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Werner Enterprises Reports Second Quarter 2015 Revenues and Record Second Quarter Earnings

July, 20, 2015

OMAHA, Neb.--(BUSINESS WIRE)--Jul. 20, 2015-- Werner Enterprises, Inc. (NASDAQ:WERN), one of the nation's largest transportation and logistics companies, reported revenues and record second quarter earnings for the second quarter ended June 30, 2015.

Summarized financial results for second quarter 2015 compared to second quarter 2014 are as follows (dollars in thousands, except per share data):


   
   
   
   



  Three Months Ended  






  Six Months Ended  







June 30,




June 30,





2015     2014

% Change

2015     2014

% Change
Total revenues

$ 534,644

$ 542,120

(1)%


$ 1,030,298


$ 1,034,142


0% 
Trucking revenues, net of fuel surcharge


353,051


332,025

6%



682,185



643,547


6%
Value Added Services (“VAS”) revenues


103,450


100,501

3%



194,310



185,655


5%
Operating income


52,210


42,330

23%



90,395



65,771


37%
Net income


31,848


25,632

24%



54,990



39,971


38%
Earnings per diluted share


0.44


0.35

25%



0.76



0.55


38%


























 

Freight demand in second quarter 2015 and so far in July 2015 continues to be stronger than the prior five years, with the exception of the same period in 2014 which was rebounding from severe winter weather in first quarter 2014 that temporarily backed up the freight network.

Constrained truck capacity combined with a gradually improving economy in the retail, consumer products and grocery products markets primarily served by us are contributing to strong freight demand. Truckload industry capacity is being challenged by an extremely competitive driver recruiting market and heightened regulatory cost increases for safety and truck ownership; we expect this favorable trend will continue. There are numerous pending and proposed federal safety initiatives that could further limit truckload and driver capacity in the next few years, including mandatory electronic logging devices (ELD’s), a national drug and alcohol driver data base, increased minimum liability insurance requirements for carriers, more sophisticated drug screening procedures for drivers and mandatory truck speed limiter devices.

Average revenues per tractor per week, net of fuel surcharge, increased 3.5% in second quarter 2015 compared to second quarter 2014. Continued focus on securing driver friendly, highly productive freight and improved freight selection using our proprietary freight optimization system enabled us to essentially maintain our average miles per truck in a strong, but not as stellar a freight market as second quarter 2014. Our average miles per truck declined slightly by 0.2% in second quarter 2015 compared to second quarter 2014. Average revenues per total mile, net of fuel surcharge, increased 3.8% in second quarter 2015 compared to second quarter 2014.

We are making continued progress implementing sustainable rate increases with our customers. These efforts are ongoing as we move forward in 2015 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 supportive of Werner's ongoing initiatives to provide sustainable transportation solutions in support of their supply chain needs.

In second quarter 2015, we averaged 7,247 trucks in service in the Truckload segment and 51 intermodal drayage trucks in the VAS segment. On the strength of an intense company-wide focus to improve our driver recruiting and retention, we ended second quarter 2015 with 7,275 trucks in the Truckload segment, a sequential improvement of 165 trucks compared to first quarter 2015 and a year-over-year improvement of 240 trucks compared to second quarter 2014. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,700 trucks (or 51% of our total Truckload segment fleet).

Diesel fuel prices were $1.15 per gallon lower in second quarter 2015 than in second quarter 2014 and were 9 cents per gallon higher than in first quarter 2015. For the first 20 days of July 2015, the average diesel fuel price per gallon was $1.16 lower than the average diesel fuel price per gallon in the same period of 2014 and $1.11 lower than in third quarter 2014. 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).

We continue to invest in equipment solutions to improve the safety, operational efficiency and fuel miles per gallon of our fleet. We increased our capital expenditures in the last 12 months to lower the average age of our truck fleet and attained an average age of 2.0 years as of June 30, 2015, which compares to an average age of 2.4 years as of June 30, 2014. Net capital expenditures in the first half of 2015 were $159 million compared to $63 million in the first half of 2014. We estimate net capital expenditures for the full year of 2015 to be in the range of $300 to $325 million, which we expect will enable us to further reduce the average age of our truck fleet to less than two 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 market remained very challenging during second quarter 2015. Several difficult market factors persist including a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate, aging truck driver demographics and increased truck safety regulations.

Gains on sales of assets were $6.7 million in second quarter 2015. This compares to gains on sales of assets of $5.2 million in second quarter 2014, which included a $1.6 million gain from the sale of real estate, and gains on sales of assets of $5.5 million in first quarter 2015. In second quarter 2015, we realized higher average gains per truck and trailer and sold more trucks and trailers than in second quarter 2014. 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).


