WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145
FOR IMMEDIATE RELEASE Contact: John J. Steele
- --------------------- Executive Vice President and
Chief Financial Officer
(402) 894-3036
Robert E. Synowicki, Jr.
Executive Vice President and
Chief Information Officer
(402) 894-3000
WERNER ENTERPRISES REPORTS FOURTH QUARTER AND ANNUAL 2006 REVENUES AND
EARNINGS
Omaha, Nebraska, January 22, 2007:
- ---------------------------------
Werner Enterprises, Inc. (Nasdaq: WERN), one of the nation's
largest truckload transportation and logistics companies, reported
revenues and earnings for the fourth quarter and year ended December 31,
2006.
Revenues decreased 1% to $518.4 million in fourth quarter 2006
compared to $526.3 million in fourth quarter 2005. Revenues, excluding
fuel surcharges, increased 1% to $453.8 million in fourth quarter 2006
from $449.0 million for the fourth quarter of 2005. Earnings per share
decreased 13% to $.31 per share in fourth quarter 2006 compared to $.36
in fourth quarter 2005.
For the full year, revenues increased 6% to $2.081 billion in 2006
compared to $1.972 billion in 2005. Revenues, excluding fuel
surcharges, increased 3% to $1.794 billion in 2006 from $1.736 billion
for 2005. Earnings per share rose 2% to $1.25 in 2006 compared to $1.22
in 2005.
An increased supply of trucks competing in the Company's primary
market segments was principally caused by a huge, industry-wide
accelerated purchase of new trucks. Approximately 331,000 class 8
trucks were built in 2006, compared to a normalized build level of
approximately 230,000 trucks. Many carriers took delivery of more new
trucks than normal in the second half of 2006 to delay the purchase of
more costly new trucks that are required to meet federally-mandated
engine emission requirements beginning with engines manufactured in
January 2007. The Company and industry analysts expect that industry
purchases of new trucks will decline dramatically beginning in the
latter part of first quarter 2007 and throughout a significant portion
of 2007, which is anticipated to reverse the recent temporary increase
in the supply of trucks.
The accelerated purchase of new trucks disrupted the supply and
demand balance in the second half of 2006, contributing to a more
challenging freight market for truckload carriers. During fourth
quarter 2006 there was a substantial year-over-year change in spot
market truckload freight rates, as the pendulum for spot market pricing
swung from truckload carriers in the fourth quarters of 2004 and 2005 to
shippers in fourth quarter 2006.
In addition, as the quarter progressed, the used truck market
became more challenging due to the temporary increase in the supply of
trucks for sale. The Company plans to sell fewer used trucks in 2007
than 2006.
The Company's gains on sales of assets, primarily trucks and
trailers, held up fairly well at $6.9 million in fourth quarter 2006
compared to lower than normal gains of $2.4 million in fourth quarter
2005. During 2006 the Company began selling its oldest van trailers
that had reached the end of their depreciable life. This contributed to
the increased gains on sales in fourth quarter 2006. A temporarily weak
truck sales market, resulting from the spike in fuel prices following
Hurricanes Katrina and Rita, negatively impacted the trucks sold in
fourth quarter 2005. The market improved following a decline in fuel
prices in the latter part of fourth quarter 2005, and first quarter 2006
gains on sales of assets reached a record high of $8.8 million. Gains on
sales are reflected as a reduction of Other Operating Expenses in the
accompanying income statement data.
The softer freight market and the softer truck sales market are
making it more difficult for marginal carriers to remain in business.
As these marginal carriers are facing significant funding requirements
for truck licensing in first quarter 2007, some trucks may not be
licensed which would tighten capacity.
As a result of the above factors, the Company anticipates that the
recent excess truck capacity in the market will gradually reverse, and
capacity may tighten as we move toward the fall peak season of 2007.
