Werner Enterprises Reports Third Quarter 2017 Revenues and Earnings

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| Source: Werner Enterprises, Inc.

                                   

 Three Months Ended
September 30,
   Nine Months Ended
 September 30,
  
  (In thousands, except per share amounts)     2017 2016 % Change 2017 2016 % Change
  Total revenues$528,643  $508,676  4% $1,549,372  $1,490,159  4%
  Trucking revenues, net of fuel surcharge351,114  336,673  4% 1,029,036  1,008,738  2%
  Werner Logistics revenues104,568  109,459  (4)% 305,225  310,001  (2)%
  Operating income35,874  29,074  23% 98,759  91,114  8%
  Net income22,517  18,920  19% 61,755  57,318  8%
  Earnings per diluted share0.31  0.26  19% 0.85  0.79  8%

OMAHA, Neb., Oct. 19, 2017 (GLOBE NEWSWIRE) -- Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation’s largest transportation and logistics companies, reported revenues and earnings for the third quarter ended September 30, 2017. Earnings per diluted share were $0.31 for third quarter 2017 compared to earnings per diluted share of $0.26 for third quarter 2016. Earnings per diluted share in third quarter 2016 included a gain on the sale of real estate of $6.5 million, or six cents per share, and $3.4 million of losses on equipment sales, or three cents per share.

Third quarter 2017 freight demand in our One-Way Truckload fleet improved throughout the quarter. In July and August 2017, freight trended better than normal and meaningfully better than the challenging freight market of third quarter 2016. As we moved into September, the freight market strengthened further due in part to the significant disruption caused by two major hurricanes in south Texas and Florida. These catastrophic weather events resulted in short-term costs in September due to out-of-route miles, higher fuel costs, equipment issues, and driver domicile issues; additionally, the multiple days of school closings at our Florida-based driving schools negatively impacted our driver hiring. At the same time, these events improved spot market pricing and further widened the positive gap between demand and capacity, which better positions the freight and contractual rate markets going forward. Freight volumes thus far in October 2017 have been seasonally better than normal.

Average revenues per tractor per week increased 2.9% in third quarter 2017 compared to third quarter 2016 due to a 3.4% increase in average revenues per total mile and a 0.5% decrease in average miles per truck.

Freight metrics have improved, and we have increasing confidence that contractual rates will strengthen over the next few quarters, particularly noting the improving freight market conditions and the expected tightening of supply when the electronic hours of service mandate for the trucking industry becomes effective on December 18, 2017.

In third quarter 2017, we averaged 7,314 trucks in service in the Truckload Transportation Services (Truckload) segment and 48 intermodal drayage trucks in the Werner Logistics segment. We ended third quarter 2017 with 7,375 trucks in the Truckload segment, a year-over-year increase of 200 trucks and a sequential increase of 60 trucks. Our Dedicated unit ended third quarter 2017 with 3,955 trucks (or 54% of our total Truckload segment fleet) compared to 3,825 trucks at the end of third quarter 2016.

In 2015 and 2016, we invested nearly $1 billion of capital expenditures (before sales of equipment) primarily to reduce the average age of our trucks and trailers. Our investment in newer trucks and trailers improves our driver experience, raises operational efficiency and helps us to better manage our maintenance, safety and fuel costs. We intend to maintain our newer fleet age of trucks and trailers. The average age of our truck fleet was 1.9 years as of September 30, 2017. Net capital expenditures in the first nine months of 2017 were $121 million compared to $294 million in the first nine months of 2016. For the full year of 2017, we expect net capital expenditures to be in the range of $175 million to $225 million.

The driver recruiting market became more challenging. Several ongoing market factors persist including a declining number of, and increased competition for, driver training school graduates, an historically low national unemployment rate, aging truck driver demographics and increased truck safety regulations. We proactively took many significant actions in the last two years to strengthen our driver recruiting and retention to make Werner the preferred choice for the best drivers, including raising driver pay, lowering the age of our truck fleet, installing safety and training features on all new trucks, investing in our driver training schools and collaborating with customers to improve or eliminate unproductive freight. Our driver turnover rate once again improved, achieving the lowest third quarter rate in 19 years.

