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
Executive Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
WERNER ENTERPRISES REPORTS FIRST QUARTER 2006 REVENUES AND EARNINGS
Omaha, Nebraska, April 17, 2006:
- -------------------------------
Werner Enterprises, Inc. (Nasdaq:WERN), one of the nation's largest
truckload transportation and logistics companies, reported operating
revenues and earnings for the first quarter ended March 31, 2006.
Operating revenues increased 8% to $491.9 million in first quarter
2006 compared to $455.3 million in first quarter 2005. Net income
increased 11% to $22.0 million in first quarter 2006 compared to $19.9
million in first quarter 2005. Earnings per share increased 11% to $.27
per share in first quarter 2006 compared to $.25 in first quarter 2005.
Freight demand was slightly softer in January and February 2006
compared to a stronger freight market in January and February 2005.
Freight demand continued to show softness in March 2006 but was about
the same as March 2005, due principally to an easier comparison caused
by a decline in seasonally adjusted freight demand from February 2005 to
March 2005. For much of first quarter 2006, freight demand was
geographically weaker in the western United States. As first quarter
2006 progressed, the Company experienced the typical seasonal
improvement in freight demand from January to March.
Werner is benefiting from actions taken by the Company during the
last few years to lessen the impact of freight market fluctuations,
particularly during first quarter that is historically the most
challenging quarter of the year in terms of freight demand. These
actions include managing more freight due to the expansion of the
Company's Value Added Services division, increasing high-service
multimodal freight that gives Werner the flexibility to use either truck
or truck/rail service options, and reducing the percentage of the fleet
that has one-way freight shipments.
In its Form 10-K filing with the Securities and Exchange Commission
(SEC) on February 15, 2006, the Company estimated the negative impact of
higher fuel costs on first quarter 2006 earnings compared to first
quarter 2005 earnings to be three cents to four cents per share,
assuming diesel fuel prices for the last seven weeks of first quarter
2006 remained at the average price for the first six weeks of 2006.
Diesel fuel prices were relatively stable during this seven-week period,
but the Company's average miles per gallon (mpg) was better than
expected, resulting in a two-cent per share negative impact on first
quarter 2006 earnings compared to first quarter 2005 earnings. The
Company includes the following items in the calculation of the estimated
impact of higher fuel costs 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.
Diesel fuel prices for the first 17 days of April 2006 averaged 41
cents per gallon, or 24%, higher than the same period in April 2005. If
diesel fuel prices remain at the average price for the first 17 days of
April 2006 for the remaining eleven weeks of second quarter 2006, the
Company estimates that fuel will have a negative impact on second
quarter 2006 earnings compared to second quarter 2005 earnings of three
cents to five cents per share. It is difficult to estimate the impact of
higher fuel costs on earnings because of changing fuel pricing trends,
the temporary lag effect of rapidly changing fuel prices on fuel
surcharge revenues, and other factors. The actual impact of higher fuel
costs on earnings could be higher or lower than estimated due to these
factors.
The driver recruiting and retention market is extremely
challenging. The supply of qualified truck drivers continues to be
constrained due to alternative jobs to truck driving that are available
in today's economy. Also, the competitive market among truckload
carriers for recruiting experienced drivers, student drivers, and owner-
operator drivers has intensified. 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.
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). The Company was fully
prepared for the HOS changes that occurred beginning October 1, 2005 as
it had made changes to its proprietary software to comply with the new
regulations. For first quarter 2006, the Company's average miles per
truck were only 1% lower than first quarter 2005, as the Company
effectively managed the impact of the new HOS regulations in a softer
freight market.
As planned, the average age of the Company's truck fleet remained
new at 1.25 years as of March 31, 2006. The percentage of the Company's
truck fleet with post-October 2002 engines (EPA phase one) increased to
95% as of March 31, 2006 from 59% as of March 31, 2005. The Company
continues to experience approximately 5% lower mpg with the post-October
2002 engines. It is the Company's intention to keep its fleet as new as
possible during 2006, in advance of the federally mandated engine
emission standards that are expected to increase operating costs for
newly manufactured trucks beginning in January 2007 (EPA phase two).
