Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation’s largest
transportation and logistics companies, reported revenues and
earnings for the first quarter ended March 31, 2017. Earnings per
diluted share were $0.22 for first quarter 2017 compared to
earnings per diluted share of $0.28 for first quarter 2016.
Freight demand in our One-Way Truckload fleet
was seasonally softer in January with weaker trends from late
January 2017 to late February 2017. In March 2017, our freight
volume trend was more encouraging, as freight improved to more
normal seasonal levels consistent with the same period in 2016.
Freight volumes thus far in April 2017 in One-Way Truckload have
been better than the same period in April 2016.
Average revenues per tractor per week increased
0.2% in first quarter 2017 compared to first quarter 2016 due to a
1.0% increase in average revenues per total mile and a 0.8%
decrease in average miles per truck. During second and third
quarter of 2016, to take advantage of a strengthening Dedicated
market, we moved trucks from One-Way Truckload, lessening the need
to find freight for trucks in the more challenged one-way truckload
market. The shifting of trucks to shorter-haul Dedicated from
longer-haul One-Way Truckload had a favorable impact on revenue per
total mile and an unfavorable impact on miles per truck.
In first quarter 2017, we averaged 7,199 trucks
in service in the Truckload segment and 62 intermodal drayage
trucks in the Werner Logistics segment. We ended first quarter 2017
with 7,180 trucks in the Truckload segment, a year-over-year
decrease of 150 trucks and a sequential increase of 80 trucks. Our
Dedicated unit ended first quarter 2017 with 3,710 trucks (or 52%
of our total Truckload segment fleet) compared to 3,640 trucks at
the end of first quarter 2016.
We are nearing completion of a significant
reinvestment in our fleet 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. The
average age of our truck fleet was 1.8 years as of March 31, 2017.
Net capital expenditures in first quarter 2017 were $14.6 million
compared to $101.6 million in first quarter 2016. For the full year
of 2017, we expect net capital expenditures to be in the range of
$200 million to $250 million, which is substantially lower than the
$430 million of net capital expenditures in 2016.
The driver recruiting market remains
challenging. Several ongoing market factors persist including a
declining number of, and increased competition for, driver training
school graduates, a low national unemployment rate, aging truck
driver demographics and increased truck safety regulations. We
proactively took many significant actions in 2016 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 and investing in our driver training schools. Our
driver turnover rate once again improved, achieving the lowest
first quarter rate in 18 years.
Gains on sales of assets were $1.4 million in
first quarter 2017. This compares to gains on sales of assets of
$3.4 million in first quarter 2016, which included a $0.6 million
real estate gain. In first quarter 2017, we sold fewer trucks and
more trailers than in first quarter 2016. We realized slightly
higher average gains per truck and lower average gains per trailer
in first quarter 2017 compared to first quarter 2016. The used
truck pricing market remained difficult in first 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.
As previously disclosed, in fourth quarter 2016,
due to the weak used truck market, we reduced the estimated life of
certain trucks to more rapidly depreciate the trucks to their
residual values. This change resulted in additional depreciation
expense in fourth quarter 2016 of $4.1 million and in first quarter
2017 of $2.6 million. We expect additional depreciation expense for
these trucks to continue to decline in second quarter 2017 as the
remaining trucks are sold.
Diesel fuel prices were 53 cents per gallon
higher in first quarter 2017 than in first quarter 2016 and were 5
cents per gallon higher than in fourth quarter 2016. For the first
20 days of April 2017, the average diesel fuel price per gallon was
45 cents higher than the average diesel fuel price per gallon in
the same period of 2016 and 25 cents higher than in second 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 and Werner Global
Logistics (International).
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Werner Logistics
(amounts in thousands) |
$ |
|
% |
|
$ |
|
% |
Operating revenues |
$ |
99,853 |
|
|
100.0 |
|
|
$ |
96,577 |
|
|
100.0 |
|
Rent and purchased
transportation expense |
84,317 |
|
|
84.4 |
|
|
79,384 |
|
|
82.2 |
|
Gross margin |
15,536 |
|
|
15.6 |
|
|
17,193 |
|
|
17.8 |
|
Other operating
expenses |
12,487 |
|
|
12.5 |
|
|
12,158 |
|
|
12.6 |
|
Operating income |
$ |
3,049 |
|
|
3.1 |
|
|
$ |
5,035 |
|
|
5.2 |
|
In first quarter 2017, Werner Logistics revenues
increased $3.3 million, or 3%, and operating income dollars
decreased $2.0 million, or 39%, compared to first quarter 2016. The
Werner Logistics gross margin percentage in first quarter 2017 of
15.6% decreased 224 basis points compared to the gross margin
percentage of 17.8% in first quarter 2016. The Werner Logistics
operating income percentage in first quarter 2017 of 3.1% decreased
216 basis points from first quarter 2016 of 5.2%.
