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
Senior Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
WERNER ENTERPRISES REPORTS RECORD OPERATING REVENUES AND EARNINGS
Omaha, Nebraska, October 14, 2004:
- ---------------------------------
Werner Enterprises, Inc. (Nasdaq: WERN-news), one of the nation's
largest truckload transportation companies, reported record revenues and
earnings for the third quarter ended September 30, 2004. Operating
revenues increased 16% to $425.4 million compared to $368.0 million in
third quarter 2003. Net income increased 18% to $24.3 million compared
to $20.5 million in third quarter 2003. Earnings per share for third
quarter 2004 were $.30 per share, or 21% higher than the $.25 per share
earned in third quarter 2003.
"I am pleased to report our twelfth consecutive quarter of
improved year-over-year earnings. Despite rising costs for fuel and
driver pay, we improved our operating margin by negotiating needed rate
increases," said Chairman and Chief Executive Officer Clarence (C.L.)
Werner. "Our freight volumes and service performance are at a high
level as we move into the seasonally strongest period of the year."
During third quarter 2004, the truckload freight economy continued
to strengthen due to ongoing truck capacity constraints. An extremely
challenging driver recruiting market is causing most large truckload
carriers to limit their fleet additions. During the past quarter,
Werner's principal daily measurement of freight demand, the percentage
of loads available to trucks available, was consistently higher than the
same period a year ago. This is particularly noteworthy since (1)
freight demand comparisons became more challenging due to sequential
freight demand improvement that occurred a year ago from second quarter
2003 to third quarter 2003 and (2) record high fuel prices and other
economic factors that seem to be slowing the pace of growth in same-
store-sales for large retail customers. Werner expects tight capacity
and strong demand for fourth quarter 2004, however fourth quarter 2004
has one less business day than fourth quarter 2003.
Beginning in August, our sales and marketing team met with
customers to negotiate rate increases. Much of our contractual business
renews in the latter part of third quarter and fourth quarter. We made
excellent progress as revenue per total mile, net of fuel surcharges,
rose almost four cents a mile, or 3%, sequentially from second quarter
2004 to third quarter 2004. Revenue per total mile is expected to
further increase sequentially from third quarter 2004 to fourth quarter
2004 as a larger percentage of rate increases become effective. Revenue
per total mile, net of fuel surcharges, rose almost 6% from third
quarter 2003 to third quarter 2004.
Soaring fuel prices reached unprecedented levels during third
quarter 2004. Diesel fuel prices, excluding taxes, in the previous
quarter (second quarter 2004) were the highest in our eighteen years as
a public company. Prices rose further in third quarter 2004, averaging
13 cents a gallon, or 12% higher than second quarter 2004. Compared to
third quarter 2003, average diesel fuel prices, excluding taxes,
increased 40 cents a gallon, or 46%. Prices increased 37 cents a gallon
from the beginning of third quarter 2004 to the end of third quarter
2004, including a 10-cent per gallon spike in the last full week of the
quarter.
The Company's existing customer fuel surcharge programs helped to
minimize the earnings impact of record high fuel prices. These
surcharge programs, which automatically adjust as fuel prices change,
enable the Company to recover a significant portion of the fuel price
increases. The Company's fuel surcharge revenue per total mile was 11.5
cents in third quarter 2004. Consistent with preliminary estimates
previously disclosed in the Company's second quarter 10-Q filed with the
SEC on August 2, 2004, during third quarter 2004 the Company's earnings
were negatively impacted by three cents per share compared to third
quarter 2003 due to rising fuel prices, net of fuel surcharge revenues.
Fuel prices in the first fourteen days of October 2004 averaged 62
cents a gallon higher than average fuel prices for fourth quarter 2003.
Typical fuel surcharge programs specify a base price per gallon when
surcharges can begin to be billed. Above this base price, carriers bill
a surcharge rate per mile when the price per gallon falls in a bracketed
range of fuel prices. When fuel prices increase, fuel surcharges recoup
a lower percentage of the incrementally higher costs due to the impact
of inadequate recovery for empty miles, out-of-route miles, truck idle
time, and "bracket creep". For example, the Department of Energy
national average fuel price per gallon is a record $2.09 this week, or
$.61 per gallon higher than the same week a year ago. If the Company
recovers 70% of the increased price per gallon through its fuel
surcharge program, the remaining 30% not recovered reduces the Company's
operating margin. In this example, $.18 per gallon is not recovered,
thereby causing a shortfall of approximately three cents a mile.
