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 THIRD QUARTER 2007 REVENUES AND EARNINGS
Omaha, Nebraska, October 15, 2007:
- ---------------------------------
Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation's largest
truckload transportation and logistics companies, reported revenues and
earnings for the third quarter ended September 30, 2007.
Revenues decreased 6% to $510.3 million in third quarter 2007
compared to $541.3 million in third quarter 2006. Earnings per share
decreased 5% to $.30 per share in third quarter 2007 compared to $.31
per share in third quarter 2006.
Despite a continuing soft freight market and the impact of rising
fuel prices, the Company once again made sequential earnings per share
progress compared to first quarter 2007 (when earnings per share were
36% lower than first quarter 2006, as adjusted for a customer bankruptcy
in first quarter 2006) and from second quarter 2007 (when earnings per
share were 15% lower than second quarter 2006).
Freight demand softness and the temporary increase in the supply of
trucks caused by the industry truck prebuy made for continued
challenging market conditions during third quarter 2007. Load volumes
for our Van Network of non-dedicated fleet trucks were lower in July,
August, and September than in the same months of the previous four
years. However, due to the load count weakness that began in August
2006, load volumes in August and September 2007 were only slightly lower
than load volumes in August and September 2006. Load volumes in third
quarter 2007 improved slightly from July to September, albeit at a
slower rate of improvement than the typical seasonal progression during
these months. Freight volumes picked up modestly due to a typical end
of quarter push at the end of third quarter 2007, but then declined
during the first two weeks of October 2007. We expect to comment on
freight trends for the full month of October 2007 in our third quarter
Form 10-Q, which we plan to file with the Securities and Exchange
Commission in early November 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, but 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. During second
quarter 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. During third quarter 2007,
our truck fleet increased slightly, ending the quarter at 8,430 trucks.
Due primarily to the fleet reduction described above, our daily
prebook percentages of loads to trucks for the Van Network improved and
exceeded 2006 prebook percentage levels for each week of August and
September 2007 compared to each week of August and September 2006. This
contributed to year-over-year miles per truck improvement of 2% during
third quarter 2007 compared to third quarter 2006. We are experiencing
better freight selectivity for the reduced number of Van fleet trucks,
which helped our revenue per loaded mile and our empty mile percentage.
In addition, due to a declining emphasis on longer haul shipments, our
average length of haul declined 5% to 550 miles per trip in third
quarter 2007 compared to 581 miles per trip in third quarter 2006.
While the overall freight rate market conditions have been difficult, we
remained disciplined with our pricing as we responded to significantly
more customer bid packages than normal during 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 a total of
170,000 more trucks in the years 2005 and 2006 than are normally
produced and (2) a softer freight market due to weakness in the housing
and automotive sectors, inventory tightening, and moderate 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 and inventory depletion of 2006
engine trucks on truck dealer lots 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,
particularly highly leveraged private carriers. If this environment
continues, it becomes more likely that trucking company failures will
increase. It also becomes more likely that when the market improves,
industry freight rates will rebound and increase more rapidly than
normal.
The driver market remained challenging, but was not quite as
difficult in third quarter 2007 compared to third quarter 2006. The
weakness in the construction market and the van fleet reduction
contributed favorably to the Company's driver recruiting and retention
efforts in third quarter 2007.
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, decreased slightly to $5.5 million in third quarter 2007
compared to $5.6 million in third quarter 2006. In third 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 third quarter 2007 was 7 cents per
gallon higher than third quarter 2006. The average price per gallon was
5 cents lower in July 2007 than July 2006, was 18 cents lower in August
2007 than August 2006, and 45 cents higher in September 2007 than
September 2006. As of today, diesel fuel prices are 54 cents per gallon
higher than on the same date a year ago. 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 (mpg)
for all trucks, due to the lower energy content (btu) of ULSD. The
Company successfully offset the negative mpg impact of ULSD in third
quarter 2007 compared to third quarter 2006 by increasing the percentage
of aerodynamic trucks in the fleet.
