Document

“Even though operating conditions have become more challenging due to macroeconomic changes that are softening the freight market, we produced good financial results,” said Derek J. Leathers, Chairman, President and Chief Executive Officer. “Strong and resilient performance from our durable Dedicated fleet more than offset moderating results in our One-Way Truckload fleet and Logistics segment. We are expecting a more subdued peak freight market in fourth quarter compared to a very strong peak freight market in fourth quarter a year ago.”

Operating income of $76.3 million increased $4.9 million, or 7%, while operating margin of 9.2% decreased 90 basis points. On a non-GAAP basis, adjusted operating income of $79.5 million increased $5.6 million, or 8%. Adjusted operating margin of 9.6% decreased 90 basis points from 10.5% for the same quarter last year. Truckload Transportation Services grew operating income by $11.2 million and adjusted operating income by $11.0 million. Logistics operating income declined $2.5 million and adjusted operating income declined by $2.0 million. Corporate and Other (including driving schools) operating income declined by $3.8 million, due to start-up impacts from substantial growth in our driver training school locations and temporary issues affecting two school locations.

During third quarter 2022, our strategic minority equity investments had market valuation changes causing a net unrealized gain on equity securities, which resulted in higher non-operating income of $0.1 million, compared to a net unrealized gain of $16.1 million, or $0.18 per share, in third quarter 2021. Consistent with prior reporting, market value increases or decreases for these strategic minority investments are adjusted out for determining non-GAAP adjusted net income and non-GAAP adjusted earnings per share.


	Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except per share amounts)	2022			2021			Y/Y Change		2022			2021			Y/Y Change
Total revenues	$	827,606		$	702,891		18	%	$	2,428,487		$	1,969,151		23	%
Truckload Transportation Services revenues	621,866			527,697			18	%	1,793,899			1,481,846			21	%
Werner Logistics revenues	187,138			157,968			18	%	580,007			437,494			33	%
Operating income	76,261			71,324			7	%	234,695			210,658			11	%
Operating margin	9.2		%	10.1		%	(90) bps		9.7		%	10.7		%	(100) bps
Net income attributable to Werner	55,051			63,761			(14)	%	181,090			182,285			(1)	%
Diluted earnings per share	0.86			0.94			(8)	%	2.79			2.68			4	%
Adjusted operating income (1)	79,453			73,850			8	%	243,247			215,679			13	%
Adjusted operating margin (1)	9.6		%	10.5		%	(90) bps		10.0		%	11.0		%	(100) bps
Adjusted net income attributable to Werner (1)	57,231			53,404			7	%	176,315			158,656			11	%
Adjusted diluted earnings per share (1)	0.90			0.79			14	%	2.72			2.33			17	%

On October 1, 2022, Werner acquired a 100% equity ownership interest in Baylor Trucking (“Baylor”) of Milan, Indiana. Baylor achieved revenues of $81.5 million for the last twelve months ended August 2022. Baylor is a premier truckload carrier that operates 200 trucks and 980 trailers in the east central and south central U.S. with their network of two terminals. Baylor, with its highly skilled professional drivers and non-driver associates, further strengthens our portfolio with their exceptional service and stellar reputation.

During third quarter 2022, Dedicated continued to experience strong and steady freight demand from its customers. One-Way Truckload customer freight demand during third quarter 2022 moderated further from second quarter. During October, Dedicated freight demand remained strong, and One-Way Truckload demand was steady from third quarter with much fewer project and surge opportunities as we enter peak season.


	Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)	2022			2021			Y/Y Change		2022			2021			Y/Y Change
Trucking revenues, net of fuel surcharge	$	503,677		$	461,380		9	%	$	1,464,246		$	1,300,555		13	%
Trucking fuel surcharge revenues	111,173			60,765			83	%	309,629			165,663			87	%
Non-trucking and other revenues	7,016			5,552			26	%	20,024			15,628			28	%
Total revenues	$	621,866		$	527,697		18	%	$	1,793,899		$	1,481,846		21	%