Assuming fuel prices remain at today's price levels for the remainder of
fourth quarter 2004, the negative impact of changing fuel prices on
earnings for fourth quarter 2004 compared to fourth quarter 2003 is
estimated to be approximately five cents to seven cents per share.
On August 1, the Company's previously announced two cent per mile
pay raise became effective for two months of the quarter, for company
solo drivers in its medium-to-long haul Van division. This increased
the pay of approximately one quarter of the Company's drivers and had an
after-tax cost of one cent per share in third quarter 2004. We
experienced an improvement in driver turnover since the announcement of
this pay raise, however the driver recruiting market continues to be
difficult.
Value Added Services (VAS) revenues, primarily brokerage, continued
their strong growth trend and increased 86% in third quarter 2004 to
$41.2 million compared to third quarter 2003. In addition, VAS revenues
grew 6% sequentially from second quarter to third quarter. We expect to
continue to capitalize on the sophisticated service, management, and
technology advantages of our Werner logistics solution in an improving
freight market. During fourth quarter, the Company expects to add
several hundred trailers to support trailer capacity needs and offer
tracking and tracing to customers in its growing intermodal operation.
3Q04 3Q03
--------------- ---------------
Value Added Services (amounts in 000's) $ % $ %
- --------------------------------------- --------------- ---------------
Revenues $41,174 100.0 $22,129 100.0
Rent and purchased transportation expense 37,318 90.6 20,548 92.9
------- -------
Gross margin $3,856 9.4 $1,581 7.1
======= =======
The Company's VAS business operates with a lower operating margin
and a higher return on assets than the trucking business. Due to the
substantial growth in VAS business in third quarter 2004 compared to
third quarter 2003, the Company's overall operating ratio was affected.
Also, the significant increase in fuel expense and related fuel
surcharge revenues increases the Company's operating ratio. If VAS rent
and purchased transportation expenses are offset against VAS revenues
and fuel surcharge revenues are offset against fuel expense, the
Company's operating ratio would be 170 basis points lower in third
quarter 2004 and 90 basis points lower in third quarter 2003.
On July 16, the U.S. Circuit Court of Appeals for the District of
Columbia rejected the new hours of service rules for truck drivers that
had been in place since January 2004 because it said the Federal Motor
Carrier Safety Administration (FMCSA) had failed to address the impact
of the rules on the health of drivers as required by Congress. In
addition, the judge's ruling noted other areas of concern including the
increase in driving hours from 10 hours to 11 hours, the exception that
allows drivers to split their required rest periods, the new rule
allowing drivers to reset their 70-hour clock to 0 hours after 34
consecutive hours off duty, and the decision by the FMCSA not to require
the use of electronic onboard recorders to monitor driver compliance.
On September 30, the extension of the Federal highway bill signed
into law by the President extended the current hours of service rules
for one year or whenever the FMCSA develops a new set of regulations,
whichever comes first.
On September 21, the FMCSA approved Werner's exemption for its
paperless log system (electronic hours of service system) that moves
this exemption from the FMCSA-approved pilot program that began in 1998
to permanent status. The exemption is to be renewed every two years.
Werner is the only truckload carrier with an approved electronic hours
of service system. In the exemption notice published in the Federal
Register, the FMCSA stated, "The agency believes the terms and
conditions of the exemption achieve a level of safety equivalent to, or
greater than, that provided by complying with the current records of
duty status" and "Werner has cooperated completely in working with FMCSA
to evaluate its use of GPS-related technology."
Werner grew its dedicated fleet from about one-quarter of its total
truck fleet in third quarter 2003 to over one-third of its total truck
fleet in third quarter 2004. Much of the 750-truck growth in the
dedicated fleet occurred in fourth quarter 2003. Since the Company's
overall truck fleet increased by 150 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 third quarter 2004 and third quarter 2003, the empty
mile percentage declined from 9.8% to 8.9%.
