Werner Enterprises Announces Acquirement Of AIT, Roadmaster Drivers School

Werner Enterprises announces acquirement of AIT, Roadmaster Drivers School

Werner Enterprises (NASDAQ: WERN) announced its acquisition of the American Institute of Trucking (AIT) and Roadmaster Drivers School. These investments help further Werner’s commitment to securing the success of the next generation of professional drivers for the entire trucking industry.

“Trucking is the backbone of our nation’s economy, and our future depends on making sure we have the best professional drivers in place to deliver this freight,” said Derek Leathers, Werner president and COO. “This was a long-term strategic investment to ensure a stable flow of highly trained student truck drivers in a time when the entire industry is facing a significant driver shortage.”

As a forward-thinking leader in the transportation industry, Werner saw an opportunity with school partners that would benefit the trucking industry as a whole. Working with both AIT and Roadmaster for many years, Werner has witnessed the solid management and quality output these companies produce in the commercial truck driver training field, in addition to common business goals.

Werner completed its acquisition of AIT in August 2013, and the Roadmaster acquisition was completed in May 2014 for undisclosed amounts. AIT, based in Phoenix, Arizona, has three southwest U.S. school locations. Roadmaster, based in Tampa, Florida, has 13 school locations throughout the U.S. The acquisition announcements were delayed to allow for a full-system integration and to ensure that student employer of choice remained a priority, as Werner is committed to ensuring students maintain the ability to choose their preferred carrier to work for after graduation. The experienced and respected AIT and Roadmaster management teams both have remained unchanged following these acquisitions. Before and after the acquisitions, the percentage of graduates from these schools placed with Werner has remained relatively consistent.

“The industry as a whole needs diversity, flexibility and a good pool of quality individuals to hire from,” said John Kearney Sr., president and CEO of Roadmaster. “One key effect with this acquisition is it provides us with the financial security needed to invest and expand so we can continue to provide the entire industry with safe and road-ready professional drivers.”

AIT and Roadmaster continue to serve as two of the industry’s largest and top-ranked driving schools.

“Werner has been one of AIT’s key partners for many years,” said Chuck Wirth, president of AIT. “We couldn’t be more pleased to be a part of an organization that is a leader in the industry.”

I was told one time by the owner of a private truck driving school that they rarely have a problem finding enough interested students. The problem they have is finding enough students that can afford the upfront cost of tuition. I'm not exactly sure what angle Werner is taking on these acquisitions but I imagine it's related to finding a way to take the risk out of financing students. Instead of paying the school $5,000 to sponsor a student who promptly leaves for another company after two weeks they can simply write off the actual cost of the schooling for that student since they own the school itself.

It's kind of like saying, "Instead of paying McDonald's $3 each to make cheeseburgers to feed the entire school we'll simply buy a McDonald's and only have to pay the actual cost of making the cheeseburger which is $2.

That's my theory anyhow. Werner will now have the opportunity to sponsor students at the actual cost of doing the schooling instead of paying a premium fee to a for-profit school.

I'm not exactly sure what angle Werner is taking on these acquisitions but I imagine it's related to finding a way to take the risk out of financing students. Instead of paying the school $5,000 to sponsor a student who promptly leaves for another company after two weeks they can simply write off the actual cost of the schooling for that student since they own the school itself.

You know no company will give money and schooling away without a commitment (often called a contract). Schools will finance the tuition with the expectation a company may pick up the tab when said student gets hired. Said student is then in a contract for their "bonus" that will be paid out over the 1 year they sign up for, and will go against their tuition balance. Still "There Ain't No Such Thing As A Free Lunch" applies.

My experience at Swift (with their own school): I signed on at the school, and even with a Veteran's Scholarship*, I had to sign on for the tuition. If you walk away from Swift after school, you don't get your Certificate of Completion till Swift gets their money. If you go to work for Swift, they will deduct tuition payments from your paychecks. (Swift does this thing where they also pay you back over 2 years.)

*Swift Veteran Scholarship: any driver with a DD214 separation that's honorable will get their entire tuition paid after 12 months. No deduction taken in the meantime.

You know no company will give money and schooling away without a commitment (often called a contract). Schools will finance the tuition with the expectation a company may pick up the tab when said student gets hired.

Actually I don't believe many private schools offer their own financing. Very few do in fact. They simply can't afford to because in the end you can't pay the bills with the money people are supposed to pay you back. So if someone fails to pay, you're out that money.

A number of trucking companies that hire students but do not have their own training program will pay private schools to train drivers and have the driver pay back the company through the contract. So it's not the school that is financing the student, it's the trucking company. The trucking company pays the school and then gets reimbursed by the contract between them and the student. But this causes a few problems:

1) The company wants the training done as inexpensively as possible. Yet the school exists to turn a profit. So it's difficult to find a middle ground where the company gets a good volume discount and the school still turns a worthwhile profit. Profit margins for schools are very thin also, as are most profits in the trucking industry.

2) If students fail to fulfill their commitment then the trucking company is out of luck. Sure they can put it on your credit report and withhold your certificate of completion but neither of those help the trucking company pay their bills.

So the trucking company would like to reduce their risk exposure and yet still finance and train their own drivers. So the best way to do that is to either build your own school or buy a bunch of existing schools.

Now I think the reason more trucking companies have not set up their own schools in recent years is because a lot of states have been passing laws preventing CDL's from being transferred into the state. So the trucking companies were having a heck of a time bringing people in from out of state to their own training facilities, training them, and then sending them home to transfer their license. So to get around that problem they've been working deals with private schools throughout the country to set up sponsorship programs and get a stream of student drivers that way.

But the Feds are enforcing the law now that says the states have to accept the CDL test scores from other states. This is going to open up a lot more opportunities for trucking companies to set up their own schools if they so choose. But this deal here between Werner and these private schools was put together over the past couple of years and at the time Werner probably feared it wouldn't be worth setting up their own school at their own facility because of the various State laws. So they did the next best thing and bought some private schools.

All of this is speculation of course from watching the various laws and business strategies over the years, especially the past two or three years. But I think that's what is going on there. The biggest hurdle to bringing new truck drivers into the industry is getting them financed for schooling. So the large carriers are always jockeying for position to keep a steady stream of new drivers coming in without breaking the bank when people fail to fulfill their commitment.

I know the thread is a year old, but based on my conversation at RoadMaster (Jun 2017) the course costs $7000 if you want financing, $5000 if you pay cash. Werner will pay $250 per month you are employed at Werner until you've received $7500. What I don't know, is at what rate you pay back the $7000 if you finance, since I paid the $5000 up front.