Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation’s largest
transportation and logistics companies, reported improved revenues
and earnings for the first quarter ended March 31, 2018. Earnings
per diluted share were $0.38 for first quarter 2018 compared to
earnings per diluted share of $0.22 for first quarter 2017.
First quarter 2018 freight demand in our One-Way
Truckload fleet was much stronger than normal for first quarter.
Demand was consistently strong each month of first quarter 2018 and
was broad-based geographically. Freight volumes thus far in April
2018 continue to be much stronger than normal.
Average revenues per tractor per week increased
6.8% in first quarter 2018 compared to first quarter 2017 due to a
10.0% increase in average revenues per total mile, partially offset
by a 2.9% decrease in average miles per truck. The increase in
average revenues per total mile was due primarily to higher
contractual rates, more freight choices with higher rates and lane
mix changes.
Our trucks and drivers experienced more severe
weather than normal in first quarter 2018 that was caused by
multiple winter storms and colder temperatures in the Eastern and
Midwest regions of the U.S. compared to a relatively mild winter in
first quarter 2017. We estimate the more challenging weather
conditions reduced earnings by three cents per diluted share in
first quarter 2018 compared to first quarter 2017. This included
cost increases for higher insurance and claims due to an increase
in event frequency and severity; higher equipment maintenance costs
for towing, road calls, jump starts and other weather-related
maintenance; more workers’ compensation claims related to weather
incidents; higher fuel costs due to increased truck idling; and
reduced revenue due to temporary closures of our driver training
schools for severe weather.
In first quarter 2018, we averaged 7,427 trucks
in service in the Truckload Transportation Services (Truckload)
segment and 43 intermodal drayage trucks in the Werner Logistics
segment. We ended first quarter 2018 with 7,385 trucks in the
Truckload segment, a year-over-year increase of 205 trucks and a
sequential decrease of 50 trucks. Our Dedicated unit ended first
quarter 2018 with 4,030 trucks (or 55% of our total Truckload
segment fleet) compared to 3,710 trucks at the end of first quarter
2017. During first quarter 2018, we added several new Dedicated
fleets.
We are continuing to invest in newer trucks and
trailers in 2018 to improve our driver experience, raise
operational efficiency and more effectively manage our maintenance,
safety and fuel costs. The average age of our truck fleet remains
low by industry standards and was 1.9 years as of March 31, 2018.
Net capital expenditures in first quarter 2018 were $55.5 million
compared to $14.6 million in first quarter 2017. We expect net
capital expenditures for 2018 to be in the range of $300 million to
$350 million. This range allows for increased investment in our
tractor and trailer fleet as a result of the Tax Cuts and Jobs Act
of 2017. It reflects increased confidence in potential growth due
to a strong Dedicated pipeline and overall market demand. Tractor
allocations between fleets are made based on relative returns, and
growth is dependent on improved margins and continued success
attracting quality drivers in a difficult market.
The driver recruiting market is increasingly
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 including the regulation changes for electronic logging
devices. We continue to take significant actions to strengthen our
driver recruiting and retention to make Werner a preferred choice
for the best drivers, including raising driver pay, maintaining a
new truck and trailer fleet, purchasing best-in-class safety and
training features for all new trucks, investing in our driver
training school network and collaborating with customers to improve
or eliminate unproductive freight. These efforts continue to have
positive results on our driver turnover with our first quarter 2018
driver turnover percentage being one of the lowest in the last 20
years.
Due to growth in company trucks and a decline in
independent contractor trucks in first quarter 2018 compared to
first quarter 2017, both company truck miles increased and
independent contractor miles decreased by approximately 5 million
miles. This caused a shift in expense from rent and purchased
transportation expense to most other operating expense categories
in first quarter 2018 compared to first quarter 2017.
Gains on sales of assets were $2.7 million in
first quarter 2018. This compares to gains on sales of assets of
$1.4 million in first quarter 2017. In first quarter 2018, we sold
slightly more trucks and fewer trailers than in first quarter 2017.
We realized higher average gains per truck and higher average gains
per trailer in first quarter 2018 compared to first quarter 2017.
The used truck pricing market remained difficult but is beginning
to show signs of improvement. Gains on sales of assets are
reflected as a reduction of Other Operating Expenses in our income
statement. First quarter 2017 included an increase in depreciation
expense of $2.6 million due to a reduction in the estimated
residual values of certain trucks as a result of the weak used
truck market.
