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Werner Enterprises Reports Improved Second Quarter 2012 Revenues and Earnings

July, 18, 2012

OMAHA, Neb.--(BUSINESS WIRE)--Jul. 18, 2012-- 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, 2012.

Summarized financial results for second quarter 2012 compared to second quarter 2011 are as follows (dollars in thousands, except per share data):

 

    2Q12     2Q11     % Change     YTD12     YTD11     % Change
Total revenues

$ 521,812

$ 515,897

1%


$ 1,020,188

$ 985,326

4%
Trucking revenues, net of fuel























surcharge

$ 331,974

$ 333,709

(1)%


$ 653,200

$ 650,156

0%
Value Added Services (“VAS”)























revenues

$ 84,024

$ 71,227

18%


$ 160,778

$ 134,800

19%
Operating income

$ 51,113

$ 46,767

9%


$ 86,515

$ 74,209

17%
Net income

$ 30,680

$ 27,518

11%


$ 51,925

$ 43,811

19%
Earnings per diluted share

$ 0.42

$ 0.38

11%


$ 0.71

$ 0.60

18%
 

Werner Enterprises achieved 11% growth in earnings per diluted share in second quarter 2012 compared to second quarter 2011, resulting from a seasonally improving freight market, operating margin expansion and logistics growth.

Second quarter 2012 freight demand demonstrated typical seasonal trends and improved into June similar to second quarter 2011. Freight demand to date in July 2012 continues to show typical seasonal trends similar to July 2011. Freight demand trends are being helped both by supply side constraints limiting truckload capacity and demand generated by economic activity from our customers.

Average revenues per total mile, net of fuel surcharge, rose 2.6% in second quarter 2012 compared to second quarter 2011. Contractual rate increase percentage awards to date in 2012 are similar to the same period of 2011. Our truckload segment experienced a balanced freight market with respect to freight and trucks during second quarter 2012 with normal seasonal strengthening at the end of the quarter. Spot pricing was slightly higher in second quarter 2012 compared to second quarter 2011; however, the number of special freight projects with customers was lower for both our truck fleets and VAS Brokerage unit in second quarter 2012. Project freight is generally high volume but short duration and therefore commands a premium price. We continue to be successful in this tightening capacity environment by working 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.

In the last half of 2011, we operated slightly below our fleet goal of 7,300 trucks due to the challenging driver market, and we ended 2011 with 7,200 trucks. During the last week of first quarter 2012, we reached our goal of 7,300 trucks. Throughout second quarter 2012, we maintained our fleet at the 7,300 truck level or slightly higher. We intend to maintain our fleet size at approximately this level. Our primary objectives continue to be improving our operating margin percentage and our returns on assets, equity and invested capital, while staying true to our broad transportation services portfolio. Only through enhanced returns can we continue our commitment to reinvest in our fleet and our expanded portfolio of services.

We remain an industry leader in miles per truck productivity; however, due to several factors, we had a decline in miles per truck of 3.4% in second quarter 2012 compared to second quarter 2011. We had a decrease in student/trainer driver teams, a 3.4% reduction in our average loaded length of haul and changes in truck counts by fleet within our Dedicated fleet division. We are working hard to increase our student/trainer driver team truck count. Our empty miles percentage increased 3.6%, as it was affected by the shorter average length of haul. Our empty miles per trip remained flat at 66 miles per trip in second quarter 2012 and second quarter 2011.

Capacity in our industry remains constrained by economic, safety and regulatory factors. From 2007 to 2010, the number of new class 8 trucks built was well below historical replacement levels for our industry. This led to the oldest average industry truck age in 40 years. Carriers were compelled to begin upgrading their aging truck fleets, which led to increased replacement purchases of new and later-model used trucks during 2011. Orders for new class 8 trucks slowed in recent months. We believe these orders slowed as current freight rate relief is not keeping pace with the increased costs and capital requirements for new and much more expensive EPA-compliant trucks. The significantly higher costs of new equipment and related diesel exhaust fluid will not be recovered through a single year rate review cycle; however, we remain committed to investing in a best in class fleet for the benefit of our customers, our drivers and the Werner brand.

In July, Congress passed the federal transportation bill which requires the U.S. Department of Transportation (“DOT”) to promulgate rules and regulations mandating the use of electronic on-board recorders (“EOBRs”) by July 2013 with full adoption for all trucking companies by no later than July 2015. We are the recognized industry leader for electronic logging of driver hours as we proactively adopted a paperless log system in 1996 that was subsequently approved for our use by the Federal Motor Carrier Safety Administration (“FMCSA”) in 1998. We believe that as EOBRs become the industry standard and industry requirement, EOBR use will help to level the competitive field for transit times, driver recruiting, driver retention and rates.

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. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,495 trucks (or 48% of our total fleet).

The driver recruiting and retention market remained challenging in second quarter 2012 and was similar to first quarter 2012. Driver pay increased 1.5 cents per mile year-over-year as we made certain pay adjustments over the last year to attract and retain drivers for specific fleets. While historically higher national unemployment rates have aided our driver recruiting and retention efforts, we believe that an improved freight market, extended government unemployment benefit programs, a reduction in available truck driving school graduates and changing industry safety regulations tightened driver supply. 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 over 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 $5.7 million in second quarter 2012 compared to $5.6 million in second quarter 2011 and $4.7 million in first quarter 2012. The market for the sale of used trucks and trailers remains strong. Gains on sales are reflected as a reduction of Other Operating Expenses in our income statement.

