WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145
FOR IMMEDIATE RELEASE Contact: Robert E. Synowicki, Jr.
- --------------------- Executive Vice President and
Chief Information Officer
(402) 894-3000
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
WERNER ENTERPRISES REPORTS ELEVENTH CONSECUTIVE QUARTER OF HIGHER
OPERATING REVENUES AND EARNINGS
Omaha, Nebraska, July 15, 2004:
- ------------------------------
Werner Enterprises, Inc. (Nasdaq: WERN-news), one of the nation's
largest truckload transportation companies, reported its eleventh
consecutive year-over-year quarter of higher operating revenues and
earnings for the second quarter ended June 30, 2004. Operating revenues
increased 13% to $411.1 million compared to $362.3 million in second
quarter 2003. Net income increased 9% to $21.6 million compared to
$19.9 million in second quarter 2003. Earnings per share for second
quarter 2004 were $.27 per share, or 10% higher than the $.24 per shared
earned in second quarter 2003.
"Freight demand and pricing continued to strengthen in second
quarter as truckload industry capacity struggled to keep up with an
improving freight economy," said Chairman and Chief Executive Officer
Clarence (C.L.) Werner. "We were consistently overbooked during the
quarter and expect a further tightening of truckload capacity in the
second half of 2004. We once again increased our net income and
earnings, despite pressures from abnormally high fuel costs and an
extremely competitive driver market."
A substantial portion of the Company's freight is under contract
with customers and provides for annual pricing increases. Much of this
business renews in the latter part of third quarter and fourth quarter.
To recoup the significant cost increases in fuel, driver pay, equipment
and insurance discussed in subsequent paragraphs and to improve margins,
the Company will be seeking increased year-over-year improvement in its
revenue per total mile through freight rate increases. Management has
continued to keep its truck capacity commitments with its partner
customers, rather than shifting truck capacity to other non-partner
customers that have freight available at attractive rates in this
improving freight market. The Company believes that standing by its
truck capacity commitments with partner customers is in the best long-
term interests of the Company.
Non-trucking revenues, primarily brokerage, grew 79% in second
quarter 2004 to $42.6 million compared to second quarter 2003 and grew
18% compared to first quarter 2004. We expect to continue to capitalize
on the sophisticated service, management, and technology advantages of
our Werner Value Added Services solution in an improving freight market.
During second quarter, the Company expanded to six regional brokerage
offices, with plans to expand to eight offices by the end of third
quarter.
2Q04 2Q03
------------- -------------
Non-trucking operation (amounts in 000's) $ % $ %
- ----------------------------------------- ------------- -------------
Revenues $42,639 100.0 $23,854 100.0
Rent and purchased transportation expense 38,907 91.2 22,365 93.8
------- -------
Gross margin $ 3,732 8.8 $ 1,489 6.2
======= =======
Diesel fuel prices in second quarter 2004 were the highest in our
eighteen years as a public company. Prices averaged 28 cents a gallon,
or 33%, higher than second quarter 2003. Even more significant, prices
in the western United States (western 5 states in DOE PADD 5) averaged
52 cents a gallon higher than second quarter 2003. Approximately 10% of
the Company's miles are in these western states.
In second quarter 2003, diesel fuel prices began to decline
following the beginning of the war in Iraq in March 2003. As previously
disclosed in our second quarter 2003 and first quarter 2004 earnings
releases, the Company's second quarter 2003 earnings were positively
impacted by two cents per share compared to second quarter 2002 due to
the temporarily favorable effect of higher fuel surcharge collections in
a declining fuel price market. During second quarter 2004, fuel prices
rose rapidly in April and May, causing the opposite effect. The
Company's earnings were negatively impacted by four cents per share in
second quarter 2004 compared to second quarter 2003 due to rising fuel
prices, net of fuel surcharge collections.
Diesel fuel prices in the first fifteen days of July 2004 averaged
29 cents a gallon higher than average fuel prices for third quarter
2003. Assuming prices remain at these price levels for the remainder of
third quarter 2004, the effect of changing fuel prices on earnings for
third quarter 2004 compared to third quarter 2003 is expected to have a
negative impact of three cents per share. Using the same fuel price
assumption, earnings for fourth quarter 2004 compared to fourth quarter
2003 are expected to be negatively impacted by two cents per share.
