WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145
FOR IMMEDIATE RELEASE John J. Steele
- --------------------- Executive Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
Contact: Robert E. Synowicki, Jr.
Executive Vice President and
Chief Information Officer
(402) 894-3000
WERNER ENTERPRISES REPORTS FIRST QUARTER 2007 REVENUES AND EARNINGS
Omaha, Nebraska, April 16, 2007:
- -------------------------------
Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation's largest
truckload transportation and logistics companies, reported revenues and
earnings for the first quarter ended March 31, 2007.
Revenues increased 2% to $503.9 million in first quarter 2007
compared to $491.9 million in first quarter 2006. Earnings per share
decreased 24% to $.21 per share in first quarter 2007 compared to $.27
in first quarter 2006.
An increase in truck capacity and softness in freight demand made
for a continued challenging market in first quarter 2007. In addition,
rising fuel prices and the effects of significant winter storms placed
added pressures on the cost side. January 2007 began with an unusually
low level of freight demand. Freight bookings were lower each week in
first quarter 2007 compared to the same weeks in each of the prior three
years. However, Werner experienced the typical seasonal improvement in
freight demand as first quarter 2007 developed from January to March.
The softness in the housing and automotive sectors that are not
large markets for Werner Enterprises, caused carriers that serve these
markets to compete more aggressively in the consumer non-durable markets
principally served by the Company. In addition, moderating economic
growth and inventory tightening also contributed to lower freight
volumes. These factors and the significant increase in truck supply
caused by the large truck pre-buy led to a competitive environment in
first quarter 2007.
The driver market remains challenging, but is less difficult than a
year ago. Normally going into the spring season, the driver market is
very difficult due to seasonal construction and housing jobs that become
available with improving weather conditions. The current weakness in
these industries and other factors are helping improve the Company's
driver availability.
Werner has historically served its partner customers by making
available a portion of its 3,000-truck Van solo driver fleet to meet
their flex and surge shipment needs, at contractually agreed terms and
rates. This fleet, which has the greatest exposure to the spot freight
market, faced the most operational challenges during the past several
months. To better match freight and trucks and to improve
profitability, in March 2007 we began reducing our Van fleet by 250
trucks over a 60-day period. In addition, we are meeting with our
partner customers to explain our goal of committing 100% of our Van
capacity on a daily basis. In the future, we intend to meet our partner
customers' flex and surge shipment needs using the 5,000 qualified
carriers managed by our experienced Brokerage team.
The ongoing diversification of our service offerings to Dedicated
(34% of revenues), Mexico and Canada international revenues (10% of
revenues) and logistics through our Value Added Services division (14%
of revenues) helped soften the impact of a less favorable freight market
in first quarter 2007, while providing increased service offerings to
our customers. Werner intends to continue to diversify and grow
Dedicated, International and Value Added Services.
As planned, the average age of the Company's fleet remained new at
1.49 years as of March 31, 2007. Werner continued to take delivery of
new trucks with 2006 engines through most of first quarter 2007. In
2005 and 2006, 170,000 more class 8 trucks than normal were built, or
approximately 6% of the class 8 trucks used for business purposes in the
United States. Since all class 8 trucks built beginning in April 2007
are required to have the 2007 engines, Werner expects that truck builds
will be at very low levels for the next several months. Werner
anticipates that the expected significant decline in truck builds in
upcoming months will gradually bring class 8 truck supply more in
balance with freight demand. Our new fleet will allow us to delay
purchases of trucks with the 2007 engines.
The Company's wholly-owned subsidiary, Fleet Truck Sales, is one of
the largest equipment sales remarketing companies, and has been in
business since 1992. Gains on sales of assets, primarily trucks and
trailers, decreased to $6.2 million in first quarter 2007 compared to a
quarterly record high of $8.8 million in first quarter 2006. As
planned, in first quarter 2007 the Company sold fewer trucks but
continued to realize solid gains per truck sold, after considering the
impact of the softer freight market and higher fuel prices. In first
quarter 2007, the Company also continued to sell its oldest van trailers
that are fully depreciated and replace them with new trailers. These
trailer sales also contributed to equipment gains in both first quarter
2007 and first quarter 2006. The Company expects to continue to sell
its oldest van trailers during the remainder of 2007 and continue
replacing them with new trailers. The number of trucks planned for sale
for each of the remaining three quarters of 2007 is expected to be lower
than 2006. Gains on sales are reflected as a reduction of Other
Operating Expenses in the Company's income statement.
