WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145
FOR IMMEDIATE RELEASE Contacts: John J. Steele
- --------------------- Executive Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
Robert E. Synowicki, Jr.
Executive Vice President and
Chief Information Officer
(402) 894-3000
WERNER ENTERPRISES REPORTS SECOND QUARTER 2007 REVENUES AND EARNINGS
Omaha, Nebraska, July 18, 2007:
- ------------------------------
Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation's largest
truckload transportation and logistics companies, reported revenues and
earnings for the second quarter ended June 30, 2007.
Revenues increased slightly to $531.3 million in second quarter
2007 compared to $528.9 million in second quarter 2006. Earnings per
share decreased 15% to $.30 per share in second quarter 2007 compared to
$.35 per share in second quarter 2006.
Despite a continued soft freight market and the impact of fuel and
higher insurance and claims costs, the Company made sequential progress
from first quarter 2007 when earnings per share were 36% lower than
first quarter 2006, after adjusting for the effect of a previously
disclosed customer bankruptcy charge of $.05 per share in first quarter
2006.
Freight demand softness and the temporary truck supply increase
caused by the trucking industry prebuy made for continued challenging
market conditions during second quarter 2007. Load volumes for our Van
Network of non-dedicated fleet trucks were lower in April and May 2007
than in the same months of the previous four years. Load volumes in the
first half of June 2007 improved meaningfully to levels nearly as high
as those during the first half of June 2006, and then declined in the
second half of June 2007 below levels in the second half of June of the
prior four years. Load volumes in second quarter 2007 progressively
improved from April to May to June, which is a typical seasonal pattern
for second quarter. We will comment on freight trends for July 2007 in
our second quarter Form 10-Q, which we expect to file with the
Securities and Exchange Commission in early August 2007.
In mid-March 2007 we began reducing our Van medium-to-long-haul
fleet by 250 trucks, or about 8% of total Van solo driver trucks, to
better match freight and trucks and to improve profitability. By the
latter part of April 2007, this initial goal was achieved, and we had
not yet achieved the desired balance of trucks and freight. As a
result, we decided to further reduce our Van fleet by an additional 400
trucks, which we completed by the end of June 2007. We were able to
transfer a portion of our Van fleet trucks to other more profitable
fleets. The net impact to our total fleet was an approximate 500-truck
reduction from mid-March 2007 to the end of June 2007. We have been
holding meetings with our partner customers to explain our goal of
committing 100% of our Van truck capacity on a daily basis. We intend
to meet our partner customers' flex and surge shipment needs using the
breadth and depth of the 5,000 qualified carriers managed by our
experienced Brokerage team.
Our daily prebook percentages of loads to trucks for the Van
Network improved and began exceeding 2006 and 2005 percentage levels in
mid-May and throughout most of the remainder of second quarter 2007.
This contributed to sequential miles per truck improvement of 6% from
first quarter 2007 to second quarter 2007 and year-over-year improvement
from a negative 3% in first quarter 2007 compared to first quarter 2006
to a positive 1% in second quarter 2007 compared to second quarter 2006.
We are also beginning to experience better freight selectivity for the
reduced number of Van fleet trucks, which should have a more favorable
effect on rate per mile and empty miles. While the overall freight rate
market conditions are challenging, we remained disciplined with our
pricing as we responded to significantly more customer bid packages than
normal in the first half of 2007.
For the last year, truckload industry freight rates have been flat
to lower due to (1) the immense truck prebuy prompted by the changes to
the engine emission regulations that became effective for newly
manufactured engines beginning January 2007, which added 6% more trucks
than are normally produced in the years 2005 and 2006 (or 170,000 extra
trucks) and (2) a softer freight market due to weakness in the housing
and automotive sectors, inventory tightening, and moderating growth in
the retail sector. Since April 2007, class 8 truck production declined
dramatically, which we expect will continue for several more months.
Over time, lower new truck production should help place the supply of
trucks more in balance with the freight market. Over the same period
that truckload freight rates have been depressed, inflationary and
operational cost pressures have severely challenged truckload carriers.
If this environment continues in the near term, it becomes more likely
that trucking company failures will increase. It also becomes more
likely that when the market turns, industry freight rates will rebound
and increase more rapidly than normal.