As discussed in the Company's previously issued second quarter 2004
and second quarter 2005 earnings releases, during the strong freight
markets of 2004 and 2005, Werner Enterprises continued to meet its truck
capacity commitments with its partner customers, rather than shifting
truck capacity to other non-partner customers that had freight available
in the spot market at attractive rates. In addition, the Company
previously stated its belief that standing by its truck capacity
commitments with partner customers was in the best long-term interests
of the Company and its partner customers. As the freight market changed
in fourth quarter 2006, we met with our customers to remind them of the
partnership approach taken by Werner Enterprises in 2004 and 2005, and
to request their assistance with respect to shipment volumes provided to
the Company and contractual freight rates. The reaction and response
from our partner customers has been extremely positive.
The truckload freight market in fourth quarter 2006 was softer than
normal, and substantially softer than the strong freight markets of
fourth quarter 2005 and fourth quarter 2004. The normal peak seasonal
increase in freight volume from mid-August through December did not
occur in fourth quarter 2006. This resulted in average miles per truck
declining 5.3% in fourth quarter 2006 compared to fourth quarter 2005.
For the first three weeks of January 2007, daily freight pre-bookings
(freight available to trucks available) continued to trend lower than
the same three weeks in January 2006.
The recent softness in the housing and automotive sectors not
principally served by Werner Enterprises caused carriers that depend on
these freight markets to more aggressively compete in other freight
markets served by the Company. Other demand-related factors that may
have contributed to lower freight demand in fourth quarter 2006 were
inventory tightening by some large retailers, some shippers shifting to
more intermodal intact container shipments for lower value freight, and
moderating economic growth.
The ongoing diversification of our service offerings to dedicated,
regional, expedited, international and logistics (via our Value Added
Services Division) continues to help soften the impact of less favorable
freight markets while providing increased service offerings for our
customers.
During fourth quarter 2006, the driver recruiting and retention
market remained challenging, but was less difficult than the extremely
challenging driver market experienced earlier in the year.
Fuel costs averaged 13 cents a gallon lower in fourth quarter 2006
compared to fourth quarter 2005, principally due to the temporary spike
in fuel prices that occurred in October 2005 after Hurricanes Katrina
and Rita. Fuel prices subsequently declined from these record levels in
November 2005. By month, October 2006 fuel averaged 59 cents a gallon
lower than October 2005, November 2006 averaged 5 cents a gallon higher
than November 2005, and December 2006 averaged 15 cents a gallon higher
than December 2005. For fourth quarter 2006 compared to fourth quarter
2005, net fuel costs had a one-cent negative impact on earnings per
share. The Company includes all of the following items in the
calculation of the impact of fuel on earnings for both periods: (1)
average fuel price per gallon, (2) fuel reimbursements paid to owner-
operator drivers, (3) lower miles per gallon ("mpg") due to the year-
over-year increase in the percentage of the company-owned truck fleet
with post-October 2002 engines and the mpg impact of ultra-low sulfur
diesel fuel, and (4) offsetting fuel surcharge revenues from customers.
As planned, the average age of the Company's truck fleet remained
new relative to historical Company and industry standards at 1.34 years
as of December 31, 2006. The Company brought down the age of its truck
fleet to delay the cost impact of the federally-mandated engine
emission standards. The Company's capital expenditures for new trucks
are expected to be much lower in 2007.
To provide our customers with additional sources of capacity and
expand our portfolio of customer solutions, we are continuing to grow
our non-asset based Value Added Services ("VAS") division. VAS includes
truck brokerage, freight management (single-source logistics),
intermodal, and international freight forwarding. Financial results for
VAS for fourth quarter 2006 and fourth quarter 2005 and for the full
years 2006 and 2005 are as follows:
Value Added Services (amounts in 000's) 4Q06 4Q05
- --------------------------------------- ---------------- ----------------
Revenues $69,585 100.0% $60,046 100.0%
Gross margin 6,753 9.7 6,304 10.5
Operating income 1,695 2.4 2,677 4.5
2006 2005
---------------- ----------------
Revenues $265,968 100.0% $218,620 100.0%
Gross margin 25,168 9.5 21,648 9.9
Operating income 7,421 2.8 8,445 3.9
Brokerage continued its strong performance by providing customers
with viable capacity solutions using a carrier base that has grown to
4,600 qualified carriers. Brokerage continued to grow rapidly,
achieving nearly $100 million of revenues in 2006 with an attractive
operating margin. Freight Management continued to grow its revenue base
and recently attracted several new single-source customers that are
being added during first quarter 2007. Intermodal's results were lower
due to a softer freight market and the impact of higher fixed costs and
repositioning costs. Several significant changes to our intermodal
operating strategy have been implemented and are expected to help
Intermodal achieve improved results in 2007 compared to 2006.
