Attached files
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| 8-K - 8-K - WERNER ENTERPRISES INC | wern-20161231x8k.htm |
Exhibit 99.1
Werner Enterprises, Inc. | Contact: | John J. Steele |
14507 Frontier Road | Executive Vice President, Treasurer | |
P. O. Box 45308 | and Chief Financial Officer | |
Omaha, NE 68145 | (402) 894-3036 | |
FOR IMMEDIATE RELEASE
WERNER ENTERPRISES REPORTS FOURTH QUARTER AND ANNUAL 2016
REVENUES AND EARNINGS
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||
(In thousands, except per share amounts) | 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||
Total revenues | $ | 518,832 | $ | 528,783 | (2 | )% | $ | 2,008,991 | $ | 2,093,529 | (4 | )% | |||||||||
Trucking revenues, net of fuel surcharge | 347,546 | 368,790 | (6 | )% | 1,356,284 | 1,411,099 | (4 | )% | |||||||||||||
Werner Logistics (1) revenue | 107,171 | 96,715 | 11 | % | 417,172 | 393,174 | 6 | % | |||||||||||||
Operating income | 34,956 | 57,261 | (39 | )% | 126,070 | 200,456 | (37 | )% | |||||||||||||
Net income | 21,811 | 36,648 | (40 | )% | 79,129 | 123,714 | (36 | )% | |||||||||||||
Earnings per diluted share | 0.30 | 0.51 | (41 | )% | 1.09 | 1.71 | (36 | )% | |||||||||||||
(1) Formerly Value Added Services (VAS)
OMAHA, NEBRASKA, January 30, 2017 - Werner Enterprises, Inc. (NASDAQ: WERN), one of the nation’s largest transportation and logistics companies, reported revenues and earnings for the fourth quarter and year ended December 31, 2016. Earnings per diluted share were $0.30 for fourth quarter 2016 compared to earnings per diluted share of $0.51 for fourth quarter 2015 and $0.26 for third quarter 2016. Earnings per diluted share for 2016 were $1.09 compared to $1.71 for 2015.
2016 was a very challenging freight and rate year for our truckload and logistics business segments. Our significant investment in the five T’s at Werner (trucks, trailers, terminals, talent and technology) is raising the bar on customer service and we expect will result in improved financial results going forward. We would like to express our sincere appreciation for the ongoing commitment, resolve, creativity and unwavering dedication of our team of 10,000-plus Werner associates as we make further progress on the journey to achieving best in class status in each of our business segments.
Our fourth quarter 2016 freight demand demonstrated seasonal improvement from third quarter 2016. We believe part of this improvement was industry specific and part was company specific. During June 2016, to take advantage of the strengthening Dedicated market, we moved 150 trucks from One-Way Truckload, lessening the need to find satisfactory freight for the trucks in the more challenged one-way truckload market. In September 2016, we moved an additional 100 trucks from One-Way Truckload into Dedicated.
Freight volumes and transactional spot market pricing in the one-way truckload market improved in fourth quarter 2016 from third quarter 2016. We experienced more typical seasonal freight volumes in One-Way Truckload in fourth quarter 2016 which were better than fourth quarter 2015. Freight demand thus far in
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January 2017 has been softer than normal in One-Way Truckload; however, with our reduced truck count in One-Way Truckload, our prebooks of loads compared to trucks are slightly better than January 2016.
Average revenues per tractor per week increased sequentially by 3.8% in fourth quarter 2016 compared to third quarter 2016 due to a 1.0% decrease in average miles per truck combined with a 4.8% increase in average revenues per total mile. Average revenues per tractor per week decreased 1.9% in fourth quarter 2016 compared to fourth quarter 2015 resulting from a 3.8% decrease in average miles per truck combined with a 1.9% increase in average revenues per total mile. Shifting 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.
