EX-99.1 2 wern2q05.txt WERNER ENTERPRISES, INC. 8K 07/18/05 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 Senior Vice President, Treasurer and Chief Financial Officer (402) 894-3036 WERNER ENTERPRISES REPORTS IMPROVED OPERATING REVENUES AND EARNINGS Omaha, Nebraska, July 18, 2005: ------------------------------ Werner Enterprises, Inc. (Nasdaq: WERN-news), one of the nation's largest truckload transportation companies, reported improved operating revenues and earnings for the second quarter ended June 30, 2005. Operating revenues increased 18% to $485.8 million compared to $411.1 million in second quarter 2004. Net income increased 17% to $25.3 million compared to $21.6 million in second quarter 2004. Earnings per share for second quarter 2005 were $.31 per share, or 17% higher than the $.27 per share earned in second quarter 2004. "Solid freight demand, our continued emphasis on strong partner customer relationships, and effective cost management contributed to our positive financial results," said Chairman and Chief Executive Officer, Clarence (C.L.) Werner. "Thanks to the combined efforts of the outstanding men and women of Werner Enterprises, we achieved our fifteenth consecutive quarter of improved year-over-year earnings." For most of second quarter 2005, our freight demand exceeded our available truck capacity. We experienced the anticipated seasonal improvement in demand from April to June. However, freight demand during second quarter 2005 was not as strong as the abnormally strong freight market of second quarter 2004. In our second quarter earnings release of a year ago, we stated that "Management has continued to keep its truck capacity commitments with its partner customers, rather than shifting truck capacity to other non-partner customers that have freight available at attractive rates in this improving freight market. The Company believes that standing by its truck capacity commitments with partner customers is in the best long-term interests of the Company." During 2004 we made the business decision to designate a portion of our non-committed truck capacity to be available for use by our partner customers. In the short run, this limited the amount of spot-market, premium-rated freight we transported. However, in the long run, our partner customers responded favorably to this decision. Over the past year, our partner customer relationships have grown stronger. A substantial portion of our freight base is under contract with customers and provides for annual pricing increases. Many of our non- dedicated fleet contracts renew in the latter part of third quarter and during fourth quarter. There are several inflationary cost pressures that are impacting truckload carriers, including driver pay, rising fuel costs, new truck engine emission costs, tolls, and other costs. We have taken several actions to limit or delay these cost increases and are keeping our customers informed of our efforts. We are working with our customers to develop solutions that drive cost out of their freight network, such as dedicated fleets, designated lanes, continuous moves, and multi-customer freight optimization. To recoup unavoidable cost increases, management will be seeking freight rate increases during the upcoming contract renewal period. The driver market remains extremely challenging. Steps we took to strengthen driver recruiting are helping to offset higher driver turnover. By placing more emphasis on training student drivers, increasing the frequency of driver home time, providing drivers with a newer truck, and maximizing productivity within the federal hours of service regulations, we are obtaining an adequate number of drivers. However, the supply of qualified truck drivers remains visibly constrained due to alternative jobs that are available with a solid economy and inadequate demographic growth for the industry's targeted driver base over the next several years. Fuel prices (excluding fuel taxes) rose for the eighth consecutive quarter in second quarter 2005. Fuel averaged 51 cents a gallon, or 45%, higher in second quarter 2005 compared to second quarter 2004. Sequentially, average prices rose 19 cents a gallon from first quarter 2005 to second quarter 2005. Fuel expense had a two cent negative impact on earnings per share in second quarter 2005 compared to second quarter 2004, after considering fuel surcharge collections and the cost impact of higher owner-operator fuel reimbursements (which is included in rent and purchased transportation expense) and lower miles per gallon due to truck engine emissions changes. The strength of the Company's fuel surcharge programs and the support of our partner customers helped to lessen the impact of fuel on earnings. Fuel