The Company's non-trucking business operates with a lower operating
margin and a higher return on assets than the trucking business. Due to
the substantial growth in the non-trucking business in second quarter
2004, the Company's overall operating ratio was affected. Also, the
significant increase in fuel expense and related fuel surcharge revenues
affected the operating ratio. If non-trucking rent and purchased
transportation expenses are offset against non-trucking revenues and
fuel surcharge revenues are offset against fuel expense, the Company's
operating ratio would be 160 basis points lower in second quarter 2004
and 100 basis points lower in second quarter 2003.
The market for recruiting drivers remains extremely challenging.
It has become more difficult to attract experienced drivers to the
Company. Despite this, the Company maintained its recruiting numbers
for experienced drivers and, in addition, is having success recruiting
drivers from driver training schools. In addition, driver turnover has
improved slightly compared to a year ago. At the beginning of second
quarter 2004, the Company implemented an optional per diem reimbursement
program for company drivers in fleets other than dedicated fleet
divisions. The per diem program is cost neutral to the Company and
increases driver satisfaction through higher net pay per mile. Per diem
also had the positive effect of helping to reduce driver turnover.
Werner Enterprises is continuing to purchase EPA-compliant truck
engines, in particular the Caterpillar ACERT engine and the Detroit
Diesel EGR engines. As of June 30, 2004, approximately 23% of the
company-owned truck fleet consisted of trucks with these engines.
Company data continues to indicate that the fuel mile per gallon (mpg)
degradation is a reduction of approximately 0.3 mpg to 0.5 mpg, or a 6%
to 9% reduction in fuel efficiency. Also, depreciation expense is
increasing due to the higher cost of the new engines. The average age
of the Company's truck fleet is 1.7 years at June 30, 2004. The Company
anticipates the average age of its truck fleet will decrease in the
second half of 2004.
The Company's liability insurance program for higher-dollar claims
renews effective August 1, 2004. For many years, the Company maintained
liability insurance coverage for individual claims exceeding $500,000
with varying annual aggregate amounts of liability for claims above
$500,000 and below $5.0 million. For the policy year ending July 31,
2004 these annual aggregate amounts totaled $8.5 million. Effective
August 1, 2004, this self-insured retention will increase to $2.0
million per claim with an annual aggregate of $3.0 million for claims
between $2.0 million and $3.0 million and the Company will be fully
insured (i.e., no aggregate) for claims between $3.0 million to $5.0
million. This increase is due to changes in the trucking insurance
market and is similar to increased claim retention levels experienced by
other truckload carriers. The Company maintains liability insurance
coverage with reputable insurance carriers substantially in excess of
the self-insured retention amount. The Company expects its liability
insurance premiums for the policy year beginning August 1, 2004 to be
approximately the same as the previous policy year.
Gains on sales of revenue equipment, primarily trucks, are
reflected as a reduction of Other Operating Expenses in the Company's
income statement. Gains increased due to the Company selling over two
and one-half times as many used trucks in second quarter 2004 compared
to second quarter 2003. The Company's goal is to sell most of its used
trucks through its 16-store Fleet Truck Sales network rather than rely
on trading used trucks to original equipment manufacturers. Gains from
trading trucks to original equipment manufacturers for new trucks lower
the depreciable cost of the new trucks and therefore reduce
depreciation. As the Company continues to sell more of its used trucks
rather than trade trucks to original equipment manufacturers,
depreciation expense is expected to increase and gains on sales of
equipment are also expected to increase.
Werner grew its dedicated fleet from almost one-quarter of its
total truck fleet in second quarter 2003 to over one-third of its total
truck fleet in second quarter 2004. Much of the 850-truck growth in the
dedicated fleet occurred in fourth quarter 2003. Since the Company's
overall truck fleet increased by only 300 trucks in the last twelve
months, the growth in the dedicated fleet was primarily offset by a
reduction in the Company's medium-to-long-haul van fleet. Dedicated
fleet business tends to have lower miles per trip, a higher empty mile
percentage, a higher rate per loaded mile, and lower miles per truck per
month. The growth in the dedicated business has a corresponding effect
on these same operating statistics for the entire Company. For example,
if dedicated fleet business is excluded from the total company operating
statistics for both second quarter 2004 and second quarter 2003, the
empty mile percentage declined from 10.0% to 8.8%.