Compared to the same month in the prior year, fuel costs were 10
cents per gallon lower in January 2007, 5 cents per gallon higher in
February 2007, and 14 cents per gallon higher in March 2007. Fuel
prices continue to rise and averaged 18 cents per gallon higher in the
first 16 days of April 2007 compared to the same period in April 2006.
In addition, the industry-wide adoption of ultra-low sulfur diesel
beginning in fourth quarter 2006 reduced miles per gallon. For first
quarter 2007 compared to first quarter 2006, net fuel costs had a two-
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) miles per gallon, and
(4) offsetting fuel surcharge revenues from customers.
In March 2006, a long-standing customer, APX Logistics, Inc., filed
bankruptcy and was subsequently being liquidated with no significant
amounts expected to be paid to unsecured creditors. The Company
recorded bad debt expense in first quarter 2006 for the full amount owed
of $7.2 million. This is reflected as an expense in Other Operating
Expenses in the Company's income statement for first quarter 2006.
To provide shippers with additional sources of managed capacity and
network analysis, the Company is growing its non-asset based Value Added
Services (VAS) division. VAS includes brokerage, freight transportation
management, intermodal, and Werner Global Logistics international
business.
Value Added Services (amounts in 000's) 1Q07 1Q06
- --------------------------------------- --------------- ---------------
Revenues $69,877 100.0% $56,171 100.0%
Gross margin 7,948 11.4 5,280 9.4
Operating income 2,940 4.2 1,511 2.7
VAS generated 24% revenue growth, 51% gross margin growth, and 95%
operating income growth.
Brokerage continued to produce strong results with 32% revenue
growth and $0.8 million of operating income improvement. Brokerage is
generating an annualized revenue run rate of $115 million with a carrier
base of approximately 5,000 qualified carriers. Freight Management, our
single source logistics solution and largest VAS service offering,
produced 9% revenue growth and $0.3 million of operating income
improvement. Freight Management continues to secure new VAS business
that is generating growth across all Company business units. Intermodal
produced 46% revenue growth and $0.3 million of operating income
improvement, as we started benefiting from intermodal strategy changes
that we implemented during fourth quarter 2006 and first quarter 2007.
Our newest VAS division, Werner Global Logistics (WGL), is fully
prepared to assist customers with innovative global supply chain
solutions. All necessary business licenses have been obtained; our
experienced management team is fully staffed and trained in Shanghai,
Shenzen and Omaha; and WGL has successfully managed hundreds of
international container shipments to date. Customer development efforts
are actively in process and WGL is expected to be a positive operating
income contributor later this year. WGL is a licensed U.S. NVOCC, U.S.
Customs Broker, Class A Freight Forwarder in China, licensed China NVOCC
and a TSA approved Indirect Air Carrier.
A comparison of the Company's truckload operating ratio, net of
fuel surcharge revenues, and VAS operating ratio for first quarters 2007
and 2006 is shown below.
Operating Ratios 1Q07 1Q06 Difference
- ---------------- ------ ------ ----------
Truckload Transportation Services 93.6% 90.5% 3.1%
Value Added Services 95.8 97.3 -1.5
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 2007 and first quarter 2006 is 94.5% and 91.9%, respectively, if
fuel surcharge revenues are included in revenues and not netted against
operating expenses.
The Company's financial position remains strong. The Company ended
the quarter with $80.0 million of debt after net repayments of $20.0
million in first quarter 2007. Stockholders' equity is $853.6 million,
or $11.55 per share. During first quarter 2007, the Company purchased
1.5 million shares of its stock at an average share price of $19.68.