prices recently increased in June and July. Assuming fuel prices remain at today's price levels throughout the remainder of third quarter 2005, the negative impact of fuel expense on earnings for third quarter 2005 compared to third quarter 2004 is estimated to be in the range of approximately two cents to three cents per share. If fuel prices average ten cents per gallon higher than today's price levels throughout the remainder of third quarter 2005, the negative impact of fuel expense on earnings for third quarter 2005 compared to third quarter 2004 is estimated to be in the range of three cents to four cents per share. All truckload carriers will be required to use new ultra-low sulfur fuel for all of their existing trucks beginning in mid-2006. Fuel supply and delivery issues may cause pricing to increase, and preliminary estimates are that the new ultra-low sulfur fuel will cause an approximate 1% to 3% decline in fuel miles per gallon. The Company expects to begin testing a few January 2007 compliant test engines using ultra-low sulfur fuel in third quarter 2005. We will also begin testing ultra-low sulfur fuel on existing company trucks in third quarter 2005 to determine the impact on our fuel mile per gallon. The average age of the Company's truck fleet declined to 1.44 years as of June 30, 2005 compared to 1.71 years as of June 30, 2004. The percentage of the Company's truck fleet with post-October 2002 engines increased to 68% as of June 30, 2005 compared to 23% as of June 30, 2004. It is the Company's intention to continue to keep its fleet as new as possible, in advance of the federally mandated engine emission standards, which are required for all newly-manufactured trucks beginning in January 2007. The Company's wholly-owned subsidiary, Fleet Truck Sales, is one of the largest domestic class 8 truck sales companies and has been in business since 1992. As a result of increased unit sales and continued solid used truck pricing trends for our late-model, driver-preferred trucks, gains on sales of assets, primarily trucks, increased to $3.6 million in second quarter 2005 compared to $3.4 million in second quarter 2004. Gains on sales of assets are reflected as a reduction of Other Operating Expenses in the Company's income statement. To provide customers with additional sources of capacity, the Company has been rapidly growing its non-asset based Value Added Services (VAS) division. VAS includes truck brokerage, freight transportation management, intermodal, and multimodal service offerings.
Value Added Services (amounts in 000's) 2Q05 2Q04 --------------------------------------- ---------------- ---------------- Revenues $55,555 100.0% $38,986 100.0% Gross margin 5,150 9.3% 3,668 9.4% Operating income 1,916 3.4% 1,169 3.0%
Werner's expansion of its VAS service offerings assists customers by providing needed capacity while driving cost out of their freight system. The Company's VAS business operates with a lower operating income percentage, but is realizing a substantially higher return on assets than the more capital-intensive truckload business due to the lower equipment investment. A comparison of the Company's truckload and VAS operating ratios for second quarter 2005 and 2004 is shown below.
Operating Ratios 2Q05 2Q04 Difference ---------------- ---------- ---------- ---------- Truckload Transportation Services 90.7% 90.8% -0.1% Value Added Services 96.6 97.0 -0.4
Higher fuel prices and higher fuel surcharge collections have the effect of increasing the Total Company operating ratio and the Truckload Transportation Services segment's operating ratio. Eliminating this sometimes volatile source of revenue provides a more consistent basis for comparing the results of operations from period to period. The Truckload Transportation Services segment's operating ratio for second quarter 2005 and second quarter 2004 would be 89.4% and 90.2%, respectively, if fuel surcharge revenues are excluded from revenues and netted against operating expenses. The Company's financial position remains strong. Werner Enterprises is debt-free and has no truck or trailer operating leases and, therefore, has no off-balance sheet debt. Stockholders' equity has grown to $815.8 million, or $10.27 per share. The Company's cash position declined to $51.1 million as of June 30, 2005 compared to $96.1 million as of March 31, 2005 due to higher than normal capital expenditures for new trucks and increased current income taxes resulting from changes in tax regulations and the timing of estimated tax payments. The Company's continuing goal is to improve its annual operating margin to 10% or better before increasing the Company's fleet growth rate, assuming an adequate supply of drivers is available.
