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Werner Enterprises Reports Second Quarter 2013 Revenues and Earnings

  Werner Enterprises Reports Second Quarter 2013 Revenues and Earnings

Business Wire

OMAHA, Neb. -- July 22, 2013

Werner Enterprises, Inc. (NASDAQ: WERN), one of the nation's largest
transportation and logistics companies, reported revenues and earnings for the
second quarter ended June 30, 2013.

Summarized financial results for second quarter and year-to-date 2013 compared
to second quarter and year-to-date 2012 are as follows (dollars in thousands,
except per share data):

                                                                       
              Three Months Ended                 Six Months Ended
              June 30,                           June 30,
              2013        2012         %        2013        2012           %
                                        Change                               Change
Total         $ 506,648    $ 521,812    (3  )%   $ 999,535    $ 1,020,188    (2  )%
revenues
Trucking
revenues,
net of        320,000      331,974      (4  )%   633,400      653,200        (3  )%
fuel
surcharge
Value
Added
Services      91,185       85,109       7   %    173,695      162,626        7   %
(“VAS”)
revenues
Operating     42,361       51,113       (17 )%   71,054       86,515         (18 )%
income
Net           25,840       30,680       (16 )%   43,351       51,925         (17 )%
income
Earnings
per           0.35         0.42         (16 )%   0.59         0.71           (17 )%
diluted
share
                                                                                 

Second quarter 2013 freight demand (as measured by our daily morning ratio of
loads to trucks in our One-Way Truckload network) was softer in April 2013
than April 2012, due in part to unfavorable temperature and weather
comparisons which negatively affected retail volumes. Freight demand improved
and seasonally strengthened during May and June 2013 and was comparable to May
and June 2012. Freight demand in July 2013 is comparable to the same period in
July 2012, with typical seasonal demand trends in the first three weeks of
July.

Average revenues per total mile, net of fuel surcharge, rose 1.6% in second
quarter 2013 compared to second quarter 2012. Base rate increases showed
modestly positive momentum as second quarter 2013 progressed. Spot market
rates were lower in second quarter 2013 than in second quarter 2012 due to
lower transactional project business, particularly in the Midwest market. 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 2.6% in second quarter 2013
compared to second quarter 2012. The freight softness in April combined with
truck mix changes (more Dedicated, less One-Way Truckload) and a 7% shorter
length of haul were the primary factors.

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 second quarter 2013, we averaged 7,134 trucks
in service in the Truckload segment and 45 intermodal drayage trucks in the
VAS segment. We ended the quarter with 7,150 trucks in the Truckload segment
(an increase of 60 trucks from the end of first quarter 2013) and 43 trucks in
the VAS segment. Our Specialized Services unit, primarily Dedicated, ended the
quarter with 3,620 trucks (or 51% of our total Truckload segment fleet).

Diesel fuel prices were 3 cents per gallon lower in second quarter 2013 than
in second quarter 2012 and were 15 cents per gallon lower than in first
quarter 2013. For the first 22 days of July 2013, the average diesel fuel
price per gallon was 13 cents higher than the average diesel fuel price per
gallon in the same period of 2012 and 13 cents lower than in third 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 $13.2 million in second quarter 2013 were
low as planned, and the majority of our 2013 capital expenditures are expected
to occur in the last half of the year. We expect our net capital expenditures
for the full year 2013 to be in a range of $150 million to $200 million.
Expected capital expenditures have increased by $50 million as the market for
used equipment was better than we anticipated in second quarter 2013. The
average age our truck fleet as of June 30, 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 ("HOS") rules in December 2011, which became 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. The Company modified and tested its
electronic HOS system and began dispatching drivers under the revised HOS
rules effective July 1. It is too early to measure the ongoing impact of the
HOS changes on driver and truck productivity. The Company is taking steps to
attempt to minimize the impact of the HOS changes. However, government
restrictions of available driving hours will negatively impact the
productivity of some drivers and some fleets within our company.

The driver recruiting and retention market remained challenging during second
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. We
were able to hire more drivers during second quarter 2013 compared to second
quarter 2012, but the difficult driver market is making it challenging to
achieve our 7,300 truck goal for the Truckload segment. 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 $6.5 million in second quarter 2013, including a
$1.1 million gain from the sale of real estate. This compares to gains on
sales of assets of $5.7 million in second quarter 2012 and $3.5 million in
first quarter 2013. We sold fewer trucks and trailers in second quarter 2013
and realized higher average gains per truck. We expect to sell approximately
the same number of trucks but fewer trailers in the second half of 2013
compared to the second half of 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                          Six Months Ended
                 June 30,                                    June 30,
                 2013                 2012                  2013                  2012
Value Added
Services         $           %        $           %        $            %        $            %
(amounts in
thousands)
Operating        $ 91,185     100.0    $ 85,109     100.0    $ 173,695     100.0    $ 162,626     100.0
revenues
Rent and
purchased        76,255      83.6     72,239      84.9     145,452      83.7     138,265      85.0
transportation
expense
Gross margin     14,930       16.4     12,870       15.1     28,243        16.3     24,361        15.0
Other
operating        10,441      11.5     8,568       10.0     20,141       11.6     16,073       9.9
expenses
Operating        $ 4,489     4.9      $ 4,302     5.1      $ 8,102      4.7      $ 8,288      5.1
income
                                                                                                        