The Company has 3.7 million shares remaining and available for
repurchase under the current authorization from the board of directors.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
3/31/07 Revenues 3/31/06 Revenues
------------- ---------- ------------- ----------
Operating revenues $503,913 100.0 $491,922 100.0
------------- ---------- ------------- ----------
Operating expenses:
Salaries, wages and
benefits 150,521 29.9 146,613 29.8
Fuel 89,085 17.7 88,646 18.0
Supplies and maintenance 39,591 7.9 37,792 7.7
Taxes and licenses 30,163 6.0 29,469 6.0
Insurance and claims 24,205 4.8 19,195 3.9
Depreciation 42,557 8.4 41,101 8.3
Rent and purchased
transportation 100,215 19.9 88,019 17.9
Communications and
utilities 5,092 1.0 4,895 1.0
Other (4,782) (1.0) (630) (0.1)
------------- ---------- ------------- ----------
Total operating
expenses 476,647 94.6 455,100 92.5
------------- ---------- ------------- ----------
Operating income 27,266 5.4 36,822 7.5
------------- ---------- ------------- ----------
Other expense (income):
Interest expense 1,336 0.3 273 0.1
Interest income (1,051) (0.2) (995) (0.2)
Other 72 0.0 41 0.0
------------- ---------- ------------- ----------
Total other expense
(income) 357 0.1 (681) (0.1)
------------- ---------- ------------- ----------
Income before income taxes 26,909 5.3 37,503 7.6
Income taxes 11,241 2.2 15,474 3.1
------------- ---------- ------------- ----------
Net income $15,668 3.1 $22,029 4.5
============= ========== ============= ==========
Diluted shares outstanding 76,216 80,963
============= =============
Diluted earnings per share $.21 $.27
============= =============
OPERATING STATISTICS
Quarter Ended Quarter Ended
3/31/07 % Change 3/31/06
------------- ---------- -------------
Trucking revenues, net of
fuel surcharge (1) $366,306 -0.5% $368,256
Trucking fuel surcharge
revenues (1) 60,383 -2.4% 61,888
Non-trucking revenues,
including VAS (1) 72,951 23.7% 58,980
Other operating revenues (1) 4,273 52.7% 2,798
------------- -------------
Operating revenues (1) $503,913 2.4% $491,922
============= =============
Average monthly miles per
tractor 9,519 -3.2% 9,834
Average revenues per total
mile (2) $1.444 -0.3% $1.448
Average revenues per loaded
mile (2) $1.676 0.8% $1.663
Average percentage of empty
miles 13.84% 7.2% 12.91%
Average trip length in
miles (loaded) 572 -2.2% 585
Total miles (loaded and
empty) (1) 253,714 -0.2% 254,317
Average tractors in service 8,884 3.1% 8,620
Average revenues per
tractor per week (2) $3,172 -3.5% $3,286
Capital expenditures, net (1) $31,564 $7,870
Cash flow from operations (1) $68,056 $103,520
Return on assets (annualized) 4.3% 6.4%
Total tractors (at quarter
end)
Company 7,976 7,820
Owner-operator 824 830
------------- -------------
Total tractors 8,800 8,650
Total trailers (truck and
intermodal, quarter end) 25,160 25,080
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
3/31/07 12/31/06
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $17,575 $31,613
Accounts receivable, trade, less
allowance of $9,299 and $9,417,
respectively 230,459 232,794
Other receivables 14,294 17,933
Inventories and supplies 10,445 10,850
Prepaid taxes, licenses and permits 13,500 18,457
Current deferred income taxes 26,251 25,251
Other current assets 23,305 24,143
------------ ------------
Total current assets 335,829 361,041
------------ ------------
Property and equipment 1,690,835 1,687,220
Less - accumulated depreciation 602,288 590,880
------------ ------------
Property and equipment, net 1,088,547 1,096,340
------------ ------------
Other non-current assets 20,482 20,792
------------ ------------
$1,444,858 $1,478,173
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $65,224 $75,821
Insurance and claims accruals 80,885 73,782
Accrued payroll 20,887 21,344
Other current liabilities 28,264 19,963
------------ ------------
Total current liabilities 195,260 190,910
------------ ------------
Long-term debt 80,000 100,000
Other long-term liabilities 6,607 999
Insurance and claims accruals, net of
current portion 99,500 99,500
Deferred income taxes 209,908 216,413
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
73,900,461 and 75,339,297 shares
outstanding, respectively 805 805
Paid-in capital 105,342 105,193
Retained earnings 874,478 862,403
Accumulated other comprehensive
loss (786) (207)
Treasury stock, at cost; 6,633,075
and 5,194,239 shares,
respectively (126,256) (97,843)
------------ ------------
Total stockholders' equity 853,583 870,351
------------ ------------
$1,444,858 $1,478,173
============ ============
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, through its subsidiary companies, is a licensed U.S. NVOCC, U.S.
Customs Broker, Class A Freight Forwarder in China, licensed China NVOCC
and a TSA approved Indirect Air Carrier.
Werner Enterprises' common stock trades on The NASDAQ Global Select
MarketSM 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,
2006. 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.