Diesel fuel prices were 39 cents per gallon
higher in first quarter 2018 than in first quarter 2017 and were 8
cents per gallon higher than in fourth quarter 2017. For the first
19 days of April 2018, the average diesel fuel price per gallon was
43 cents higher than the average diesel fuel price per gallon in
the same period of 2017 and 55 cents higher than in second quarter
2017. 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).
Our effective income tax rate in first quarter
2018 of 21.3% was lower than our expected range of 25% to 26% due
to the benefit of discrete federal and state income tax items. We
expect our effective income tax rate to be in the range of 25% to
26% going forward.
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 March 31, |
|
|
2018 |
|
|
2017 |
Werner Logistics
(amounts in thousands) |
$ |
|
% |
|
$ |
|
% |
Operating revenues |
$ |
117,420 |
|
|
100.0 |
|
|
$ |
99,853 |
|
|
100.0 |
|
Rent and purchased
transportation expense |
100,276 |
|
|
85.4 |
|
|
84,317 |
|
|
84.4 |
|
Gross margin |
17,144 |
|
|
14.6 |
|
|
15,536 |
|
|
15.6 |
|
Other operating
expenses |
14,387 |
|
|
12.3 |
|
|
12,487 |
|
|
12.5 |
|
Operating income |
$ |
2,757 |
|
|
2.3 |
|
|
$ |
3,049 |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In first quarter 2018, Werner Logistics revenues
increased $17.6 million, or 18%, and operating income dollars
decreased $0.3 million, or 10%, compared to first quarter 2017. The
Werner Logistics gross margin percentage in first quarter 2018 of
14.6% decreased 96 basis points compared to the gross margin
percentage of 15.6% in first quarter 2017. The Werner Logistics
operating income percentage in first quarter 2018 of 2.3% decreased
71 basis points from first quarter 2017 of 3.1%. Tighter carrier
capacity in first quarter 2018 compared to first quarter 2017
resulted in higher purchased transportation costs for the Company’s
predominately contractual logistics business causing the lower
gross margin and operating income percentages.
In first quarter 2018, Werner Logistics achieved
36.3% revenue growth year over year in our truck brokerage
solution, including transactional brokerage. Our freight management
and international solutions had revenue growth, while intermodal
had slightly lower revenues due to a planned comprehensive yield
initiative that led to a volume decline. The Werner Logistics
operating income percentage improved sequentially the last two
quarters, from 1.3% in third quarter 2017 to 1.8% in fourth quarter
2017 to 2.3% in first quarter 2018. 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. Achieving
contractual rate increases in 2018 to recoup rising costs of
third-party capacity is a focus for Werner Logistics.
Comparisons of the operating ratios for the
Truckload segment (net of fuel surcharge revenues of $60.7 million
and $48.0 million in first quarters 2018 and 2017, respectively)
and the Werner Logistics segment are shown below.
|
|
|
|
|
Three Months Ended March 31, |
|
|
Operating Ratios |
2018 |
|
2017 |
|
Difference |
Truckload
Transportation Services |
91.0 |
% |
|
93.0 |
% |
|
(2.0 |
)% |
Werner Logistics |
97.7 |
% |
|
96.9 |
% |
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
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 2018 and
first quarter 2017 are 92.3% and 93.9%, 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, 2018, we had $75 million of debt outstanding and over
$1.2 billion of stockholders’ equity.
