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Press Release: Werner Enterprises Reports Record -2-

· 02/04/2021 16:05
2020 and 4Q20 Guidance 4Q20 Actual (as 2021 Annual 2021 2021 (as of of 12/31/20) Guidance (as Commentary Guidance 10/28/20) of 2/4/21) ------------ ---------------- ------------------ -------------- ----------------- TTS truck (3)% to (1)% (2)% 1% to 3% Targeted growth growth from with strong BoY to EoY performing Dedicated fleet Augmenting TTS capacity with growing power-only Logistics solution ------------ ---------------- ------------------ -------------- ----------------- Gains on $2M to $3M $4.0M $12M to $15M Higher gains in sales of improving market equipment with highly spec'd equipment Growing retail vs. wholesale sales mix ------------ ---------------- ------------------ -------------- ----------------- Net capital $88M to $113M $79M $275M to $300M Newer expenditures trucks/trailers with enhanced safety features Opening two new full-service terminals Continued investment in Werner Edge digital initiative ------------ ---------------- ------------------ -------------- ----------------- TTS Guidance ------------ ---------------- ------------------ -------------- ----------------- Dedicated n/a n/a 3% to 5% (1H21 Consistent RPTPW* vs. 1H20) performance growth record of YoY improvement through both strong and softer freight markets ------------ ---------------- ------------------ -------------- ----------------- One-Way 3% to 5% 6.9% 7% to 10% High-single-digit Truckload (4Q20 vs. 4Q19) (4Q20 vs. 4Q19) (1H21 vs. to (OWT) RPTM* 1H20) Low-double-digit growth percentage contractual rate renewals expected during bid season Strong OWT freight market; focus areas of cross-border and expedited ------------ ---------------- ------------------ -------------- ----------------- Assumptions ------------ ---------------- ------------------ -------------- ----------------- Effective 25.0% to 25.5% 25.4% 24.5% to 25.5% income tax rateKey Werner Logistics Segment Financial Metrics Three Months Ended Year Ended December 31, December 31, ------------------------------------- Y/Y Y/Y (In thousands) 2020 2019 Change 2020 2019 Change ------------ ------------ --------- ------------ ------------ --------- Total revenues $130,113 $120,145 8% $469,791 $489,729 (4)% Rent and purchased transportation expense 113,908 101,764 12% 407,308 411,506 (1)% Gross profit 16,205 18,381 (12)% 62,483 78,223 (20)% Other operating expenses 13,572 15,014 (10)% 56,478 61,935 (9)% Operating income 2,633 3,367 (22)% 6,005 16,288 (63)% Gross margin 12.5% 15.3% (280) bps 13.3% 16.0% (270) bps Operating margin 2.0% 2.8% (80) bps 1.3% 3.3% (200) bps-- Revenues of $130.1 million increased $10.0 million, or 8% -- Gross margin of 12.5% decreased 280 bps -- Operating income of $2.6 million decreased $0.7 million, or 22% -- Operating margin of 2.0% decreased 80 bpssurcharge 18.2% 14.0% 420 bps 14.0% 12.3% 170 bps Adjusted operating (200) ratio 83.2% 87.6% (440) bps 87.2% 89.2% bps Adjusted operating ratio, net of fuel (170) surcharge 81.8% 86.0% (420) bps 86.0% 87.7% bps

Werner Logistics Segment

Truckload Logistics revenues (62% of total Logistics revenues) increased by 2%. Truckload Logistics volume declined 12%, and revenues per load increased 16%. Intermodal revenues (27% of Logistics revenues) increased 23%, due to volume growth of 21% and 1% higher revenues per load.

The gross margin percentage decreased 280 bps due to the large rise in spot truckload rates in the second half of 2020 which significantly increased the cost of capacity for contractual brokerage shipments in fourth quarter 2020. The logistics operating margin declined 80 bps to 2.0% as the 12% decline in gross profit exceeded the 10% decline in other operating expenses. As a result of improving customer rates for contractual brokerage shipments, the gross margin percentage and operating margin percentage both improved sequentially from third quarter 2020 to fourth quarter 2020 by 170 basis points and 270 basis points, respectively.

Cash Flow and Capital Allocation

Cash flow from operations in fourth quarter 2020 was $99.5 million compared to $94.5 million in fourth quarter 2019, an increase of 5%. Full year 2020 cash flow from operations was $445.9 million, producing $179.7 million of free cash flow for the year.

Gains on sales of equipment in fourth quarter 2020 were $4.0 million, or $0.04 per share, compared to $3.6 million, or $0.04 per share, in fourth quarter 2019. Year over year, we sold slightly fewer trucks and significantly fewer trailers which was offset by higher average gains per truck and trailer. Pricing in the market for our used trucks continued to improve in fourth quarter 2020. As a reminder, gains on sales of assets are reflected as a reduction of Other Operating Expenses in our income statement.

Net capital expenditures in 2020 were $266.2 million compared to $283.9 million in 2019, a decrease of 6%. As a result of the improved pricing for our used trucks in fourth quarter 2020, we sold significantly more trucks than originally anticipated. This resulted in a decrease in fourth quarter 2020 net capital expenditures versus our guidance. We plan to continue to invest in new trucks and trailers and our terminals to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs. The average ages of our truck and trailer fleets remain low by industry standards and were 2.0 years and 4.0 years, respectively, as of December 31, 2020.

During the quarter, we repurchased 1.2 million shares of common stock for a total cost of $47.7 million, or an average price of $39.77 per share. As of December 31, 2020, we had 2.8 million shares remaining under our share repurchase authorization.

As of December 31, 2020, we had $200 million of debt outstanding, $29 million of cash and nearly $1.2 billion of stockholders' equity.

2020 and 2021 Guidance Metrics and Assumptions

The following table summarizes (1) our 2020 guidance and assumptions compared to actual results and (2) introduces our 2021 guidance and assumptions:

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February 04, 2021 16:05 ET (21:05 GMT)