Werner Enterprises Reports Third Quarter 2012 Revenues and Earnings

  Werner Enterprises Reports Third Quarter 2012 Revenues and Earnings

Business Wire

OMAHA, Neb. -- October 17, 2012

Werner Enterprises, Inc. (NASDAQ: WERN), one of the nation's largest
transportation and logistics companies, reported revenues and earnings for the
third quarter ended September 30, 2012.

Summarized financial results for third quarter and year-to-date 2012 compared
to third quarter and year-to-date 2011 are as follows (dollars in thousands,
except per share data):

                                                                        
              3Q12         3Q11         %         YTD12          YTD11          %
                                        Change                                  Change
Total         $ 506,504    $ 509,587    (1  )%    $ 1,526,692    $ 1,494,913    2   %
revenues
Trucking
revenues,
net of
fuel
surcharge     $ 326,222    $ 331,346    (2  )%    $ 979,422      $ 981,502      0   %
Value
Added
Services
(“VAS”)
revenues      $ 82,490     $ 76,635     8   %     $ 243,268      $ 211,435      15  %
Operating     $ 41,805     $ 50,066     (17 )%    $ 128,320      $ 124,275      3   %
income
Net           $ 25,128     $ 29,578     (15 )%    $ 77,053       $ 73,389       5   %
income
Earnings
per           $ 0.34       $ 0.40       (15 )%    $ 1.05         $ 1.00         5   %
diluted
share
                                                                                    

Werner Enterprises had a 15% decline in earnings per diluted share in third
quarter 2012 compared to third quarter 2011, resulting from softer freight
demand, rising fuel prices and other cost increases that exceeded rate
increases. Earnings per diluted share for third quarter 2012 were in line with
expectations that the Company announced on September 13, 2012.

Freight demand in third quarter 2012 did not show normal seasonal improvement
from mid-August through September; in contrast, we experienced seasonal
strengthening in demand during the same period in third quarter 2011. In third
quarter 2012, our customers generally chose to keep their inventory levels
leaner in a market with economic and political uncertainty. Freight trends for
October 2012 to date have continued to trend below levels for the same period
in 2011.

Average revenues per total mile, net of fuel surcharge, rose 1.9% in third
quarter 2012 compared to third quarter 2011. Lower than anticipated freight
volumes caused our loads to truck ratio in our truckload segment to be
slightly below equilibrium for much of third quarter 2012. As a result, spot
pricing rates trended lower, and the number of special freight projects with
customers declined for both our truck fleets and VAS Brokerage unit in third
quarter 2012 compared to third quarter 2011. Project freight is generally of a
higher volume and shorter duration and therefore commands a premium price.
While the recent freight trends have been disappointing, we believe truckload
capacity constraints will continue due to an older industry truck fleet, the
higher cost of new trucks and trailers, significant safety regulatory changes
and a challenging driver market. We continue to work jointly with our
customers to secure sustainable transportation solutions across all modes and
to offset increased rates through enhanced optimization and transportation
solutions whenever possible.

In third quarter 2012, we averaged 7,222 trucks in service and we ended the
quarter with 7,110 trucks. This is a 215 truck decline from the end of second
quarter 2012. This truck decline resulted primarily from our decision to exit
certain less profitable customer business during third quarter 2012. Our
primary objectives continue to be improving our operating margin percentage
and our returns on assets, equity and invested capital, while staying true to
our broad transportation services portfolio. Only through enhanced returns can
we continue our commitment to reinvest in our fleet and our expanded portfolio
of services.

We continue to diversify our business model with the goal of achieving a
balanced portfolio of revenues comprised of One-Way Truckload (which includes
the short-haul Regional, medium-to-long-haul Van and Expedited fleets),
Specialized Services and VAS. Our Specialized Services unit, primarily
Dedicated, ended the quarter with 3,285 trucks (or 46% of our total fleet).

Diesel fuel prices were seven cents per gallon higher in third quarter 2012
than in third quarter 2011 and were 11 cents per gallon higher than in second
quarter 2012. In second quarter 2012, the Department of Energy ("DOE")
national average fuel survey price per gallon declined each week for the last
eleven weeks. In a period of steadily declining fuel prices, the Company
experiences a temporary favorable earnings lag effect, since fuel costs
decline at a faster pace than the market indexes used to determine fuel
surcharge collections. This occurred during second quarter 2012, enabling the
Company to temporarily have lower net fuel expense, which helped to offset
uncompensated fuel costs such as truck idling, empty miles, and out-of-route
miles. In third quarter 2012, the DOE national average fuel price increased
each week for eleven consecutive weeks. When fuel prices steadily rise each
week, there is a temporary negative earnings lag effect that occurs because
the cost of fuel rises immediately and the market indexes that are used to
determine fuel surcharges increase at a slower pace. This occurred during
third quarter 2012, causing the Company to have higher net fuel expense. For
the first 17 days of October 2012, the average diesel fuel price per gallon
was 40 cents higher than the average diesel fuel price per gallon in the same
period of 2011 and 30 cents higher than in fourth quarter 2011.

