EXHIBIT 99.1
WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145
FOR IMMEDIATE RELEASE Contacts: Robert E. Synowicki, Jr.
- --------------------- Executive Vice President and
Chief Information Officer
(402) 894-3000
John J. Steele
Executive Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
WERNER ENTERPRISES REPORTS OPERATING REVENUES AND EARNINGS
Omaha, Nebraska, October 17, 2005:
- ---------------------------------
Werner Enterprises, Inc. (Nasdaq: WERN-news), one of the nation's
largest truckload transportation companies, reported operating revenues
and earnings for the third quarter ended September 30, 2005.
Operating revenues increased 19% to $504.5 million in third quarter
2005 compared to $425.4 million in third quarter 2004. Net income was
$24.5 million in third quarter 2005 compared to $24.3 million in third
quarter 2004. Earnings per share were $.30 per share in both third
quarter 2005 and third quarter 2004.
Freight demand was solid in July and August 2005, but not as strong
as the strong freight market of July and August 2004. Freight demand
improved beginning the first week in September 2005 through the date of
this news release, and was approximately the same as the strong freight
demand during the same period in 2004. During third quarter 2005, the
Company's marketing department began the process of renewing customer
contracts and initiating annual rate increases for a substantial portion
of the Company's non-dedicated fleet business that renews in the second
half of 2005. The Company's goal is to recoup several inflationary cost
increases including driver pay and benefits, truck engine emissions
costs, and tolls and to improve the Company's operating income
percentage.
On September 20, 2005, the Company issued a news release and
provided an update on the impact of high diesel fuel prices on third
quarter 2005 earnings. As of that date, the Company estimated the
negative impact of fuel expense on earnings for third quarter 2005
compared to third quarter 2004 to be six to seven cents per share. The
actual negative impact of fuel expense on earnings was four cents per
share. The quarterly earnings impact was less than estimated as a
result of factors in September 2005 that were better than anticipated,
including assumptions for fuel surcharge recovery, fuel stop pricing
arrangements, empty miles, and fuel mile per gallon (mpg). The Company
includes the following items in the calculation of the impact of fuel
expense on earnings for both periods: fuel pricing, fuel reimbursement
to owner-operator drivers, lower mpg due to the increasing percentage of
company-owned trucks with post-October 2002 engines, and anticipated
fuel surcharge reimbursement.
Fuel prices rose sequentially for the ninth consecutive quarter
during third quarter 2005. Diesel fuel prices in third quarter 2005
were $0.69 a gallon, or 55%, higher than in third quarter 2004. At the
end of the quarter, diesel fuel prices were over $1.10 a gallon higher
than at the end of third quarter 2004. Fuel prices were more volatile
during third quarter 2005 due to the impact of Hurricane Katrina in
early September and Hurricane Rita in mid-September.
With higher fuel prices, we are now in an untenable position with
many customer fuel surcharge programs. The recent hurricanes caused a
shortage of refined product that escalated diesel fuel prices at the
same time that crude oil prices did not increase significantly. This,
in turn, showed a weakness in the truckload industry's fuel surcharge
standard of a one-cent per mile increase in rate for every five-cent per
gallon increase in the Department of Energy (DOE) fuel price that is
used for most fuel surcharge programs. This weakness is due to the fact
that five-cent per gallon brackets only recoup about 80% to 85% of the
actual increase in the cost of fuel.
Historically, in slower rising fuel price markets, the Company
works hard to recover this 15% to 20% fuel surcharge shortfall by
pricing the shortfall into the base rate per mile during the annual rate
increase process. With rapidly escalating fuel prices, this is not
possible. If fuel prices do not decline to lower price levels, it may
be necessary to either (1) lower the fuel surcharge price-per-gallon
brackets or (2) change the base rate per mile more frequently than once
a year. We are currently meeting with our customers to discuss the
deficiency in the current five-cent bracket surcharge program. We are
explaining how it negatively affects our earnings, the truckload
industry's earnings, and the need to make improvements to the fuel
surcharge program. If the shipping and truckload industries do not work
together to address this problem, they risk losing a substantial amount
of truck capacity.
The Company believes that when fuel prices decline and lower
the Company's fuel expense, the savings should be passed on to its
customers through lower fuel surcharges. If the higher price of fuel is
priced in the base rate per mile, when fuel prices decline the customer
does not realize a savings. It is our intention to neutralize fuel as
much as possible through a fair and accurate fuel surcharge program. As
a result, the current fuel market creates a need to address the fuel
surcharge industry standard of five-cent per gallon brackets.
