Werner profits skyrocket in 2017 on U.S. tax reform

Omaha, Neb.-based trucking operator and logistics provider Werner Enterprises saw its fourth quarter and full-year net income spike 547 percent and 156 percent, respectively, thanks in part to a $110.5 million reduction in income tax expenses.    Werner Enterprises, Inc. saw its profits skyrocket in 2017 thanks in large part to recent tax reform legislation in the United States, according to the company’s most recent financial statements.
   The Omaha, Neb.-based trucking operator and logistics provider’s net income spiked 547 percent year-over-year to $141.13 million in the fourth quarter alone. Diluted earnings per share (EPS) were similarly up 545 percent to $1.94 per share for the quarter, despite revenues growing just 9 percent to $567.47 million.
   For the full year, Werner’s net income jumped 156 percent to $202.89 million ($2.80 per share) on revenues that rose 5 percent to $2.12 billion.
   The company attributed the strong earnings growth primarily to a $110.5 million ($1.52 per share) reduction in income tax expenses that resulted from the lower U.S. federal income tax rate enacted in December under the Tax Cuts and Jobs Act of 2017. The tax reform legislation lowered the federal corporate income tax rate from 35 percent to 21 percent.
   Werner warned, however, that its earnings estimates were based on the company’s initial analysis of the Tax Act and, therefore, may be adjusted in future periods.
   Net capital expenditures in 2017 were $199 million compared to $430 million in 2016.
   The company in 2015 and 2016 invested nearly $1 billion in capex, primarily reducing the average age of its trucks and trailers in an effort to improve driver experience, raise operational efficiency and better manage maintenance, safety and fuel costs. Werner said it intends to maintain the newer fleet age of trucks and trailers, which stood at 1.9 years as of Dec. 31, 2017.
   Looking ahead to 2018, the company said it expects net capital expenditures to be in the range of $300 million to $350 million to allow for increased investment in its tractor and trailer fleet as a result of the Tax Act.
   Werner noted that the driver recruiting market remains “challenging,” but said that proactive steps taken by the company in the last two years, including raising driver pay, lowering the age of its truck fleet, purchasing best-in-class safety and training features on all new trucks, investing in driver training schools and collaborating with customers to improve or eliminate unproductive freight, have allowed Werner to grow its fleet by nearly 5 percent in 2017 despite the “difficult” driver market.
   The company’s non-asset-based Werner Logistics segment, which includes brokerage, freight management, intermodal, Werner Global Logistics (International), and Werner Final Mile, saw operating income drop 52 percent to $2.03 million in fourth quarter 2017, despite revenues increasing 5 percent to $112.41 million.
   For the full year, Werner Logistics’ operating income fell 58.1 percent to $8.68 million even as revenues remained almost unchanged at $417.64 million.
   “2017 was a year of meaningful progress for Werner Enterprises,” the company said of the results. “Our investment in the five T’s (trucks, trailers, terminals, talent and technology) produced an improved customer experience and better financial results.
   “Fourth quarter 2017 freight demand in our One-Way Truckload fleet was strong,” it added. “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…Freight metrics are improving, and we have increasing confidence that contractual rates will strengthen over the next few quarters.”