Capacity in our industry remains constrained by economic, safety and
regulatory factors. From 2007 to 2010, the number of new class 8 trucks built
was well below historical replacement levels for our industry. This led to the
oldest average industry truck age in 40 years. Carriers were compelled to
begin upgrading their aging truck fleets, which led to increased replacement
purchases of new and later-model used trucks during 2011. Orders for new class
8 trucks have been slowing during 2012. We believe these orders slowed as
current freight rate relief is not keeping pace with the increased costs and
capital requirements for new and much more expensive EPA-compliant trucks. The
significantly higher costs of new equipment and related diesel exhaust fluid
will not be recovered through a single year rate review cycle; however, we
remain committed to investing in a best in class fleet for the benefit of our
customers, our drivers and the Werner brand.

In July, Congress passed the federal transportation bill which requires the
U.S. Department of Transportation (“DOT”) to promulgate rules and regulations
mandating the use of electronic on-board recorders (“EOBRs”) by July 2013 with
full adoption for all trucking companies by no later than July 2015. We are
the recognized industry leader for electronic logging of driver hours as we
proactively adopted a paperless log system in 1996 that was subsequently
approved for our use by the Federal Motor Carrier Safety Administration
(“FMCSA”) in 1998. We believe that as EOBRs become the industry standard and
industry requirement, EOBR use will help to level the competitive field for
transit times, driver recruiting, driver retention and rates.

The driver recruiting and retention market became more challenging in third
quarter 2012 compared to second quarter 2012. Driver pay increases by our
competitors, a slightly lower number of and increased competition for truck
driving school graduates and an improved housing construction market were all
factors. Driver pay increased 1.4 cents per total mile in third quarter 2012
compared to third quarter 2011 as we made certain pay adjustments over the
last year to attract and retain drivers for specific fleets. While we are not
immune to fluctuations in the driver market, we continue to believe we are in
a better position in the current market than many competitors because
approximately 70% of our driving jobs are in more attractive, shorter-haul
Regional and Dedicated fleet operations that enable us to return these drivers
to their homes on a more frequent and consistent basis.

Gains on sales of assets were $5.4 million in third quarter 2012 compared to
$6.0 million in third quarter 2011 and $5.7 million in second quarter 2012. We
sold fewer trucks and trailers in third quarter 2012 which resulted in
slightly lower gains. We expect to sell fewer trucks and trailers in fourth
quarter 2012 compared to fourth quarter 2011. Gains on sales are reflected as
a reduction of Other Operating Expenses in our income statement.

We continued to buy new trucks and trailers to replace older equipment we sell
or trade. The higher cost of new equipment results in higher depreciation
expense. We continue to invest in environmentally friendly equipment solutions
such as more aerodynamic truck features, idle reduction systems, tire
inflation systems and trailer skirts which improve the mile per gallon
efficiency of our fleet. Our net capital expenditures in third quarter 2012
were $58 million, which puts year-to-date net capital expenditures for 2012 at
$180 million. We expect our net capital expenditures for the full year 2012 to
be in a range of $210 million to $225 million. The average age of our truck
fleet as of September 30, 2012 was 2.3 years, and we expect to further reduce
our average truck age to approximately 2.2 years as of December 31, 2012.

To provide shippers with additional sources of managed capacity and network
analysis, we continue to develop our non-asset-based VAS segment. VAS includes
Brokerage, Freight Management, Intermodal and Werner Global Logistics
(International).

                                                                
                   Three Months Ended                                Nine Months Ended
                   September 30,                                     September 30,
                   2012                   2011                      2012                    2011
Value Added
Services           $             %        $             %          $              %        $              %
(amounts in
thousands)
Operating          $  82,490     100.0    $  76,635     100.0      $  243,268     100.0    $  211,435     100.0
revenues
Rent and
purchased
transportation     69,888        84.7     64,648        84.4       206,305        84.8     178,365        84.4
expense
Gross margin       12,602         15.3     11,987         15.6       36,963          15.2     33,070          15.6
Other
operating          8,823         10.7     7,913         10.3       24,896         10.2     21,867         10.3
expenses
Operating          $  3,779     4.6      $  4,074     5.3        $  12,067     5.0      $  11,203     5.3
income
                                                                                                              

The following table shows the change in shipment volume and average revenue
(excluding logistics fee revenue) per shipment for all VAS shipments.