During fourth quarter 2016, we experienced freight strengthening which further validated our pricing strategy. In second quarter 2016, the contractual rate market was very challenging, particularly in One-Way Truckload. An excess supply of industry trucks relative to sluggish freight demand created a market in which some customers pushed hard and obtained contractual rate decreases. At that time, we chose to exit from certain contractual business that would have required mid-to-high single digit contractual rate decreases for the next year, since we believed that this pricing was not sustainable. In fourth quarter 2016, transactional spot rates demonstrated material improvement, and contract rates began to stabilize for new contracts. Expectations are rising for improved pricing in 2017, noting a more positive economic outlook, rationalizing industry truck supply, normalized current customer inventory levels and the much anticipated supply-constricting December 2017 electronic logging device (ELD) regulatory mandate.
In fourth quarter 2016, we averaged 7,178 trucks in service in the Truckload segment and 80 intermodal drayage trucks in the Werner Logistics segment. We ended fourth quarter 2016 with 7,100 trucks in the Truckload segment, a year-over-year decrease of 350 trucks and a sequential decrease of 75 trucks. Our Specialized Services unit, primarily Dedicated, ended fourth quarter 2016 with 3,760 trucks (or 53% of our total Truckload segment fleet compared to 49% as of December 2015).
We are nearing completion of a significant reinvestment in our fleet over the last two years 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 December 31, 2016. Net capital expenditures in 2016 were $429.6 million compared to $351.5 million in 2015. We estimate net capital expenditures for 2017 to be in the range of $225 million to $275 million.
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 have taken many significant actions in the last year 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, tightening our driver hiring standards and investing in our driver training schools. In 2016, we achieved our lowest driver turnover rate in 17 years.
Gains on sales of assets were $3.2 million in fourth quarter 2016. This compares to gains on sales of assets of $4.4 million in fourth quarter 2015. In fourth quarter 2016, we sold significantly fewer trucks and over twice as many trailers as in fourth quarter 2015. We realized lower average gains per truck and trailer in fourth quarter 2016 compared to fourth quarter 2015. The used truck pricing market remained very difficult in fourth quarter 2016 due to a higher than normal supply of used trucks in the market and low buyer demand. We expect the tough used truck pricing market will persist in 2017. Gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.
During fourth quarter 2016, due to the weak used truck market, we realized a $4.1 million increase in depreciation expense due to a reduction in the estimated residual values of certain trucks. We expect
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depreciation expense for these trucks to continue at similar higher level in first quarter 2017 and then gradually decline as these trucks are sold in the first few quarters of 2017. Insurance and claims expense in fourth quarter 2016 was higher than normal due to negative loss development of prior year claims; however, due to multiple safety initiatives we were pleased our accident frequency in 2016 declined 8% compared to 2015.
Diesel fuel prices were 14 cents per gallon higher in fourth quarter 2016 than in fourth quarter 2015 and were 12 cents per gallon higher than in third quarter 2016. For the first 30 days of January 2017, the average diesel fuel price per gallon was 63 cents higher than the average diesel fuel price per gallon in the same period of 2016 and 54 cents higher than in first 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 December 31, | Year Ended December 31, | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Werner Logistics (amounts in thousands) | $ | % | $ | % | $ | % | $ | % | |||||||||||||||
Operating revenues | $ | 107,171 | 100.0 | $ | 96,715 | 100.0 | $ | 417,172 | 100.0 | $ | 393,174 | 100.0 | |||||||||||
Rent and purchased transportation expense | 89,836 | 83.8 | 80,762 | 83.5 | 345,790 | 82.9 | 332,168 | 84.5 | |||||||||||||||
Gross margin | 17,335 | 16.2 | 15,953 | 16.5 | 71,382 | 17.1 | 61,006 | 15.5 | |||||||||||||||
Other operating expenses | 13,103 | 12.3 | 11,529 | 11.9 | 50,648 | 12.1 | 44,108 | 11.2 | |||||||||||||||
Operating income | $ | 4,232 | 3.9 | $ | 4,424 | 4.6 | $ | 20,734 | 5.0 | $ | 16,898 | 4.3 | |||||||||||
In fourth quarter 2016, Werner Logistics revenues increased $10.5 million, or 11%, and operating income dollars decreased $0.2 million, or 4%, compared to fourth quarter 2015. The Werner Logistics gross margin percentage in fourth quarter 2016 of 16.2% decreased 30 basis points compared to the gross margin percentage of 16.5% in fourth quarter 2015. The Werner Logistics operating income percentage in fourth quarter 2016 of 3.9% decreased 70 basis points from fourth quarter 2015 of 4.6%.