INCOME STATEMENT DATA (Unaudited) (In thousands, except per share amounts) Quarter % of Quarter % of Ended Operating Ended Operating 6/30/05 Revenues 6/30/04 Revenues -------- --------- -------- --------- Operating revenues $485,789 100.0 $411,115 100.0 -------- --------- -------- --------- Operating expenses: Salaries, wages and benefits 141,332 29.1 134,296 32.6 Fuel 78,064 16.1 50,105 12.2 Supplies and maintenance 39,921 8.2 34,802 8.4 Taxes and licenses 29,465 6.1 27,428 6.7 Insurance and claims 21,838 4.4 20,022 4.9 Depreciation 40,539 8.3 35,644 8.7 Rent and purchased transportation 90,342 18.6 71,201 17.3 Communications and utilities 5,134 1.1 4,450 1.1 Other (2,974) (0.6) (1,824) (0.4) -------- --------- -------- --------- Total operating expenses 443,661 91.3 376,124 91.5 -------- --------- -------- --------- Operating income 42,128 8.7 34,991 8.5 -------- --------- -------- --------- Other expense (income): Interest expense 2 0.0 4 0.0 Interest income (822) (0.1) (551) (0.1) Other 46 0.0 57 0.0 -------- --------- -------- --------- Total other expense (income) (774) (0.1) (490) (0.1) -------- --------- -------- --------- Income before income taxes 42,902 8.8 35,481 8.6 Income taxes 17,607 3.6 13,861 3.3 -------- --------- -------- --------- Net income $25,295 5.2 $21,620 5.3 ======== ========= ======== ========= Diluted shares outstanding 80,692 80,891 ======== ======== Diluted earnings per share $.31 $.27 ======== ======== OPERATING STATISTICS (Quarter Ended June 30) 2Q05 % Change 2Q04 -------- --------- -------- Trucking revenues, net of fuel surcharge (1) $371,612 8.7% $341,966 Trucking fuel surcharge revenues (1) 51,967 116.4% 24,016 Non-trucking revenues, including VAS (1) 59,065 38.5% 42,639 Other operating revenues (1) 3,145 26.1% 2,494 -------- -------- Operating revenues (1) $485,789 18.2% $411,115 ======== ======== Average monthly miles per tractor 10,199 -0.5% 10,254 Average revenues per total mile (2) $1.389 5.4% $1.318 Average revenues per loaded mile (2) $1.578 6.5% $1.482 Average percentage of empty miles 11.99% 8.7% 11.03% Average trip length in miles (loaded) 566 -3.7% 588 Total miles (loaded and empty) (1) 267,547 3.1% 259,384 Average tractors in service 8,744 3.7% 8,432 Average revenues per tractor per week (2) $3,269 4.8% $3,119 Capital expenditures, net (1) $73,630 $40,603 Cash flow from operations (1) $29,246 $65,000 Return on assets (annualized) 8.0% 7.5% Total tractors (at quarter end) Company 7,820 7,520 Owner-operator 930 930 -------- -------- Total tractors 8,750 8,450 Total trailers (at quarter end) 24,090 22,920
(1) Amounts in thousands. (2) Net of fuel surcharge revenues.
INCOME STATEMENT DATA (Unaudited) (In thousands, except per share amounts) Six Months % of Six Months % of Ended Operating Ended Operating 6/30/05 Revenues 6/30/04 Revenues ---------- --------- ---------- --------- Operating revenues $941,051 100.0 $797,395 100.0 ---------- --------- ---------- --------- Operating expenses: Salaries, wages and benefits 281,554 29.9 267,608 33.6 Fuel 145,692 15.5 95,857 12.0 Supplies and maintenance 76,675 8.1 67,696 8.5 Taxes and licenses 58,243 6.2 54,940 6.9 Insurance and claims 45,038 4.8 39,529 5.0 Depreciation 80,176 8.5 70,629 8.9 Rent and purchased transportation 172,909 18.4 134,351 16.8 Communications and utilities 10,576 1.1 8,998 1.1 Other (4,777) (0.5) (2,063) (0.3) ---------- --------- ---------- --------- Total operating expenses 866,086 92.0 737,545 92.5 ---------- --------- ---------- --------- Operating income 74,965 8.0 59,850 7.5 ---------- --------- ---------- --------- Other expense (income): Interest expense 6 0.0 6 0.0 Interest income (1,787) (0.1) (1,086) (0.1) Other 73 0.0 94 0.0 ---------- --------- ---------- --------- Total other expense (income) (1,708) (0.1) (986) (0.1) ---------- --------- ---------- --------- Income before income taxes 76,673 8.1 60,836 7.6 Income taxes 31,457 3.3 23,648 2.9 ---------- --------- ---------- --------- Net income $45,216 4.8 $37,188 4.7 ========== ========= ========== ========= Diluted shares outstanding 80,754 81,116 ========== ========== Diluted earnings per share $.56 $.46 ========== ========== OPERATING STATISTICS (Six Months Ended June 30) YTD05 % Change YTD04 --------- ---------- --------- Trucking revenues, net of fuel surcharge (1) $729,478 8.6% $671,699 Trucking fuel surcharge revenues (1) 92,903 121.3% 41,987 Non-trucking revenues, including VAS (1) 112,742 42.9% 78,892 Other operating revenues (1) 5,928 23.1% 4,817 -------- --------- Operating revenues (1) $941,051 18.0% $797,395 ======== ========= Average monthly miles per tractor 10,066 -0.8% 10,144 Average revenues per total mile (2) $1.391 6.3% $1.309 Average revenues per loaded mile (2) $1.579 7.0% $1.476 Average percentage of empty miles 11.88% 4.6% 11.36% Average trip length in miles (loaded) 569 -2.6% 584 Total miles (loaded and empty) (1) 524,393 2.2% 513,337 Average tractors in service 8,682 2.9% 8,434 Average revenues per tractor per week (2) $3,231 5.5% $3,063 Capital expenditures, net (1) $152,661 $73,024 Cash flow from operations (1) $96,271 $124,508 Return on assets (annualized) 7.2% 6.5% Total tractors (at quarter end) Company 7,820 7,520 Owner-operator 930 930 ---------- ---------- Total tractors 8,750 8,450 Total trailers (at quarter end) 24,090 22,920
(1) Amounts in thousands. (2) Net of fuel surcharge revenues.
BALANCE SHEET DATA (In thousands, except share amounts) 6/30/05 12/31/04 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $51,057 $108,807 Accounts receivable, trade, less allowance of $8,590 and $8,189, respectively 198,789 186,771 Other receivables 11,760 11,832 Inventories and supplies 10,152 9,658 Prepaid taxes, licenses and permits 8,279 15,292 Current deferred income taxes 18,791 - Income taxes receivable 7,672 768 Other current assets 17,466 18,128 ----------- ----------- Total current assets 323,966 351,256 ----------- ----------- Property and equipment 1,477,085 1,374,649 Less - accumulated depreciation 540,833 511,651 ----------- ----------- Property and equipment, net 936,252 862,998 ----------- ----------- Other non-current assets 15,043 11,521 ----------- ----------- $1,275,261 $1,225,775 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $53,789 $49,618 Insurance and claims accruals 64,985 55,095 Accrued payroll 19,280 19,579 Income taxes payable 9,082 475 Current deferred income taxes - 15,569 Other current liabilities 17,607 17,230 ----------- ----------- Total current liabilities 164,743 157,566 ----------- ----------- Insurance and claims accruals, net of current portion 87,301 84,301 Deferred income taxes 207,424 210,739 Stockholders' equity: Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536 shares issued; 79,419,695 and 79,197,747 shares outstanding, respectively 805 805 Paid-in capital 105,588 106,695 Retained earnings 730,294 691,035 Accumulated other comprehensive loss (361) (861) Treasury stock, at cost; 1,113,841 and 1,335,789 shares, respectively (20,533) (24,505) ----------- ----------- Total stockholders' equity 815,793 773,169 ----------- ----------- $1,275,261 $1,225,775 =========== ===========
Werner Enterprises is a full-service transportation company providing truckload and logistics 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 transportation companies with a fleet of 8,750 trucks and 24,090 trailers. Werner Enterprises' common stock is traded on The Nasdaq Stock Market under the symbol WERN. The Werner website address is www.werner.com. Note: This press release contains forward-looking statements, which are based on information currently available. Actual results could differ materially from those anticipated as a result of a number of factors, including, but not limited to, those discussed in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2004. 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.