                                                                                                      
                  Three Months Ended                                  Nine Months Ended
                  September 30,                                       September 30,
                  2012         2011          Difference   %          2012         2011          Difference   %
                                                           Change                                              Change
Total VAS         65,989        65,343        646          1   %      201,185       188,450       12,735       7   %
shipments
Less:
Non-committed
shipments to
Truckload
segment           20,473       19,853       620         3   %      58,438       58,505       (67      )   0   %
Net VAS           45,516       45,490       26          0   %      142,747      129,945      12,802      10  %
shipments
Average                                                                                          
revenue per
shipment          $  1,651    $  1,556    $   95      6   %      $  1,589    $  1,520    $    69    5   %
                                                                                                                   

In third quarter 2012, VAS revenues increased $6 million or 8%, gross margin
dollars increased 5% and operating income dollars decreased 7% compared to
third quarter 2011.

Brokerage revenues in third quarter 2012 increased 7% compared to third
quarter 2011 due to an 8% increase in average revenue per shipment, partially
offset by a 1% decrease in shipment volume. Brokerage gross margin percentage
declined 60 basis points due to lower special project business, and Brokerage
operating income in third quarter 2012 was higher than in third quarter 2011.
Intermodal revenues increased 10%, and Intermodal operating income was higher
comparing third quarter 2012 to third quarter 2011. Werner Global Logistics
revenues increased slightly in third quarter 2012 compared to third quarter
2011 while operating income declined.

Comparisons of the operating ratios (net of fuel surcharge revenues) for the
Truckload segment and VAS segment for third quarters 2012 and 2011 and
year-to-date 2012 and 2011 are shown below.

                                                                   
Operating         3Q12       3Q11      Difference    YTD12      YTD11     Difference
Ratios
Truckload
Transportation     88.9 %       86.3 %     2.6    %       88.6 %       88.4 %     0.2    %
Services
Value Added        95.4 %       94.7 %     0.7    %       95.0 %       94.7 %     0.3    %
Services
                                                                                         

Fluctuating fuel prices and fuel surcharge collections impact the total
company operating ratio and the Truckload segment's operating ratio when fuel
surcharges are reported on a gross basis as revenues versus netting against
fuel expenses. Eliminating fuel surcharge revenues, which are generally a more
volatile source of revenue, provides a more consistent basis for comparing the
results of operations from period to period. The Truckload segment's operating
ratios for third quarter 2012 and third quarter 2011 are 91.3% and 89.3%,
respectively, and for year-to-date 2012 and 2011 are 91.1% and 91.0%,
respectively, when fuel surcharge revenues are reported as revenues instead of
a reduction of operating expenses.

Our financial position remains strong. As of September 30, 2012 we had no debt
and $796.2 million of stockholders' equity.

                  
                                              
                     INCOME STATEMENT DATA
                     (Unaudited)
                     (In thousands, except per share amounts)
                                                                
                     Quarter         % of         Quarter          % of
                     Ended             Operating    Ended            Operating
                     9/30/2012         Revenues     9/30/2011        Revenues
Operating            $  506,504       100.0       $  509,587      100.0  
revenues
Operating
expenses:
Salaries, wages      134,923           26.6            132,128       25.9
and benefits
Fuel                 98,805            19.5            103,777       20.4
Supplies and         44,589            8.8             44,334        8.7
maintenance
Taxes and            22,251            4.4             23,932        4.7
licenses
Insurance and        14,469            2.8             15,603        3.1
claims
Depreciation         41,901            8.3             40,197        7.9
Rent and
purchased            107,495           21.2            100,081       19.6
transportation
Communications       3,382             0.7             3,846         0.8
and utilities
Other                (3,116      )     (0.6   )       (4,377  )     (0.9   )
Total operating      464,699          91.7          459,521      90.2   
expenses
Operating income     41,805           8.3           50,066       9.8    
Other expense
(income):
Interest expense     18                —               5             —
Interest income      (461        )     (0.1   )        (337    )     (0.1   )
Other                16               —             52           —      
Total other          (427        )     (0.1   )       (280    )     (0.1   )
expense (income)
Income before        42,232            8.4             50,346        9.9
income taxes
Income taxes         17,104           3.4           20,768       4.1    
Net income           $  25,128        5.0         $  29,578       5.8    
Diluted shares       73,445                          73,231  
outstanding
Diluted earnings     $  0.34                       $  0.40    
per share
                                                                     