In second quarter 2013, VAS revenue increased $6.1 million or 7%, and
operating income dollars increased $0.2 million or 4%, compared to second
quarter 2012. For the same periods, VAS gross margin dollars increased $2.1
million or 16%, and other operating expenses increased $1.9 million or 22%;
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. Brokerage
revenues in second quarter 2013 increased 11% compared to second quarter 2012
due to an increase in average revenue per shipment and a 3% increase in
shipment volume. Brokerage gross margin percentage increased 28 basis points,
and Brokerage operating income in second quarter 2013 was higher than in
second quarter 2012. Intermodal revenues increased 11%, and Intermodal
operating income was also higher comparing second quarter 2013 to second
quarter 2012. Werner Global Logistics revenues and operating income decreased
in second quarter 2013 compared to second quarter 2012.

Comparisons of the operating ratios for the Truckload segment (net of fuel
surcharge revenues of $88.6 million and $97.4 million in second quarters 2013
and 2012, respectively, and $180.2 million and $190.6 million in the
year-to-date 2013 and 2012 periods, respectively) and the VAS segment are
shown below.

                                                               
                  Three Months                    Six Months
                  Ended                           Ended
                  June 30,                        June 30,
Operating         2013     2012     Difference   2013    2012     Difference
Ratios
Truckload
Transportation    89.4  %   86.6 %   2.8    %     91.0 %   88.4 %   2.6    %
Services
Value Added       95.1  %   94.9 %   0.2    %     95.3 %   94.9 %   0.4    %
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 second quarter 2013 and second quarter 2012 are 91.7% and 89.6%,
respectively, and for year-to-date 2013 and 2012 are 92.9% 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 June 30, 2013, we had $40.0
million of debt outstanding and $738.9 million of stockholders' equity. During
second quarter 2013, the Company purchased 608,791 shares of its common stock
for a total cost of $15.1 million.

               
                 INCOME STATEMENT
                 (Unaudited)
                 (In thousands, except per share amounts)
                                                                                                               
                 Three Months Ended                             Six Months Ended
                 June 30,                                        June 30,
                 2013                   2012                    2013                   2012
                 $            %         $            %         $            %         $              %
Operating        $ 506,648    100.0    $ 521,812    100.0    $ 999,535    100.0    $ 1,020,188    100.0 
revenues
Operating
expenses:
Salaries,
wages and        135,236       26.7      138,512       26.5      268,341       26.9      272,360         26.7
benefits
Fuel             90,191        17.8      99,322        19.0      186,984       18.7      202,259         19.8
Supplies and     43,934        8.7       44,741        8.6       87,062        8.7       86,578          8.5
maintenance
Taxes and        21,586        4.2       22,967        4.4       43,210        4.3       45,499          4.5
licenses
Insurance and    17,320        3.4       15,103        2.9       37,121        3.7       34,327          3.4
claims
Depreciation     42,367        8.4       41,506        8.0       84,698        8.5       82,177          8.0
Rent and
purchased        115,060       22.7      108,496       20.8      221,378       22.2      209,006         20.5
transportation
Communications   3,187         0.6       3,344         0.6       6,329         0.6       7,163           0.7
and utilities
Other            (4,594    )   (0.9  )   (3,292    )   (0.6  )   (6,642    )   (0.7  )   (5,696      )   (0.6  )
Total
operating        464,287      91.6     470,699      90.2     928,481      92.9     933,673        91.5  
expenses
Operating        42,361       8.4      51,113       9.8      71,054       7.1      86,515         8.5   
income
Other expense
(income):
Interest         91            —         65            —         235           —         207             —
expense
Interest         (535      )   (0.1  )   (433      )   (0.1  )   (1,040    )   (0.1  )   (855        )   (0.1  )
income
Other            (82       )   —        (82       )   —        (92       )   —        (106        )   —     
Total other
expense          (526      )   (0.1  )   (450      )   (0.1  )   (897      )   (0.1  )   (754        )   (0.1  )
(income)
Income before    42,887        8.5       51,563        9.9       71,951        7.2       87,269          8.6
income taxes
Income taxes     17,047       3.4      20,883       4.0      28,600       2.9      35,344         3.5   
Net income       $ 25,840     5.1      $ 30,680     5.9      $ 43,351     4.3      $ 51,925       5.1   
                                                                                                         
Diluted shares   73,598                 73,412                 73,690                 73,401      
outstanding
Diluted
earnings per     $ 0.35                 $ 0.42                 $ 0.59                 $ 0.71      
share
                                                                                                         

                     
                       SEGMENT INFORMATION
                       (Unaudited)
                       (In thousands)
                       
