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Werner Enterprises Reports Improved Fourth Quarter and Annual 2017 Revenues and Earnings

January, 29, 2018
 Three Months Ended
December 31,
   Year Ended
 December 31,
(In thousands, except per share amounts)2017 2016 % Change 2017 2016 % Change
Total revenues$567,365  $518,832  9% $2,116,737  $2,008,991  5%
Trucking revenues, net of fuel surcharge374,827  347,546  8% 1,403,863  1,356,284  4%
Werner Logistics revenues112,414  107,171  5% 417,639  417,172  0%
Operating income45,061  34,956  29% 143,820  126,070  14%
Net income141,134  21,811  547% 202,889  79,129  156%
Earnings per diluted share1.94  0.30  545% 2.80  1.09  156%

OMAHA, Nebraska, Jan. 29, 2018 (GLOBE NEWSWIRE) -- Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation’s largest transportation and logistics companies, reported improved revenues and earnings for the fourth quarter and year ended December 31, 2017. Earnings per diluted share were $1.94 for fourth quarter 2017 compared to earnings per diluted share of $0.30 for fourth quarter 2016. Earnings per diluted share for 2017 were $2.80 compared to $1.09 for 2016. Excluding the non-cash income tax reform benefit discussed below, which management believes provides a more useful comparison of the Company’s performance from period to period, earnings per diluted share were $0.42 and $1.27 for fourth quarter 2017 and full year 2017, respectively.

Fourth quarter 2017 and annual 2017 results included a $110.5 million, or $1.52 per diluted share, non-cash reduction in income tax expense, which resulted from the Company’s revalued net deferred income tax liabilities to reflect the lower federal income tax rate enacted on December 22, 2017. The Tax Cuts and Jobs Act of 2017 (the Tax Act) lowered the federal corporate income tax rate to 21% from 35% beginning in 2018. These estimates are based on the Company’s initial analysis of the Tax Act and may be adjusted in future periods as required. During fourth quarter 2017, the Company also recorded income tax benefits of $2.4 million, or three cents per share, related to state income tax accruals and other discrete income tax benefits. The Company currently estimates its full year 2018 effective income tax rate to be approximately 25% to 26%.

2017 was a year of meaningful progress for Werner Enterprises. Our investment in the five T’s (trucks, trailers, terminals, talent and technology) produced an improved customer experience and better financial results. Our success depends on the unwavering dedication and commitment of the talented Werner Enterprises associates, and we sincerely thank our entire Werner team of driving and non-driving professionals for a job well done.

Fourth quarter 2017 freight demand in our One-Way Truckload fleet was strong. Freight in October 2017 was seasonally better than normal, and demand strengthened further in November and December. Freight volumes thus far in January 2018 have been much stronger than normal for January.

Average revenues per tractor per week increased 4.1% in fourth quarter 2017 compared to fourth quarter 2016 due to a 4.7% increase in average revenues per total mile and a 0.6% decrease in average miles per truck. Growth in shorter-haul Dedicated compared to longer-haul one-way Truckload had a favorable impact on revenue per total mile and an unfavorable impact on miles per truck.

Freight metrics are improving, and we have increasing confidence that contractual rates will strengthen over the next few quarters.

In fourth quarter 2017, we averaged 7,436 trucks in service in the Truckload Transportation Services (Truckload) segment and 44 intermodal drayage trucks in the Werner Logistics segment. We ended fourth quarter 2017 with 7,435 trucks in the Truckload segment, a year-over-year increase of 335 trucks and a sequential increase of 60 trucks. Our Dedicated unit ended fourth quarter 2017 with 4,000 trucks (or 54% of our total Truckload segment fleet) compared to 3,650 trucks at the end of fourth 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 December 31, 2017. Net capital expenditures in 2017 were $199 million compared to $430 million in 2016. 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 Act. It reflects increased confidence in potential growth due to a strong Dedicated pipeline and overall market demand. Tractor allocations between fleets will be 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 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, purchasing best-in-class safety and training features on all new trucks, investing in our driver training schools and collaborating with customers to improve or eliminate unproductive freight. We were pleased to grow our fleet by nearly 5% in 2017 in this difficult driver market. Our driver turnover rate once again improved, achieving our lowest fourth quarter and annual driver turnover rate in 19 years.

Gains on sales of assets were $0.8 million in fourth quarter 2017. This compares to gains on sales of assets of $3.2 million in fourth quarter 2016. In fourth quarter 2017, we sold more trucks and fewer trailers than in fourth quarter 2016. We realized lower average gains per truck and higher average gains per trailer in fourth quarter 2017 compared to fourth quarter 2016. The used truck pricing market remained difficult in fourth 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. Fourth quarter 2016 included an increase in depreciation expense of $4.1 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 37 cents per gallon higher in fourth quarter 2017 than in fourth quarter 2016 and were 24 cents per gallon higher than in third quarter 2017. For the first 29 days of January 2018, the average diesel fuel price per gallon was 44 cents higher than the average diesel fuel price per gallon in the same period of 2017 and 45 cents higher than in first 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).