The ongoing diversification of our service offerings to Dedicated
(36% of revenues), Mexico and Canada international truckload revenues
(11% of revenues) and logistics through our Value Added Services
division (11% of revenues) helped soften the impact of a less favorable
freight market in third 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.
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) 3Q07 3Q06
- -------------------------------------- --------------- ---------------
Revenues $54,517 100.0% $71,405 100.0%
Rent and purchased transportation
expense 45,963 84.3 64,873 90.9
-------- --------
Gross margin 8,554 15.7 6,532 9.1
Other operating expenses 5,373 9.9 4,682 6.5
-------- --------
Operating income $3,181 5.8 $1,850 2.6
======== ========
YTD07 YTD06
--------------- ---------------
Revenues $200,243 100.0% $196,383 100.0%
Rent and purchased transportation
expense 175,200 87.5 177,968 90.6
-------- --------
Gross margin 25,043 12.5 18,415 9.4
Other operating expenses 15,465 7.7 12,689 6.5
-------- --------
Operating income $9,578 4.8 $5,726 2.9
======== ========
VAS had a 24% decline in reported revenues (as explained below),
31% gross margin growth, and 72% operating income growth. Beginning in
third quarter 2007, the Company and a large VAS customer negotiated a
structural change to their continuing arrangement that resulted in a
reduction in VAS revenues and VAS rent and purchased transportation
expense of $20.0 million from third quarter 2006 to third quarter 2007.
This change had no impact on the dollar amount of VAS gross margin or
operating income. Excluding the affected freight revenues for this
customer, VAS revenues grew 6% in third quarter 2007 compared to third
quarter 2006 and grew 12% in YTD 2007 compared to YTD 2006.
Brokerage continued to produce strong results with 16% revenue
growth and improved operating income as a percentage of revenues.
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 by design, but
produced significant operating income improvement as the Company
benefited from intermodal strategy changes that we began implementing
during the latter part of 2006.
The Company, through its Werner Global Logistics (WGL) affiliates
and subsidiaries, is actively assisting customers with innovative global
supply chain solutions. Customer development efforts are progressing,
and WGL currently has awarded business with an annualized revenue run
rate of approximately $25 million per year, in line with our business
plan. WGL continues to produce several new and meaningful customer
business awards. Werner, through its subsidiaries and affiliates, is a
licensed U.S. NVOCC, U.S. Customs Broker, licensed Freight Forwarder in
China, licensed China NVOCC, a TSA approved Indirect Air Carrier, and an
IATA Accredited Cargo Agent.
A comparison of the Company's truckload operating ratio, net of
fuel surcharge revenues, and VAS operating ratio for third quarters 2007
and 2006 is shown below.