In fourth quarter 2016, Werner Logistics continued to see strong growth in our truck brokerage and intermodal solutions despite the challenged logistics freight market. This is a strong vote of confidence from our customers as they continue to appreciate the value of the Werner Enterprises portfolio of service offerings. A large Werner Logistics Freight Management customer was acquired in 2015, and their logistics solution will transition to another platform in first quarter 2017. This will slow revenue growth in the near term.
Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $44.3 million and $45.3 million in fourth quarters 2016 and 2015, respectively, and $155.3 million and $212.5 million in 2016 and 2015, respectively) and the Werner Logistics segment are shown below.
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||
Operating Ratios | 2016 | 2015 | Difference | 2016 | 2015 | Difference | |||||||||||
Truckload Transportation Services | 90.7 | % | 84.5 | % | 6.2 | % | 92.2 | % | 86.7 | % | 5.5 | % | |||||
Werner Logistics | 96.1 | % | 95.4 | % | 0.7 | % | 95.0 | % | 95.7 | % | (0.7 | )% | |||||
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 fourth quarter 2016 and fourth quarter 2015 are 91.8%
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and 86.2%, respectively, and for 2016 and 2015 are 93.0% and 88.5%, respectively, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses.
Our financial position remains strong. As of December 31, 2016, we had $180.0 million of debt outstanding and $994.8 million of stockholders’ equity.
INCOME STATEMENT | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||
Operating revenues | $ | 518,832 | 100.0 | $ | 528,783 | 100.0 | $ | 2,008,991 | 100.0 | $ | 2,093,529 | 100.0 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Salaries, wages and benefits | 156,814 | 30.2 | 160,766 | 30.4 | 636,112 | 31.7 | 639,908 | 30.6 | |||||||||||||||||||
Fuel | 43,008 | 8.3 | 43,587 | 8.2 | 155,042 | 7.7 | 204,583 | 9.8 | |||||||||||||||||||
Supplies and maintenance | 40,838 | 7.9 | 45,786 | 8.7 | 171,397 | 8.5 | 190,114 | 9.1 | |||||||||||||||||||
Taxes and licenses | 21,194 | 4.1 | 23,187 | 4.4 | 85,547 | 4.3 | 89,646 | 4.3 | |||||||||||||||||||
Insurance and claims | 24,482 | 4.7 | 20,814 | 3.9 | 83,866 | 4.2 | 80,848 | 3.9 | |||||||||||||||||||
Depreciation | 56,879 | 11.0 | 50,144 | 9.5 | 209,728 | 10.4 | 193,209 | 9.2 | |||||||||||||||||||
Rent and purchased transportation | 133,141 | 25.6 | 119,918 | 22.7 | 512,296 | 25.5 | 480,624 | 22.9 | |||||||||||||||||||
Communications and utilities | 3,996 | 0.8 | 3,820 | 0.7 | 16,106 | 0.8 | 15,121 | 0.7 | |||||||||||||||||||
Other | 3,524 | 0.7 | 3,500 | 0.7 | 12,827 | 0.6 | (980 | ) | (0.1 | ) | |||||||||||||||||
Total operating expenses | 483,876 | 93.3 | 471,522 | 89.2 | 1,882,921 | 93.7 | 1,893,073 | 90.4 | |||||||||||||||||||
Operating income | 34,956 | 6.7 | 57,261 | 10.8 | 126,070 | 6.3 | 200,456 | 9.6 | |||||||||||||||||||
Other expense (income): | |||||||||||||||||||||||||||
Interest expense | 738 | 0.1 | 405 | — | 2,577 | 0.2 | 1,974 | 0.1 | |||||||||||||||||||
