We Are Werner
NASDAQ: WERN 30.37 -0.18 -0.57% Volume: 92,516 June 17, 2019

Werner Enterprises Reports Fourth Quarter and Annual 2015 Revenues and Record Earnings

01/28/2016

OMAHA, Neb.--(BUSINESS WIRE)-- Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation's largest transportation and logistics companies, reported revenues and record earnings for the fourth quarter and year ended December 31, 2015.

Summarized financial results for fourth quarter and year 2015 compared to fourth quarter and year 2014 are as follows (dollars in thousands, except per share data):

               
Three Months Ended
December 31,
Year Ended
December 31,
2015     2014 % Change 2015     2014 % Change
Total revenues $ 528,783 $ 553,186 (4 )% $ 2,093,529 $ 2,139,289 (2 )%
Trucking revenues, net of fuel surcharge 368,790 354,812 4 % 1,411,099 1,332,879 6 %
Value Added Services (“VAS”) revenues 96,715 98,500 (2 )% 393,174 390,645 1 %
Operating income 57,261 52,627 9 % 200,456 160,088 25 %
Net income 36,648 32,709 12 % 123,714 98,650 25 %
Earnings per diluted share 0.51 0.45 12 % 1.71 1.36 26 %
 

2015 was a strong earnings year for Werner Enterprises. We would like to take this opportunity to thank the hard working men and women of Werner for keeping America moving and helping us achieve this significant milestone. Their relentless commitment to excellence and outstanding customer service are the keys to our success as we enter our 60th year in business.

Our freight demand in fourth quarter 2015 was less robust than the strong fourth quarter of 2014; however, it was consistent with our average freight demand in the fourth quarters of 2013, 2012 and 2011. Demand was less than expected in the first half of fourth quarter 2015, picked up significant strength in latter November and early December and then tapered to seasonally solid freight levels for the remainder of the year. Freight demand to date in January 2016 has been seasonally softer and in-line with the same periods of 2013, 2012 and 2011. Compared to the same periods in January 2015 and January 2014, freight demand is not as strong.

2014 and 2015 were cyclically contrasting years. 2014 provided the benefits of gradually improving demand from a strengthening economy and constrained supply due to a tight driver market and increasing safety regulations. Freight demand in 2015 did not strengthen as the year progressed, as the rate of economic growth slowed. The truckload sector also experienced supply increases in 2015 as small carrier confidence rose as a result of better rates in 2014 and much lower fuel prices beginning in late 2014. Finally, as 2015 ended, truckload supply began to stabilize as truck orders declined significantly and safety regulators finalized the long awaited electronic logging device regulations in December 2015.

Noting the difficult comparisons to the strong freight market in fourth quarter 2014, average revenues per tractor per week, net of fuel surcharge, decreased 2.3% in fourth quarter 2015 compared to fourth quarter 2014. We continued to focus on securing driver friendly, highly productive freight in a market with fewer surge and project opportunities than we had in fourth quarter 2014. Our average miles per truck declined by 2.8% in fourth quarter 2015 compared to fourth quarter 2014.

Average revenues per total mile, net of fuel surcharge, increased 0.5% in fourth quarter 2015 compared to fourth quarter 2014. Our average length of haul in fourth quarter 2015 was essentially flat compared to fourth quarter 2014.

We are continuing to work with our customers to recoup the cost increases associated with more expensive equipment, a shrinking supply of qualified drivers and an increasingly challenging regulatory environment. Strategic customers understand the collective capacity and service challenges facing our company and our industry and are supportive of Werner's ongoing initiatives to provide sustainable transportation solutions in support of their supply chain needs.

In fourth quarter 2015, we averaged 7,469 trucks in service in the Truckload segment and 64 intermodal drayage trucks in the VAS segment. Following an ongoing and intense company-wide focus to improve our driver recruiting and retention, we ended fourth quarter 2015 with 7,450 trucks in the Truckload segment, a year-over-year improvement of 400 trucks compared to the end of fourth quarter 2014. Our Specialized Services unit, primarily Dedicated, ended 2015 with 3,675 trucks (or 49% of our total Truckload segment fleet).