|
|
|
INCOME STATEMENT |
|
(Unaudited) |
|
(In thousands, except per share amounts) |
|
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
|
$ |
|
% |
|
$ |
|
% |
Operating revenues |
$ |
562,684 |
|
|
100.0 |
|
|
$ |
501,221 |
|
|
100.0 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Salaries,
wages and benefits |
182,794 |
|
|
32.5 |
|
|
160,839 |
|
|
32.1 |
|
Fuel |
59,032 |
|
|
10.5 |
|
|
45,156 |
|
|
9.0 |
|
Supplies
and maintenance |
45,739 |
|
|
8.1 |
|
|
38,232 |
|
|
7.6 |
|
Taxes and
licenses |
22,493 |
|
|
4.0 |
|
|
20,786 |
|
|
4.2 |
|
Insurance
and claims |
21,158 |
|
|
3.8 |
|
|
19,840 |
|
|
4.0 |
|
Depreciation |
55,506 |
|
|
9.9 |
|
|
55,336 |
|
|
11.0 |
|
Rent and
purchased transportation |
135,922 |
|
|
24.2 |
|
|
126,425 |
|
|
25.2 |
|
Communications and utilities |
4,107 |
|
|
0.7 |
|
|
4,072 |
|
|
0.8 |
|
Other |
818 |
|
|
0.1 |
|
|
4,563 |
|
|
0.9 |
|
Total
operating expenses |
527,569 |
|
|
93.8 |
|
|
475,249 |
|
|
94.8 |
|
Operating income |
35,115 |
|
|
6.2 |
|
|
25,972 |
|
|
5.2 |
|
Other expense
(income): |
|
Interest
expense |
482 |
|
|
0.1 |
|
|
776 |
|
|
0.2 |
|
Interest
income |
(740 |
) |
|
(0.1 |
) |
|
(914 |
) |
|
(0.2 |
) |
Other |
53 |
|
|
— |
|
|
53 |
|
|
— |
|
Total
other expense (income) |
(205 |
) |
|
— |
|
|
(85 |
) |
|
— |
|
Income before income
taxes |
35,320 |
|
|
6.2 |
|
|
26,057 |
|
|
5.2 |
|
Income tax expense
(benefit) |
7,513 |
|
|
1.3 |
|
|
10,038 |
|
|
2.0 |
|
Net income |
$ |
27,807 |
|
|
4.9 |
|
|
$ |
16,019 |
|
|
3.2 |
|
|
|
|
|
|
|
|
|
Diluted shares
outstanding |
72,671 |
|
|
|
|
72,447 |
|
|
|
Diluted earnings per
share |
$ |
0.38 |
|
|
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT INFORMATION |
|
(Unaudited) |
|
(In thousands) |
|
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Revenues |
|
|
|
Truckload
Transportation Services |
$ |
431,556 |
|
|
$ |
385,003 |
|
Werner Logistics |
117,420 |
|
|
99,853 |
|
Other (1) |
13,259 |
|
|
16,110 |
|
Corporate |
907 |
|
|
422 |
|
Subtotal |
563,142 |
|
|
501,388 |
|
Inter-segment
eliminations (2) |
(458 |
) |
|
(167 |
) |
Total |
$ |
562,684 |
|
|
$ |
501,221 |
|
|
|
|
|
Operating Income |
|
|
|
Truckload
Transportation Services |
$ |
33,422 |
|
|
$ |
23,466 |
|
Werner Logistics |
2,757 |
|
|
3,049 |
|
Other (1) |
(386 |
) |
|
145 |
|
Corporate |
(678 |
) |
|
(688 |
) |
Total |
$ |
35,115 |
|
|
$ |
25,972 |
|
|
|
|
|
|
|
|
|
(1) Other includes our driver training schools,
transportation-related activities such as third-party equipment
maintenance and equipment leasing, and other business activities.
On January 1, 2018, we adopted Accounting Standards Update 2014-09,
“Revenue from Contracts with Customers”, using the modified
retrospective transition method, and comparative information has
not been restated. Adoption of the new standard resulted in a $3.1
million reduction of Other revenues that would have been reported
as Other operating expense prior to the new standard with no impact
to operating income.
(2) Inter-segment eliminations represent transactions between
reporting segments that are eliminated in consolidation.
|
|
|
OPERATING STATISTICS BY SEGMENT |
|
(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
2018 |
|
2017 |
|
% Change |
Truckload
Transportation Services segment |
|
|
|
|
|
Average percentage of
empty miles |
12.56 |
% |
|
12.39 |
% |
|
1.4 |
% |
Average completed trip
length in miles (loaded) |
449 |
|
|
469 |
|
|
(4.3 |
)% |
Average tractors in
service |
7,427 |
|
|
7,199 |
|
|
3.2 |
% |
Average revenues per
tractor per week (1) |
$ |
3,772 |
|
|
$ |
3,531 |
|
|
6.8 |
% |
Total trailers (at
quarter end) |
22,460 |
|
|
22,035 |
|
|
|
Total tractors (at
quarter end) |
|
|
|
|
|
Company |
6,780 |
|
|
6,455 |
|
|
|
Independent contractor |
605 |
|
|
725 |
|
|
|
Total
tractors |
7,385 |
|
|
7,180 |
|
|
|
|
|
|
|
|
|
Werner Logistics
segment |
|
|
|
|
|
Average tractors in
service |
43 |
|
|
62 |
|
|
|
Total trailers (at
quarter end) |
1,730 |
|
|
1,780 |
|
|
|
Total tractors (at
quarter end) |
44 |
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
(1) Net of fuel surcharge revenues.