In first quarter 2017, Werner Logistics achieved
solid growth in our truck brokerage solution, while our intermodal
solution had lower revenues due to more challenging market
conditions. As previously disclosed, a large Werner Logistics
Freight Management customer 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.
Comparisons of the operating ratios for the
Truckload segment (net of fuel surcharge revenues of $48.0 million
and $30.7 million in first quarters 2017 and 2016, respectively)
and the Werner Logistics segment are shown below.
|
Three Months Ended March 31, |
|
|
Operating Ratios |
2017 |
|
2016 |
|
Difference |
Truckload
Transportation Services |
93.0 |
% |
|
90.5 |
% |
|
2.5 |
% |
Werner Logistics |
96.9 |
% |
|
94.8 |
% |
|
2.1 |
% |
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 first quarter 2017 and
first quarter 2016 are 93.9% and 91.3%, respectively, when fuel
surcharge revenues are reported as revenues instead of a reduction
of operating expenses.
Our financial position remains strong. As of
March 31, 2017, we had $130 million of debt outstanding and over $1
billion of stockholders’ equity.
|
INCOME STATEMENT |
|
(Unaudited) |
|
(In thousands, except per share amounts) |
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
|
$ |
|
% |
|
$ |
|
% |
Operating revenues |
$ |
501,221 |
|
|
100.0 |
|
|
$ |
482,802 |
|
|
100.0 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Salaries,
wages and benefits |
160,839 |
|
|
32.1 |
|
|
156,737 |
|
|
32.5 |
|
Fuel |
45,156 |
|
|
9.0 |
|
|
32,060 |
|
|
6.6 |
|
Supplies
and maintenance |
38,232 |
|
|
7.6 |
|
|
47,115 |
|
|
9.8 |
|
Taxes and
licenses |
20,786 |
|
|
4.2 |
|
|
20,987 |
|
|
4.4 |
|
Insurance
and claims |
19,840 |
|
|
4.0 |
|
|
18,347 |
|
|
3.8 |
|
Depreciation |
55,336 |
|
|
11.0 |
|
|
50,164 |
|
|
10.4 |
|
Rent and
purchased transportation |
126,425 |
|
|
25.2 |
|
|
117,976 |
|
|
24.4 |
|
Communications and utilities |
4,072 |
|
|
0.8 |
|
|
3,909 |
|
|
0.8 |
|
Other |
4,563 |
|
|
0.9 |
|
|
3,020 |
|
|
0.6 |
|
Total
operating expenses |
475,249 |
|
|
94.8 |
|
|
450,315 |
|
|
93.3 |
|
Operating income |
25,972 |
|
|
5.2 |
|
|
32,487 |
|
|
6.7 |
|
Other expense
(income): |
|
Interest
expense |
776 |
|
|
0.2 |
|
|
494 |
|
|
0.1 |
|
Interest
income |
(914 |
) |
|
(0.2 |
) |
|
(990 |
) |
|
(0.2 |
) |
Other |
53 |
|
|
— |
|
|
45 |
|
|
— |
|
Total
other expense (income) |
(85 |
) |
|
— |
|
|
(451 |
) |
|
(0.1 |
) |
Income before income
taxes |
26,057 |
|
|
5.2 |
|
|
32,938 |
|
|
6.8 |
|
Income taxes |
10,038 |
|
|
2.0 |
|
|
12,846 |
|
|
2.6 |
|
Net income |
$ |
16,019 |
|
|
3.2 |
|
|
$ |
20,092 |
|
|
4.2 |
|
|
|
|
|
|
|
|
|
Diluted shares
outstanding |
72,447 |
|
|
|
|
72,353 |
|
|
|
Diluted earnings per
share |
$ |
0.22 |
|
|
|
|
$ |
0.28 |
|
|
|
|
SEGMENT INFORMATION |
|
(Unaudited) |
|
(In thousands) |
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Revenues |
|
|
|
Truckload
Transportation Services |
$ |
385,003 |
|
|
$ |
372,917 |
|
Werner Logistics |
99,853 |
|
|
96,577 |
|
Other (1) |
16,110 |
|
|
13,178 |
|
Corporate |
422 |
|
|
373 |
|
Subtotal |
501,388 |
|
|
483,045 |
|
Inter-segment
eliminations (2) |
(167 |
) |
|
(243 |
) |
Total |
$ |
501,221 |
|
|
$ |
482,802 |
|
|
|
|
|
Operating Income |
|
|
|
Truckload
Transportation Services |
$ |
23,466 |
|
|
$ |
32,359 |
|
Werner Logistics |
3,049 |
|
|
5,035 |
|
Other (1) |
145 |
|
|
(1,934 |
) |
Corporate |
(688 |
) |
|
(2,973 |
) |
Total |
$ |
25,972 |
|
|
$ |
32,487 |
|
|
(1) Other
includes our driver training schools,
transportation-relatedactivities such as third-party equipment
maintenance and equipment leasing,and other business
activities. |
(2)
Inter-segment eliminations
represent transactions between reportingsegments
that are eliminated in consolidation. |
|
OPERATING STATISTICS BY SEGMENT |
|
