Werner Enterprises Reports First Quarter 2013 Revenues and Earnings Business Wire OMAHA, Neb. -- April 18, 2013 Werner Enterprises, Inc. (NASDAQ: WERN), one of the nation's largest transportation and logistics companies, reported revenues and earnings for the first quarter ended March 31, 2013. Summarized financial results for first quarter 2013 compared to first quarter 2012 are as follows (dollars in thousands, except per share data): Three Months Ended March 31, 2013 2012 % Change Total revenues $ 492,887 $ 498,376 (1 )% Trucking revenues, net of fuel 313,400 321,226 (2 )% surcharge Value Added Services (“VAS”) 82,510 77,517 6 % revenues Operating income 28,693 35,402 (19 )% Net income 17,511 21,245 (18 )% Earnings per diluted share 0.24 0.29 (18 )% Werner Enterprises had an 18% decrease in earnings per diluted share in first quarter 2013 compared to first quarter 2012. Year-over-year earnings improvement in first quarter 2012 compared to first quarter 2011 was 30%, and in first quarter 2011 compared to first quarter 2010 was 49%. First quarter 2013 freight demand (as measured by our daily morning ratio of loads to trucks in our One-Way Truckload network) followed typical seasonal patterns and was similar to first quarter 2012. As we noted a year ago in our first quarter 2012 earnings release, unusually mild winter weather in first quarter 2012 had a modest positive impact on that quarter's operational efficiency and certain operating costs. We experienced more severe winter weather in first quarter 2013, which had a modest negative impact on truck productivity and caused operating expenses in the current quarter to be somewhat higher. We also had startup costs for new business added during first quarter 2013 in our Logistics, Dedicated and One-Way Truckload business units. To date in April 2013, we are experiencing softer freight demand trends compared to the same period in April 2012. Average revenues per total mile, net of fuel surcharge, rose 1.3% in first quarter 2013 compared to first quarter 2012. There was a minimal amount of base freight rate increases in first quarter 2013, as many customer bids were in process during first quarter 2013. We currently expect bid activity to remain high, as it normally does, into second quarter 2013. Spot market rates were lower year-over-year in January and February 2013 and strengthened to slightly positive on a year-over-year basis in March 2013. We believe there are several truckload capacity constraints including 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. Average monthly miles per truck declined by 3.2% in first quarter 2013 compared to first quarter 2012. We attribute this decrease to (i) more severe winter weather in 2013, (ii) one less business day in first quarter 2013 (due to leap year in first quarter 2012) and (iii) the Easter holiday falling on the last day of first quarter 2013 compared to the second week of April in 2012. 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. In first quarter 2013, we averaged 7,157 trucks in service and we ended the quarter with 7,090 trucks (a decrease of 60 from the end of fourth quarter 2012). Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,495 trucks (or 49% of our total fleet). During first quarter 2013, we shifted 200 trucks from One-Way Truckload to Dedicated due to new business awards. Diesel fuel prices were 4 cents per gallon lower in first quarter 2013 than in first quarter 2012 and were 4 cents per gallon lower than in fourth quarter 2012. For the first 18 days of April 2013, the average diesel fuel price per gallon was 24 cents lower than the average diesel fuel price per gallon in the same period of 2012 and 2 cents higher than in second quarter 2012. The components of the Company's total fuel cost consist of and are recorded in our income statement as follows: (i) Fuel (fuel expense for company trucks excluding federal and state fuel taxes); (ii) Taxes and Licenses (federal and state fuel taxes); and (iii) Rent and Purchased Transportation (fuel component of our independent contractor costs, including the base cost of fuel and additional fuel surcharge reimbursement for costs exceeding the fuel base). Capacity in our industry remains constrained by economic and safety regulatory factors. Following the 2008 recession, class 8 truck builds have been low, resulting in an industry average truck age that remains historically high at 6.6 years. It is very difficult for many smaller and medium size private carriers to replace their older, lower-value trucks with much higher cost, EPA-compliant new trucks, which significantly reduces the risk of trucks being added to the market. We reduced the average age of our much younger truck fleet by half a year during 2011 and 2012, with net capital expenditures totaling $457 million during that two-year period. The significantly higher cost of new trucks and resulting higher depreciation expense and related diesel