Operating income	74,117			62,856			18	%	214,214			193,592			11	%
Operating margin	11.9		%	11.9		%	— bps		11.9		%	13.1		%	(120) bps
Operating ratio	88.1		%	88.1		%	— bps		88.1		%	86.9		%	120 bps
Adjusted operating income (1)	76,341			65,382			17	%	220,798			198,634			11	%
Adjusted operating margin (1)	12.3		%	12.4		%	(10) bps		12.3		%	13.4		%	(110) bps
Adjusted operating margin, net of fuel surcharge (1)	14.9		%	14.0		%	90 bps		14.9		%	15.1		%	(20) bps
Adjusted operating ratio (1)	87.7		%	87.6		%	10 bps		87.7		%	86.6		%	110 bps
Adjusted operating ratio, net of fuel surcharge (1)	85.1		%	86.0		%	(90) bps		85.1		%	84.9		%	20 bps


	Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)	2022			2021			Y/Y Change		2022			2021			Y/Y Change
Total revenues	$	187,138		$	157,968		18	%	$	580,007		$	437,494		33	%
Operating expenses:
Purchased transportation expense	154,960			134,972			15	%	478,722			379,887			26	%
Other operating expenses	27,033			15,346			76	%	74,969			41,456			81	%
Total operating expenses	181,993			150,318			21	%	553,691			421,343			31	%
Operating income	$	5,145		$	7,650		(33)	%	$	26,316		$	16,151		63	%
Operating margin	2.7		%	4.8		%	(210) bps		4.5		%	3.7		%	80 bps
Adjusted operating income (1)	$	5,645		$	7,650		(26)	%	$	27,816		$	15,138		84	%
Adjusted operating margin (1)	3.0		%	4.8		%	(180) bps		4.8		%	3.5		%	130 bps

Net capital expenditures in third quarter 2022 were $100.6 million compared to $59.8 million in third quarter 2021, an increase of 68%. 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 4.8 years, respectively, as of September 30, 2022.

Gains on sales of equipment in third quarter 2022 were $21.5 million, or $0.25 per share, compared to $15.3 million, or $0.17 per share, in third quarter 2021. Year over year, we sold more trucks and a similar number of trailers and realized higher average gains per truck and trailer. Gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.

As of September 30, 2022, we had $126 million of cash and nearly $1.4 billion of stockholders’ equity. Total debt outstanding was $574 million at September 30, 2022. After considering letters of credit issued, we had available liquidity consisting of cash and available borrowing capacity as of September 30, 2022 of $287 million, prior to the closing payment for Baylor on October 3, 2022.

2022 Guidance

Prior
(as of 8/3/22)

Actual
(as of 9/30/22)

New
(as of 11/2/22)

Commentary

TTS truck growth from BoY to EoY

2% to 5%
(annual)

3%
(YTD22)

3% to 5%
(annual)

Includes Baylor trucks acquired 10/1/22; rest of fleet flat to slightly lower in 4Q22

Net capital expenditures

$275M to $325M
(annual)

$254.1M
(YTD22)

$300M to $325M
(annual)

Subject to availability of new equipment

TTS Guidance

Dedicated RPTPW* growth

6% to 8%
(annual)

8.6%
(YTD22 vs. YTD21)

6% to 8%
(4Q22 vs. 4Q21)

Expect continued strong rate levels to offset inflationary costs

One-Way Truckload RPTM* growth

2% to 5%
(3Q22 vs. 3Q21)

2.5%
(3Q22 vs. 3Q21)

(3)% to 0%
(4Q22 vs. 4Q21)

Moderating OWT freight market, tough YOY RPTM comps, much fewer premium pricing opportunities in 4Q22

Assumptions

Effective income tax rate

24.5% to 25.5%
(annual)

24.3%
(YTD22)

24.0% to 24.5%
(annual)

Truck age
Trailer age

2.2 years
4.8 years

2.3 years
4.8 years

2.3 years
5.0 years

Subject to availability of new equipment

Werner Enterprises, Inc. will conduct a conference call to discuss third 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.

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 14,000 talented associates and our innovative Werner EDGE technology, we are an essential solutions provider for customers who value the integrity of their supply chain and require safe and exceptional on-time service. Werner provides Dedicated and One-Way Truckload services as well as Logistics services that include truckload brokerage, freight management, intermodal and final mile. As an industry leader, Werner is deeply committed to promoting sustainability and supporting diversity, equity and inclusion.