Diesel fuel prices were $1.02 per gallon lower in fourth quarter 2015 than in fourth quarter 2014 and were 19 cents per gallon lower than in third quarter 2015. For the first 28 days of January 2016, the average diesel fuel price per gallon was 60 cents lower than the average diesel fuel price per gallon in the same period of 2015 and 78 cents lower than in first quarter 2015. The components of the Company's 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).

Total revenues declined by 4% in fourth quarter 2015 compared to fourth quarter 2014. However, trucking revenues, net of fuel surcharge revenues, grew 4% in fourth quarter 2015 compared to fourth quarter 2014. The significantly lower fuel prices in fourth quarter 2015 compared to fourth quarter 2014 primarily caused a reduction in fuel surcharge revenues by $36 million in the Truckload segment and revenues by an estimated $6 million in the VAS segment. This had the effect of reducing total consolidated revenues by an estimated 8 percentage points in fourth quarter 2015 compared to fourth quarter 2014.

We continue to invest in equipment solutions to improve our driver experience, raise operational efficiency and better manage maintenance and safety costs. We increased our capital expenditures in 2015 to lower the average age of our truck fleet and attained an average age of 1.9 years as of December 31, 2015, which compares to an average age of 2.2 years as of December 31, 2014. Net capital expenditures in 2015 were $351.5 million compared to $212.3 million in 2014. We estimate net capital expenditures for 2016 to be in the range of $400 million to $450 million, assuming mid-single digit fleet growth and a continuing reduction in our truck average age. However, if the freight market shows significant weakness during 2016, we will consider adjusting our capital expenditures accordingly. We remain committed to investing in a best in class fleet for the benefit of our customers, our drivers and the Werner brand.

The driver recruiting market remained challenging during fourth quarter 2015. Several difficult market factors persist including a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate, aging truck driver demographics and increased truck safety regulations. During fourth quarter 2015, we announced strategic and targeted driver and owner-operator per mile increases in our Van 48-state business units totaling slightly more than $10 million on an annualized basis to nearly 20% of our drivers. Most of these increases became effective January 2016. Over time, we expect the cost benefits of improved retention, higher mileage productivity and lower safety costs will more than offset these pay increases.

Gains on sales of assets were $4.4 million in fourth quarter 2015. This compares to gains on sales of assets of $5.0 million in fourth quarter 2014 and gains on sales of assets of $6.7 million in third quarter 2015 (which included a $0.7 million gain from a real estate sale). In fourth quarter 2015, we sold fewer trucks and more trailers than in fourth quarter 2014. We realized lower average gains per truck and higher average gains per trailer in fourth quarter 2015 compared to fourth quarter 2014. The used truck market weakened in fourth quarter 2015 causing lower pricing. This trend is expected to continue into 2016. Gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.

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

       
Three Months Ended
December 31,
Year Ended
December 31,
2015     2014 2015     2014

Value Added Services (amounts in thousands)

$     % $     % $     % $   %
Operating revenues $ 96,715 100.0 $ 98,500 100.0 $ 393,174 100.0 $ 390,645 100.0
Rent and purchased transportation expense   80,762 83.5   85,100 86.4   332,168 84.5   338,625 86.7
Gross margin 15,953 16.5 13,400 13.6 61,006 15.5 52,020 13.3
Other operating expenses   11,529 11.9   10,997 11.2   44,108 11.2   44,485 11.4
Operating income $ 4,424 4.6 $ 2,403 2.4 $ 16,898 4.3 $ 7,535 1.9
 

In fourth quarter 2015, VAS revenues decreased $1.8 million or 2%, and operating income dollars increased $2.0 million or 84%, compared to fourth quarter 2014. Adjusting for lower fuel prices that reduced operating revenues by an estimated $6 million, operating revenues would have increased 4%. The VAS gross margin percentage in fourth quarter 2015 of 16.5% improved 290 basis points year over year compared to the gross margin percentage of 13.6% in fourth quarter 2014. The VAS operating income percentage in fourth quarter 2015 of 4.6% improved 220 basis points from fourth quarter 2014 of 2.4%.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $45.3 million and $81.2 million in fourth quarters 2015 and 2014, respectively, and $212.5 million and $349.8 million in 2015 and 2014, respectively) and the VAS segment are shown below.