Interest income | (1,004 | ) | (0.2 | ) | (787 | ) | (0.1 | ) | (4,158 | ) | (0.2 | ) | (2,875 | ) | (0.1 | ) | |||||||||||
Other | 43 | — | (61 | ) | — | 191 | — | 196 | — | ||||||||||||||||||
Total other expense (income) | (223 | ) | (0.1 | ) | (443 | ) | (0.1 | ) | (1,390 | ) | — | (705 | ) | — | |||||||||||||
Income before income taxes | 35,179 | 6.8 | 57,704 | 10.9 | 127,460 | 6.3 | 201,161 | 9.6 | |||||||||||||||||||
Income taxes | 13,368 | 2.6 | 21,056 | 4.0 | 48,331 | 2.4 | 77,447 | 3.7 | |||||||||||||||||||
Net income | $ | 21,811 | 4.2 | $ | 36,648 | 6.9 | $ | 79,129 | 3.9 | $ | 123,714 | 5.9 | |||||||||||||||
Diluted shares outstanding | 72,446 | 72,417 | 72,393 | 72,556 | |||||||||||||||||||||||
Diluted earnings per share | $ | 0.30 | $ | 0.51 | $ | 1.09 | $ | 1.71 | |||||||||||||||||||
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SEGMENT INFORMATION | |||||||||||||||
(Unaudited) | |||||||||||||||
(In thousands) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | |||||||||||||||
Truckload Transportation Services | $ | 397,503 | $ | 419,435 | $ | 1,533,981 | $ | 1,644,874 | |||||||
Werner Logistics | 107,171 | 96,715 | 417,172 | 393,174 | |||||||||||
Other (1) | 13,914 | 12,516 | 57,062 | 54,512 | |||||||||||
Corporate | 449 | 417 | 1,749 | 2,297 | |||||||||||
Subtotal | 519,037 | 529,083 | 2,009,964 | 2,094,857 | |||||||||||
Inter-segment eliminations (2) | (205 | ) | (300 | ) | (973 | ) | (1,328 | ) | |||||||
Total | $ | 518,832 | $ | 528,783 | $ | 2,008,991 | $ | 2,093,529 | |||||||
Operating Income | |||||||||||||||
Truckload Transportation Services | $ | 32,742 | $ | 57,949 | $ | 107,713 | $ | 189,850 | |||||||
Werner Logistics | 4,232 | 4,424 | 20,734 | 16,898 | |||||||||||
Other (1) | (1,213 | ) | (5,475 | ) | (6,177 | ) | (7,513 | ) | |||||||
Corporate | (805 | ) | 363 | 3,800 | 1,221 | ||||||||||
Total | $ | 34,956 | $ | 57,261 | $ | 126,070 | $ | 200,456 | |||||||
(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 December 31, | Year Ended December 31, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Truckload Transportation Services segment | |||||||||||||||||||||
Average percentage of empty miles | 12.62 | % | 12.63 | % | (0.1 | )% | 12.96 | % | 12.39 | % | 4.6 | % | |||||||||
Average trip length in miles (loaded) | 472 | 485 | (2.7 | )% | 468 | 482 | (2.9 | )% | |||||||||||||
Average tractors in service | 7,178 | 7,469 | (3.9 | )% | 7,263 | 7,271 | (0.1 | )% | |||||||||||||
Average revenues per tractor per week (1) | $ | 3,724 | $ | 3,798 | (1.9 | )% | $ | 3,591 | $ | 3,732 | (3.8 | )% | |||||||||
Total trailers (at quarter end) | 22,725 | 22,630 | 22,725 | 22,630 | |||||||||||||||||
Total tractors (at quarter end) | |||||||||||||||||||||
Company | 6,305 | 6,635 | 6,305 | 6,635 | |||||||||||||||||
Independent contractor | 795 | 815 | 795 | 815 | |||||||||||||||||
Total tractors | 7,100 | 7,450 | 7,100 | 7,450 | |||||||||||||||||
Werner Logistics segment | |||||||||||||||||||||
Average tractors in service | 80 | 64 | 73 | 56 | |||||||||||||||||
Total trailers (at quarter end) | 1,625 | 1,460 | 1,625 | 1,460 | |||||||||||||||||
Total tractors (at quarter end) | 74 | 62 | 74 | 62 | |||||||||||||||||
(1) Net of fuel surcharge revenues.