Gains on sales of assets were $2.2 million in third quarter 2017. This compares to gains on sales of assets of $3.1 million in third quarter 2016, which included a $6.5 million real estate gain and $3.4 million of losses on equipment sales. In third quarter 2017, we sold fewer trucks and fewer trailers than in third quarter 2016. We realized average gains per truck in third quarter 2017 compared to average losses in third quarter 2016 and realized lower average gains per trailer in third quarter 2017 compared to third quarter 2016. The used truck pricing market remained difficult in third quarter 2017 due to a higher than normal supply of used trucks in the market and low buyer demand. Gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.

Diesel fuel prices were 26 cents per gallon higher in third quarter 2017 than in third quarter 2016 and were 15 cents per gallon higher than in second quarter 2017. For the first 19 days of October 2017, the average diesel fuel price per gallon was 25 cents higher than the average diesel fuel price per gallon in the same period of 2016 and 30 cents higher than in fourth quarter 2016. The components of our total fuel cost consist of and are recorded in our income statement as follows: (i) Fuel (fuel expense for company trucks excluding federal and state fuel taxes); (ii) Taxes and Licenses (federal and state fuel taxes); and (iii) Rent and Purchased Transportation (fuel component of our independent contractor costs, including the base cost of fuel and additional fuel surcharge reimbursement for costs exceeding the fuel base).

To provide shippers with additional sources of managed capacity and network analysis, we continue to develop our non-asset based Werner Logistics segment. Werner Logistics includes Brokerage, Freight Management, Intermodal, Werner Global Logistics (International) and Werner Final Mile.

 Three Months Ended
September 30,
 Nine Months Ended
 September 30,
 2017 2016 2017 2016
Werner Logistics (amounts in thousands)$ % $ % $ % $ %
Operating revenues$104,568  100.0  $109,459  100.0  $305,225  100.0  $310,001  100.0 
Rent and purchased transportation expense   89,507  85.6  91,695  83.8  259,277  84.9  255,954  82.6 
Gross margin15,061  14.4  17,764  16.2  45,948  15.1  54,047  17.4 
Other operating expenses13,743  13.1  12,870  11.7  39,296  12.9  37,545  12.1 
Operating income$1,318  1.3  $4,894  4.5  $6,652  2.2  $16,502  5.3 

In third quarter 2017, Werner Logistics revenues decreased $4.9 million, or 4%, and operating income dollars decreased $3.6 million, or 73%, compared to third quarter 2016. The Werner Logistics gross margin percentage in third quarter 2017 of 14.4% decreased 183 basis points compared to the gross margin percentage of 16.2% in third quarter 2016. The Werner Logistics operating income percentage in third quarter 2017 of 1.3% decreased 321 basis points from third quarter 2016 of 4.5%. Tighter carrier capacity in third quarter 2017 compared to third quarter 2016 resulted in higher purchased transportation costs causing the lower gross margin and operating income percentages.

In third quarter 2017, Werner Logistics achieved solid revenue growth year over year in our truck brokerage solution, while our intermodal and international solutions had lower revenues due to more challenging market conditions. As previously disclosed, a large Werner Logistics Freight Management customer (5.5% of Werner Logistics revenues in third quarter 2016) that was acquired in 2015 transitioned to their parent company’s transportation platform mid-quarter during first quarter 2017. We continue to see strong customer acceptance of the value of the Werner Logistics portfolio of service offerings, particularly as the market strengthens and shippers tend to consolidate their logistics business with the stability of larger asset-backed logistics providers.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $50.2 million and $42.0 million in third quarters 2017 and 2016, respectively, and $147.6 million and $111.0 million in the year-to-date 2017 and 2016 periods, respectively) and the Werner Logistics segment are shown below.