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are based on information presently available to the Company’s management and are current only as of the date made. Actual results could also differ materially from those anticipated as a result of a number of factors, including, but not limited to, those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and subsequently filed Quarterly Reports on Form 10-Q.

For those reasons, undue reliance should not be placed on any forward-looking statement. The Company assumes no duty or obligation to update or revise any forward-looking statement, although it may do so from time to time as management believes is warranted or as may be required by applicable securities law. Any such updates or revisions may be made by filing reports with the U.S. Securities and Exchange Commission (“SEC”), through the issuance of press releases or by other methods of public disclosure.


INCOME STATEMENT
(Unaudited)
(In thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	$		%	$		%	$		%	$		%
Operating revenues	$	827,606	100.0	$	702,891	100.0	$	2,428,487	100.0	$	1,969,151	100.0
Operating expenses:
Salaries, wages and benefits	264,443		32.0	234,250		33.3	760,078		31.3	649,198		33.0
Fuel	111,985		13.5	64,692		9.2	325,852		13.4	174,033		8.8
Supplies and maintenance	68,009		8.2	57,067		8.1	187,690		7.7	152,628		7.7
Taxes and licenses	25,016		3.0	24,419		3.5	72,640		3.0	71,396		3.6
Insurance and claims	34,501		4.2	27,702		4.0	103,064		4.2	70,497		3.6
Depreciation and amortization	70,397		8.5	68,615		9.8	206,097		8.5	196,431		10.0
Rent and purchased transportation	187,449		22.6	161,061		22.9	569,802		23.5	458,474		23.3
Communications and utilities	3,720		0.5	3,598		0.5	11,427		0.5	9,953		0.5
Other	(14,175)		(1.7)	(9,837)		(1.4)	(42,858)		(1.8)	(24,117)		(1.2)
Total operating expenses	751,345		90.8	631,567		89.9	2,193,792		90.3	1,758,493		89.3
Operating income	76,261		9.2	71,324		10.1	234,695		9.7	210,658		10.7
Other expense (income):
Interest expense	2,778		0.3	1,284		0.2	6,004		0.3	2,823		0.1
Interest income	(392)		—	(287)		(0.1)	(980)		—	(918)		—
Gain on investments in equity securities, net	(114)		—	(16,090)		(2.3)	(14,403)		(0.6)	(36,281)		(1.8)
Other	77		—	50		—	276		—	146		—
Total other expense (income)	2,349		0.3	(15,043)		(2.2)	(9,103)		(0.3)	(34,230)		(1.7)
Income before income taxes	73,912		8.9	86,367		12.3	243,798		10.0	244,888		12.4
Income tax expense	17,987		2.1	21,278		3.0	59,229		2.4	61,275		3.1
Net income	55,925		6.8	65,089		9.3	184,569		7.6	183,613		9.3
Net income attributable to noncontrolling interest	(874)		(0.1)	(1,328)		(0.2)	(3,479)		(0.1)	(1,328)		—
Net income attributable to Werner	$	55,051	6.7	$	63,761	9.1	$	181,090	7.5	$	182,285	9.3
Diluted shares outstanding	63,782			67,834			64,819			68,136
Diluted earnings per share	$	0.86		$	0.94		$	2.79		$	2.68


CONDENSED BALANCE SHEET
(In thousands, except share amounts)

	September 30, 2022		December 31, 2021
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	125,683	$	54,196
Accounts receivable, trade, less allowance of $10,142 and $9,169, respectively	493,139		460,518
Other receivables	24,480		24,449
Inventories and supplies	12,849		11,140
Prepaid taxes, licenses and permits	8,510		17,549
Other current assets	65,845		63,361
Total current assets	730,506		631,213
Property and equipment	2,780,691		2,557,825
Less – accumulated depreciation	1,061,578		944,582
Property and equipment, net	1,719,113		1,613,243
Goodwill	74,404		74,618
Intangible assets, net	51,238		55,315
Other non-current assets (1)	283,868		229,324
Total assets	$	2,859,129	$	2,603,713