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
December 31,
 Year Ended
 December 31,
 2017 2016 2017 2016
Werner Logistics (amounts in thousands)$ % $ % $ % $ %
Operating revenues$112,414  100.0  $107,171  100.0  $417,639  100.0  $417,172  100.0 
Rent and purchased transportation expense96,267  85.6  89,836  83.8  355,544  85.1  345,790  82.9 
Gross margin16,147  14.4  17,335  16.2  62,095  14.9  71,382  17.1 
Other operating expenses14,116  12.6  13,103  12.3  53,412  12.8  50,648  12.1 
Operating income$2,031  1.8  $4,232  3.9  $8,683  2.1  $20,734  5.0 

In fourth quarter 2017, Werner Logistics revenues increased $5.2 million, or 5%, and operating income dollars decreased $2.2 million, or 52%, compared to fourth quarter 2016. The Werner Logistics gross margin percentage in fourth quarter 2017 of 14.4% decreased 182 basis points compared to the gross margin percentage of 16.2% in fourth quarter 2016. The Werner Logistics operating income percentage in fourth quarter 2017 of 1.8% decreased 214 basis points from fourth quarter 2016 of 3.9%. Tighter carrier capacity in fourth quarter 2017 compared to fourth quarter 2016 resulted in higher purchased transportation costs for the Company’s predominately contractual logistics business causing the lower gross margin and operating income percentages.

In fourth quarter 2017, Werner Logistics achieved 36.0% revenue growth year over year in our truck brokerage solution, including transactional brokerage, 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 (4.3% of Werner Logistics revenues in fourth 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. 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 $57.9 million and $44.3 million in fourth quarters 2017 and 2016, respectively, and $205.5 million and $155.3 million in 2017 and 2016, respectively) and the Werner Logistics segment are shown below.

 Three Months Ended
December 31,
   Year Ended
 December 31,
Operating Ratios2017 2016 Difference 2017 2016 Difference
Truckload Transportation Services88.3% 90.7% (2.4)% 90.3% 92.2% (1.9)%
Werner Logistics98.2% 96.1% 2.1% 97.9% 95.0% 2.9%

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 2017 and fourth quarter 2016 are 89.9% and 91.8%, respectively, and for 2017 and 2016 are 91.6% and 93.0%, 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, 2017, we had $75 million of debt outstanding and over $1.1 billion of stockholders’ equity.

 (In thousands, except per share amounts)
 Three Months Ended
December 31,
 Year Ended
 December 31,
 2017 2016 2017 2016
 $ % $ % $ % $ %
Operating revenues$567,365  100.0  $518,832  100.0  $2,116,737  100.0  $2,008,991  100.0 
Operating expenses:               
Salaries, wages and benefits180,927  31.9  156,814  30.2  681,547  32.2  636,112  31.7 
Fuel58,194  10.3  43,008  8.3  198,745  9.4  155,042  7.7 
Supplies and maintenance44,049  7.8  40,838  7.9  164,325  7.7  171,397  8.5 
Taxes and licenses22,673  4.0  21,194  4.1  86,768  4.1  85,547  4.3 
Insurance and claims19,591  3.4  24,482  4.7  79,927  3.8  83,866  4.2 
Depreciation55,020  9.7  56,879  11.0  217,639  10.3  209,728  10.4 
Rent and purchased transportation132,427  23.3  133,141  25.6  509,573  24.1  512,296  25.5 
Communications and utilities3,947  0.7  3,996  0.8  16,105  0.7  16,106  0.8 
Other5,476  1.0  3,524  0.7  18,288  0.9  12,827  0.6 
Total operating expenses522,304  92.1  483,876  93.3  1,972,917  93.2  1,882,921  93.7 
Operating income45,061  7.9  34,956  6.7  143,820  6.8  126,070  6.3 
Other expense (income):         
Interest expense351    738  0.1  2,243  0.1  2,577  0.2 
Interest income(752) (0.1) (1,004) (0.2) (3,308) (0.1) (4,158) (0.2)
Other35    43    328    191   
Total other expense (income)(366) (0.1) (223) (0.1) (737)   (1,390)  
Income before income taxes45,427  8.0  35,179  6.8  144,557  6.8  127,460  6.3 
Income tax expense (benefit)(95,707) (16.9) 13,368  2.6  (58,332) (2.8) 48,331  2.4 
Net income$141,134  24.9  $21,811  4.2  $202,889  9.6  $79,129  3.9 
Diluted shares outstanding72,660    72,446    72,558    72,393   
Diluted earnings per share$1.94    $0.30    $2.80    $1.09   

