EX-99 3 wern2q03.txt WERNER ENTERPRISES, INC. 8K 7/16/03 WERNER ENTERPRISES, INC. 14507 Frontier Road P. O. Box 45308 Omaha, Nebraska 68145 FOR IMMEDIATE RELEASE Contact: Robert E. Synowicki, Jr. --------------------- Executive Vice President and Chief Information Officer (402) 894-3000 John J. Steele Vice President, Treasurer and Chief Financial Officer (402) 894-3036 WERNER ENTERPRISES REPORTS SEVENTH CONSECUTIVE QUARTER OF HIGHER OPERATING REVENUES AND EARNINGS Omaha, Nebraska, July 16, 2003: ------------------------------ Werner Enterprises, Inc. (Nasdaq: WERN-news), one of the nation's largest truckload transportation companies, reported its seventh consecutive year-over-year quarter of higher operating revenues and earnings for the second quarter ended June 30, 2003. Operating revenues increased 6% to $362.3 million compared to $340.4 million in second quarter 2002. Net income increased 20% to $19.9 million compared to $16.6 million in second quarter 2002. Earnings per share for second quarter 2003 were $.30 per share, or 20% higher than the $.25 per share earned in second quarter 2002. "Our freight demand for second quarter ranged from flat to slightly better compared to the same period a year ago," said Chairman and Chief Executive Officer Clarence (C.L.) Werner. "We increased our revenue per total mile by 3.5% compared to second quarter 2002. We are achieving our goal of improving our operating margin which increased from 8.0% of revenues to 8.7% of revenues." Freight demand in the beginning of April was slightly higher than the same period a year ago but returned to about the same level as a year ago for the latter part of April and the month of May. The Company experienced some modest improvement in June that has continued into July. Werner measures its freight demand by continually comparing the number of available loads to available trucks on a daily basis. Average fuel prices declined from the twenty-year high levels of first quarter 2003 by 19 cents a gallon. However, diesel prices, excluding fuel taxes, remained 14 cents a gallon, or 19%, higher in second quarter 2003 compared to second quarter 2002. To lessen the effect of fluctuating fuel prices on the Company's margins, Werner collects fuel surcharge revenues from its customers. These surcharge programs, which automatically adjust weekly through fuel surcharge price brackets, continued in effect. In this period of declining prices, the Company realized a temporary short-term benefit for the lag effect of collecting surcharge revenues while fuel costs were declining. Fuel surcharge revenues were $14.9 million in second quarter 2003 compared to $6.6 million in second quarter 2002. Earnings per share were positively impacted by two cents per share in second quarter 2003 compared to second quarter 2002 due to the temporary lag benefit of fuel surcharge revenues. As discussed in previous quarterly earnings releases, the Company delayed the business risk of buying new truck engines that are subject to the new emissions standards mandated by the Environmental Protection Agency. Since there was inadequate time to test these new truck engines prior to the October 1, 2002 effective date, the Company significantly increased the purchase of trucks with pre-October engines. During second quarter, the Company continued to bring new trucks with pre- October engines into service to replace trucks that were reaching the Company's normal three-year trade/sale age. The average age of the Company's truck fleet as of June 30, 2003 is 1.4 years. The Company is continuing ongoing testing of the new truck engines, in particular the Caterpillar ACERT engines and the Detroit Diesel EGR engines. Testing is still in the early stages, and the Company has not made any final decisions on its engine purchases for 2004. However, the Company will take delivery of approximately 325 model year 2004 trucks with Caterpillar ACERT engines in third quarter 2003. Werner plans to purchase more Caterpillar ACERT and Detroit Diesel EGR engines during the remainder of 2003. The Company's insurance and claims expense of 4.9% of revenues in second quarter 2003 was lower than first quarter 2003 of 5.5% of revenues, but continued to track significantly higher than the Company's historical insurance trends. The frequency and severity of claims in second quarter 2003 was higher than expected, particularly due to a few large claims that occurred in the last half of June. The Company's insurance policies for claims in excess of $3 million renew on August 1. Management expects it will increase the aggregate amount of losses it retains above $3 million per claim when these insurance policies are finalized in the next two weeks. The Company is continuing to make progress refining its safety program and has instituted several enhancements developed by its Risk Management Loss Prevention team. Werner Enterprises has substantial experience for over 10 years managing a majority of its claims as a self-insured carrier. The Company also has significant experience establishing and analyzing its accrued liabilities for insurance claims and will continue to accrue for losses and anticipated claim development as losses are incurred. Gains on sales of equipment, primarily trucks, are reflected as a reduction of Other Operating Expenses in the Company's income statement and amounted to a gain of $1.3 million in second quarter 2003 compared to a gain of $0.1 million in second quarter 2002. Gains increased due to a higher average sales price, and gain, per truck in second quarter 2003. Tractors in service declined by 40 trucks from first quarter 2003 to