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable	$	115,860	$	93,987
Current portion of long-term debt	5,000		5,000
Insurance and claims accruals	77,663		72,594
Accrued payroll	47,619		44,333
Accrued expenses	31,553		28,758

Other current liabilities	24,939		24,011
Total current liabilities	302,634		268,683
Long-term debt, net of current portion	568,750		422,500
Other long-term liabilities	42,765		43,314
Insurance and claims accruals, net of current portion (1)	238,689		237,220
Deferred income taxes	281,057		268,499
Total liabilities	1,433,895		1,240,216
Temporary equity - redeemable noncontrolling interest	38,676		35,947
Stockholders’ equity:
Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536
shares issued; 63,202,053 and 65,790,112 shares outstanding, respectively	805		805
Paid-in capital	127,046		121,904
Retained earnings	1,823,927		1,667,104
Accumulated other comprehensive loss	(13,435)		(20,604)
Treasury stock, at cost; 17,331,483 and 14,743,424 shares, respectively	(551,785)		(441,659)
Total stockholders’ equity	1,386,558		1,327,550
Total liabilities, temporary equity and stockholders’ equity	$	2,859,129	$	2,603,713

(1) Under the terms of our insurance policies, we are the primary obligor of the damage award in a previously disclosed adverse jury verdict, and as such, we have recorded a $79.2 million receivable from our third-party insurance providers in other non-current assets and a corresponding liability of the same amount in the long-term portion of insurance and claims accruals in the unaudited condensed balance sheets as of September 30, 2022 and December 31, 2021.


SEGMENT INFORMATION
(Unaudited)
(In thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues
Truckload Transportation Services	$	621,866	$	527,697	$	1,793,899	$	1,481,846
Werner Logistics	187,138		157,968		580,007		437,494
Other (1)	18,469		17,004		54,928		49,128
Corporate	535		434		1,402		1,222
Subtotal	828,008		703,103		2,430,236		1,969,690
Inter-segment eliminations (2)	(402)		(212)		(1,749)		(539)
Total	$	827,606	$	702,891	$	2,428,487	$	1,969,151
Operating Income
Truckload Transportation Services	$	74,117	$	62,856	$	214,214	$	193,592
Werner Logistics	5,145		7,650		26,316		16,151
Other (1)	(1,091)		1,406		(185)		3,935
Corporate	(1,910)		(588)		(5,650)		(3,020)
Total	$	76,261	$	71,324	$	234,695	$	210,658


OPERATING STATISTICS BY SEGMENT
(Unaudited)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022			2021			% Chg		2022			2021			% Chg
Truckload Transportation Services segment
Average trucks in service	8,513			8,161			4.3	%	8,346			7,872			6.0	%
Average revenues per truck per week (1)	$	4,551		$	4,349		4.6	%	$	4,499		$	4,236		6.2	%
Total trucks (at quarter end)
Company	8,335			7,905			5.4	%	8,335			7,905			5.4	%
Independent contractor	245			315			(22.2)	%	245			315			(22.2)	%
Total trucks	8,580			8,220			4.4	%	8,580			8,220			4.4	%
Total trailers (at quarter end)	25,825			25,245			2.3	%	25,825			25,245			2.3	%
One-Way Truckload
Trucking revenues, net of fuel surcharge (in 000’s)	$	189,620		$	190,314		(0.4)	%	$	564,553		$	513,324		10.0	%
Average trucks in service	3,154			3,110			1.4	%	3,107			2,894			7.4	%
Total trucks (at quarter end)	3,150			3,100			1.6	%	3,150			3,100			1.6	%
Average percentage of empty miles	13.00		%	11.17		%	16.4	%	12.39		%	11.08		%	11.8	%
Average revenues per truck per week (1)	$	4,624		$	4,708		(1.8)	%	$	4,659		$	4,549		2.4	%
Average % change YOY in revenues per total mile (1)	2.5		%	21.8		%			11.7		%	16.2		%
Average % change YOY in total miles per truck per week	(4.2)		%	(11.4)		%			(8.3)		%	(7.2)		%
Average completed trip length in miles (loaded)	668			731			(8.6)	%	691			814			(15.1)	%
Dedicated
Trucking revenues, net of fuel surcharge (in 000’s)	$	314,057		$	271,066		15.9	%	$	899,693		$	787,231		14.3	%
Average trucks in service	5,359			5,051			6.1	%	5,239			4,978			5.2	%
Total trucks (at quarter end)	5,430			5,120			6.1	%	5,430			5,120			6.1	%
Average revenues per truck per week (1)	$	4,508		$	4,129		9.2	%	$	4,404		$	4,055		8.6	%
Werner Logistics segment
Average trucks in service	54			41			31.7	%	55			38			44.7	%
Total trucks (at quarter end)	50			50			—	%	50			50			—	%
Total trailers (at quarter end)	2,045			1,515			35.0	%	2,045			1,515			35.0	%