During second quarter 2004, the Company purchased 259,600 shares of
its common stock at an average price of $18.24 per share, for a total of
$4.7 million. The Company has an additional 4.2 million shares
available for repurchase under the Board of Directors' existing
authorization.
The Company's continuing goal is to improve its annual operating
margin to 10% or better before increasing the Company's fleet growth
rate.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
6/30/04 Revenues 6/30/03 Revenues
-------- --------- -------- ---------
Operating revenues $411,115 100.0 $362,290 100.0
-------- --------- -------- ---------
Operating expenses:
Salaries, wages and
benefits 134,296 32.6 127,821 35.3
Fuel 50,105 12.2 37,188 10.3
Supplies and maintenance 34,802 8.4 29,709 8.2
Taxes and licenses 27,428 6.7 25,836 7.1
Insurance and claims 20,022 4.9 17,881 4.9
Depreciation 35,644 8.7 32,981 9.1
Rent and purchased
transportation 71,201 17.3 54,961 15.2
Communications and
utilities 4,450 1.1 3,980 1.1
Other (1,824) (0.4) 357 0.1
-------- --------- -------- ---------
Total operating
expenses 376,124 91.5 330,714 91.3
-------- --------- -------- ---------
Operating income 34,991 8.5 31,576 8.7
-------- --------- -------- ---------
Other expense (income):
Interest expense 4 0.0 283 0.0
Interest income (551) (0.1) (508) (0.1)
Other 57 0.0 28 0.0
-------- --------- -------- ---------
Total other expense
(income) (490) (0.1) (197) (0.1)
-------- --------- -------- ---------
Income before income taxes 35,481 8.6 31,773 8.8
Income taxes 13,861 3.3 11,914 3.3
-------- --------- -------- ---------
Net income $21,620 5.3 $19,859 5.5
======== ========= ======== =========
Diluted shares outstanding 80,891 81,680
======== ========
Diluted earnings per share $.27 $.24
======== ========
OPERATING STATISTICS
(Quarter Ended June 30)
2Q04 % Change 2Q03
-------- --------- --------
Trucking revenues, net of
fuel surcharge (1) $341,966 6.4% $321,418
Trucking fuel surcharge
revenues (1) 24,016 60.8% 14,934
Non-trucking revenues (1) 42,639 78.7% 23,854
Other operating revenues (1) 2,494 19.7% 2,084
-------- --------
Operating revenues (1) $411,115 13.5% $362,290
======== ========
Average monthly miles per
tractor 10,254 0.0% 10,249
Average revenues per total
mile (2) $1.318 3.7% $1.271
Average revenues per loaded
mile (2) $1.482 4.4% $1.420
Average percentage of empty
miles 11.03% 4.8% 10.52%
Average trip length in
miles (loaded) 588 (8.3%) 641
Average tractors in service 8,432 2.5% 8,228
Average revenues per truck
per week (2) $3,119 3.8% $3,005
Capital expenditures, net $40,603 $14,384
Cash flow from operations $65,000 $58,909
Total tractors (at quarter
end)
Company 7,520 7,225
Owner-operator 930 925
-------- --------
Total tractors 8,450 8,150
Total trailers (at quarter
end) 22,920 21,355
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Six Six
Months % of Months % of
Ended Operating Ended Operating
6/30/04 Revenues 6/30/03 Revenues
-------- --------- -------- ---------
Operating revenues $797,395 100.0 $709,498 100.0
-------- --------- -------- ---------
Operating expenses:
Salaries, wages and
benefits 267,608 33.6 250,948 35.4
Fuel 95,857 12.0 82,133 11.6
Supplies and maintenance 67,696 8.5 58,468 8.2
Taxes and licenses 54,940 6.9 51,556 7.3
Insurance and claims 39,529 5.0 37,022 5.2
Depreciation 70,629 8.9 65,702 9.3
Rent and purchased
transportation 134,351 16.8 105,043 14.8
Communications and
utilities 8,998 1.1 7,975 1.1
Other (2,063) (0.3) 92 0.0
-------- --------- -------- ---------
Total operating
expenses 737,545 92.5 658,939 92.9
-------- --------- -------- ---------
Operating income 59,850 7.5 50,559 7.1
-------- --------- -------- ---------
Other expense (income):
Interest expense 6 0.0 588 0.0
Interest income (1,086) (0.1) (782) (0.1)
Other 94 0.0 37 0.0
-------- --------- -------- ---------
Total other expense
(income) (986) (0.1) (157) (0.1)
-------- --------- -------- ---------