(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
2017 |
|
2016 |
|
% Change |
Truckload
Transportation Services segment |
|
|
|
|
|
Average percentage of
empty miles |
12.39 |
% |
|
13.27 |
% |
|
(6.6 |
)% |
Average trip length in
miles (loaded) |
469 |
|
|
472 |
|
|
(0.6 |
)% |
Average tractors in
service |
7,199 |
|
|
7,352 |
|
|
(2.1 |
)% |
Average revenues per
tractor per week (1) |
$ |
3,531 |
|
|
$ |
3,523 |
|
|
0.2 |
% |
Total trailers (at
quarter end) |
22,035 |
|
|
22,335 |
|
|
|
Total tractors (at
quarter end) |
|
|
|
|
|
Company |
6,455 |
|
|
6,430 |
|
|
|
Independent
contractor |
725 |
|
|
900 |
|
|
|
Total
tractors |
7,180 |
|
|
7,330 |
|
|
|
|
|
|
|
|
|
Werner Logistics
segment |
|
|
|
|
|
Average tractors in
service |
62 |
|
|
68 |
|
|
|
Total trailers (at
quarter end) |
1,780 |
|
|
1,605 |
|
|
|
Total tractors (at
quarter end) |
55 |
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
(1) Net of fuel
surcharge revenues. |
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
(Unaudited) |
|
(In thousands) |
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Capital expenditures,
net |
$ |
14,594 |
|
|
$ |
101,603 |
|
Cash flow from
operations |
74,947 |
|
|
91,319 |
|
Return on assets
(annualized) |
3.6 |
% |
|
5.1 |
% |
Return on equity
(annualized) |
6.4 |
% |
|
8.5 |
% |
|
CONDENSED BALANCE SHEET |
|
(In thousands, except share amounts) |
|
|
|
|
|
March 31,2017 |
|
December 31, 2016 |
|
(Unaudited) |
|
|
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
30,804 |
|
|
$ |
16,962 |
|
Accounts
receivable, trade, less allowance of $9,301 and $9,183,
respectively |
247,035 |
|
|
261,372 |
|
Other
receivables |
15,604 |
|
|
15,168 |
|
Inventories and supplies |
12,314 |
|
|
12,768 |
|
Prepaid
taxes, licenses and permits |
11,499 |
|
|
15,374 |
|
Income
taxes receivable |
15,300 |
|
|
21,497 |
|
Other
current assets |
37,261 |
|
|
29,987 |
|
Total
current assets |
369,817 |
|
|
373,128 |
|
|
|
|
|
Property and
equipment |
2,067,555 |
|
|
2,109,991 |
|
Less – accumulated
depreciation |
744,181 |
|
|
747,353 |
|
Property
and equipment, net |
1,323,374 |
|
|
1,362,638 |
|
|
|
|
|
Other non-current
assets |
52,477 |
|
|
57,237 |
|
Total assets |
$ |
1,745,668 |
|
|
$ |
1,793,003 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
63,546 |
|
|
$ |
66,618 |
|
Current
portion of long-term debt |
25,000 |
|
|
20,000 |
|
Insurance
and claims accruals |
74,483 |
|
|
83,404 |
|
Accrued
payroll |
27,034 |
|
|
26,189 |
|
Other
current liabilities |
17,000 |
|
|
18,650 |
|
Total
current liabilities |
207,063 |
|
|
214,861 |
|
|
|
|
|
Long-term debt, net of
current portion |
105,000 |
|
|
160,000 |
|
Other long-term
liabilities |
16,064 |
|
|
16,711 |
|
Insurance and claims
accruals, net of current portion |
110,960 |
|
|
113,875 |
|
Deferred income
taxes |
296,197 |
|
|
292,769 |
|
|
|
|
|
Stockholders’
equity: |
|
|
|
Common
stock, $.01 par value, 200,000,000 shares authorized;
80,533,536 |
|
|
|
shares
issued; 72,219,768 and 72,166,969 shares outstanding,
respectively |
805 |
|
|
805 |
|
Paid-in
capital |
101,587 |
|
|
101,035 |
|
Retained
earnings |
1,096,190 |
|
|
1,084,796 |
|
Accumulated other comprehensive loss |
(14,256 |
) |
|
(16,917 |
) |
Treasury
stock, at cost; 8,313,768 and 8,366,567 shares, respectively |
(173,942 |
) |
|
(174,932 |
) |
Total
stockholders’ equity |
1,010,384 |
|
|
994,787 |
|
Total liabilities and
stockholders’ equity |
$ |
1,745,668 |
|
|
$ |
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 van,
temperature-controlled and flatbed; medium-to-long-haul, regional
and local van; and expedited services. The Werner Logistics
portfolio includes freight management, truck brokerage, intermodal,
and international 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
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