 3,816 | 0.2 | % | 3,634 | 0.2 | % | |||||||||||||
| Acquisition expenses (3) | — | — | % | — | — | % | 992 | 0.1 | % | — | — | % | |||||||||||||
| Gain on sale of Werner Global Logistics (4) | — | — | % | — | — | % | (1,013 | ) | (0.1 | ) | % | — | — | % | |||||||||||
| Depreciation (5) | — | — | % | 921 | 0.2 | % | — | — | % | 9,614 | 0.6 | % | |||||||||||||
| Amortization of intangible assets (6) | 1,226 | 0.2 | % | — | — | % | 1,226 | 0.1 | % | — | — | % | |||||||||||||
| Non-GAAP adjusted operating income and non-GAAP adjusted operating margin | $ | 73,850 | 10.5 | % | $ | 64,262 | 10.9 | % | $ | 215,679 | 11.0 | % | $ | 159,235 | 9.1 | % | |||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||
| 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) | $ | 63,761 | $ | 0.94 | $ | 46,332 | $ | 0.67 | $ | 182,285 | $ | 2.68 | $ | 108,522 | $ | 1.56 | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||
| Insurance and claims (2) | 1,300 | 0.02 | 1,238 | 0.02 | 3,816 | 0.05 | 3,634 | 0.05 | |||||||||||||||||||||||
| Acquisition expenses (3) | — | — | — | — | 992 | 0.01 | — | — | |||||||||||||||||||||||
| Gain on sale of Werner Global Logistics (4) | — | — | — | — | (1,013 | ) | (0.01 | ) | — | — | |||||||||||||||||||||
| Depreciation (5) | — | — | 921 | 0.01 | — | — | 9,614 | 0.14 | |||||||||||||||||||||||
| Amortization of intangible assets, net of amount attributable to noncontrolling interest (6) | 981 | 0.02 | — | — | 981 | 0.01 | — | — | |||||||||||||||||||||||
| Gain on investments in equity securities, net (7) | (16,090 | ) | (0.24 | ) | — | — | (36,281 | ) | (0.53 | ) | — | — | |||||||||||||||||||
| Income tax effect of above adjustments | 3,522 | 0.05 | (550 | ) | (0.01 | ) | 8,034 | 0.12 | (3,378 | ) | (0.05 | ) | |||||||||||||||||||
| Non-GAAP adjusted net income attributable to Werner and non-GAAP adjusted diluted EPS | $ | 53,474 | $ | 0.79 | $ | 47,941 | $ | 0.69 | $ | 158,814 | $ | 2.33 | $ | 118,392 | $ | 1.70 | |||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – TRUCKLOAD TRANSPORTATION SERVICES (TTS) SEGMENT
(unaudited)
(In thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| 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) | $ | 62,856 | 11.9 | % | $ | 63,080 | 13.8 | % | $ | 193,592 | 13.1 | % | $ | 143,394 | 10.5 | % | |||||||
| Non-GAAP adjustments: | . | ||||||||||||||||||||||
| Insurance and claims (2) | 1,300 | 0.3 | % | 1,238 | 0.2 | % | 3,816 | 0.2 | % | 3,634 | 0.2 | % | |||||||||||
| Depreciation (5) | — | — | % | 921 | 0.2 | % | — | — | % | 9,614 | 0.7 | % | |||||||||||
| Amortization of intangible assets (6) | 1,226 | 0.2 | % | — | — | % | 1,226 | 0.1 | % | — | — | % | |||||||||||
| Non-GAAP adjusted operating income and non-GAAP adjusted operating margin | $ | 65,382 | 12.4 | % | $ | 65,239 | 14.2 | % | $ | 198,634 | 13.4 | % | $ | 156,642 | 11.4 | % | |||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||
| 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) | $ | 464,841 | 88.1 | % | $ | 395,176 | 86.2 | % | $ | 1,288,254 | 86.9 | % | $ | 1,224,778 | 89.5 | % | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||
| Insurance and claims (2) | (1,300 | ) | (0.3 | ) | % | (1,238 | ) | (0.2 | ) | % | (3,816 | ) | (0.2 | ) | % | (3,634 | ) | (0.2 | ) | % | |||||||||||
| Depreciation (5) | — | — | % | (921 | ) | (0.2 | ) | % | — | — | % | (9,614 | ) | (0.7 | ) | % | |||||||||||||||
| Amortization of intangible assets (6) | (1,226 | ) | (0.2 | ) | % | — | — | % | (1,226 | ) | (0.1 | ) | % | — | — | % | |||||||||||||||
| Non-GAAP adjusted operating expenses and non-GAAP adjusted operating ratio | $ | 462,315 | 87.6 | % | $ | 393,017 | 85.8 | % | $ | 1,283,212 | 86.6 | % | $ | 1,211,530 | 88.6 | % | |||||||||||||||
| 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) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||
| Operating revenues – (GAAP) | $ | 527,697 | $ | 458,256 | $ | 1,481,846 | $ | 1,368,172 | |||||||||||
| Less: Trucking fuel surcharge (8) | (60,765 | ) | (36,799 | ) | (165,663 | ) | (122,048 | ) | |||||||||||
| Operating revenues, net of fuel surcharge – (Non-GAAP) | 466,932 | 421,457 | 1,316,183 | 1,246,124 | |||||||||||||||
| Operating expenses – (GAAP) | 464,841 | 395,176 | 1,288,254 | 1,224,778 | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||
| Trucking fuel surcharge (8) | (60,765 | ) | (36,799 | ) | (165,663 | ) | (122,048 | ) | |||||||||||
| Insurance and claims (2) | (1,300 | ) | (1,238 | ) | (3,816 | ) | (3,634 | ) | |||||||||||
| Depreciation (5) | — | (921 | ) | — | (9,614 | ) | |||||||||||||
| Amortization of intangible assets (6) | (1,226 | ) | — | (1,226 | ) | — | |||||||||||||
| Non-GAAP adjusted operating expenses, net of fuel surcharge | 401,550 | 356,218 | 1,117,549 | 1,089,482 | |||||||||||||||
| Non-GAAP adjusted operating income | $ | 65,382 | $ | 65,239 | $ | 198,634 | $ | 156,642 | |||||||||||
| Non-GAAP adjusted operating margin, net of fuel surcharge | 14.0 | % | 15.5 | % | 15.1 | % | 12.6 | % | |||||||||||
| Non-GAAP adjusted operating ratio, net of fuel surcharge | 86.0 | % | 84.5 | % | 84.9 | % | 87.4 | % | |||||||||||
(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 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 expenses; and GAAP operating ratio, which are their most directly comparable GAAP financial measures.
(2) During third quarter 2021 and 2020, 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. Interest is accrued 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 second quarter 2021, we incurred legal and professional fees related to the acquisition of ECM, which was finalized on July 1, 2021. 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.
(4) 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.
(5) During first quarter 2020, we changed the estimated life of certain trucks expected to be sold in 2020 to more rapidly depreciate these trucks to their estimated residual values due to the weak used truck market. These trucks continued to depreciate at the same higher rate per truck, until all were sold. 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 Truckload Transportation Services segment in our Segment Information table.
(6) Amortization expense related to intangible assets acquired in the ECM acquisition is excluded because management does not believe it is indicative of our core operating performance. This item is included in our Truckload Transportation Services segment in our Segment Information table.
(7) Represents non-operating mark-to-market adjustments for gains/losses on our ownership interests in TuSimple, an autonomous technology company, and Mastery Logistics Systems, Inc., a transportation management systems company. We account for these ownership interests 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.
(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.