The driver market remained challenging in second quarter 2007.
Normally in the spring and summer months, the driver market is
difficult due to outdoor jobs that become available with improving
weather conditions.
The ongoing diversification of our service offerings to Dedicated
(35% of revenues), Mexico and Canada international truckload 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 second quarter 2007, while providing increased service
offerings to our customers. Werner intends to continue to diversify and
grow Dedicated, International truckload and Value Added Services.
The Company's wholly-owned subsidiary, Fleet Truck Sales, is one of
the largest equipment sales remarketing companies in the U.S., and has
been in business since 1992. Gains on sales of assets, primarily trucks
and trailers, increased to $7.6 million in second quarter 2007 compared
to $7.1 million in second quarter 2006. In second quarter 2007, the
Company continued to sell its oldest van trailers that are fully
depreciated, replacing them with new trailers, and expects to continue
doing so throughout the remainder of 2007. Gains on sales are reflected
as a reduction of Other Operating Expenses in the Company's income
statement.
Average fuel cost per gallon in second quarter 2007 was the same as
second quarter 2006. The Department of Energy (DOE) national average
fuel price was three cents per gallon lower in second quarter 2007 than
second quarter 2006. The DOE price, which is reported each Monday,
establishes the fuel surcharge rate per mile billable to the customer
for shipments dispatched the following week. The Company's actual fuel
costs are based on supplier rack fuel prices and can vary significantly
from day-to-day, while the surcharge revenue rate typically changes only
once a week. As a result, there can be significant variations between
fuel costs and fuel surcharge revenues. During second quarter 2007
compared to second quarter 2006, the effect of the lower average DOE
price per gallon compared to the flat fuel price per gallon caused fuel
surcharge revenues to decline more than fuel costs in second quarter
2007 and resulted in a one-cent per share negative impact to earnings
per share. In addition, there was a shifting of revenues from fuel
surcharges to base rates due to (1) increased brokerage freight with
all-in base and surcharge rates during the first five months of 2007 and
(2) a few customers changing their fuel surcharge programs which had the
effect of lowering fuel surcharge revenues and increasing base rate
revenues. The industry-wide adoption of ultra-low sulfur diesel (ULSD)
fuel beginning in fourth quarter 2006 resulted in an approximate 2%
degradation of fuel mile per gallon for all trucks, due to the lower
energy content (btu) of ULSD. The Company successfully offset a portion
of the negative impact of these factors by increasing the percentage of
aerodynamic trucks in the fleet and lowering out-of-route miles.
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.
Value Added Services (amounts in 000's) 2Q07 2Q06
- --------------------------------------- ---------------- ---------------
Revenues $75,849 100.0% $68,807 100.0%
Gross margin 8,541 11.3 6,603 9.6
Operating income 3,457 4.6 2,365 3.4
VAS generated 10% revenue growth, 29% gross margin growth, and
46% operating income growth.
Brokerage continued to produce strong results with 33%
revenue growth and improved operating income as a percentage of
revenues. Brokerage is generating revenue at an annualized rate of $135
million. Freight Management, our single source logistics solution,
successfully distributed freight to other operating divisions and
continues to secure new customer business awards that are generating
growth across all Company business units. Intermodal revenues declined
due to a more difficult intermodal market, but produced significant
operating income improvement as we benefited from intermodal strategy
changes that we began implementing during the latter part of 2006. In
addition, Freight Management and Brokerage provided more freight to
the truckload divisions in second quarter 2007 compared to second
quarter 2006. This freight is included in truckload revenues and not
included in VAS revenues.
Werner Global Logistics (WGL) is actively assisting 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 over 1,000 international container shipments
to date. Customer development efforts are actively in process, and WGL
is expecting to be a positive operating income contributor by the end of
third quarter 2007. WGL continues to produce several new and meaningful
customer business awards. 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 second quarters
2007 and 2006 is shown below.