Income before income taxes 60,836 7.6 50,716 7.2
Income taxes 23,648 2.9 19,018 2.7
-------- --------- -------- ---------
Net income $37,188 4.7 $31,698 4.5
======== ========= ======== =========
Diluted shares outstanding 81,116 81,561
======== ========
Diluted earnings per share $.46 $.39
======== ========
OPERATING STATISTICS
(Six Months Ended June 30)
YTD04 % Change YTD03
-------- --------- --------
Trucking revenues, net of
fuel surcharge (1) $671,699 7.0% $627,933
Trucking fuel surcharge
revenues (1) 41,987 25.3% 33,500
Non-trucking revenues (1) 78,892 79.3% 44,003
Other operating revenues (1) 4,817 18.6% 4,062
-------- --------
Operating revenues (1) $797,395 12.4% $709,498
======== ========
Average monthly miles per
tractor 10,144 0.7% 10,078
Average revenues per total
mile (2) $1.309 4.0% $1.259
Average revenues per loaded
mile (2) $1.476 4.8% $1.408
Average percentage of empty
miles 11.36% 7.7% 10.55%
Average trip length in
miles (loaded) 584 (10.4%) 652
Average tractors in service 8,434 2.3% 8,248
Average revenues per truck
per week (2) $3,063 4.6% $2,929
Capital expenditures, net $73,024 $24,440
Cash flow from operations $124,508 $99,171
Total tractors (at quarter
end)
Company 7,520 7,225
Owner-operator 930 925
-------- --------
Total tractors 8,450 8,150
Total trailers (at quarter
end) 22,920 21,355
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
6/30/04 12/31/03
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $138,264 $101,409
Accounts receivable, trade,
less allowance of $7,480
and $6,043, respectively 153,475 152,461
Other receivables 8,758 8,892
Inventories and supplies 8,754 9,877
Prepaid taxes, licenses
and permits 7,957 14,957
Other current assets 18,557 17,691
----------- -----------
Total current assets 335,765 305,287
----------- -----------
Property and equipment 1,299,375 1,261,252
Less - accumulated depreciation 487,949 455,565
----------- -----------
Property and equipment, net 811,426 805,687
----------- -----------
Other non-current assets 10,448 10,553
----------- -----------
$1,157,639 $1,121,527
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $43,152 $40,903
Insurance and claims accruals 58,706 55,201
Accrued payroll 17,758 15,828
Current deferred income taxes 15,513 15,151
Other current liabilities 15,679 15,392
----------- -----------
Total current liabilities 150,808 142,475
----------- -----------
Insurance and claims accruals, net
of current portion 78,301 71,301
Deferred income taxes 198,420 198,640
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
79,170,167 and 79,714,271 shares
outstanding, respectively 805 805
Paid-in capital 108,931 108,706
Retained earnings 646,445 614,011
Accumulated other comprehensive loss (1,015) (837)
Treasury stock, at cost;
1,363,369 and 819,265 shares,
respectively (25,056) (13,574)
----------- -----------
Total stockholders' equity 730,110 709,111
----------- -----------
$1,157,639 $1,121,527
=========== ===========
Werner Enterprises is a full-service transportation company
providing truckload and logistics services throughout the 48 states,
portions of Canada and Mexico. C.L. Werner founded the Company in 1956.
Werner is one of the nation's largest truckload transportation companies
with a fleet of 8,450 trucks and 22,920 trailers.
Werner Enterprises' common stock is traded on The Nasdaq Stock
Market under the symbol WERN. The Werner Enterprises web site address
is www.werner.com.
Note: This press release contains forward-looking statements,
which are based on information currently available. Actual results
could differ materially from those anticipated as a result of a number
of factors, including, but not limited to, those discussed in Item 7 of
the Company's Annual Report on Form 10-K for the year ended December 31,
2003. The Company assumes no obligation to update any forward-looking
statement to the extent it becomes aware that it will not be achieved
for any reason.