|
|
|
SUPPLEMENTAL INFORMATION |
|
(Unaudited) |
|
(In thousands) |
|
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Capital expenditures,
net |
$ |
55,506 |
|
|
$ |
14,594 |
|
Cash flow from
operations (1) |
99,862 |
|
|
85,928 |
|
Return on assets
(annualized) |
6.1 |
% |
|
3.6 |
% |
Return on equity
(annualized) |
9.3 |
% |
|
6.4 |
% |
|
|
|
|
|
|
(1) On January 1, 2018, we adopted Accounting
Standards Update 2016-18, “Statement of Cash Flows (Topic 230):
Restricted Cash”, by applying the retrospective transition method
to each period presented. Adoption of the guidance resulted in an
$11.0 million increase to first quarter 2017 cash flow from
operations.
|
|
|
CONDENSED BALANCE SHEET |
|
(In thousands, except share amounts) |
|
|
|
|
|
March 31, 2018 |
|
December 31,2017 |
|
(Unaudited) |
|
|
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
38,789 |
|
|
$ |
13,626 |
|
Accounts
receivable, trade, less allowance of $8,436 and $8,250,
respectively |
301,967 |
|
|
304,174 |
|
Other
receivables |
17,076 |
|
|
26,491 |
|
Inventories and supplies |
10,620 |
|
|
11,694 |
|
Prepaid
taxes, licenses and permits |
11,991 |
|
|
15,972 |
|
Other
current assets |
30,824 |
|
|
28,272 |
|
Total
current assets |
411,267 |
|
|
400,229 |
|
|
|
|
|
Property and
equipment |
2,126,307 |
|
|
2,114,337 |
|
Less – accumulated
depreciation |
776,125 |
|
|
767,474 |
|
Property
and equipment, net |
1,350,182 |
|
|
1,346,863 |
|
|
|
|
|
Other non-current
assets |
60,596 |
|
|
60,899 |
|
Total assets |
$ |
1,822,045 |
|
|
$ |
1,807,991 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Checks
issued in excess of cash balances |
$ |
— |
|
|
$ |
21,539 |
|
Accounts
payable |
83,295 |
|
|
73,802 |
|
Insurance
and claims accruals |
73,674 |
|
|
79,674 |
|
Accrued
payroll |
30,733 |
|
|
32,520 |
|
Other
current liabilities |
24,095 |
|
|
24,642 |
|
Total
current liabilities |
211,797 |
|
|
232,177 |
|
|
|
|
|
Long-term debt, net of
current portion |
75,000 |
|
|
75,000 |
|
Other long-term
liabilities |
12,045 |
|
|
12,575 |
|
Insurance and claims
accruals, net of current portion |
108,560 |
|
|
108,270 |
|
Deferred income
taxes |
201,539 |
|
|
195,187 |
|
|
|
|
|
Stockholders’
equity: |
|
|
|
Common
stock, $.01 par value, 200,000,000 shares authorized;
80,533,536 |
|
|
|
shares
issued; 72,454,202 and 72,409,222 shares outstanding,
respectively |
805 |
|
|
805 |
|
Paid-in
capital |
102,904 |
|
|
102,563 |
|
Retained
earnings |
1,292,618 |
|
|
1,267,871 |
|
Accumulated other comprehensive loss |
(13,232 |
) |
|
(15,835 |
) |
Treasury
stock, at cost; 8,079,334 and 8,124,314 shares, respectively |
(169,991 |
) |
|
(170,622 |
) |
Total
stockholders’ equity |
1,213,104 |
|
|
1,184,782 |
|
Total liabilities and
stockholders’ equity |
$ |
1,822,045 |
|
|
$ |
1,807,991 |
|
|
|
|
|
|
|
|
|
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, 2017.
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. SteeleExecutive Vice President,
Treasurerand Chief Financial Officer(402) 894-3036
Werner Enterprises (NASDAQ:WERN)
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