Operating Ratios 3Q07 3Q06 Difference
- ---------------------- -------- -------- ------------
Truckload Transportation Services 91.2% 89.9% 1.3%
Value Added Services 94.2 97.4 (3.2)
YTD07 YTD06 Difference
-------- -------- ------------
Truckload Transportation Services 91.8% 89.6% 2.2%
Value Added Services 95.2 97.1 (1.9)
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 third
quarter 2007 and third quarter 2006 are 92.7% and 91.7%, 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 $10.0 million of debt after debt repayments of $40.0
million in third quarter 2007. During third quarter 2007, the Company
purchased 1.5 million shares of its stock at an average share price of
$19.29 for a total cost of $28.9 million. After these purchases, the
Company had 0.7 million shares remaining and available for repurchase
under its current authorization from the board of directors. On October
11, 2007, the Company's board of directors approved an 8.0 million share
increase in the shares authorized and available for repurchase by the
Company.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
9/30/07 Revenues 9/30/06 Revenues
---------- ---------- ---------- ----------
Operating revenues $510,260 100.0 $541,297 100.0
---------- ---------- ---------- ----------
Operating expenses:
Salaries, wages and
benefits 150,789 29.5 149,466 27.6
Fuel 101,859 20.0 106,946 19.8
Supplies and maintenance 40,698 8.0 41,427 7.7
Taxes and licenses 28,796 5.6 30,069 5.6
Insurance and claims 22,001 4.3 24,079 4.4
Depreciation 41,087 8.0 42,623 7.9
Rent and purchased
transportation 87,537 17.2 105,150 19.4
Communications and
utilities 4,978 1.0 5,117 0.9
Other (4,549) (0.9) (4,266) (0.8)
---------- ---------- ---------- ----------
Total operating
expenses 473,196 92.7 500,611 92.5
---------- ---------- ---------- ----------
Operating income 37,064 7.3 40,686 7.5
---------- ---------- ---------- ----------
Other expense (income):
Interest expense 527 0.1 65 0.0
Interest income (1,015) (0.2) (1,079) (0.2)
Other 54 0.0 59 0.0
---------- ---------- ---------- ----------
Total other expense
(income) (434) (0.1) (955) (0.2)
---------- ---------- ---------- ----------
Income before income taxes 37,498 7.4 41,641 7.7
Income taxes 15,648 3.1 17,090 3.2
---------- ---------- ---------- ----------
Net income $21,850 4.3 $24,551 4.5
========== ========== ========== ==========
Diluted shares outstanding 73,501 78,564
========== ==========
Diluted earnings per share $.30 $.31
========== ==========
OPERATING STATISTICS
Quarter Ended Quarter Ended
9/30/07 % Change 9/30/06
------------- ---------- -------------
Trucking revenues, net of
fuel surcharge (1) $371,746 -2.5% $381,108
Trucking fuel surcharge
revenues (1) 77,286 -5.8% 82,088
Non-trucking revenues,
including VAS (1) 56,725 -23.9% 74,519
Other operating revenues (1) 4,503 25.7% 3,582
------------- -------------
Operating revenues (1) $510,260 -5.7% $541,297
============= =============
Average monthly miles per tractor 9,956 2.2% 9,742
Average revenues per total mile (2) $1.474 -0.1% $1.475
Average revenues per loaded
mile (2) $1.702 0.4% $1.696
Average percentage of empty miles 13.38% 2.9% 13.00%
Average trip length in miles
(loaded) 550 -5.3% 581
Total miles (loaded and empty) (1) 252,128 -2.4% 258,329
Average tractors in service 8,441 -4.5% 8,839
Average revenues per tractor per
week (2) $3,388 2.1% $3,317
Capital expenditures, net (1) ($2,097) $86,464
Cash flow from operations (1) $52,862 $79,674
Return on assets (annualized) 6.3% 7.2%
Total tractors (at quarter end)
Company 7,620 8,050
Owner-operator 810 810
------------- -------------
Total tractors 8,430 8,860
Total trailers (truck and
intermodal, quarter end) 24,765 25,330
(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
9/30/07 Revenues 9/30/06 Revenues
----------- ----------- ----------- -----------
Operating revenues $1,545,459 100.0 $1,562,108 100.0
----------- ----------- ----------- -----------
Operating expenses:
Salaries, wages and
benefits 451,645 29.2 445,822 28.5
Fuel 290,862 18.8 298,404 19.1
Supplies and maintenance 120,366 7.8 118,201 7.6
Taxes and licenses 88,276 5.7 87,443 5.6
Insurance and claims 70,128 4.6 64,887 4.2