Gains on sales of revenue equipment, primarily trucks, are
reflected as a reduction of Other Operating Expenses in the Company's
income statement and were $1.7 million in third quarter 2004 compared to
$2.3 million in third quarter 2003. Werner Enterprises' wholly-owned
subsidiary, Fleet Truck Sales, is one of the largest domestic truck
sales entities with 16 truck sales locations throughout the United
States.
The average age of the Company truck fleet declined from 1.7 years
as of June 30, 2004 to 1.6 years as of September 30, 2004, consistent
with the Company's plans to reduce the age of its fleet in the last half
of 2004. The percentage of the Company fleet with the post-October 2002
engines increased from 23% as of June 30, 2004 to 35% as of September
30, 2004.
During third quarter 2004, the Company purchased 402,000 shares of
its common stock at an average price of $18.44 per share, for a total of
$7.4 million. Year-to-date, the Company has purchased 1,173,200 shares
at an average price of $18.40 per share for a total of $21.6 million.
The Company has an additional 3.8 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, assuming an adequate supply of drivers is available.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
9/30/04 Revenues 9/30/03 Revenues
-------- --------- -------- ---------
Operating revenues $425,409 100.0 $368,034 100.0
-------- --------- -------- ---------
Operating expenses:
Salaries, wages and
benefits 136,977 32.2 131,094 35.6
Fuel 55,245 13.0 38,119 10.4
Supplies and maintenance 33,564 7.9 32,568 8.8
Taxes and licenses 26,699 6.3 25,806 7.0
Insurance and claims 17,663 4.2 18,446 5.0
Depreciation 36,514 8.6 33,708 9.2
Rent and purchased
transportation 74,617 17.5 52,396 14.2
Communications and
utilities 4,863 1.1 4,340 1.2
Other (243) (0.1) (1,171) (0.3)
-------- --------- -------- ---------
Total operating
expenses 385,899 90.7 335,306 91.1
-------- --------- -------- ---------
Operating income 39,510 9.3 32,728 8.9
-------- --------- -------- ---------
Other expense (income):
Interest expense 5 0.0 279 0.1
Interest income (710) (0.1) (430) (0.1)
Other 45 0.0 47 0.0
-------- --------- -------- ---------
Total other expense
(income) (660) (0.1) (104) 0.0
-------- --------- -------- ---------
Income before income taxes 40,170 9.4 32,832 8.9
Income taxes 15,871 3.7 12,316 3.3
-------- --------- -------- ---------
Net income $24,299 5.7 $20,516 5.6
======== ========= ======== =========
Diluted shares outstanding 80,573 81,932
======== ========
Diluted earnings per share $.30 $.25
======== ========
OPERATING STATISTICS
(Quarter Ended September 30)
3Q04 % Change 3Q03
-------- --------- --------
Trucking revenues, net of
fuel surcharge (1) $348,408 6.5% $327,071
Trucking fuel surcharge
revenues (1) 29,625 117.7% 13,608
Non-trucking revenues,
including VAS (1) 45,051 80.0% 25,028
Other operating revenues (1) 2,325 (0.1%) 2,327
-------- --------
Operating revenues (1) $425,409 15.6% $368,034
======== ========
Average monthly miles per
tractor 10,186 (1.0%) 10,288
Average revenues per total
mile (2) $1.357 5.9% $1.281
Average revenues per loaded
mile (2) $1.528 6.4% $1.436
Average percentage of empty
miles 11.20% 3.5% 10.82%
Average trip length in
miles (loaded) 580 (5.2%) 612
Total miles (loaded and
empty) (1) 256,726 0.5% 255,382
Average tractors in service 8,401 1.5% 8,275
Average revenues per truck
per week (2) $3,190 4.9% $3,041
Capital expenditures,
net (1) $61,170 $31,213
Cash flow from
operations (1) $37,161 $58,576
Total tractors (at quarter
end)
Company 7,535 7,400
Owner-operator 940 925
-------- --------
Total tractors 8,475 8,325
Total trailers (at quarter
end) 22,950 22,110
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Nine Months % of Nine Months % of
Ended Operating Ended Operating
9/30/04 Revenues 9/30/03 Revenues
----------- --------- ----------- ---------
Operating revenues $1,222,804 100.0 $1,077,532 100.0
----------- --------- ----------- ---------
Operating expenses:
Salaries, wages and
benefits 404,585 33.1 382,042 35.5