exhaust fluid costs is not being recovered through a single year customer rate review cycle. We continue to invest in equipment solutions such as more aerodynamic truck features, idle reduction systems, tire inflation systems and trailer skirts to improve the mile per gallon efficiency of our fleet. Net capital expenditures of $21.3 million in first quarter 2013 were low as planned, and the majority of our 2013 capital expenditures are expected to occur in the last three calendar quarters of the year. We expect our net capital expenditures for the full year 2013 to be in a range of $100 million to $150 million. The average age our truck fleet as of March 31, 2013 was 2.4 years, and our goal is to maintain our average truck age at approximately this level during 2013. We remain committed to investing in a best in class fleet for the benefit of our customers, our drivers and the Werner brand. The Federal Motor Carrier Safety Administration (“FMCSA”) published final driver hours of service rules in December 2011, to be effective July 1, 2013. Among the changes are more restrictive requirements covering driver use of the 34-hour restart rule and a new mandatory 30-minute rest period after 8 hours on duty. The trucking industry association and consumer advocate groups both appealed these changes before the court in March 2013. The court has not yet issued a ruling. Assuming the rules are adopted without change, we currently believe the new rules will result in a decrease in truck productivity and could tighten up supply relative to demand in the freight market. In July 2012, Congress passed the federal transportation bill which requires the U.S. Department of Transportation to promulgate rules and regulations mandating the use of electronic on-board recorders (“EOBRs”) by September 2013 with full adoption for all trucking companies by no later than September 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 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 during first quarter 2013. Significant factors included a declining number of and increased competition for driver training school graduates, a gradually declining national unemployment rate and a strengthening housing construction market. 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 $3.5 million in first quarter 2013 compared to $4.7 million in first quarter 2012 and $4.7 million in fourth quarter 2012. We sold fewer trucks and trailers in first quarter 2013 and had slightly lower average gains per truck and trailer. We expect to sell fewer trucks and trailers in 2013 compared to 2012. Gains on sales are reflected as a reduction of Other Operating Expenses in our income statement. 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 March 31, 2013 2012 Value Added Services $ % $ % (amounts in thousands) Operating revenues $ 82,510 100.0 $ 77,517 100.0 Rent and purchased 69,197 83.9 66,026 85.2 transportation expense Gross margin 13,313 16.1 11,491 14.8 Other operating expenses 9,700 11.7 7,505 9.7 Operating income $ 3,613 4.4 $ 3,986 5.1 In first quarter 2013, VAS revenues increased $5.0 million or 6%, and operating income dollars decreased $0.4 million or 9%, compared to first quarter 2012. For the same periods, VAS gross margin dollars increased $1.8 million or 16%, and other operating expenses increased $2.2 million or 29%; these changes are partially attributed to Intermodal's development of its own drayage fleet, which had the effect of lowering rent and purchased transportation expense and increasing other operating expenses. During first quarter 2013, VAS implemented a new customer business award involving all four VAS operating units and began managing shipments. We continue to focus on expanding this area of our business. Brokerage revenues in first quarter 2013 increased 3% compared to first quarter 2012 due to an increase in average revenue per shipment, partially offset by a 2% decrease in shipment volume. Brokerage gross margin percentage decreased 64 basis points due to rising capacity costs, and Brokerage operating income in first quarter 2013 was lower than in first quarter 2012. Intermodal revenues increased 8%, and Intermodal operating income was lower comparing first quarter 2013 to first quarter 2012. Werner Global Logistics revenues and operating income increased in first quarter 2013 compared to first quarter 2012. Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $91.6 million in first quarter 2013 and $93.2 million in first quarter 2012) and the VAS segment are shown below. Three Months Ended March 31, Operating Ratios 2013 2012 Difference Truckload Transportation Services 92.6 % 90.3 % 2.3 % Value Added Services 95.6 % 94.9 % 0.7 % 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 first quarter 2013 and first quarter 2012 are 94.2% and 92.5%, respectively, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses. Our financial position remains strong. During first quarter 2013, we repaid $50.0 million of debt, and as of March 31, 2013, we had $40.0 million of debt outstanding and $731.1 million of stockholders' equity. INCOME STATEMENT (Unaudited) (In thousands, except per share amounts) Quarter % of Quarter % of Ended Operating Ended Operating 3/31/2013 Revenues 3/31/2012 Revenues Operating revenues $ 492,887 100.0 $ 498,376 100.0 Operating expenses: Salaries, wages 133,105 27.0 133,848 26.9 and benefits Fuel 96,793 19.6 102,937 20.6 Supplies and 43,128 8.8 41,837 8.4 maintenance Taxes and licenses 21,624 4.4 22,532 4.5 Insurance and 19,801 4.0 19,224 3.9 claims Depreciation 42,331 8.6 40,671 8.1 Rent and purchased 106,318 21.6 100,510 20.2 transportation Communications and 3,142 0.6 3,819 0.8 utilities Other (2,048 ) (0.4 ) (2,404 ) (0.5 ) Total operating 464,194 94.2 462,974 92.9 expenses Operating income 28,693 5.8 35,402 7.1 Other expense (income): Interest expense 144 — 142 — Interest income (505 ) (0.1 ) (422 ) (0.1 ) Other (10 ) — (24 ) — Total other (371 ) (0.1 ) (304 ) (0.1 ) expense (income) Income before 29,064 5.9 35,706 7.2 income taxes Income taxes 11,553 2.3 14,461 2.9 Net income $ 17,511 3.6 $ 21,245 4.3 Diluted shares 73,782 73,390 outstanding Diluted earnings $ 0.24 $ 0.29 per share SEGMENT INFORMATION (Unaudited) (In thousands) Quarter Ended Quarter Ended 3/31/2013 3/31/2012 Revenues Truckload Transportation Services $ 408,900 $ 417,490 Value Added Services 82,510 77,517 Other 2,044 3,057 Corporate 650 1,075 Subtotal 494,104 499,139 Inter-segment eliminations (1) (1,217 ) (763 ) Total $ 492,887 $ 498,376 Operating Income Truckload Transportation Services $ 23,615 $ 31,364 Value Added Services 3,613 3,986 Other 905 504 Corporate 560 (452 ) Total $ 28,693 $ 35,402 (1) Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation. 2012 VAS segment revenues have been revised to conform with the current presentation. OPERATING STATISTICS BY SEGMENT (Unaudited) Quarter Ended Quarter Ended 3/31/2013 3/31/2012 % Change Truckload Transportation Services segment Average percentage of empty 13.03 % 11.88 % 9.7 % miles Average trip length in miles 465 491 (5.3 )% (loaded) (1) Average tractors in service 7,157 7,195 (0.5 )% Average revenues per tractor $ 3,368 $ 3,434 (1.9 )% per week (2) Total tractors (at quarter end) Company 6,425 6,685 Independent contractor 665 615 Total tractors 7,090 7,300 Total trailers (truck and 23,680 23,165 intermodal, quarter end) Value Added Services segment Total VAS shipments 64,366 66,820 (3.7 )% Less: Non-committed shipments 19,946 19,157 4.1 % to truckload segment Net VAS shipments 44,420 47,663 (6.8 )% Average revenue per shipment $ 1,677 $ 1,523 10.1 % (1) Quarter ended 3/31/2012 trip length corrected. See www.werner.com (“Investors tab” under “Featured Documents”) for correction of prior quarterly and annual trip length data. (2) Net of fuel surcharge revenues. SUPPLEMENTAL INFORMATION (Unaudited) (In thousands) Quarter Ended Quarter Ended 3/31/2013 3/31/2012 Capital expenditures, net $ 21,306 $ 82,549 Cash flow from operations 76,606 83,999 Return on assets (annualized) 5.3 % 6.4 % CONDENSED BALANCE SHEET (In thousands, except share amounts) 3/31/2013 12/31/2012 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 19,529 $ 15,428 Accounts receivable, trade, less allowance of $10,592 and $10,528, respectively 219,010 211,133 Other receivables 9,621 8,004 Inventories and supplies 22,528 23,260 Prepaid taxes, licenses and permits 11,088 14,893 Current deferred income taxes 24,869 25,139 Other current assets 21,229 21,330 Total current assets 327,874 319,187 Property and equipment 1,688,715 1,690,490 Less – accumulated depreciation 715,878 696,647 Property and equipment, net 972,837 993,843 Other non-current assets 22,263 21,870 $ 1,322,974 $ 1,334,900 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 62,724 $ 56,397 Current portion of long-term debt — 20,000 Insurance and claims accruals 61,155 57,679 Accrued payroll 23,556 21,134 Income taxes payable 14,491 1,544 Other current liabilities 18,849 19,439 Total current liabilities 180,775 176,193 Long-term debt, net of current 40,000 70,000 portion Other long-term liabilities 16,341 15,779 Insurance and claims accruals, net of 127,950 125,500 current portion Deferred income taxes 226,833 232,531 Stockholders’ equity: Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 shares issued; 73,272,124 and 73,246,598 shares outstanding, 805 805 respectively Paid-in capital 98,403 97,457 Retained earnings 772,464 758,617 Accumulated other comprehensive loss (3,193 ) (4,156 ) Treasury stock, at cost; 7,261,412 and 7,286,938 shares, respectively (137,404 ) (137,826 ) Total stockholders’ equity 731,075 714,897 $ 1,322,974 $ 1,334,900 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, 2012. 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
Werner Enterprises Reports First Quarter 2013 Revenues and Earnings
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