                       Three Months Ended         Six Months Ended
                       June 30,                    June 30,
                       2013         2012          2013         2012
Revenues
Truckload
Transportation         $ 412,869     $ 432,888     $ 821,769     $ 850,378
Services
Value Added Services   91,185        85,109        173,695       162,626
Other                  2,083         3,481         4,127         6,538
Corporate              996          1,419        1,646        2,494       
Subtotal               507,133       522,897       1,001,237     1,022,036
Inter-segment          (485      )   (1,085    )   (1,702    )   (1,848      )
eliminations (1)
Total                  $ 506,648    $ 521,812    $ 999,535    $ 1,020,188 
                                                                 
Operating Income
Truckload
Transportation         $ 34,442      $ 45,074      $ 58,057      $ 76,438
Services
Value Added Services   4,489         4,302         8,102         8,288
Other                  1,623         855           2,528         1,359
Corporate              1,807        882          2,367        430         
Total                  $ 42,361     $ 51,113     $ 71,054     $ 86,515    
                                                                             

(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)
                                                                                
                 Three Months Ended              Six Months Ended      
                 June 30,                          June 30,
                 2013       2012        %         2013       2012        %
                                         Change                            Change
Truckload
Transportation
Services
segment
Average
percentage of    12.93   %   12.23   %   5.7  %    12.98   %   12.06   %   7.6  %
empty miles
Average trip
length in        441         476         (7.4 )%   453         483         (6.2 )%
miles (loaded)
Average
tractors in      7,134       7,327       (2.6 )%   7,146       7,261       (1.6 )%
service
Average
revenues per     $ 3,450     $ 3,485     (1.0 )%   $ 3,409     $ 3,460     (1.5 )%
tractor per
week (1)
Total trailers
(at quarter      22,005      22,355                22,005      22,355
end)
Total tractors
(at quarter
end)
Company          6,480       6,675                 6,480       6,675
Independent      670        650                  670        650     
contractor
Total tractors   7,150       7,325                 7,150       7,325
                                                                           
Value Added
Services
segment
Total VAS        70,383      68,376      2.9  %    134,749     135,196     (0.3 )%
shipments
Less:
Non-committed
shipments to     19,411     18,808     3.2  %    39,357     37,965     3.7  %
truckload
segment
Net VAS          50,972     49,568     2.8  %    95,392     97,231     (1.9 )%
shipments
Average
revenue per      $ 1,632    $ 1,595    2.3  %    $ 1,653    $ 1,559    6.0  %
shipment
                                                                           
Average
tractors in      45          17                    42          14
service
Total trailers
(at quarter      1,755       1,000                 1,755       1,000
end)
Total tractors
(at quarter      43          17                    43          17
end)
                                                                           

(1) Net of fuel surcharge revenues.

                         
                            SUPPLEMENTAL INFORMATION
                            (Unaudited)
                            (In thousands)
                            
                            Three Months Ended       Six Months Ended
                            June 30,                  June 30,
                            2013        2012         2013        2012
Capital expenditures,       $ 13,223     $ 39,377     $ 34,529     $ 121,926
net
Cash flow from              34,302       54,799       110,908      138,798
operations
Return on assets            7.8      %   9.2      %   6.5      %   7.8       %
(annualized)
                                                                             

                                        
                                          CONDENSED BALANCE SHEET
                                          (In thousands, except share amounts)
                                                           
                                          June 30,            December 31,
                                          2013                2012
                                          (Unaudited)
                                                              
ASSETS
Current assets:
Cash and cash equivalents                 $  24,248           $  15,428
Accounts receivable, trade, less
allowance of $10,540 and $10,528,         223,990             211,133
respectively
Other receivables                         10,453              8,004
Inventories and supplies                  20,249              23,260
Prepaid taxes, licenses and permits       7,039               14,893
Current deferred income taxes             25,662              25,139
Other current assets                      36,225             21,330        
Total current assets                      347,866            319,187       
                                                              
Property and equipment                    1,671,280           1,690,490
Less – accumulated depreciation           721,800            696,647       
Property and equipment, net               949,480            993,843       
                                                              
Other non-current assets                  23,102             21,870        
Total assets                              $  1,320,448       $  1,334,900  
                                                              
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                          $  69,339           $  56,397
Current portion of long-term debt         —                   20,000
Insurance and claims accruals             57,543              57,679
Accrued payroll                           24,023              21,134
Other current liabilities                 18,394             20,983        
Total current liabilities                 169,299            176,193       
                                                              
Long-term debt, net of current portion    40,000              70,000
Other long-term liabilities               16,799              15,779
Insurance and claims accruals, net of     127,400             125,500
current portion
Deferred income taxes                     228,069             232,531
                                                              
Stockholders’ equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536
shares issued; 72,692,730 and
73,246,598 shares outstanding,            805                 805
respectively
Paid-in capital                           99,681              97,457
Retained earnings                         794,669             758,617
Accumulated other comprehensive loss      (4,340        )     (4,156        )
Treasury stock, at cost; 7,840,806 and    (151,934      )     (137,826      )
7,286,938 shares, respectively
Total stockholders’ equity                738,881            714,897       
Total liabilities and stockholders'       $  1,320,448       $  1,334,900  
equity
                                                                            

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
 
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