News Details

OMAHA, Neb.--(BUSINESS WIRE)--Oct. 20, 2014-- 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, 2014.

Summarized financial results for third quarter and year-to-date 2014 compared to third quarter and year-to-date 2013 are as follows (dollars in thousands, except per share data):

The Company's effective income tax rate for third quarter 2014 was 38.3% which included certain state tax refunds for prior periods. The Company’s effective income tax rate for third quarter 2013 was 35.8% primarily because of favorable tax adjustments for uncertain tax positions. The Company expects its fourth quarter 2014 effective income tax rate to be approximately 40.3%.

Freight demand continued to be strong in third quarter 2014, as it was in second quarter 2014. Freight demand (as measured by our daily morning ratio of loads available to trucks available in our One-Way Truckload network, which includes the medium-to-long-haul Van, Expedited and short-haul Regional fleets) showed consistent strength, and we were overbooked (more available freight than available trucks at the beginning of each business day) throughout third quarter 2014. The freight market dynamics began showing year-over-year improvement for Werner in mid-November 2013, and that favorable trend has continued for the last eleven months, including the first three weeks of October. A tight capacity market combined with a gradually firming economy were the primary contributing factors. Truck capacity is being challenged by an increasingly competitive driver market, trucking company failures and heightened regulatory cost increases for truck ownership and safety; thus, we expect this favorable demand trend relative to constrained supply will continue.

Average revenues per tractor per week, net of fuel surcharge, increased 7.4% in third quarter 2014 compared to third quarter 2013. This compares to year-over-year percentage improvements in average revenues per tractor per week of 1.6% in first quarter 2014 and 4.9% in second quarter 2014. Rate increases for contractual business, continued focus on securing driver friendly, highly productive freight and improved freight selection using our proprietary freight optimization system enabled us to raise our average miles per truck by 5.3% and further reduce our empty miles percentage by 2.2% compared to third quarter 2013. Average revenues per total mile, net of fuel surcharge, increased 2.0% in third quarter 2014 compared to third quarter 2013.

There are several factors that had a positive impact on our average revenues per tractor per week and profitability, while at the same time reduced the percentage increase in our reported revenue per total mile. Our average trip length increased by 6.7% in third quarter 2014 compared to third quarter 2013, and longer length of haul shipments generally have a lower rate per mile due to productivity benefits. Noting the improved freight market in third quarter 2014 compared to third quarter 2013, during third quarter 2014 we accepted less brokerage freight (in which rates are inclusive of fuel) and instead supported our customers with additional capacity priced with a base rate per mile and a fuel surcharge per mile. Finally, customer changes in fuel surcharge programs had a neutral impact on profitability but an adverse effect on reported revenue per total mile. A few large customers modified their fuel surcharge programs to a "zero peg" in the last 12 months, which shifted revenues from base rates to fuel surcharges.

We made good progress implementing sustainable rate increases with our customers during third quarter 2014. These efforts are expected to continue as we move forward and work to recoup the cost increases associated with more expensive equipment, a shrinking supply of qualified drivers and an increasingly challenging regulatory environment. Strategic customers understand the collective capacity and service challenges facing our company and our industry and are increasingly supportive of Werner's ongoing initiatives to provide sustainable transportation solutions in support of their supply chain needs.

In third quarter 2014, we averaged 6,974 trucks in service in the Truckload segment and 50 intermodal drayage trucks in the VAS segment. We ended the quarter with 7,060 trucks in the Truckload segment and 55 intermodal drayage trucks in the VAS segment. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,655 trucks (or 52% of our total Truckload segment fleet).

Diesel fuel prices were 20 cents per gallon lower in third quarter 2014 than in third quarter 2013 and were 16 cents per gallon lower than in second quarter 2014. For the first 20 days of October 2014, the average diesel fuel price per gallon was 37 cents lower than the average diesel fuel price per gallon in the same period of 2013 and 34 cents lower than in fourth quarter 2013. 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 the truckload industry remains constrained by economic and safety regulatory factors. It is very costly for many smaller and medium size private carriers to replace their older, lower-value trucks with much more expensive, EPA-compliant new trucks, which significantly reduces the risk of trucks being added to the market. We continue to invest in equipment solutions including more aerodynamic truck features, idle reduction systems, tire inflation systems and trailer skirts to improve the mile per gallon efficiency of our fleet. As we noted in our second quarter 2014 earnings release on July 21, 2014, we increased our capital expenditure guidance for the second half of 2014 to begin to lower the average age of our truck fleet. Net capital expenditures in third quarter 2014 were $84.0 million and were $146.8 million year-to-date in 2014. We estimate net capital expenditures for the full year 2014 to be in the range of $210 to $230 million. The average age of our truck fleet as of September 30, 2014, was 2.3 years. We remain committed to investing in a best in class fleet for the benefit of our customers, our drivers and the Werner brand.

The driver recruiting and retention market was very difficult during third quarter 2014. During July and the first half of August, our driver and truck counts declined from June. We increased pay by varying percentage amounts for many drivers in certain fleets within our One-Way Truckload unit in mid-August 2014. Following these changes, our driver recruiting and retention metrics improved. Additionally over the last several months, we increased driver pay in multiple Dedicated fleets, almost always after obtaining rate increases from these customers. However, significant problematic market factors remain including a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate and job competition from the housing construction, manufacturing and hydraulic fracturing markets. We expect that competition for drivers will remain high in the coming months.

Gains on sales of assets were $4.5 million in third quarter 2014. This compares to gains on sales of assets of $2.7 million in third quarter 2013 and $5.2 million in second quarter 2014, which included a $1.6 million gain from the sale of real estate. In third quarter 2014, we realized higher average gains per truck and sold more trucks and trailers compared to third quarter 2013. Gains on sales of assets 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).

In third quarter 2014, VAS revenues increased $10.0 million or 10%, and operating income dollars decreased $3.2 million or 76%, compared to third quarter 2013. The increase in VAS revenues was due primarily to growth in Brokerage and Werner Global Logistics revenues. Operating income was impacted by a lower gross margin percentage for contractual business due to rising third party carrier costs, as capacity was tighter during third quarter 2014 compared to third quarter 2013. In addition, the Company's gross margin percentage continues to be impacted negatively by the startup of a large customer during second quarter 2014. Gross margins for this customer are being impacted by regional carrier capacity issues that are currently being addressed with the customer. VAS operating income declined in third quarter 2014 from third quarter 2013 due primarily to a lower gross margin percentage. However, the gross margin percentage improved sequentially from July to September 2014.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $88.8 million and $87.6 million in third quarters 2014 and 2013, respectively, and $268.6 million and $267.7 million in the year-to-date 2014 and 2013 periods, respectively) and the VAS segment are shown below.

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 2014 and third quarter 2013 are 90.9% and 93.4%, respectively, and for year-to-date 2014 and 2013 are 92.2% and 93.1%, 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, 2014, we had $75.0 million of debt outstanding and $804.5 million of stockholders' equity. During third quarter 2014, the Company purchased 200,000 shares of its common stock for a total cost of $5.0 million.

(1) Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation.

(1) Net of fuel surcharge revenues.

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 December 31, 2013.

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.

Source: Werner Enterprises, Inc.

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