               
Three Months Ended
December 31,
Year Ended
December 31,

Operating Ratios

2015     2014 Difference

  2015  

   

  2014  

Difference
Truckload Transportation Services 84.5 % 84.8 % (0.3 )% 86.7 % 88.7 % (2.0 )%
Value Added Services 95.4 % 97.6 % (2.2 )% 95.7 % 98.1 % (2.4 )%
 

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 2015 and fourth quarter 2014 are 86.2% and 87.6%, respectively, and for 2015 and 2014 are 88.5% and 91.0%, 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, 2015, we had $75.0 million of debt outstanding and $935.7 million of stockholders' equity.

   
INCOME STATEMENT
(Unaudited)
(In thousands, except per share amounts)
               
Three Months Ended
December 31,
Year Ended
December 31,
2015     2014 2015 2014
$     % $     % $ % $ %
Operating revenues $ 528,783   100.0   $ 553,186   100.0   $ 2,093,529   100.0   $ 2,139,289   100.0  
Operating expenses:
Salaries, wages and benefits 160,766 30.4 155,581 28.1 639,908 30.6 584,006 27.3
Fuel 43,587 8.2 76,032 13.7 204,583 9.8 346,058 16.2
Supplies and maintenance 45,786 8.7 48,169 8.7 190,114 9.1 188,437 8.8
Taxes and licenses 23,187 4.4 21,905 4.0 89,646 4.3 85,468 4.0
Insurance and claims 20,814 3.9 21,200 3.8 80,848 3.9 80,375 3.7
Depreciation 50,144 9.5 45,106 8.2 193,209 9.2 176,984 8.3
Rent and purchased transportation 119,918 22.7 125,004 22.6 480,624 22.9 498,782 23.3
Communications and utilities 3,820 0.7 3,623 0.7 15,121 0.7 14,220 0.7
Other   3,500   0.7     3,939   0.7     (980 ) (0.1 )   4,871   0.2  
Total operating expenses   471,522   89.2     500,559   90.5     1,893,073   90.4     1,979,201   92.5  
Operating income   57,261   10.8     52,627   9.5     200,456   9.6     160,088   7.5  
Other expense (income):
Interest expense 405 511 0.1 1,974 0.1 881
Interest income (787 ) (0.1 ) (609 ) (0.1 ) (2,875 ) (0.1 ) (2,538 ) (0.1 )
Other   (61 )     (31 )     196       (29 )  
Total other expense (income)   (443 ) (0.1 )   (129 )     (705 )     (1,686 ) (0.1 )
Income before income taxes 57,704 10.9 52,756 9.5 201,161 9.6 161,774 7.6
Income taxes   21,056   4.0     20,047   3.6     77,447   3.7     63,124   3.0  
Net income $ 36,648   6.9   $ 32,709   5.9   $ 123,714   5.9   $ 98,650   4.6  
Diluted shares outstanding   72,417     72,508     72,556     72,738  
Diluted earnings per share $ 0.51   $ 0.45   $ 1.71   $ 1.36  
 
   
SEGMENT INFORMATION
(Unaudited)
(In thousands)
       
Three Months Ended
December 31,
Year Ended
December 31,
2015     2014 2015 2014

Revenues

Truckload Transportation Services $ 419,435 $ 440,943 $ 1,644,874 $ 1,702,137
Value Added Services 96,715 98,500 393,174 390,645
Driving Schools and Other 12,516 13,473 54,512 46,588
Corporate   417     728     2,297     2,803  
Subtotal 529,083 553,644 2,094,857 2,142,173
Inter-segment eliminations (1)   (300 )   (458 )   (1,328 )   (2,884 )
Total $ 528,783   $ 553,186   $ 2,093,529   $ 2,139,289  
 