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.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
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)	$	76,261	9.2	%	$	71,324	10.1	%	$	234,695	9.7	%	$	210,658	10.7	%
Non-GAAP adjustments:
Insurance and claims (2)	1,365		0.2	%	1,300		0.2	%	4,007		0.1	%	3,816		0.2	%
Gain on sale of Werner Global Logistics (3)	—		—	%	—		—	%	—		—	%	(1,013)		(0.1)	%
Amortization of intangible assets (4)	1,359		0.2	%	1,226		0.2	%	4,077		0.2	%	1,226		0.1	%
Acquisition expenses (5)	468		—	%	—		—	%	468		—	%	992		0.1	%
Non-GAAP adjusted operating income and non-GAAP adjusted operating margin	$	79,453	9.6	%	$	73,850	10.5	%	$	243,247	10.0	%	$	215,679	11.0	%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
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)	$	55,051	$	0.86	$	63,761	$	0.94	$	181,090	$	2.79	$	182,285	$	2.68
Non-GAAP adjustments:
Insurance and claims (2)	1,365		0.02		1,300		0.02		4,007		0.06		3,816		0.05
Gain on sale of Werner Global Logistics (3)	—		—		—		—		—		—		(1,013)		(0.01)
Amortization of intangible assets, net of amount attributable to noncontrolling interest (4)	1,187		0.02		981		0.02		3,561		0.06		981		0.01
Acquisition expenses (5)	468		0.01		—		—		468		0.01		992		0.01
Gain on investments in equity securities, net (6)	(114)		—		(16,090)		(0.24)		(14,403)		(0.22)		(36,281)		(0.53)
Income tax effect of above adjustments (7)	(726)		(0.01)		3,452		0.05		1,592		0.02		7,876		0.12
Non-GAAP adjusted net income attributable to Werner and non-GAAP adjusted diluted EPS	$	57,231	$	0.90	$	53,404	$	0.79	$	176,315	$	2.72	$	158,656	$	2.33


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
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)	$	74,117	11.9	%	$	62,856	11.9	%	$	214,214	11.9	%	$	193,592	13.1	%
Non-GAAP adjustments:
Insurance and claims (2)	1,365		0.2	%	1,300		0.3	%	4,007		0.2	%	3,816		0.2	%
Amortization of intangible assets (4)	859		0.2	%	1,226		0.2	%	2,577		0.2	%	1,226		0.1	%
Non-GAAP adjusted operating income and non-GAAP adjusted operating margin	$	76,341	12.3	%	$	65,382	12.4	%	$	220,798	12.3	%	$	198,634	13.4	%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
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)	$	547,749	88.1	%	$	464,841	88.1	%	$	1,579,685	88.1	%	$	1,288,254	86.9	%
Non-GAAP adjustments:
Insurance and claims (2)	(1,365)		(0.2)	%	(1,300)		(0.3)	%	(4,007)		(0.2)	%	(3,816)		(0.2)	%
Amortization of intangible assets (4)	(859)		(0.2)	%	(1,226)		(0.2)	%	(2,577)		(0.2)	%	(1,226)		(0.1)	%
Non-GAAP adjusted operating expenses and non-GAAP adjusted operating ratio	$	545,525	87.7	%	$	462,315	87.6	%	$	1,573,101	87.7	%	$	1,283,212	86.6	%