Diesel fuel for the first seventeen days of October 2005 averaged
$0.95 per gallon, or 61%, higher than October 2004. Assuming fuel
prices remain at current elevated prices throughout the remainder of
fourth quarter 2005, the negative impact of fuel expense on earnings for
fourth quarter 2005 compared to fourth quarter 2004 is estimated to be
in the range of eight cents to eleven cents per share, which would be
more than the impact of fuel for the first nine months of 2005 compared
to the first nine months of 2004. Current fuel prices are $1.08 per
gallon higher than the average fuel price in fourth quarter 2004, which
is substantially higher than the price increase of $0.69 per gallon in
third quarter 2005 compared to third quarter 2004. Another reason for
the larger estimated negative earnings impact in fourth quarter 2005
compared to fourth quarter 2004 is because of the decline in fuel prices
that occurred in November and December 2004. In October 2004, the
Company estimated the negative impact of fuel on fourth quarter 2004
earnings compared to fourth quarter 2003 earnings would be five to seven
cents per share, assuming fuel prices remained at then current price
levels. The actual negative earnings impact for that period was only
two cents per share due to declining fuel prices in November and
December 2004. It is difficult to estimate the impact of fuel expense
on earnings because of changing fuel pricing trends and other factors.
The actual impact of fuel expense on earnings could be higher or lower
than estimated due to these factors.
The driver market remains very challenging. Improved driver
recruiting continues to offset higher driver turnover. The supply of
qualified truck drivers continues to be constrained due to alternative
jobs to truck driving that are available in today's economy. The
Company continues to focus on driver quality of life issues such as
developing more driving jobs with more frequent home time, providing
drivers with newer trucks, and maximizing mileage productivity within
the federal hours of service (HOS) regulations.
Effective October 1, 2005, all truckload carriers became subject to
revised federal hours of service regulations. The only significant
change from the previous regulations is that drivers using the sleeper
berth provision must take at least eight consecutive hours in the
sleeper berth during their ten hours off-duty. Previously, drivers were
allowed to split their ten hour off-duty time in the sleeper berth into
two periods, provided neither period was less than two hours. This
somewhat more restrictive sleeper berth provision is requiring some
drivers to plan their time better and may have a negative impact on
mileage productivity. It is expected that the greatest impact will be
for multiple-stop shipments or those shipments with pickup or delivery
delays. Werner Enterprises is the only truckload carrier with a Federal
Motor Carrier Safety Administration (FMCSA) approved exemption for an
electronic HOS system (paperless log system). Since the FMCSA did not
announce the rules changes until late August 2005, the Company's MIS
department had a short window of time to program and test changes to the
Company's paperless log system prior to October 1. Thanks to the
efforts of our dedicated team of MIS professionals, the programming and
testing were completed in advance of the October 1 effective date.
The average age of the Company's truck fleet declined to 1.34 years
as of September 30, 2005 compared to 1.65 years as of September 30,
2004. The percentage of the Company's truck fleet with post-October
2002 engines continued to increase as planned and was 76% as of
September 30, 2005 compared to 35% as of September 30, 2004. The
Company continues to experience approximately 5% lower mpg with the
post-October 2002 engines. It is the Company's intention to keep its
truck fleet as new as possible, in advance of the federally mandated
engine emission standards that are expected to increase operating costs
for newly manufactured trucks beginning in January 2007.
When truckload carriers are required to use new ultra-low sulfur
fuel for all of their existing trucks, preliminary estimates are the new
fuel may decrease mpg by approximately 1% to 3%. In October 2005, the
Company began a limited test of two January 2007 compliant test engines
using the new ultra-low sulfur fuel. The Company will continue its
testing in fourth quarter 2005.
The Company's wholly-owned subsidiary, Fleet Truck Sales, is one of
the largest domestic class 8 used truck sales companies and has been in
business since 1992. As a result of increased unit sales and slightly
lower truck pricing trends for our late-model, driver-preferred trucks,
gains on sales of assets, primarily trucks, were $2.5 million in third
quarter 2005 compared to $3.6 million in second quarter 2005 and $1.7
million in third quarter 2004. Gains on sales are reflected as a
reduction of Other Operating Expenses in the Company's income statement.
Beginning in September 2005 after the rapid rise in fuel prices, the
Company experienced a decline in unit sales of trucks due to third-party
finance companies not approving financing for prospective truck buyers
and due to some truck buyers canceling orders. If fuel prices remain
high and this trend continues, this will likely result in lower gains on
sales of equipment beginning in fourth quarter 2005.
To provide customers with additional sources of capacity, the
Company has been rapidly growing its non-asset based Value Added
Services (VAS) division. VAS includes truck brokerage, freight
transportation management, intermodal, and multimodal service offerings.