second quarter 2003. The market for qualified company drivers tightened during second quarter, and company driver turnover increased. While part of the driver market changes are due to seasonal factors, it appears the driver market is becoming more challenging. Over the last few years, many carriers have held the line or lowered driver pay to control costs. This may have caused some drivers to leave the industry. Effective July 2003, the Company changed its monthly mileage bonus pay program for Van solo drivers. The goal is to increase driver miles per truck by rewarding higher production from Van solo drivers with higher pay. The annual cost of this bonus pay increase, if mile production remains the same as current levels, is approximately $1.5 million per year. In addition, trucking has become very difficult for small fleets and owner-operators due to the significantly increased cost and reduced coverage for truck insurance and other factors. Many of these smaller truckload carriers have decreased their liability insurance coverage to the Department of Transportation required minimum of $750,000 per claim due to the hard insurance market. A large claim or a few large claims exceeding this minimal coverage amount could wipe out owners' equity of these small fleets. This concern may cause these fleet owners to consider leasing trucks and drivers to companies like Werner Enterprises. Werner is poised to assist this area of the truck market and offer more small fleets the benefits enjoyed by Werner's current owner-operators and small fleet owners - strong nationwide freight base, maintenance and parts discounts, one of the best owner-operator packages in the industry, advanced technology, financial stability, and other business management tools and resources. These benefits, coupled with Werner Enterprises' reputation and driver friendly environment, should aid the efforts to grow Small Fleet Development. Non-trucking revenues increased 8% to $25.9 million compared to $24.0 million in second quarter 2002. However, the growth was lower than anticipated in second quarter 2003 as Werner's Value Added Services division contracted with Werner's trucking division to haul more freight in second quarter 2003, thereby causing a shift this quarter from non- trucking revenues to trucking revenues. During second quarter 2003, the Company purchased 93,900 shares of common stock at an average price of $21.34 per share, for a total of $2.0 million. On June 12, the Company announced an increase in the quarterly cash dividend rate from $.02 per share to $.03 per share payable to stockholders of record on July 7, 2003 and paid on July 22, 2003. On an annualized basis, the new dividend rate is $.12 per share. Werner Enterprises believes it is the only truckload carrier that is currently paying a dividend. Werner Enterprises has been paying a dividend for seventeen years. The Company's financial position continues to improve. Cash increased during the quarter by $43.8 million to $101.8 million due to cash flow from operations and reduced capital expenditures. The Company's cash exceeds its only remaining debt of $20.0 million that matures during fourth quarter 2003. Werner has no truck or trailer operating leases and, therefore, has no off balance sheet debt. Stockholder's equity has grown to $676.3 million, or $10.59 per share. The Company's continuing goal is to improve its annual operating margin to 10% or better before increasing the Company's fleet growth rate.
INCOME STATEMENT DATA (Unaudited) (In thousands, except per share amounts) Quarter % of Quarter % of Ended Operating Ended Operating 6/30/03 Revenues 6/30/02 Revenues -------- -------- -------- -------- Operating revenues $362,290 100.0 $340,405 100.0 -------- -------- -------- -------- Operating expenses: Salaries, wages and benefits 127,821 35.3 122,417 36.0 Fuel 37,188 10.3 30,401 8.9 Supplies and maintenance 29,709 8.2 31,112 9.1 Taxes and licenses 25,836 7.1 24,723 7.3 Insurance and claims 17,881 4.9 12,793 3.7 Depreciation 32,981 9.1 29,521 8.7 Rent and purchased transportation 54,961 15.2 57,852 17.0 Communications and utilities 3,980 1.1 3,644 1.1 Other 357 0.1 804 0.2 -------- -------- -------- -------- Total operating expenses 330,714 91.3 313,267 92.0 -------- -------- -------- -------- Operating income 31,576 8.7 27,138 8.0 -------- -------- -------- -------- Other expense (income): Interest expense 283 0.0 801 0.3 Interest income (508) (0.1) (602) (0.2) Other 28 0.0 419 0.1 -------- -------- -------- -------- Total other expense (197) (0.1) 618 0.2 -------- -------- -------- -------- Income before income taxes 31,773 8.8 26,520 7.8 Income taxes 11,914 3.3 9,945 2.9 -------- -------- -------- -------- Net income $19,859 5.5 $16,575 4.9 ======== ======== ======== ======== Diluted shares outstanding 65,344 65,192 ======== ======== Diluted earnings per share $.30 $.25 ======== ======== OPERATING STATISTICS (Quarter Ended June 30) % Change ---------- Average monthly miles per tractor 10,249 (2.9%) 10,550 Average revenues per total mile (1) $1.271 3.5% $1.228 Average revenues per loaded mile (1) $1.420 4.9% $1.354 Average percentage of empty miles 10.52% 13.0% 9.31% Average tractors in service 8,228 3.2% 7,973 Average revenues per truck per week (1) $3,005 0.5% $2,989 Non-trucking revenues (in thousands) $25,938 8.2% $23,973 Capital expenditures, net $14,384 $39,057 Cash flow from operations $58,909 $43,708 Total tractors (at quarter end) Company 7,225 6,800 Owner-operator 925 1,150 -------- -------- Total tractors 8,150 7,950 Total trailers (at quarter end) 21,355 19,855
(1) Net of fuel surcharge revenues.