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. Gains on sales of assets, primarily trucks and
trailers, increased to $8.8 million in first quarter 2006 compared to
$2.5 million in first quarter 2005. In first quarter 2006, the Company
sold more trucks, realized higher gains per truck, and spent less on
repairs per truck sold. In first quarter 2006, the Company began
selling its oldest van trailers that have already reached the end of
their depreciable life, and these trailer sales also resulted in
equipment gains. The Company expects to continue to sell its oldest
trailers during the remainder of 2006 as it replaces them with new
trailers. Fuel prices have begun to rise in recent weeks, and this
could have a negative impact on used truck pricing and unit sales of
trucks. With the rapid rise in fuel prices in September and October
2005, the Company experienced a temporary decline in truck sales and
pricing while fuel remained high. As fuel prices declined, unit sales
and pricing improved. The number of the Company's trucks planned for
sale for each of the remaining three quarters of 2006 should be
approximately the same as the number of trucks sold in first quarter
2006, however the number of trucks planned for sale during each quarter
of 2007 is expected to be significantly lower. Gains on sales are
reflected as a reduction of Other Operating Expenses in the Company's
income statement.
On March 17, 2006, the Company filed a Form 8-K with the SEC
disclosing that a customer, APX Logistics, Inc., declared bankruptcy
owing the Company $7.2 million. Due to the significant uncertainty of
collection of the amount owed by this customer, the Company recorded
additional bad debt expense in the amount of $7.2 million in first
quarter 2006. This is reflected as an expense in Other Operating
Expenses in the Company's income statement.
To provide customers with additional sources of capacity, the
Company has been 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) 1Q06 1Q05
- --------------------------------------- ---------------- ----------------
Revenues $56,171 100.0% $50,160 100.0%
Gross margin 5,280 9.4 4,994 10.0
Operating income 1,511 2.7 1,993 4.0
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 realizes a substantially higher return on assets
than the more capital-intensive truckload business due to the lower
equipment investment. The Company continues to expect a tight truckload
capacity market in 2006 with the extremely challenging driver market and
historically high fuel prices, which could make it difficult to find
qualified truckload capacity to meet VAS customer freight needs.
During fourth quarter 2005, VAS expanded its small, but growing,
intermodal presence by entering into an agreement with Union Pacific
(UP) to lease UP-owned containers for intermodal freight shipments.
During first quarter 2006, VAS Intermodal was leasing 400 containers.
VAS Intermodal incurred start-up costs during first quarter 2006 related
to this container program which negatively impacted the total VAS gross
margin and operating income shown above. VAS Intermodal has the option
to, and expects to, increase the number of leased containers in 2006 as
it further develops its intermodal freight program. Additional start-up
costs will be incurred as this container program continues to expand in
2006.
A comparison of the Company's truckload operating ratio, net of
fuel surcharge revenues, and VAS operating ratio for first quarters 2006
and 2005 is shown below.
Operating Ratios 1Q06 1Q05 Difference
- ---------------- ------ ------ ----------
Truckload Transportation Services 90.5% 91.4% -0.9%
Value Added Services 97.3 96.0 1.3
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 first
quarter 2006 and first quarter 2005 is 91.9% and 92.2%, respectively, if
fuel surcharge revenues are included in revenues and not netted against
operating expenses.
In the first quarter of 2006, Werner adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R) for its share-based compensation
plan on a modified prospective basis. Under SFAS No. 123(R), all share-
based compensation cost is recognized as an expense in the income
statement. In 2005 and prior years, the Company accounted for share-
based compensation using the intrinsic value method prescribed in APB
Opinion No. 25, under which the Company recorded no compensation expense
since the exercise price of the options equaled the fair market value of
the underlying common stock on the date of grant. The Company recorded
expense of $0.7 million in Salaries, Wages and Benefits (or 0.5 cents
per share, net of taxes) in first quarter 2006. The estimated impact of
this new accounting standard for the full year of 2006 is approximately
two cents per share, representing the expense to be recognized for the
unvested portion of awards granted to date. The Company cannot predict
the earnings impact of any awards that may be granted in the future.
The Company's financial position remains strong. The Company repaid
$60 million of debt in first quarter 2006 and ended the quarter debt-
free. Stockholders' equity grew to $866.7 million, or $11.00 per share.
