wern-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


[Mark			one]
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-14690

WERNER ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Nebraska

47-0648386

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

14507 Frontier Road

Post Office Box 45308

Omaha

Nebraska

68145-0308

(Address of principal executive offices)

(Zip Code)

(402) 895-6640

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value

WERN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, 65,057,763 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

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WERNER ENTERPRISES, INC.

INDEX


		PAGE
PART I – FINANCIAL INFORMATION
	Cautionary Note Regarding Forward-Looking Statements	3
Item 1.	Financial Statements:	4
	Consolidated Statements of Income for the Three Months Ended March 31 , 202 2 and 202 1	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 3 1 , 202 2 and 202 1	5
	Consolidated Condensed Balance Sheets as of March 31 , 202 2 and December 31, 202 1	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 202 2 and 202 1	7
	Consolidated Statements of Stockholders’ Equity and Temporary Equity - Redeemable Noncontrolling Interest for the Three Months Ended March 31, 202 2 and 202 1	8
	Notes to Consolidated Financial Statements (Unaudited) as of March 3 1 , 202 2	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28

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PART I

FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements:

This Quarterly Report on Form 10-Q contains historical information and forward-looking statements based on information currently available to our management. The forward-looking statements in this report, including those made in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of Part I, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These safe harbor provisions encourage reporting companies to provide prospective information to investors. Forward-looking statements can be identified by the use of certain words, such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project” and other similar terms and language. We believe the forward-looking statements are reasonable based on currently available information. However, forward-looking statements involve risks, uncertainties and assumptions, whether known or unknown, that could cause our actual results, business, financial condition and cash flows to differ materially from those anticipated in the forward-looking statements. A discussion of important factors relating to forward-looking statements is included in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”). Readers should not unduly rely on the forward-looking statements included in this Form 10-Q because such statements speak only to the date they were made. Unless otherwise required by applicable securities laws, we undertake no obligation or duty to update or revise any forward-looking statements contained herein to reflect subsequent events or circumstances or the occurrence of unanticipated events.

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Item 1. Financial Statements.

WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended March 31,
(In thousands, except per share amounts)	2022		2021
	(Unaudited)
Operating revenues	$	764,605	$	616,446
Operating expenses:
Salaries, wages and benefits	241,996		204,853
Fuel	88,421		50,838
Supplies and maintenance	57,025		46,147
Taxes and licenses	23,833		23,233
Insurance and claims	27,492		22,056
Depreciation and amortization	67,229		63,951
Rent and purchased transportation	185,237		146,493
Communications and utilities	3,926		3,022
Other	(14,065)		(6,618)
Total operating expenses	681,094		553,975
Operating income	83,511		62,471
Other expense (income):
Interest expense	1,439		838
Interest income	(275)		(297)
Loss on investments in equity securities	9,806		—
Other	73		42
Total other expense (income)	11,043		583
Income before income taxes	72,468		61,888
Income tax expense	17,433		15,396
Net income	55,035		46,492
Net income attributable to noncontrolling interest	(1,286)		—
Net income attributable to Werner	$	53,749	$	46,492
Earnings per share:
Basic	$	0.82	$	0.68
Diluted	$	0.82	$	0.68

Weighted-average common shares outstanding:
Basic	65,543		67,932
Diluted	65,878		68,223

See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended March 31,
(In thousands)	2022		2021
	(Unaudited)
Net income	$	55,035	$	46,492
Other comprehensive income (loss):
Foreign currency translation adjustments	1,153		(1,568)
Change in fair value of interest rate swaps, net of tax	3,631		1,303
Other comprehensive income (loss)	4,784		(265)
Comprehensive income	59,819		46,227
Comprehensive income attributable to noncontrolling interest	(1,286)		—
Comprehensive income attributable to Werner	$	58,533	$	46,227

See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS


(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	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	241,690		237,220

Deferred income taxes	269,361		268,499
Total liabilities	1,270,329		1,240,216
Commitments and contingencies
Temporary equity - redeemable noncontrolling interest	37,233		35,947
Stockholders’ equity:
Common stock, $0.01 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

See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(In thousands)	2022		2021
	(Unaudited)
Cash flows from operating activities:
Net income	$	55,035	$	46,492
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,229		63,951
Deferred income taxes	(254)		3,487
Gain on disposal of property and equipment	(20,458)		(10,520)
Non-cash equity compensation	3,026		2,502
Insurance and claims accruals, net of current portion	4,470		4,212
Other	(2,080)		1,285
Loss on investments in equity securities	9,806		—
Changes in certain working capital items:
Accounts receivable, net	11,279		(6,798)
Other current assets	13,152		551
Accounts payable	12,330		18,481
Other current liabilities	1,422		12,224
Net cash provided by operating activities	154,957		135,867
Cash flows from investing activities:
Additions to property and equipment	(73,629)		(82,555)
Proceeds from sales of property and equipment	36,555		44,689
Net cash invested in acquisition	705		—
Investment in equity securities	—		(5,000)
Decrease in notes receivable	1,831		1,575
Net cash used in investing activities	(34,538)		(41,291)
Cash flows from financing activities:
Repayments of short-term debt	(1,250)		(25,000)

Repayments of long-term debt	(100,000)		—
Proceeds from issuance of long-term debt	100,000		—

Dividends on common stock	(7,895)		(6,114)
Repurchases of common stock	(36,180)		(5,507)
Tax withholding related to net share settlements of restricted stock awards	(3,658)		(3,740)