                                                                     
                     OPERATING STATISTICS
                     Quarter Ended                  Quarter
                                                    Ended
                     9/30/12           % Change     9/30/11
Trucking
revenues, net of     $  326,222        (1.5   )%    $  331,346
fuel surcharge
(1)
Trucking fuel
surcharge            90,143            (4.4   )%       94,326
revenues (1)
Non-trucking
revenues,            86,157            8.6    %        79,320
including VAS
(1)
Other operating      3,982            (13.3  )%      4,595   
revenues (1)
Operating            $  506,504       (0.6   )%    $  509,587 
revenues (1)
Average monthly
miles per            9,575             (3.1   )%       9,881
tractor
Average revenues
per total mile       $  1.573          1.9    %     $  1.543
(2)
Average revenues
per loaded mile      $  1.797          2.6    %     $  1.752
(2)
Average
percentage of        12.48       %     4.5    %        11.94   %
empty miles
Average trip
length in miles      477               (2.7   )%       490
(loaded) (3)
Total miles
(loaded and          207,446           (3.4   )%       214,792
empty) (1)
Average tractors     7,222             (0.3   )%       7,246
in service
Average revenues
per tractor per      $  3,475          (1.2   )%    $  3,518
week (2)
Capital
expenditures,        $  58,321                      $  47,660
net (1)
Cash flow from       $  59,917                      $  83,309
operations (1)
Return on assets     7.5         %                     9.5     %
(annualized)
Total tractors
(at quarter end)
Company              6,460                             6,630
Independent          650                             620     
contractor
Total tractors       7,110                             7,250
Total trailers
(truck and           23,600                            22,925
intermodal,
quarter end)
                                                                     

(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) Quarter ended 9/30/11 trip length corrected. See www.werner.com
(“Investors tab” under “Featured Documents”) for correction of prior quarterly
and annual trip length data.

                
                   
                   INCOME STATEMENT DATA
                   (Unaudited)
                   (In thousands, except per share amounts)
                                                              
                   Nine Months       % of          Nine Months       % of
                   Ended             Operating     Ended             Operating
                   9/30/2012         Revenues      9/30/2011         Revenues
Operating          $ 1,526,692      100.0        $ 1,494,913      100.0  
revenues
Operating
expenses:
Salaries,
wages and            407,283         26.7            400,256         26.8
benefits
Fuel                 301,064         19.7            312,210         20.9
Supplies and         131,167         8.6             128,608         8.6
maintenance
Taxes and            67,750          4.4             70,372          4.7
licenses
Insurance and        48,796          3.2             50,194          3.3
claims
Depreciation         124,078         8.1             119,161         8.0
Rent and
purchased            316,501         20.7            287,183         19.2
transportation
Communications       10,545          0.7             11,612          0.8
and utilities
Other               (8,812    )     (0.5   )       (8,958    )     (0.6   )
Total
operating           1,398,372      91.6          1,370,638      91.7   
expenses
Operating           128,320        8.4           124,275        8.3    
income
Other expense
(income):
Interest             225             —               43              —
expense
Interest             (1,316    )     (0.1   )        (1,027    )     (0.1   )
income
Other               (90       )     —             341            —      
Total other
expense             (1,181    )     (0.1   )       (643      )     (0.1   )
(income)
Income before        129,501         8.5             124,918         8.4
income taxes
Income taxes        52,448         3.5           51,529         3.5    
Net income         $ 77,053         5.0          $ 73,389         4.9    
Diluted shares      73,414                        73,203    
outstanding
Diluted
earnings per       $ 1.05                         $ 1.00      
share
                                                                     
                                                                     
                   OPERATING STATISTICS
                   YTD 12            % Change      YTD 11
Trucking
revenues, net      $ 979,422         (0.2   )%     $ 981,502
of fuel
surcharge (1)
Trucking fuel
surcharge            280,739         —      %        280,786
revenues (1)
Non-trucking
revenues,            253,380         15.3   %        219,725
including VAS
(1)
Other
operating           13,151         1.9    %       12,900    
revenues (1)
Operating          $ 1,526,692      2.1    %      $ 1,494,913 
revenues (1)
                                                                     
Average
monthly miles        9,650           (2.3   )%       9,882
per tractor
Average
revenues per       $ 1.556           2.4    %      $ 1.520
total mile (2)
Average
revenues per       $ 1.772           3.0    %      $ 1.721
loaded mile
(2)
Average
percentage of        12.20     %     4.5    %        11.67     %     
empty miles
Average trip
length in            481             (2.8   )%       495
miles (loaded)
(3)
Total miles
(loaded and          629,441         (2.5   )%       645,568
empty) (1)
Average
tractors in          7,248           (0.2   )%       7,259
service
Average
revenues per       $ 3,465           (0.1   )%     $ 3,467
tractor per
week (2)
Capital
expenditures,      $ 180,247                       $ 153,600
net (1)
Cash flow from     $ 198,715                       $ 200,339
operations (1)
Return on
assets               7.7       %                     8.1       %     
(annualized)
Total tractors
(at quarter
end)
Company              6,460                           6,630
Independent         650                           620       
contractor
Total tractors       7,110                           7,250
Total trailers
(truck and           23,600                          22,925
intermodal,
quarter end)
                                                                     