 (In thousands)
 Three Months Ended
December 31,
 Year Ended
 December 31,
 2017 2016 2017 2016
Truckload Transportation Services$439,173  $397,503  $1,635,244  $1,533,981 
Werner Logistics112,414  107,171  417,639  417,172 
Other (1)15,488  13,914  62,745  57,062 
Corporate399  449  1,938  1,749 
  Subtotal567,474  519,037  2,117,566  2,009,964 
Inter-segment eliminations (2)(109) (205) (829) (973)
  Total$567,365  $518,832  $2,116,737  $2,008,991 
Operating Income       
Truckload Transportation Services$44,548  $32,742  $138,059  $107,713 
Werner Logistics2,031  4,232  8,683  20,734 
Other (1)(570) (1,213) 35  (6,177)
Corporate(948) (805) (2,957) 3,800 
  Total$45,061  $34,956  $143,820  $126,070 
(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.

 Three Months Ended
December 31,
   Year Ended
 December 31,
 2017 2016 % Change 2017 2016 % Change
Truckload Transportation Services segment           
Average percentage of empty miles12.76% 12.62% 1.1% 12.49% 12.96% (3.6)%
Average trip length in miles (loaded)463  472  (1.9)% 468  468  %
Average tractors in service7,436  7,178  3.6% 7,305  7,263  0.6%
Average revenues per tractor per week (1)$3,878  $3,724  4.1% $3,696  $3,591  2.9%
Total trailers (at quarter end)22,900  22,725    22,900  22,725   
Total tractors (at quarter end)           
  Company6,805  6,305    6,805  6,305   
  Independent contractor630  795    630  795   
  Total tractors7,435  7,100    7,435  7,100   
Werner Logistics segment           
Average tractors in service44  80    50  73   
Total trailers (at quarter end)1,600  1,625    1,600  1,625   
Total tractors (at quarter end)45  74    45  74   

(1) Net of fuel surcharge revenues.

(In thousands)
 Three Months Ended
December 31,
 Year Ended
 December 31,
 2017 2016 2017 2016
Capital expenditures, net$77,740 $135,593
Cash flow from operations64,890  111,222  281,838  312,397 
Return on assets (annualized)*31.6% 5.0% 11.5% 4.7%
Return on equity (annualized)*51.8% 8.8% 19.5% 8.2%
*Includes the $110.5 million non-cash reduction in income tax expense in fourth quarter 2017 and full year 2017 resulting from the revaluation of net deferred income tax liabilities due to the Tax Act. Excluding this item, return on assets was 6.9% and 5.3% and return on equity was 11.5% and 9.0% for the fourth quarter 2017 and full year 2017, respectively. Management believes the exclusion of the tax reform benefit provides a more useful comparison of the Company’s performance from period to period.

(In thousands, except share amounts)
 December 31, 2017 December 31, 2016
Current assets:   
Cash and cash equivalents$13,626  $16,962 
Accounts receivable, trade, less allowance of $8,250 and $9,183, respectively304,174  261,372 
Other receivables26,491  15,168 
Inventories and supplies11,694  12,768 
Prepaid taxes, licenses and permits15,972  15,374 
Income taxes receivable1,189  21,497 
Other current assets27,083  29,987 
Total current assets400,229  373,128 
Property and equipment2,114,337  2,109,991 
Less – accumulated depreciation767,474  747,353 
Property and equipment, net1,346,863  1,362,638 
Other non-current assets60,899  57,237 
Total assets$1,807,991  $1,793,003 
Current liabilities:   
Checks issued in excess of cash balances$21,539  $ 
Accounts payable73,802  66,618 
Current portion of long-term debt  20,000 
Insurance and claims accruals79,674  83,404 
Accrued payroll32,520  26,189 
Other current liabilities24,642  18,650 
Total current liabilities232,177  214,861 
Long-term debt, net of current portion75,000  160,000 
Other long-term liabilities12,575  16,711 
Insurance and claims accruals, net of current portion108,270  113,875 
Deferred income taxes195,187  292,769 
Stockholders’ equity:   
Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536   
shares issued; 72,409,222 and 72,166,969 shares outstanding, respectively805  805 
Paid-in capital102,563  101,035 
Retained earnings1,267,871  1,084,796 
Accumulated other comprehensive loss(15,835) (16,917)
Treasury stock, at cost; 8,124,314 and 8,366,567 shares, respectively(170,622) (174,932)
Total stockholders’ equity1,184,782  994,787 
Total liabilities and stockholders’ equity$1,807,991  $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

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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Source: Werner Enterprises, Inc.

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