In July 2006, the Company formed Werner Global Logistics U.S., LLC
("WGL"), a separate company that operates within the VAS segment. In
October 2006, the Company established its Wholly Owned Foreign Entity
(WOFE) headquartered in Shanghai, China. Werner is one of the first U.S.
companies to receive a combined approval to conduct comprehensive
forwarding and logistics business, nationwide import/export, and
wholesale and commission agency business. Over the course of 2006, WGL
and its subsidiaries were able to obtain business licenses to operate as
an Ocean Transport Intermediary (NVOCC and Ocean Freight Forwarder),
U.S. Customs Broker, and Class A Freight Forwarder in China. In
addition, WGL has recently entered into the air freight forwarding
business. This structure allows the Company to provide sophisticated,
tailor-made supply chain and distribution solutions.
Customer response has been very positive. Analysis and optimization
work prepared for key partner customers has resulted in multiple door-
to-door business awards being managed by the Company, primarily in the
Trans-Pacific trade lanes. Current service offerings within China
include site selection analysis, PO and vendor management, origin
consolidation, warehousing, freight forwarding and customs brokerage. By
combining Werner's 50 years of experience in the transportation
marketplace with its leading-edge technology and logistics know-how, the
Company is providing comprehensive global supply chain solutions to our
customers. These services are being provided through a combination of
strategic alliances with best in class providers and company-owned
assets.
A comparison of the Company's truckload operating ratios, net of
fuel surcharge revenues, and VAS operating ratios for fourth quarters
2006 and 2005 and for the full years 2006 and 2005 is shown below.
Operating Ratios 4Q06 4Q05
- ---------------- -------- --------
Truckload Transportation Services 89.9% 88.0%
Value Added Services 97.6 95.5
2006 2005
-------- --------
Truckload Transportation Services 89.7% 89.6%
Value Added Services 97.2 96.1
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
sometime 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 ratios for fourth
quarter 2006 and fourth quarter 2005 are 91.3% and 90.0%, respectively,
and for 2006 and 2005 are 91.3% and 91.0%, respectively, if fuel
surcharge revenues are included in revenues and not netted against
operating expenses.
The Company's financial position remains strong. Werner
Enterprises had $31.6 million of cash and $100.0 million of debt as of
December 31, 2006. Stockholders' equity grew to $870.4 million, or
$11.55 per share. During fourth quarter 2006, the Company purchased 1.5
million shares of its common stock at an average share price of $18.49.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter Ended % of Operating Quarter Ended % of Operating
12/31/06 Revenues 12/31/05 Revenues
------------- -------------- ------------- --------------
Operating revenues $518,447 100.0 $526,276 100.0
------------- -------------- ------------- --------------
Operating expenses:
Salaries, wages and
benefits 148,961 28.7 146,296 27.8
Fuel 90,306 17.4 102,026 19.4
Supplies and maintenance 37,103 7.2 37,594 7.2
Taxes and licenses 30,127 5.8 30,796 5.9
Insurance and claims 27,693 5.4 23,780 4.5
Depreciation 42,720 8.3 41,082 7.8
Rent and purchased
transportation 101,156 19.5 92,830 17.6
Communications and
utilities 4,812 0.9 4,812 0.9
Other (5,073) (1.0) (1,448) (0.3)
------------- -------------- ------------- --------------
Total operating
expenses 477,805 92.2 477,768 90.8
------------- -------------- ------------- --------------
Operating income 40,642 7.8 48,508 9.2
------------- -------------- ------------- --------------
Other expense (income):
Interest expense 854 0.2 416 0.1
Interest income (1,112) (0.2) (781) (0.2)