(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) YTD 2011 trip length data corrected. See www.werner.com (“Investors tab”
under “Featured Documents”) for correction of prior quarterly and annual trip
length data.

                                      
                                         BALANCE SHEET DATA
                                         (In thousands, except share amounts)
                                                             
                                          9/30/12                12/31/11
                                          (Unaudited)
ASSETS
                                                                 
Current assets:
Cash and cash equivalents                 $  18,037              $ 12,412
Accounts receivable, trade, less
allowance
of $10,530 and $10,154,                   217,758                218,712
respectively
Other receivables                         9,957                  9,213
Inventories and supplies                  25,172                 30,212
Prepaid taxes, licenses and permits       6,568                  15,094
Current deferred income taxes             27,420                 25,805
Other current assets                      23,768                29,883      
Total current assets                      328,680               341,331     
                                                                 
Property and equipment                    1,689,927              1,625,008
Less – accumulated depreciation           691,418               682,872     
Property and equipment, net               998,509               942,136     
                                                                 
Other non-current assets                  19,143                18,949      
                                          $  1,346,332          $ 1,302,416 
                                                                 
LIABILITIES AND STOCKHOLDERS’
EQUITY
                                                                 
Current liabilities:
Checks issued in excess of cash           $  —                   $ 6,671
balances
Accounts payable                          74,216                 93,486
Insurance and claims accruals             56,798                 62,681
Accrued payroll                           26,512                 19,483
Other current liabilities                 19,902                16,504      
Total current liabilities                 177,428               198,825     
                                                                 
Other long-term liabilities               15,306                 14,194
                                                                 
Insurance and claims accruals, net        121,200                121,250
of current portion
                                                                 
Deferred income taxes                     236,232                243,000
                                                                 
Stockholders’ equity:
Common stock, $.01 par value,
200,000,000 shares
authorized; 80,533,536 shares
issued; 72,883,336
and 72,847,576 shares outstanding,        805                    805
respectively
Paid-in capital                           97,404                 94,396
Retained earnings                         846,116                779,994
Accumulated other comprehensive           (3,902        )        (5,170      )
loss
Treasury stock, at cost; 7,650,200
and 7,685,960
shares, respectively                      (144,257      )        (144,878    )
Total stockholders’ equity                796,166               725,147     
                                          $  1,346,332          $ 1,302,416 
                                                                   

Werner Enterprises, Inc. was founded in 1956 and is a premier transportation
and logistics company, with coverage throughout North America, Asia, Europe,
South America, Africa and Australia. Werner maintains its global headquarters
in Omaha, Nebraska and maintains offices in the United States, Canada, Mexico,
China and Australia. Werner is among the five largest truckload carriers in
the United States, with a diversified portfolio of transportation services
that includes dedicated van, temperature-controlled and flatbed;
medium-to-long-haul, regional and local van; and expedited services. Werner's
Value Added Services portfolio includes freight management, truck brokerage,
intermodal, and international services. International services are provided
through Werner’s domestic and global subsidiary companies and include ocean,
air and ground transportation; freight forwarding; and customs brokerage.

Werner Enterprises, Inc.’s common stock trades on The NASDAQ Global Select
Market^SM under the symbol “WERN”. For further information about Werner, visit
the Company’s website at www.werner.com.

This press release may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, and made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, as
amended. Such forward-looking statements are based on information presently
available to the Company’s management and are current only as of the date
made. Actual results could also differ materially from those anticipated as a
result of a number of factors, including, but not limited to, those discussed
in the Company’s Annual Report on Form 10-K for the year ended December31,
2011. For those reasons, undue reliance should not be placed on any
forward-looking statement. The Company assumes no duty or obligation to update
or revise any forward-looking statement, although it may do so from time to
time as management believes is warranted or as may be required by applicable
securities law. Any such updates or revisions may be made by filing reports
with the U.S. Securities and Exchange Commission, through the issuance of
press releases or by other methods of public disclosure.

Contact:

Werner Enterprises, Inc.
John J. Steele, 402-894-3036
Executive Vice President, Treasurer and
Chief Financial Officer