Value Added Services (amounts in 000'S) 3Q05 3Q04
- --------------------------------------- ---------------- ----------------
Revenues $52,859 100.0% $41,174 100.0%
Gross margin 5,200 9.8% 3,856 9.4%
Operating income 1,859 3.5% 1,310 3.2%
Werner's expansion of its VAS service offerings assists customers
by providing needed capacity while driving cost out of their freight
system. The Company's VAS business operates with a lower operating
income percentage, but is realizing a substantially higher return on
assets than the more capital-intensive truckload business due to the
lower equipment investment. A comparison of the Company's truckload and
VAS operating ratios for third quarter 2005 and 2004 is shown below.
Operating Ratios 3Q05 3Q04 Difference
- ---------------- ---------- ---------- ----------
<c> <c> <c>
Truckload Transportation Services 91.3% 90.0% 1.3%
Value Added Services 96.5 96.8 -0.3
Higher fuel prices and higher fuel surcharge collections have the
effect of increasing the Total Company operating ratio and the Truckload
Transportation Services segment's operating ratio. Eliminating this
sometimes volatile source of revenue provides a more consistent basis
for comparing the results of operations from period to period. The
Truckload Transportation Services segment's operating ratio for third
quarter 2005 and third quarter 2004 would be 89.9% and 89.2%,
respectively, if fuel surcharge revenues are excluded from revenues and
netted against operating expenses.
The Company's financial position remains strong. As of September
30, 2005, Werner Enterprises is debt-free and has no truck or trailer
operating leases and, therefore, has no off-balance sheet debt.
Stockholders' equity has grown to $836.2 million, or $10.53 per share.
The Company's cash position declined to $20.5 million as of September
30, 2005 compared to $51.1 million as of June 30, 2005 due primarily to
higher than normal capital expenditures for new trucks and an increase
in accounts receivable due to higher fuel surcharge billings.
The Company's continuing goal is to improve its annual operating
income as a percentage of revenues 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
9/30/05 Revenues 9/30/04 Revenues
-------- --------- -------- ---------
Operating revenues $504,520 100.0 $425,409 100.0
-------- --------- -------- ---------
Operating expenses:
Salaries, wages and
benefits 147,043 29.1 136,977 32.2
Fuel 92,904 18.4 55,245 13.0
Supplies and maintenance 40,450 8.0 33,564 7.9
Taxes and licenses 29,814 5.9 26,699 6.3
Insurance and claims 19,777 3.9 17,663 4.2
Depreciation 41,204 8.2 36,514 8.6
Rent and purchased
transportation 88,596 17.6 74,617 17.5
Communications and
utilities 5,080 1.0 4,863 1.1
Other (1,486) (0.3) (243) (0.1)
-------- --------- -------- ---------
Total operating
expenses 463,382 91.8 385,899 90.7
-------- --------- -------- ---------
Operating income 41,138 8.2 39,510 9.3
-------- --------- -------- ---------
Other expense (income):
Interest expense 250 0.0 5 0.0
Interest income (813) (0.1) (710) (0.1)
Other 184 0.0 45 0.0
-------- --------- -------- ---------
Total other expense
(income) (379) (0.1) (660) (0.1)
-------- --------- -------- ---------
Income before income taxes 41,517 8.3 40,170 9.4
Income taxes 17,026 3.4 15,871 3.7
-------- --------- -------- ---------
Net income $24,491 4.9 $24,299 5.7
======== ========= ======== =========
Diluted shares outstanding 80,626 80,573
======== ========
Diluted earnings per share $.30 $.30
======== ========
OPERATING STATISTICS
(Quarter Ended September 30)
3Q05 % Change 3Q04
-------- -------- --------
Trucking revenues, net of
fuel surcharge (1) $380,320 9.2% $348,408
Trucking fuel surcharge
revenues (1) 65,490 121.1% 29,625
Non-trucking revenues,
including VAS (1) 55,906 24.1% 45,051
Other operating revenues (1) 2,804 20.6% 2,325
-------- --------
Operating revenues (1) $504,520 18.6% $425,409
======== ========
Average monthly miles per
tractor 10,123 -0.6% 10,186
Average revenues per total
mile (2) $1.423 4.9% $1.357
Average revenues per loaded
mile (2) $1.621 6.1% $1.528
Average percentage of empty
miles 12.21% 9.0% 11.20%
Average trip length in
miles (loaded) 564 -2.8% 580
Total miles (loaded and
empty) (1) 267,305 4.1% 256,726
Average tractors in service 8,802 4.8% 8,401
Average revenues per
tractor per week (2) $3,324 4.2% $3,190
Capital expenditures, net (1) $69,606 $61,170
Cash flow from operations (1) $41,783 $37,161
Return on assets (annualized) 7.6% 8.2%
Total tractors (at quarter
end)
Company 7,960 7,535
Owner-operator 890 940
-------- --------
Total tractors 8,850 8,475
Total trailers (at quarter
end) 24,700 22,950