Fuel 151,102 12.3 120,252 11.2
Supplies and maintenance 101,260 8.3 91,036 8.4
Taxes and licenses 81,639 6.7 77,362 7.2
Insurance and claims 57,192 4.7 55,468 5.2
Depreciation 107,143 8.8 99,410 9.2
Rent and purchased
transportation 208,968 17.1 157,439 14.6
Communications and
utilities 13,861 1.1 12,315 1.1
Other (2,306) (0.2) (1,079) (0.1)
----------- --------- ----------- ---------
Total operating
expenses 1,123,444 91.9 994,245 92.3
----------- --------- ----------- ---------
Operating income 99,360 8.1 83,287 7.7
----------- --------- ----------- ---------
Other expense (income):
Interest expense 11 0.0 867 0.1
Interest income (1,796) (0.2) (1,212) (0.1)
Other 139 0.0 84 0.0
----------- --------- ----------- ---------
Total other expense
(income) (1,646) (0.2) (261) 0.0
----------- --------- ----------- ---------
Income before income taxes 101,006 8.3 83,548 7.7
Income taxes 39,519 3.3 31,334 2.9
----------- --------- ----------- ---------
Net income $61,487 5.0 $52,214 4.8
=========== ========= =========== =========
Diluted shares outstanding 80,939 81,703
=========== ===========
Diluted earnings per share $.76 $.64
=========== ===========
OPERATING STATISTICS
(Nine Months Ended September 30)
YTD04 % Change YTD03
---------- -------- ----------
Trucking revenues, net of
fuel surcharge (1) $1,020,107 6.8% $955,004
Trucking fuel surcharge
revenues (1) 71,612 52.0% 47,108
Non-trucking revenues,
including VAS (1) 123,944 79.5% 69,031
Other operating revenues (1) 7,141 11.8% 6,389
---------- ----------
Operating revenues (1) $1,222,804 13.5% $1,077,532
========== ==========
Average monthly miles per
tractor 10,158 0.1% 10,148
Average revenues per total
mile (2) $1.325 4.6% $1.267
Average revenues per loaded
mile (2) $1.494 5.4% $1.418
Average percentage of empty
miles 11.30% 6.1% 10.65%
Average trip length in
miles (loaded) 583 (8.6%) 638
Total miles (loaded and
empty) (1) 770,063 2.1% 754,100
Average tractors in service 8,423 2.0% 8,257
Average revenues per truck
per week (2) $3,105 4.7% $2,966
Capital expenditures,
net (1) $134,194 $55,653
Cash flow from
operations (1) $161,669 $157,747
Total tractors (at quarter
end)
Company 7,535 7,400
Owner-operator 940 925
---------- ----------
Total tractors 8,475 8,325
Total trailers (at quarter
end) 22,950 22,110
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
9/30/04 12/31/03
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $105,489 $101,409
Accounts receivable, trade,
less allowance of $7,893
and $6,043, respectively 182,014 152,461
Other receivables 13,446 8,892
Inventories and supplies 9,347 9,877
Prepaid taxes, licenses and permits 4,093 14,957
Other current assets 24,751 17,691
----------- -----------
Total current assets 339,140 305,287
----------- -----------
Property and equipment 1,336,606 1,261,252
Less - accumulated depreciation 500,011 455,565
----------- -----------
Property and equipment, net 836,595 805,687
----------- -----------
Other non-current assets 10,839 10,553
----------- -----------
$1,186,574 $1,121,527
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $44,793 $40,903
Insurance and claims accruals 57,960 55,201
Accrued payroll 19,217 15,828
Current deferred income taxes 15,826 15,151
Other current liabilities 18,389 15,392
----------- -----------
Total current liabilities 156,185 142,475
----------- -----------
Insurance and claims accruals, net
of current portion 81,301 71,301
Deferred income taxes 203,756 198,640
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
78,854,525 and 79,714,271 shares
outstanding, respectively 805 805
Paid-in capital 108,563 108,706
Retained earnings 667,984 614,011
Accumulated other comprehensive loss (1,028) (837)
Treasury stock, at cost;
1,679,011 and 819,265 shares,
respectively (30,992) (13,574)
----------- -----------
Total stockholders' equity 745,332 709,111
----------- -----------
$1,186,574 $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 8,475 trucks and 22,950 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.