Operating Ratios 2Q07 2Q06 Difference
- ---------------- ------ ------ ----------
Truckload Transportation Services 90.8% 88.4% 2.4%
Value Added Services 95.4 96.6 (1.2)
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 ratios for second
quarter 2007 and second quarter 2006 are 92.3% and 90.4%, 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 $50.0 million of debt after repayments of $30.0 million
in second quarter 2007. During second quarter 2007, the Company
purchased 1.5 million shares of its stock at an average share price of
$19.06 for a total cost of $28.6 million. The Company has 2.2 million
shares remaining and available for repurchase under its current
authorization from the board of directors. Capital expenditures, net of
sales, were ($2.2) million in second quarter 2007.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
6/30/07 Revenues 6/30/06 Revenues
----------- ---------- --------- ----------
Operating revenues $531,286 100.0 $528,889 100.0
----------- ---------- --------- ----------
Operating expenses:
Salaries, wages and
benefits 150,335 28.3 149,743 28.3
Fuel 99,918 18.8 102,812 19.4
Supplies and maintenance 40,077 7.6 38,982 7.4
Taxes and licenses 29,317 5.5 27,905 5.3
Insurance and claims 23,922 4.5 21,613 4.1
Depreciation 41,629 7.8 41,072 7.8
Rent and purchased
transportation 108,903 20.5 101,335 19.1
Communications and
utilities 5,182 1.0 4,827 0.9
Other (6,383) (1.2) (5,751) (1.1)
----------- ---------- --------- ----------
Total operating
expenses 492,900 92.8 482,538 91.2
----------- ---------- --------- ----------
Operating income 38,386 7.2 46,351 8.8
----------- ---------- --------- ----------
Other expense (income):
Interest expense 1,057 0.2 4 0.0
Interest income (923) (0.2) (1,221) (0.2)
Other 46 0.0 85 0.0
----------- ---------- --------- ----------
Total other expense
(income) 180 0.0 (1,132) (0.2)
----------- ---------- --------- ----------
Income before income taxes 38,206 7.2 47,483 9.0
Income taxes 15,952 3.0 19,462 3.7
----------- ---------- ----------- ----------
Net income $22,254 4.2 $28,021 5.3
=========== ========== =========== ==========
Diluted shares outstanding 74,748 79,689
=========== ===========
Diluted earnings per share $.30 $.35
=========== ===========
OPERATING STATISTICS
Quarter Ended Quarter Ended
6/30/07 % Change 6/30/06
------------- ---------- -------------
Trucking revenues, net of
fuel surcharge (1) $375,169 -0.2% $375,897
Trucking fuel surcharge
revenues (1) 73,403 -6.1% 78,213
Non-trucking revenues,
including VAS (1) 78,184 9.2% 71,569
Other operating revenues (1) 4,530 41.1% 3,210
------------- -------------
Operating revenues (1) $531,286 0.5% $528,889
============= =============
Average monthly miles per
tractor 10,078 1.4% 9,938
Average revenues per total
mile (2) $1.463 0.0% $1.463
Average revenues per loaded
mile (2) $1.685 0.4% $1.679
Average percentage of empty
miles 13.19% 2.7% 12.84%
Average trip length in
miles (loaded) 561 -3.9% 584
Total miles (loaded and
empty) (1) 256,486 -0.1% 256,852
Average tractors in service 8,483 -1.5% 8,615
Average revenues per
tractor per week (2) $3,402 1.4% $3,356
Capital expenditures, net (1) ($2,189) $33,965
Cash flow from operations (1) $66,268 $43,595
Return on assets (annualized) 6.2% 8.3%
Total tractors (at quarter
end)
Company 7,530 7,905
Owner-operator 820 805
------------- -------------
Total tractors 8,350 8,710
Total trailers (truck and
intermodal, quarter end) 24,800 25,180
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Six Months % of Six Months % of
Ended Operating Ended Operating
6/30/07 Revenues 6/30/06 Revenues
------------- ---------- ------------- ----------
Operating revenues $1,035,199 100.0 $1,020,811 100.0
------------- ---------- ------------- ----------
Operating expenses:
Salaries, wages and
benefits 300,856 29.1 296,356 29.0
Fuel 189,003 18.3 191,458 18.8
Supplies and maintenance 79,668 7.7 76,774 7.5
Taxes and licenses 59,480 5.7 57,374 5.6
Insurance and claims 48,127 4.7 40,808 4.0