   
   



Three Months Ended

Six Months Ended



June 30,

June 30,



2015     2014

2015     2014
Value Added Services (amounts in thousands)

$     %

$     %

$     %

$     %
Operating revenues

$ 103,450

100.0

$ 100,501

 100.0



$ 194,310

100.0

$ 185,655

 100.0

Rent and purchased transportation expense

  87,448

84.5

  87,209

86.8

  165,321

85.1

  159,763

86.1
Gross margin


16,002

15.5


13,292

13.2


28,989

14.9


25,892

13.9
Other operating expenses

  10,998

10.7

  11,037

11.0

  21,536

11.1

  21,782

11.7
Operating income

$ 5,004

4.8

$ 2,255

2.2

$ 7,453

3.8

$ 4,110

2.2




























 

In second quarter 2015, VAS revenues increased $2.9 million or 3%, and operating income dollars increased $2.7 million or 122%, compared to second quarter 2014. Our on-going efforts to address customer pricing, contractual and operational issues within VAS resulted in the best quarterly gross margin and operating income percentages since second quarter 2013. The VAS gross margin percentage in second quarter 2015 of 15.5% improved year over year compared to the gross margin percentage of 13.2% in second quarter 2014 and also improved sequentially from the 14.3% gross margin in first quarter 2015. The VAS operating income percentage in second quarter 2015 of 4.8% improved from second quarter 2014 of 2.2% and first quarter 2015 of 2.7%.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $58.3 million and $92.7 million in second quarters 2015 and 2014, respectively, and $114.7 million and $179.8 million in the year-to-date 2015 and 2014 periods, respectively) and the VAS segment are shown below.


   
   
   
   



 Three Months Ended 






 Six Months Ended 







June 30,




June 30,


Operating Ratios



2015     2014

Difference

2015     2014

Difference
Truckload Transportation Services

86.8%


88.6%


(1.8)%


88.0%


90.9%


(2.9)%
Value Added Services

95.2%


97.8%


(2.6)%


96.2%


97.8%


(1.6)%
























 

Fluctuating fuel prices and fuel surcharge revenues 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 2015 and second quarter 2014 are 88.7% and 91.1%, respectively, and for year-to-date 2015 and 2014 are 89.7% and 92.9%, 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, 2015, we had $75.0 million of debt outstanding and $878.2 million of stockholders' equity. During second quarter 2015, the Company purchased 225,000 shares of its common stock for a total cost of $6.4 million.


   



INCOME STATEMENT



(Unaudited)



(In thousands, except per share amounts)




   
   
   
 



Three Months Ended

Six Months Ended



June 30,

June 30,



2015     2014

2015

2014



$     %

$     %

$

%

$
%
Operating revenues

$ 534,644  

 100.0

 

$ 542,120  

 100.0

 

$ 1,030,298  

 100.0

 

$ 1,034,142  

 100.0

 
Operating expenses:






















Salaries, wages and benefits


160,376


30.0



144,506


26.7



311,841


30.3



279,219

27.0
Fuel


57,381


10.7



92,131


17.0



110,141


10.7



183,206

17.7
Supplies and maintenance


46,388


8.7



45,887


8.5



94,045


9.1



91,741

8.9
Taxes and licenses


22,763


4.3



21,311


3.9



43,843


4.3



42,143

4.0
Insurance and claims


20,615


3.8



19,180


3.5



42,662


4.1



39,386

3.8
Depreciation


48,264


9.0



44,573


8.2



93,984


9.1



87,696

8.5
Rent and purchased transportation


124,952


23.4



128,239


23.7



238,700


23.2



239,885

23.2
Communications and utilities


3,837


0.7



3,409


0.6



7,515


0.7



6,908

0.7
Other

  (2,142)


(0.4)


  554  

0.1  

  (2,828)


(0.3)


  (1,813)

(0.2)
Total operating expenses

  482,434  

90.2  

  499,790  

92.2  

  939,903  

91.2  

  968,371  
93.6  
Operating income

  52,210  

9.8  

  42,330  

7.8  

  90,395  

8.8  

  65,771  
6.4  
Other expense (income):





Interest expense


583


0.1



136






1,058


0.1



230


Interest income


(697)


(0.1)



(660)


(0.1)



(1,328)


(0.1)



(1,315)

(0.1)
Other

  135  

 

  (45)


 

  225  

 

  (41)

 
Total other expense (income)

  21  

 

  (569)


(0.1)


  (45)


 

  (1,126)

(0.1)
Income before income taxes


52,189


9.8



42,899


7.9



90,440


8.8



66,897

6.5
Income taxes

  20,341  

3.8  

  17,267  

3.2  

  35,450  

3.5  

  26,926  
2.6  
Net income

$ 31,848  

6.0  

$ 25,632  

4.7  

$ 54,990  

5.3  

$ 39,971  
3.9  
Diluted shares outstanding

  72,424  




  72,597  




  72,482  




  72,882  

Diluted earnings per share

$ 0.44  




$ 0.35  




$ 0.76  




$ 0.55  
































 

   