Net cash used in financing activities	(48,983)		(40,361)
Effect of exchange rate fluctuations on cash	317		(419)
Net increase in cash and cash equivalents	71,753		53,796
Cash and cash equivalents, beginning of period	54,196		29,334
Cash and cash equivalents, end of period	$	125,949	$	83,130
Supplemental disclosures of cash flow information:
Interest paid	$	1,536	$	878
Income taxes paid	837		536
Supplemental schedule of non-cash investing and financing activities:
Notes receivable issued upon sale of property and equipment	$	1,613	$	988
Change in fair value of interest rate swaps	3,631		1,303
Property and equipment acquired included in accounts payable	13,671		23,570
Property and equipment disposed included in other receivables	154		17
Dividends accrued but not yet paid at end of period	7,807		6,792

See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND

TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST


(In thousands, except share and per share amounts)	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders’ Equity		Temporary Equity - Redeemable Noncontrolling Interest
	(Unaudited)
BALANCE, December 31, 2021	$	805	$	121,904	$	1,667,104	$	(20,604)	$	(441,659)	$	1,327,550	$	35,947
Net income attributable to Werner	—		—		53,749		—		—		53,749		—
Net income attributable to noncontrolling interest	—		—		—		—		—		—		1,286
Other comprehensive income	—		—		—		4,784		—		4,784		—
Purchases of 845,100 shares of common stock	—		—		—		—		(36,180)		(36,180)		—
Dividends on common stock ($0.12 per share)	—		—		(7,807)		—		—		(7,807)		—
Equity compensation activity, 112,751 shares	—		(3,773)		—		—		115		(3,658)		—
Non-cash equity compensation expense	—		3,026		—		—		—		3,026		—
BALANCE, March 31, 2022	$	805	$	121,157	$	1,713,046	$	(15,820)	$	(477,724)	$	1,341,464	$	37,233


BALANCE, December 31, 2020	$	805	$	116,039	$	1,438,916	$	(22,833)	$	(337,887)	$	1,195,040	$	—
Net income attributable to Werner	—		—		46,492		—		—		46,492		—
Other comprehensive loss	—		—		—		(265)		—		(265)		—
Purchases of 130,446 shares of common stock	—		—		—		—		(5,507)		(5,507)		—
Dividends on common stock ($0.10 per share)	—		—		(6,792)		—		—		(6,792)		—
Equity compensation activity, 116,868 shares	—		(3,953)		—		—		213		(3,740)		—
Non-cash equity compensation expense	—		2,502		—		—		—		2,502		—
BALANCE, March 31, 2021	$	805	$	114,588	$	1,478,616	$	(23,098)	$	(343,181)	$	1,227,730	$	—

See Notes to Consolidated Financial Statements (Unaudited).

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WERNER ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of Werner Enterprises, Inc. and its controlled subsidiaries (collectively, the “Company” or “Werner”). Noncontrolling interest on the consolidated condensed balance sheets represents the portion of a consolidated entity in which we do not have a direct equity ownership. In these notes, the terms “we,” “us,” or “our” refer to Werner Enterprises, Inc. and its subsidiaries. All significant intercompany accounts and transactions relating to these entities have been eliminated.

These consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (SEC) instructions to Form 10-Q and, in the opinion of management, reflect all adjustments, which are all of normal recurring nature, necessary to present fairly the financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles (“GAAP”). These consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements; although in management’s opinion, the disclosures are adequate so that the information presented is not misleading.

Operating results for the three-month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. In the opinion of management, the information set forth in the accompanying consolidated condensed balance sheets is fairly stated in all material respects in relation to the consolidated balance sheets from which it has been derived.

These consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes contained in our 2021 Form 10-K.

New Accounting Pronouncements Adopted

In the first quarter 2022, we adopted Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The provisions of this update are effective for all entities as of March 12, 2020 through December 31, 2022 and apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The adoption of the new guidance did not have a material impact on our consolidated financial statements.

(2) Business Acquisitions

On July 1, 2021, we acquired an 80% ownership interest in ECM Associated, LLC ("ECM”) for a final purchase price of $141.3 million after net working capital changes and net of cash acquired. ECM, through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service, LLC (“MCS”) subsidiaries, provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the United States. The results of operations for ECM are included in our consolidated financial statements beginning July 1, 2021, and the noncontrolling interest is presented as a separate component of the consolidated financial statements.

On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”) for a final purchase price of $62.3 million after including the impacts of contingent consideration and net working capital changes. The purchase price allocation for NEHDS is considered final as of March 31, 2022. NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest U.S. markets. NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries. The results of operations for NEHDS are included in our consolidated financial statements beginning November 22, 2021.

Amortization expense on intangible assets was $1.4 million for the three months ended March 31, 2022.

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(3) Revenue

Revenue Recognition

Revenues are recognized over time as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

The following table presents our revenues disaggregated by revenue source (in thousands):


	Three Months Ended March 31,
	2022		2021
Truckload Transportation Services	$	558,417	$	462,949
Werner Logistics	189,008		137,853
Inter-segment eliminations	(722)		(134)
Transportation services	746,703		600,668
Other revenues	17,902		15,778
Total revenues	$	764,605	$	616,446

The following table presents our revenues disaggregated by geographic areas in which we conduct business (in thousands). Operating revenues for foreign countries include revenues for (i) shipments with an origin or destination in that country and (ii) other services provided in that country. If both the origin and destination are in a foreign country, the revenues are attributed to the country of origin.


	Three Months Ended March 31,
	2022		2021
United States	$	710,904	$	555,239
Mexico	43,291		38,756
Other	10,410

SEC Form 10-Q filed by Werner Enterprises Inc.