 Three Months Ended
September 30,
   Nine Months Ended
 September 30,
  
Operating Ratios2017 2016 Difference 2017 2016 Difference
Truckload Transportation Services   90.5% 94.2% (3.7)% 91.1% 92.7% (1.6)%
Werner Logistics98.7% 95.5% 3.2% 97.8% 94.7% 3.1%

Fluctuating fuel prices and fuel surcharge revenues impact the total company operating ratio and the Truckload segment’s operating ratio when fuel surcharges are reported on a gross basis as revenues versus netting against fuel expenses. Eliminating fuel surcharge revenues, which are generally a more volatile source of revenue, provides a more consistent basis for comparing the results of operations from period to period. The Truckload segment’s operating ratios for third quarter 2017 and third quarter 2016 are 91.7% and 94.8%, respectively, and for year-to-date 2017 and 2016 are 92.2% and 93.4%, respectively, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses.

Our financial position remains strong. As of September 30, 2017, we had $75 million of debt outstanding and over $1 billion of stockholders’ equity.

 INCOME STATEMENT
 (Unaudited)
 (In thousands, except per share amounts)
          
 Three Months Ended
September 30,
 Nine Months Ended
 September 30,
 2017 2016 2017 2016
 $ % $ % $ % $ %
Operating revenues$528,643  100.0  $508,676  100.0  $1,549,372  100.0  $1,490,159  100.0 
Operating expenses:               
Salaries, wages and benefits170,238  32.2  162,862  32.0  500,620  32.3  479,298  32.2 
Fuel50,266  9.5  40,638  8.0  140,551  9.1  112,034  7.5 
Supplies and maintenance41,986  7.9  41,027  8.1  120,276  7.8  130,559  8.8 
Taxes and licenses21,671  4.1  21,540  4.2  64,095  4.1  64,353  4.3 
Insurance and claims20,669  3.9  19,106  3.8  60,336  3.9  59,384  4.0 
Depreciation53,578  10.1  51,781  10.2  162,619  10.5  152,849  10.3 
Rent and purchased transportation126,087  23.9  133,876  26.3  377,146  24.3  379,155  25.4 
Communications and utilities4,199  0.8  4,206  0.8  12,158  0.8  12,110  0.8 
Other4,075  0.8  4,566  0.9  12,812  0.8  9,303  0.6 
Total operating expenses492,769  93.2  479,602  94.3  1,450,613  93.6  1,399,045  93.9 
Operating income35,874  6.8  29,074  5.7  98,759  6.4  91,114  6.1 
Other expense (income):         
Interest expense492  0.1  749  0.1  1,892  0.1  1,839  0.1 
Interest income(766) (0.1) (1,055) (0.2) (2,556) (0.1) (3,154) (0.2)
Other88    46    293    148   
Total other expense (income)(186)   (260) (0.1) (371)   (1,167) (0.1)
Income before income taxes36,060  6.8  29,334  5.8  99,130  6.4  92,281  6.2 
Income taxes13,543  2.5  10,414  2.1  37,375  2.4  34,963  2.4 
Net income$22,517  4.3  $18,920  3.7  $61,755  4.0  $57,318  3.8 
                
Diluted shares outstanding72,601    72,406    72,517    72,364   
Diluted earnings per share$0.31    $0.26    $0.85    $0.79   


 SEGMENT INFORMATION
 (Unaudited)
 (In thousands)
      
 Three Months Ended
September 30,
 Nine Months Ended
 September 30,
 2017 2016 2017 2016
Revenues       
Truckload Transportation Services$407,566  $384,312  $1,196,071  $1,136,478 
Werner Logistics104,568  109,459  305,225  310,001 
Other (1)16,020  14,804  47,257  43,148 
Corporate593  313  1,539  1,300 
Subtotal528,747  508,888  1,550,092  1,490,927 
Inter-segment eliminations (2)(104) (212) (720) (768)
Total$528,643  $508,676  $1,549,372  $1,490,159 
        
Operating Income       
Truckload Transportation Services               $34,009  $19,846  $93,511  $74,971 
Werner Logistics1,318  4,894  6,652  16,502 
Other (1)1,001  (1,191) 605  (4,964)
Corporate(454) 5,525  (2,009) 4,605 
Total$35,874  $29,074  $98,759  $91,114 