SEGMENT INFORMATION



(Unaudited)



(In thousands)




   
   



 Three Months Ended 



 Six Months Ended 




June 30,

June 30,



2015     2014

2015

2014

Revenues













Truckload Transportation Services

$ 417,015


$ 429,390


$ 807,578


$ 832,575
Value Added Services


103,450



100,501



194,310



185,655
Other


13,924



12,258



27,909



16,247
Corporate

  725  

  829  

  1,246  

  1,387  
Subtotal


535,114



542,978



1,031,043



1,035,864
Inter-segment eliminations (1)

  (470)


  (858)


  (745)


  (1,722)
Total

$ 534,644  

$ 542,120  

$ 1,030,298  

$ 1,034,142  












 

Operating Income













Truckload Transportation Services

$ 47,312


$ 38,320


$ 83,154


$ 59,100
Value Added Services


5,004



2,255



7,453



4,110
Other


(239)



357



(684)



841
Corporate

  133  

  1,398  

  472  

  1,720  
Total

$ 52,210  

$ 42,330  

$ 90,395  

$ 65,771  




















 

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

 

   



OPERATING STATISTICS BY SEGMENT



(Unaudited)




   
   
   



 Three Months Ended 

   


 Six Months Ended 







June 30,




June 30,





2015     2014

% Change

2015

2014

% Change

Truckload Transportation Services segment



















Average percentage of empty miles


12.21%



12.14%


0.6%



12.18%



12.06%


1.0%
Average trip length in miles (loaded)


476



466


2.1%



479



466


2.8%
Average tractors in service


7,247



7,055


2.7%



7,130



7,029


1.4%
Average revenues per tractor per week (1)

$ 3,748


$ 3,620


3.5%


$ 3,680


$ 3,521


4.5%
Total trailers (at quarter end)


22,070



21,865






22,070



21,865



Total tractors (at quarter end)

















Company


6,615



6,375






6,615



6,375



Independent contractor

  660  

  660  




  660  

  660  


Total tractors


7,275



7,035






7,275



7,035





















 

Value Added Services segment



















Average tractors in service


51



48






51



47



Total trailers (at quarter end)


1,695



1,730






1,695



1,730



Total tractors (at quarter end)


57



55






57



55





























 

(1) Net of fuel surcharge revenues.

 

   



SUPPLEMENTAL INFORMATION



(Unaudited)



(In thousands)




   
   



 Three Months Ended 



 Six Months Ended 




June 30,

June 30,



2015     2014

2015

2014
Capital expenditures, net

$ 74,541


$ 46,761


$ 159,406


$ 62,807
Cash flow from operations


69,469



31,336



190,455



90,545
Return on assets (annualized)


8.3%



7.4%



7.3%



5.8%
Return on equity (annualized)


14.7%



13.1%



12.9%



10.3%




















 

   



CONDENSED BALANCE SHEET



(In thousands, except share amounts)




   



  June 30,  



 December 31, 




2015

2014



(Unaudited)


ASSETS





Current assets:





Cash and cash equivalents

$ 47,491


$ 22,604
Accounts receivable, trade, less allowance of $9,616 and $10,017, respectively


258,823



266,727
Other receivables


21,283



20,316
Inventories and supplies


16,756



17,824
Prepaid taxes, licenses and permits


7,374



14,914
Current deferred income taxes


34,568



34,066
Income taxes receivable


2,950



23,435
Other current assets

  26,827  

  26,458  
Total current assets

  416,072  

  426,344  






 
Property and equipment


1,850,826



1,786,229
Less – accumulated depreciation

  766,340  

  772,447  
Property and equipment, net

  1,084,486  

  1,013,782  






 
Other non-current assets

  42,857  

  40,336  
Total assets

$ 1,543,415  

$ 1,480,462  






 
LIABILITIES AND STOCKHOLDERS’ EQUITY





Current liabilities:





Accounts payable

$ 87,981


$ 64,827
Insurance and claims accruals


62,067



73,814
Accrued payroll


32,286



28,121
Other current liabilities

  21,445  

  19,768  
Total current liabilities

  203,779  

  186,530  






 
Long-term debt, net of current portion


75,000



75,000
Other long-term liabilities


17,940



20,021
Insurance and claims accruals, net of current portion


130,545



123,445
Deferred income taxes


237,911



241,606






 
Stockholders’ equity:





Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536





shares issued; 71,882,822 and 72,038,368 shares outstanding, respectively


805



805
Paid-in capital


104,909



101,803
Retained earnings


962,876



915,085
Accumulated other comprehensive loss


(10,672)



(9,375)
Treasury stock, at cost; 8,650,714 and 8,495,168 shares, respectively

  (179,678)


  (174,458)
Total stockholders’ equity

  878,240  

  833,860  
Total liabilities and stockholders' equity

$ 1,543,415  

$ 1,480,462  










 

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 MarketSM 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, 2014.

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

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