	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)	2022			2021			2022			2021
	$			$			$			$
Operating revenues – (GAAP)	$	621,866		$	527,697		$	1,793,899		$	1,481,846
Less: Trucking fuel surcharge (8)	(111,173)			(60,765)			(309,629)			(165,663)
Operating revenues, net of fuel surcharge – (Non-GAAP)	510,693			466,932			1,484,270			1,316,183
Operating expenses – (GAAP)	547,749			464,841			1,579,685			1,288,254
Non-GAAP adjustments:
Trucking fuel surcharge (8)	(111,173)			(60,765)			(309,629)			(165,663)
Insurance and claims (2)	(1,365)			(1,300)			(4,007)			(3,816)
Amortization of intangible assets (4)	(859)			(1,226)			(2,577)			(1,226)
Non-GAAP adjusted operating expenses, net of fuel surcharge	434,352			401,550			1,263,472			1,117,549
Non-GAAP adjusted operating income	$	76,341		$	65,382		$	220,798		$	198,634
Non-GAAP adjusted operating margin, net of fuel surcharge	14.9		%	14.0		%	14.9		%	15.1		%
Non-GAAP adjusted operating ratio, net of fuel surcharge	85.1		%	86.0		%	85.1		%	84.9		%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
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)	$	5,145	2.7	%	$	7,650	4.8	%	$	26,316	4.5	%	$	16,151	3.7	%
Non-GAAP adjustments:
Gain on sale of Werner Global Logistics (3)	—		—	%	—		—	%	—		—	%	(1,013)		(0.2)	%
Amortization of intangible assets (4)	500		0.3	%	—		—	%	1,500		0.3	%	—		—	%
Non-GAAP adjusted operating income and non-GAAP adjusted operating margin	$	5,645	3.0	%	$	7,650	4.8	%	$	27,816	4.8	%	$	15,138	3.5	%

(1) Non-GAAP adjusted operating income; non-GAAP adjusted operating margin; non-GAAP adjusted operating margin, net of fuel surcharge; non-GAAP adjusted net income attributable to Werner; non-GAAP adjusted diluted earnings per share; non-GAAP adjusted operating revenues, net of fuel surcharge; non-GAAP adjusted operating expenses; non-GAAP adjusted operating expenses, net of fuel surcharge; non-GAAP adjusted operating ratio; and non-GAAP adjusted operating ratio, net of fuel surcharge should be considered in addition to, rather than as substitutes for, GAAP operating income; GAAP operating margin; GAAP net income attributable to Werner; GAAP diluted earnings per share; GAAP operating revenues; GAAP operating expenses; and GAAP operating ratio, which are their most directly comparable GAAP financial measures.

(2) We accrued pre-tax insurance and claims expense for interest related to a previously disclosed excess adverse jury verdict rendered on May 17, 2018 in a lawsuit arising from a December 2014 accident. The Company is appealing this verdict. Additional information about the accident was included in our Current Report on Form 8-K dated May 17, 2018. Under our insurance policies in effect on the date of this accident, our maximum liability for this accident is $10.0 million (plus pre-judgment and post-judgment interest) with premium-based insurance coverage that exceeds the jury verdict amount. We continue to accrue pre-tax insurance and claims expense for interest at $0.5 million per month until such time as the outcome of our appeal is finalized. Management believes excluding the effect of this item provides a more useful comparison of our performance from period to period. This item is included in the Truckload Transportation Services segment in our Segment Information table.

(3) During first quarter 2021, we sold Werner Global Logistics 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) We incurred business acquisition-related expenses including legal and professional fees. Acquisition-related expenses are excluded as management believes these costs are not representative of the costs of managing our on-going business. The expenses are included within other operating expenses in our Income Statement and in Corporate operating income in our Segment Information table.

(6) 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.

(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.


SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Capital expenditures, net	$	100,649		$	59,783		$	254,072		$	162,730
Cash flow from operations	65,189			63,880			332,716			253,344
Return on assets (annualized)	7.8		%	10.8		%	9.0		%	10.8		%
Return on equity (annualized)	15.9		%	19.9		%	17.7		%	19.4		%