SUPPLEMENTAL INFORMATION | |||||||||||||||
(Unaudited) | |||||||||||||||
(In thousands) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Capital expenditures, net | $ | 135,593 | $ | 100,374 | $ | 429,607 | $ | 351,483 | |||||||
Cash flow from operations | 111,222 | 87,620 | 312,397 | 370,392 | |||||||||||
Return on assets (annualized) (1) | 5.0 | % | 9.4 | % | 4.7 | % | 8.2 | % | |||||||
Return on equity (annualized) | 8.8 | % | 15.9 | % | 8.2 | % | 14.1 | % | |||||||
(1) Pursuant to the Company’s early adoption of Accounting Standards Update 2015-17 (see explanatory note on the Condensed Balance Sheet), return on assets for all periods presented reflects the impact of reclassifying the current deferred tax asset into the non-current deferred tax liability.
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CONDENSED BALANCE SHEET | |||||||
(In thousands, except share amounts) | |||||||
December 31, 2016 | December 31, 2015 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 16,962 | $ | 31,833 | |||
Accounts receivable, trade, less allowance of $9,183 and $10,298, respectively | 261,372 | 251,023 | |||||
Other receivables | 15,168 | 17,241 | |||||
Inventories and supplies | 12,768 | 16,415 | |||||
Prepaid taxes, licenses and permits | 15,374 | 15,657 | |||||
Income taxes receivable | 21,497 | 20,052 | |||||
Other current assets | 29,987 | 27,281 | |||||
Total current assets | 373,128 | 379,502 | |||||
Property and equipment | 2,109,991 | 1,908,600 | |||||
Less – accumulated depreciation | 747,353 | 754,130 | |||||
Property and equipment, net | 1,362,638 | 1,154,470 | |||||
Other non-current assets | 57,237 | 51,675 | |||||
Total assets | $ | 1,793,003 | $ | 1,585,647 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 66,618 | $ | 70,643 | |||
Current portion of long-term debt | 20,000 | — | |||||
Insurance and claims accruals | 83,404 | 64,106 | |||||
Accrued payroll | 26,189 | 25,233 | |||||
Other current liabilities | 18,650 | 23,720 | |||||
Total current liabilities | 214,861 | 183,702 | |||||
Long-term debt, net of current portion | 160,000 | 75,000 | |||||
Other long-term liabilities | 16,711 | 19,832 | |||||
Insurance and claims accruals, net of current portion | 113,875 | 125,195 | |||||
Deferred income taxes (1) | 292,769 | 246,264 | |||||
Stockholders’ equity: | |||||||
Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 | |||||||
shares issued; 72,166,969 and 71,998,750 shares outstanding, respectively | 805 | 805 | |||||
Paid-in capital | 101,035 | 102,734 | |||||
Retained earnings | 1,084,796 | 1,022,966 | |||||
Accumulated other comprehensive loss | (16,917 | ) | (13,063 | ) | |||
Treasury stock, at cost; 8,366,567 and 8,534,786 shares, respectively | (174,932 | ) | (177,788 | ) | |||
Total stockholders’ equity | 994,787 | 935,654 | |||||
Total liabilities and stockholders’ equity | $ | 1,793,003 | $ | 1,585,647 | |||
(1) In November 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-17, which requires presentation of deferred tax assets and liabilities as non-current in the balance sheet beginning January 1, 2017. The Company early-adopted the guidance in 2016 and retrospectively adjusted the December 31, 2015 presentation by reclassifying a $28.0 million current deferred tax asset into the non-current liability “Deferred income taxes”.
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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, 2015.
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.