INCOME STATEMENT DATA (Unaudited) (In thousands, except per share amounts) Six Six Months % of Months % of Ended Operating Ended Operating 6/30/03 Revenues 6/30/02 Revenues -------- -------- -------- -------- Operating revenues $709,498 100.0 $652,980 100.0 -------- -------- -------- -------- Operating expenses: Salaries, wages and benefits 250,948 35.4 237,919 36.4 Fuel 82,133 11.6 55,462 8.5 Supplies and maintenance 58,468 8.2 61,168 9.4 Taxes and licenses 51,556 7.3 48,605 7.4 Insurance and claims 37,022 5.2 24,399 3.7 Depreciation 65,702 9.3 58,723 9.0 Rent and purchased transportation 105,043 14.8 113,267 17.4 Communications and utilities 7,975 1.1 7,361 1.1 Other 92 0.0 1,653 0.3 -------- -------- -------- -------- Total operating expenses 658,939 92.9 608,557 93.2 -------- -------- -------- -------- Operating income 50,559 7.1 44,423 6.8 -------- -------- -------- -------- Other expense (income): Interest expense 588 0.0 1,559 0.2 Interest income (782) (0.1) (1,276) (0.2) Other 37 0.0 631 0.1 -------- -------- -------- -------- Total other expense (157) (0.1) 914 0.1 -------- -------- -------- -------- Income before income taxes 50,716 7.2 43,509 6.7 Income taxes 19,018 2.7 16,316 2.5 -------- -------- -------- -------- Net income $31,698 4.5 $27,193 4.2 ======== ======== ======== ======== Diluted shares outstanding 65,249 65,250 ======== ======== Diluted earnings per share $.49 $.42 ======== ======== OPERATING STATISTICS (Six Months Ended June 30) % Change ---------- Average monthly miles per tractor 10,078 (2.3%) 10,320 Average revenues per total mile (1) $1.259 3.2% $1.220 Average revenues per loaded mile (1) $1.408 4.3% $1.350 Average percentage of empty miles 10.55% 9.4% 9.64% Average tractors in service 8,248 4.0% 7,928 Average revenues per truck per week (1) $2,929 0.8% $2,905 Non-trucking revenues (in thousands) $48,065 5.6% $45,516 Capital expenditures, net $24,440 $84,713 Cash flow from operations $99,171 $100,251 Total tractors (at quarter end) Company 7,225 6,800 Owner-operator 925 1,150 -------- -------- Total tractors 8,150 7,950 Total trailers (at quarter end) 21,355 19,855
(1) Net of fuel surcharge revenues.
BALANCE SHEET DATA (In thousands) 6/30/03 12/31/02 ---------- ---------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $101,814 $29,885 Accounts receivable, trade, less allowance of $5,585 and $4,459, respectively 143,836 131,889 Other receivables 13,858 10,335 Inventories and supplies 9,184 9,777 Prepaid taxes, licenses and permits 7,387 13,535 Income taxes receivable - 9,811 Other current assets 14,641 14,317 ---------- ---------- Total current assets 290,720 219,549 ---------- ---------- Property and equipment 1,208,569 1,212,488 Less - accumulated depreciation 415,416 380,221 ---------- ---------- Property and equipment, net 793,153 832,267 ---------- ---------- Other non-current assets 10,698 11,062 ---------- ---------- $1,094,571 $1,062,878 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $39,265 $50,546 Current portion of long-term debt 20,000 20,000 Insurance and claims accruals 56,987 47,358 Accrued payroll 20,487 18,374 Current deferred income taxes 17,710 17,710 Other current liabilities 13,563 11,885 ---------- ---------- Total current liabilities 168,012 165,873 ---------- ---------- Insurance and claims accruals, net of current portion 56,301 47,801 Deferred income taxes 193,924 201,561 Stockholders' equity: Common stock, $.01 par value, 200,000,000 shares authorized; 64,427,173 shares issued; 63,862,875 and 63,781,288 shares outstanding, respectively 644 644 Paid-in capital 108,892 107,527 Retained earnings 575,973 547,467 Accumulated other comprehensive loss (164) (216) Treasury stock, at cost; 564,298 and 645,885 shares, respectively (9,011) (7,779) ---------- ---------- Total stockholders' equity 676,334 647,643 ---------- ---------- $1,094,571 $1,062,878 ========== ==========
Werner Enterprises is a full-service transportation company providing truckload services throughout the 48 states, portions of Canada and Mexico. C.L. Werner founded the Company in 1956. Werner is one of the nation's largest truckload carriers with a fleet of 8,150 trucks and 21,355 trailers. Werner Enterprises' common stock is traded on The Nasdaq Stock Market under the symbol WERN. The Werner Enterprises web site 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 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2002. 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.