Other 134 0.0 4 0.0
------------- -------------- ------------- --------------
Total other expense
(income) (124) (0.0) (361) (0.1)
------------- -------------- ------------- --------------
Income before income taxes 40,766 7.8 48,869 9.3
Income taxes 16,724 3.2 20,042 3.8
------------- -------------- ------------- --------------
Net income $24,042 4.6 $28,827 5.5
============= ============== ============= ==============
Diluted shares outstanding 77,253 80,661
============= =============
Diluted earnings per share $.31 $.36
============= =============
OPERATING STATISTICS
Quarter Ended Quarter Ended
12/31/06 % Change 12/31/05
------------- -------------- -------------
Trucking revenues, net of
fuel surcharge (1) $377,566 -1.7% $384,028
Trucking fuel surcharge
revenues (1) 64,654 -16.4% 77,297
Non-trucking revenues,
including VAS (1) 72,113 15.9% 62,215
Other operating revenues (1) 4,114 50.4% 2,736
------------- -------------
Operating revenues (1) $518,447 -1.5% $526,276
============= =============
Average monthly miles per
tractor 9,519 -5.3% 10,049
Average revenues per total
mile (2) $1.477 2.1% $1.447
Average revenues per loaded
mile (2) $1.708 3.0% $1.658
Average percentage of empty
miles (3) 13.50% 6.2% 12.71%
Average trip length in miles
(loaded) 574 0.7% 570
Total miles (loaded and
empty) (1) 255,631 -3.7% 265,365
Average tractors in service 8,951 1.7% 8,802
Average revenues per tractor
per week (2) $3,245 -3.3% $3,356
Capital expenditures, net (1) $113,522 $76,942
Cash flow from operations (1) $57,276 $34,438
Return on assets (annualized) 6.7% 8.5%
Total tractors (at quarter
end)
Company 8,180 7,920
Owner-operator 820 830
------------- -------------
Total tractors 9,000 8,750
Total trailers (truck and
intermodal, quarter end) 25,200 25,210
Managed containers (quarter
end) 400 400
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) Miles without trailer cargo. Dedicated fleets have a higher empty
mile percentage, which is priced in the dedicated business.
INCOME STATEMENT DATA
(In thousands, except per share amounts)
Year % of Year % of
Ended Operating Ended Operating
12/31/06 Revenues 12/31/05 Revenues
------------- -------------- ------------- --------------
Operating revenues $2,080,555 100.0 $1,971,847 100.0
------------- -------------- ------------- --------------
Operating expenses:
Salaries, wages and
benefits 594,783 28.6 574,893 29.2
Fuel 388,710 18.7 340,622 17.3
Supplies and maintenance 155,304 7.5 154,719 7.9
Taxes and licenses 117,570 5.7 118,853 6.0
Insurance and claims 92,580 4.4 88,595 4.5
Depreciation 167,516 8.1 162,462 8.2
Rent and purchased
transportation 395,660 19.0 354,335 18.0
Communications and
utilities 19,651 0.9 20,468 1.0
Other (15,720) (0.8) (7,711) (0.4)
------------- -------------- ------------- --------------
Total operating
expenses 1,916,054 92.1 1,807,236 91.7
------------- -------------- ------------- --------------
Operating income 164,501 7.9 164,611 8.3
------------- -------------- ------------- --------------
Other expense (income):
Interest expense 1,196 0.1 672 0.0
Interest income (4,407) (0.2) (3,381) (0.2)
Other 319 0.0 261 0.0
------------- -------------- ------------- --------------
Total other expense
(income) (2,892) (0.1) (2,448) (0.2)
------------- -------------- ------------- --------------
Income before income taxes 167,393 8.0 167,059 8.5
Income taxes 68,750 3.3 68,525 3.5
------------- -------------- ------------- --------------
Net Income $98,643 4.7 $98,534 5.0
============= ============== ============= ==============
Diluted shares outstanding 79,101 80,701
============= =============
Diluted earnings per share $1.25 $1.22
============= =============
OPERATING STATISTICS
Year Ended Year Ended
12/31/06 % Change 12/31/05
------------- -------------- -------------
Trucking revenues, net of
fuel surcharge (1) $1,502,827 0.6% $1,493,826
Trucking fuel surcharge