During first quarter 2006, the Company purchased 1 million shares of its
stock at an average share price of $19.82. On April 14, 2006, the
Company's Board of Directors approved a 6 million-share increase in the
number of shares authorized and available for repurchase.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
3/31/06 Revenues 3/31/05 Revenues
-------- --------- -------- ---------
Operating revenues $491,922 100.0 $455,262 100.0
-------- --------- -------- ---------
Operating expenses:
Salaries, wages and
benefits 146,613 29.8 140,222 30.8
Fuel 88,646 18.0 67,628 14.9
Supplies and maintenance 37,792 7.7 36,754 8.1
Taxes and licenses 29,469 6.0 28,778 6.3
Insurance and claims 19,195 3.9 23,200 5.1
Depreciation 41,101 8.3 39,637 8.7
Rent and purchased
transportation 88,019 17.9 82,567 18.1
Communications and
utilities 4,895 1.0 5,442 1.2
Other (630) (0.1) (1,803) (0.4)
-------- --------- -------- ---------
Total operating
expenses 455,100 92.5 422,425 92.8
-------- --------- -------- ---------
Operating income 36,822 7.5 32,837 7.2
-------- --------- -------- ---------
Other expense (income):
Interest expense 273 0.1 4 0.0
Interest income (995) (0.2) (965) (0.2)
Other 41 0.0 27 0.0
-------- --------- -------- ---------
Total other expense
(income) (681) (0.1) (934) (0.2)
-------- --------- -------- ---------
Income before income taxes 37,503 7.6 33,771 7.4
Income taxes 15,474 3.1 13,850 3.0
-------- --------- -------- ---------
Net income $22,029 4.5 $19,921 4.4
======== ========= ======== =========
Diluted shares outstanding 80,963 80,824
======== ========
Diluted earnings per share $.27 $.25
======== ========
OPERATING STATISTICS
Quarter Ended Quarter Ended
3/31/06 % Change 3/31/05
------------- -------- -------------
Trucking revenues, net of
fuel surcharge (1) $368,256 2.9% $357,866
Trucking fuel surcharge
revenues (1) 61,888 51.2% 40,936
Non-trucking revenues,
including VAS (1) 58,980 9.9% 53,677
Other operating revenues (1) 2,798 0.5% 2,783
------------- -------------
Operating revenues (1) $491,922 8.1% $455,262
============= =============
Average monthly miles per
tractor 9,834 -1.0% 9,932
Average revenues per total
mile (2) $1.448 3.9% $1.393
Average revenues per loaded
mile (2) $1.663 5.3% $1.579
Average percentage of empty
miles 12.91% 9.7% 11.77%
Average trip length in
miles (loaded) 585 2.1% 573
Total miles (loaded and
empty) (1) 254,317 -1.0% 256,846
Average tractors in service 8,620 0.0% 8,620
Average revenues per
tractor per week (2) $3,286 2.9% $3,193
Capital expenditures, net (1) $7,870 $79,031
Cash flow from operations (1) $103,520 $67,025
Return on assets (annualized) 6.4% 6.4%
Total tractors (at quarter
end)
Company 7,820 7,720
Owner-operator 830 930
------------- -------------
Total tractors 8,650 8,650
Total trailers (at quarter
end) 25,080 23,710
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
3/31/06 12/31/05
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $55,140 $36,583
Accounts receivable, trade, less
allowance of $15,536 and $8,357,
respectively 215,693 240,224
Other receivables 15,105 19,914
Inventories and supplies 10,936 10,951
Prepaid taxes, licenses and
permits 13,439 18,054
Current deferred income taxes 21,414 20,940
Other current assets 17,421 20,966
----------- -----------
Total current assets 349,148 367,632
----------- -----------
Property and equipment 1,531,811 1,555,764
Less - accumulated depreciation 555,023 553,157
----------- -----------
Property and equipment, net 976,788 1,002,607
----------- -----------
Other non-current assets 16,914 15,523
----------- -----------
$1,342,850 $1,385,762
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $53,346 $52,387
Current portion of long-term debt - 60,000
Insurance and claims accruals 66,442 62,418
Accrued payroll 20,353 21,274
Income taxes payable 8,050 4,443
Other current liabilities 17,772 17,395
----------- -----------
Total current liabilities 165,963 217,917
----------- -----------
Other long-term liabilities 633 526
Insurance and claims accruals,
net of current portion 96,500 95,000
Deferred income taxes 213,073 209,868
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
78,777,924 and 79,420,443 shares
outstanding, respectively 805 805
Paid-in capital 103,951 105,074
Retained earnings 796,138 777,260
Accumulated other comprehensive
loss (557) (259)
Treasury stock, at cost;
1,755,612 and 1,113,093
shares, respectively (33,656) (20,429)
----------- -----------
Total stockholders' equity 866,681 862,451
----------- -----------
$1,342,850 $1,385,762
=========== ===========
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 8,650 trucks and 25,080 trailers.
Werner Enterprises' common stock is traded on The Nasdaq Stock
Market under the symbol WERN.
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 1A of
the Company's Annual Report on Form 10-K for the year ended December 31,
2005. 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.