Depreciation 125,273 8.1 124,796 8.0
Rent and purchased
transportation 296,655 19.2 294,504 18.9
Communications and
utilities 15,252 1.0 14,839 0.9
Other (15,714) (1.0) (10,647) (0.7)
----------- ----------- ----------- -----------
Total operating
expenses 1,442,743 93.4 1,438,249 92.1
----------- ----------- ----------- -----------
Operating income 102,716 6.6 123,859 7.9
----------- ----------- ----------- -----------
Other expense (income):
Interest expense 2,920 0.2 342 0.0
Interest income (2,989) (0.2) (3,295) (0.2)
Other 172 0.0 185 0.0
----------- ----------- ----------- -----------
Total other expense
(income) 103 0.0 (2,768) (0.2)
----------- ----------- ----------- -----------
Income before income taxes 102,613 6.6 126,627 8.1
Income taxes 42,841 2.7 52,026 3.3
----------- ----------- ----------- -----------
Net income $59,772 3.9 $74,601 4.8
=========== =========== =========== ===========
Diluted shares outstanding 74,810 79,728
=========== ===========
Diluted earnings per share $.80 $.94
=========== ===========
OPERATING STATISTICS
YTD 07 % Change YTD 06
------------- ---------- -------------
Trucking revenues, net of
fuel surcharge (1) $1,113,221 -1.1% $1,125,261
Trucking fuel surcharge
revenues (1) 211,072 -5.0% 222,189
Non-trucking revenues,
including VAS (1) 207,860 1.4% 205,068
Other operating revenues (1) 13,306 38.7% 9,590
------------- -------------
Operating revenues (1) $1,545,459 -1.1% $1,562,108
============= =============
Average monthly miles per tractor 9,846 0.1% 9,837
Average revenues per total mile (2) $1.460 -0.1% $1.462
Average revenues per loaded
mile (2) $1.688 0.5% $1.679
Average percentage of empty miles 13.47% 4.3% 12.92%
Average trip length in miles
(loaded) 561 -3.8% 583
Total miles (loaded and empty) (1) 762,327 -0.9% 769,498
Average tractors in service 8,603 -1.0% 8,692
Average revenues per tractor per
week (2) $3,318 -0.1% $3,320
Capital expenditures, net (1) $27,278 $128,299
Cash flow from operations (1) $187,186 $226,789
Return on assets (annualized) 5.6% 7.3%
Total tractors (at quarter end)
Company 7,620 8,050
Owner-operator 810 810
------------- -------------
Total tractors 8,430 8,860
Total trailers (truck and
intermodal, quarter end) 24,765 25,330
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
9/30/07 12/31/06
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $20,850 $31,613
Accounts receivable, trade, less
allowance of $9,634 and $9,417,
respectively 218,094 232,794
Other receivables 13,890 17,933
Inventories and supplies 11,002 10,850
Prepaid taxes, licenses and permits 7,551 18,457
Current deferred income taxes 28,477 25,251
Other current assets 26,197 24,143
------------ ------------
Total current assets 326,061 361,041
------------ ------------
Property and equipment 1,634,244 1,687,220
Less - accumulated depreciation 621,445 590,880
------------ ------------
Property and equipment, net 1,012,799 1,096,340
------------ ------------
Other non-current assets 19,640 20,792
------------ ------------
$1,358,500 $1,478,173
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $64,254 $75,821
Insurance and claims accruals 78,365 73,782
Accrued payroll 25,057 21,344
Other current liabilities 17,742 19,963
------------ ------------
Total current liabilities 185,418 190,910
------------ ------------
Long-term debt 10,000 100,000
Other long-term liabilities 7,185 999
Insurance and claims accruals, net of
current portion 104,500 99,500
Deferred income taxes 205,639 216,413
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
71,804,271 and 75,339,297 shares
outstanding, respectively 805 805
Paid-in capital 100,804 105,193
Retained earnings 911,344 862,403
Accumulated other comprehensive loss (339) (207)
Treasury stock, at cost; 8,729,265
and 5,194,239 shares, respectively (166,856) (97,843)
------------ ------------
Total stockholders' equity 845,758 870,351
------------ ------------
$1,358,500 $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, licensed Freight Forwarder in China, licensed China
NVOCC, a TSA approved Indirect Air Carrier, and an IATA Accredited Cargo
Agent.
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.