Depreciation 84,186 8.1 82,173 8.1
Rent and purchased
transportation 209,118 20.2 189,354 18.5
Communications and
utilities 10,274 1.0 9,722 1.0
Other (11,165) (1.1) (6,381) (0.6)
------------- ---------- ------------- ----------
Total operating
expenses 969,547 93.7 937,638 91.9
------------- ---------- ------------- ----------
Operating income 65,652 6.3 83,173 8.1
------------- ---------- ------------- ----------
Other expense (income):
Interest expense 2,393 0.2 277 0.0
Interest income (1,974) (0.2) (2,216) (0.2)
Other 118 0.0 126 0.0
------------- ---------- ------------- ----------
Total other expense
(income) 537 0.0 (1,813) (0.2)
------------- ---------- ------------- ----------
Income before income taxes 65,115 6.3 84,986 8.3
Income taxes 27,193 2.6 34,936 3.4
------------- ---------- ------------- ----------
Net income $37,922 3.7 $50,050 4.9
============= ========== ============= ==========
Diluted shares outstanding 75,477 80,324
============= =============
Diluted earnings per share $.50 $.62
============= =============
OPERATING STATISTICS
YTD 07 % Change YTD 06
----------- ---------- -----------
Trucking revenues, net of
fuel surcharge (1) $741,475 -0.4% $744,153
Trucking fuel surcharge
revenues (1) 133,786 -4.5% 140,101
Non-trucking revenues,
including VAS (1) 151,135 15.8% 130,549
Other operating revenues (1) 8,803 46.5% 6,008
----------- -----------
Operating revenues (1) $1,035,199 1.4% $1,020,811
=========== ===========
Average monthly miles per
tractor 9,792 -1.0% 9,886
Average revenues per total
mile (2) $1.453 -0.2% $1.456
Average revenues per loaded
mile (2) $1.680 0.5% $1.671
Average percentage of empty
miles 13.51% 5.0% 12.87%
Average trip length in
miles (loaded) 567 -3.1% 585
Total miles (loaded and
empty) (1) 510,200 -0.2% 511,169
Average tractors in service 8,684 0.8% 8,618
Average revenues per
tractor per week (2) $3,284 -1.1% $3,321
Capital expenditures, net (1) $29,375 $41,835
Cash flow from operations (1) $134,324 $147,115
Return on assets (annualized) 5.3% 7.4%
Total tractors (at quarter
end)
Company 7,530 7,905
Owner-operator 820 805
------------- -------------
Total tractors 8,350 8,710
Total trailers (truck and
intermodal, quarter end) 24,800 25,180
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
6/30/07 12/31/06
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $32,897 $31,613
Accounts receivable, trade, less
allowance of $9,381 and $9,417,
respectively 223,747 232,794
Other receivables 13,890 17,933
Inventories and supplies 10,862 10,850
Prepaid taxes, licenses and permits 8,217 18,457
Current deferred income taxes 27,440 25,251
Other current assets 19,904 24,143
------------ ------------
Total current assets 336,957 361,041
------------ ------------
Property and equipment 1,662,218 1,687,220
Less - accumulated depreciation 610,540 590,880
------------ ------------
Property and equipment, net 1,051,678 1,096,340
------------ ------------
Other non-current assets 19,488 20,792
------------ ------------
$1,408,123 $1,478,173
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $66,487 $75,821
Current portion of long-term debt 30,000 -
Insurance and claims accruals 82,609 73,782
Accrued payroll 23,786 21,344
Other current liabilities 18,683 19,963
------------ ------------
Total current liabilities 221,565 190,910
------------ ------------
Long-term debt 20,000 100,000
Other long-term liabilities 6,897 999
Insurance and claims accruals,
net of current portion 101,000 99,500
Deferred income taxes 207,030 216,413
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
72,947,352 and 75,339,297 shares
outstanding, respectively 805 805
Paid-in capital 102,429 105,193
Retained earnings 893,084 862,403
Accumulated other comprehensive
loss 106 (207)
Treasury stock, at cost; 7,586,184
and 5,194,239 shares,
respectively (144,793) (97,843)
------------ ------------
Total stockholders' equity 851,631 870,351
------------ ------------
$1,408,123 $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.