(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
9/30/05 Revenues 9/30/04 Revenues
----------- --------- ----------- ---------
Operating revenues $1,445,571 100.0 $1,222,804 100.0
----------- --------- ----------- ---------
Operating expenses:
Salaries, wages and
benefits 428,597 29.6 404,585 33.1
Fuel 238,596 16.5 151,102 12.3
Supplies and maintenance 117,125 8.1 101,260 8.3
Taxes and licenses 88,057 6.1 81,639 6.7
Insurance and claims 64,815 4.5 57,192 4.7
Depreciation 121,380 8.4 107,143 8.8
Rent and purchased
transportation 261,505 18.1 208,968 17.1
Communications and
utilities 15,656 1.1 13,861 1.1
Other (6,263) (0.4) (2,306) (0.2)
----------- --------- ----------- ---------
Total operating
expenses 1,329,468 92.0 1,123,444 91.9
----------- --------- ----------- ---------
Operating income 116,103 8.0 99,360 8.1
----------- --------- ----------- ---------
Other expense (income):
Interest expense 256 0.0 11 0.0
Interest income (2,600) (0.2) (1,796) (0.2)
Other 257 0.0 139 0.0
----------- --------- ----------- ---------
Total other expense
(income) (2,087) (0.2) (1,646) (0.2)
----------- --------- ----------- ---------
Income before income taxes 118,190 8.2 101,006 8.3
Income taxes 48,483 3.4 39,519 3.3
----------- --------- ----------- ---------
Net income $69,707 4.8 $61,487 5.0
=========== ========= =========== =========
Diluted shares outstanding 80,713 80,939
=========== ===========
Diluted earnings per share $.86 $.76
=========== ===========
OPERATING STATISTICS
(Nine Months Ended September 30)
YTD05 % Change YTD04
---------- -------- ----------
Trucking revenues, net of
fuel surcharge (1) $1,109,798 8.8% $1,020,107
Trucking fuel surcharge
revenues (1) 158,393 121.2% 71,612
Non-trucking revenues,
including VAS (1) 168,648 36.1% 123,944
Other operating revenues (1) 8,732 22.3% 7,141
---------- ----------
Operating revenues (1) $1,445,571 18.2% $1,222,804
========== ==========
Average monthly miles per
tractor 10,085 -0.7% 10,158
Average revenues per total
mile (2) $1.402 5.8% $1.325
Average revenues per loaded
mile (2) $1.593 6.6% $1.494
Average percentage of empty
miles 11.99% 6.1% 11.30%
Average trip length in
miles (loaded) 567 -2.7% 583
Total miles (loaded and
empty) (1) 791,697 2.8% 770,063
Average tractors in service 8,722 3.5% 8,423
Average revenues per
tractor per week (2) $3,263 5.1% $3,105
Capital expenditures, net (1) $222,267 $134,194
Cash flow from operations (1) $138,054 $161,669
Return on assets (annualized) 7.4% 7.1%
Total tractors (at quarter
end)
Company 7,960 7,535
Owner-operator 890 940
---------- ----------
Total tractors 8,850 8,475
Total trailers (at quarter
end) 24,700 22,950
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
9/30/05 12/31/04
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $20,462 $108,807
Accounts receivable, trade, less
allowance of $8,324 and $8,189,
respectively 222,771 186,771
Other receivables 16,386 11,832
Inventories and supplies 11,027 9,658
Prepaid taxes, licenses and permits 8,044 15,292
Current deferred income taxes 23,718 -
Other current assets 22,062 18,896
----------- -----------
Total current assets 324,470 351,256
----------- -----------
Property and equipment 1,512,601 1,374,649
Less - accumulated depreciation 547,249 511,651
----------- -----------
Property and equipment, net 965,352 862,998
----------- -----------
Other non-current assets 15,325 11,521
----------- -----------
$1,305,147 $1,225,775
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $56,880 $49,618
Insurance and claims accruals 66,090 55,095
Accrued payroll 22,033 19,579
Income taxes payable 3,211 475
Current deferred income taxes - 15,569
Other current liabilities 18,210 17,230
----------- -----------
Total current liabilities 166,424 157,566
----------- -----------
Insurance and claims accruals,
net of current portion 92,301 84,301
Deferred income taxes 210,177 210,739
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
79,382,754 and 79,197,747 shares
outstanding, respectively 805 805
Paid-in capital 105,318 106,695
Retained earnings 751,610 691,035
Accumulated other comprehensive loss (350) (861)
Treasury stock, at cost;
1,150,782 and 1,335,789 shares,
respectively (21,138) (24,505)
----------- -----------
Total stockholders' equity 836,245 773,169
----------- -----------
$1,305,147 $1,225,775
=========== ===========
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 8,850 trucks and 24,700 trailers.
Werner Enterprises' common stock is traded on The Nasdaq Stock
Market under the symbol WERN. The Werner website 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,
2004. 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.