revenues (1) 286,843 21.7% 235,690
Non-trucking revenues,
including VAS (1) 277,181 20.1% 230,863
Other operating revenues (1) 13,704 19.5% 11,468
------------- -------------
Operating revenues (1) $2,080,555 5.5% $1,971,847
============= =============
Average monthly miles per
tractor 9,756 -3.2% 10,076
Average revenues per total
mile (2) $1.466 3.8% $1.413
Average revenues per loaded
mile (2) $1.686 4.8% $1.609
Average percentage of empty
miles (3) 13.06% 7.3% 12.17%
Average trip length in miles
(loaded) 581 2.3% 568
Total miles (loaded and
empty) (1) 1,025,129 -3.0% 1,057,062
Average tractors in service 8,757 0.2% 8,742
Average revenues per tractor
per week (2) $3,300 0.4% $3,286
Capital expenditures, net (1) $241,821 $299,209
Cash flow from operations (1) $284,065 $172,492
Return on assets (annualized) 7.1% 7.6%
Total tractors (at quarter
end)
Company 8,180 7,920
Owner-operator 820 830
------------- -------------
Total tractors 9,000 8,750
Total trailers (truck and
intermodal, quarter end) 25,200 25,210
Managed containers (quarter
end) 400 400
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) Miles without trailer cargo. Dedicated fleets have a higher
empty mile percentage, which is priced in the dedicated business.
BALANCE SHEET DATA
(In thousands, except share amounts)
12/31/06 12/31/05
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $31,613 $36,583
Accounts receivable, trade,
less allowance of $9,417 and
$8,357, respectively 232,794 240,224
Other receivables 17,933 19,914
Inventories and supplies 10,850 10,951
Prepaid taxes, licenses and permits 18,457 18,054
Current deferred income taxes 25,251 20,940
Other current assets 24,143 20,966
------------ ------------
Total current assets 361,041 367,632
------------ ------------
Property and equipment 1,687,220 1,555,764
Less - accumulated depreciation 590,880 553,157
------------ ------------
Property and equipment, net 1,096,340 1,002,607
------------ ------------
Other non-current assets 20,792 15,523
------------ ------------
$1,478,173 $1,385,762
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $75,821 $52,387
Current portion of long-term debt - 60,000
Insurance and claims accruals 73,782 62,418
Accrued payroll 21,344 21,274
Other current liabilities 19,963 21,838
------------ ------------
Total current liabilities 190,910 217,917
------------ ------------
Long-term debt, net of current
portion 100,000 -
Other long-term liabilities 999 526
Insurance and claims accruals,
net of current portion 99,500 95,000
Deferred income taxes 216,413 209,868
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
75,339,297 and 79,420,443 shares
outstanding, respectively 805 805
Paid-in capital 105,193 105,074
Retained earnings 862,403 777,260
Accumulated other comprehensive
loss (207) (259)
Treasury stock, at cost;
5,194,239 and 1,113,093
shares, respectively (97,843) (20,429)
------------ ------------
Total stockholders' equity 870,351 862,451
------------ ------------
$1,478,173 $1,385,762
============ ============
Werner Enterprises, Inc. was founded in 1956 and is a premier
transportation and logistics company, with coverage throughout the
United States, Canada, Mexico and China. Werner maintains its global
headquarters in Omaha, Nebraska with offices throughout North America
and China. Werner is among the five largest truckload carriers in the
United States, with a diversified portfolio of transportation services
that includes dedicated, medium-to-long-haul, regional and local van
capacity, expedited, temperature-controlled, and flatbed. Werner's Value
Added Services portfolio includes freight management, truck brokerage,
intermodal, load/mode and network optimization and freight forwarding.
Werner is a licensed NVOCC and U.S. Customs Broker.
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 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.