(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,
  
 2017 2016 % Change 2017 2016 % Change
Truckload Transportation Services segment                    
Average percentage of empty miles12.53% 12.55% (0.2)% 12.40% 13.08% (5.2)%
Average trip length in miles (loaded)469  468  0.2% 469  466  0.6%
Average tractors in service7,314  7,216  1.4% 7,261  7,291  (0.4)%
Average revenues per tractor per week (1)$3,693  $3,589  2.9% $3,634  $3,547  2.4%
Total trailers (at quarter end)22,435  22,655    22,435  22,655   
Total tractors (at quarter end)           
Company6,700  6,355    6,700  6,355   
Independent contractor675  820    675  820   
Total tractors7,375  7,175    7,375  7,175   
            
Werner Logistics segment           
Average tractors in service48  75    53  71   
Total trailers (at quarter end)1,655  1,590    1,655  1,590   
Total tractors (at quarter end)47  86    47  86   
 
(1) Net of fuel surcharge revenues.


 SUPPLEMENTAL INFORMATION
 (Unaudited)
 (In thousands)
      
 Three Months Ended
September 30,
 Nine Months Ended
 September 30,
 2017 2016 2017 2016
Capital expenditures, net$55,130  $33,488  $121,105  $294,014 
Cash flow from operations44,487  30,153  216,948  201,175 
Return on assets (annualized)     5.2% 4.4% 4.7% 4.6%
Return on equity (annualized)8.6% 7.8% 8.1% 8.0%


 CONDENSED BALANCE SHEET
 (In thousands, except share amounts)
    
 September 30,
2017
 December 31,
2016
 (Unaudited)  
    
ASSETS   
Current assets:   
Cash and cash equivalents$10,733  $16,962 
Accounts receivable, trade, less allowance of $8,410 and $9,183, respectively 279,716  261,372 
Other receivables27,028  15,168 
Inventories and supplies11,624  12,768 
Prepaid taxes, licenses and permits6,935  15,374 
Income taxes receivable6,538  21,497 
Other current assets38,898  29,987 
Total current assets381,472  373,128 
    
Property and equipment2,078,229  2,109,991 
Less – accumulated depreciation758,331  747,353 
Property and equipment, net1,319,898  1,362,638 
    
Other non-current assets61,571  57,237 
Total assets$1,762,941  $1,793,003 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Checks issued in excess of cash balances$3,538  $ 
Accounts payable72,343  66,618 
Current portion of long-term debt  20,000 
Insurance and claims accruals84,436  83,404 
Accrued payroll31,029  26,189 
Other current liabilities22,938  18,650 
Total current liabilities214,284  214,861 
    
Long-term debt, net of current portion75,000  160,000 
Other long-term liabilities14,321  16,711 
Insurance and claims accruals, net of current portion107,230  113,875 
Deferred income taxes301,199  292,769 
    
Stockholders’ equity:   
Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536   
shares issued; 72,334,476 and 72,166,969 shares outstanding, respectively805  805 
Paid-in capital103,296  101,035 
Retained earnings1,131,805  1,084,796 
Accumulated other comprehensive loss(13,378) (16,917)
Treasury stock, at cost; 8,199,060 and 8,366,567 shares, respectively(171,621) (174,932)
Total stockholders’ equity1,050,907  994,787 
Total liabilities and stockholders’ equity$1,762,941  $1,793,003 

Werner Enterprises, Inc. was founded in 1956 and is a premier transportation and logistics company, with coverage throughout North America, Asia, Europe, South America, Africa and Australia. Werner maintains its global headquarters in Omaha, Nebraska and maintains offices in the United States, Canada, Mexico, China and Australia. Werner is among the five largest truckload carriers in the United States, with a diversified portfolio of transportation services that includes dedicated; medium-to-long-haul, regional and expedited van; and temperature-controlled. The Werner Logistics portfolio includes truck brokerage, freight management, intermodal, international and final mile services. International services are provided through Werner’s domestic and global subsidiary companies and include ocean, air and ground transportation; freight forwarding; and customs brokerage.

Werner Enterprises, Inc.’s common stock trades on The NASDAQ Global Select MarketSM under the symbol “WERN”. For further information about Werner, visit the Company’s website at www.werner.com.

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, 2016.

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, 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