Operating Income

Truckload Transportation Services $ 57,949 $ 54,754 $ 189,850 $ 152,992
Value Added Services 4,424 2,403 16,898 7,535
Driving Schools and Other (5,475 ) (5,236 ) (7,513 ) (3,991 )
Corporate   363     706     1,221     3,552  
Total $ 57,261   $ 52,627   $ 200,456   $ 160,088  
 

(1) 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,
2015     2014 % Change 2015 2014 % Change

Truckload Transportation Services segment

Average percentage of empty miles 12.63 % 12.08 % 4.6 % 12.39 % 12.06 % 2.7 %
Average trip length in miles (loaded) 485 484 0.2 % 482 473 1.9 %
Average tractors in service 7,469 7,021 6.4 % 7,271 7,013 3.7 %
Average revenues per tractor per week (1) $ 3,798 $ 3,888 (2.3 )% $ 3,732 $ 3,655 2.1 %
Total trailers (at quarter end) 22,630 22,305 22,630 22,305
Total tractors (at quarter end)
Company 6,635 6,400 6,635 6,400
Independent contractor   815     650     815     650  
Total tractors 7,450 7,050 7,450 7,050
 

Value Added Services segment

Average tractors in service 64 55 56 50
Total trailers (at quarter end) 1,460 1,670 1,460 1,670
Total tractors (at quarter end) 62 55 62 55
 

(1) Net of fuel surcharge revenues.

   
SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands)
       
Three Months Ended
December 31,
Year Ended
December 31,
2015     2014 2015 2014
Capital expenditures, net $ 100,374 $ 65,455 $ 351,483 $ 212,294
Cash flow from operations 87,620 41,354 370,392 206,565
Return on assets (annualized) 9.2 % 8.9 % 8.0 % 7.0 %
Return on equity (annualized) 15.9 % 15.9 % 14.1 % 12.4 %
 
   
CONDENSED BALANCE SHEET
(In thousands, except share amounts)
   
December 31, 2015 December 31, 2014
(Unaudited)
 
ASSETS
Current assets:
Cash and cash equivalents $ 31,833 $ 22,604
Accounts receivable, trade, less allowance of $10,298 and $10,017, respectively 251,023 266,727
Other receivables 17,241 20,316
Inventories and supplies 16,415 17,824
Prepaid taxes, licenses and permits 15,657 14,914
Current deferred income taxes 28,037 34,066
Income taxes receivable 20,052 23,435
Other current assets   27,281     26,458  
Total current assets   407,539     426,344  
 
Property and equipment 1,908,600 1,786,229
Less – accumulated depreciation   754,130     772,447  
Property and equipment, net   1,154,470     1,013,782  
 
Other non-current assets   51,675     40,336  
Total assets $ 1,613,684   $ 1,480,462  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 70,643 $ 64,827
Insurance and claims accruals 64,106 73,814
Accrued payroll 25,233 28,121
Other current liabilities   23,720     19,768  
Total current liabilities   183,702     186,530  
 
Long-term debt, net of current portion 75,000 75,000
Other long-term liabilities 19,832 20,021
Insurance and claims accruals, net of current portion 125,195 123,445
Deferred income taxes 274,301 241,606
 
Stockholders’ equity:

Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 shares issued; 71,998,750 and 72,038,368 shares outstanding, respectively

805 805
Paid-in capital 102,734 101,803
Retained earnings 1,022,966 915,085
Accumulated other comprehensive loss (13,063 ) (9,375 )
Treasury stock, at cost; 8,534,786 and 8,495,168 shares, respectively   (177,788 )   (174,458 )
Total stockholders’ equity   935,654     833,860  
Total liabilities and stockholders' equity $ 1,613,684   $ 1,480,462  
 

On January 27, 2016, Gary L. Werner provided notice of his intent to retire from the Board of Directors and as the Vice Chairman of the company, effective February 12, 2016. Mr. Werner is retiring after more than 40 years of service and the Company is very thankful for his many years of valued service.

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. Werner's Value Added Services 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, 2014.

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.

Source: Werner Enterprises, Inc.

Werner Enterprises, Inc.

John J. Steele, 402-894-3036

Executive Vice President, Treasurer and

Chief Financial Officer

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