We continue to buy new trucks to replace older trucks we sell or trade. We continue to invest in environmentally friendly equipment solutions such as more aerodynamic truck features, idle reduction systems, tire inflation systems and trailer skirts which improve the mile per gallon efficiency of our fleet. Over the last year, we reduced our annual carbon footprint by almost 98,000 tons. Our net capital expenditures in second quarter 2012 were $39 million which puts year-to-date net capital expenditures for 2012 at $122 million. We expect our net capital expenditures for the full year 2012 to be in a range of $180 million to $210 million. The average age of our truck fleet as of June 30, 2012 was 2.3 years, and we expect to further reduce our average truck age to approximately 2.1 years as of December 31, 2012. We remain committed to the ongoing investment required to maintain a best-in-class fleet while focusing on the lowest operating cost model for our customers.

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).


   
   
Value Added Services (amounts in 000’s)

2Q12

2Q11
Revenues

$ 84,024     100.0%


$ 71,227     100.0%
Rent and purchased transportation expense

  71,154

84.7


  60,385

84.8
Gross margin


12,870

15.3



10,842

15.2
Other operating expenses

  8,568

10.2


  7,123

10.0
Operating income

$ 4,302

5.1


$ 3,719

5.2














 

The following table shows the change in shipment volume and average revenue (excluding logistics fee revenue) per shipment for all VAS shipments.


   
   
   

   



2Q12

2Q11

Difference


% Change  
Total VAS shipments


68,376


63,671


4,705


7%
Less: Non-committed shipments to
















Truckload segment

  18,808

  20,247

  (1,439)


(7)%
Net VAS shipments

  49,568

  43,424

  6,144


14%













 
Average revenue per shipment

$ 1,595

$ 1,531

$ 64


4%













 

In second quarter 2012, VAS revenues increased $13 million or 18%, gross margin dollars increased 19% and operating income dollars increased 16% compared to second quarter 2011.

Brokerage revenues in second quarter 2012 increased 11% compared to second quarter 2011 due to a 10% increase in shipment volume and a 1% increase in average revenue per shipment. Brokerage gross margin percentage declined 80 basis points due to rising capacity costs and lower special project business, which in turn caused Brokerage operating income to be essentially flat compared to second quarter 2011. Intermodal revenues increased 20%, and Intermodal operating income was slightly lower comparing second quarter 2012 to second quarter 2011. Werner Global Logistics revenues increased 57% in second quarter 2012 compared to second quarter 2011 and had a larger percentage increase in operating income.

Comparisons of the operating ratios (net of fuel surcharge revenues) for the Truckload segment and VAS segment for second quarters 2012 and 2011 and year-to-date 2012 and 2011 are shown below.

 
Operating Ratios     2Q12     2Q11     Difference
Truckload Transportation Services

86.6%


86.7%


(0.1)%
Value Added Services

94.9


94.8


0.1












 



YTD12

YTD11

Difference
Truckload Transportation Services

88.4%


89.5%


(1.1)%
Value Added Services

94.8


94.7


0.1
 

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 2012 and second quarter 2011 are 89.6% and 89.8%, respectively, and for year-to- date 2012 and 2011 are 91.0% and 91.8%, respectively, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses.

Diesel fuel prices were 16 cents per gallon lower in second quarter 2012 than in second quarter 2011 and were 15 cents per gallon lower than in first quarter 2012. For the first 18 days of July 2012, the average diesel fuel price per gallon was 26 cents lower than the average diesel fuel price per gallon in the same period of 2011 and 20 cents lower than in third quarter 2011.

Our financial position remains strong. As of June 30, 2012 we had no debt and $772.8 million of stockholders’ equity.

 

    INCOME STATEMENT DATA



(Unaudited)



(In thousands, except per share amounts)



 



Quarter
    % of
    Quarter
    % of



Ended


Operating


Ended


Operating



6/30/12


Revenues


6/30/11


Revenues

 

















Operating revenues

$ 521,812


100.0


$ 515,897


100.0
















 
Operating expenses:















Salaries, wages and benefits


138,512


26.5



135,265


26.2
Fuel


99,322


19.0



110,502


21.4
Supplies and maintenance


44,741


8.6



43,085


8.4
Taxes and licenses


22,967


4.4



23,414


4.5
Insurance and claims


15,103


2.9



16,531


3.2
Depreciation


41,506


8.0



39,246


7.6
Rent and purchased transportation


108,496


20.8



98,605


19.1
Communications and utilities


3,344


0.6



3,843


0.8
Other

  (3,292)


(0.6)


  (1,361)


(0.3)
Total operating expenses

  470,699


90.2


  469,130


90.9
Operating income

  51,113


9.8


  46,767


9.1








 
Other expense (income):







Interest expense


65


0.0



10


0.0
Interest income


(433)


(0.1)



(345)


(0.1)
Other

  (82)


(0.0)


  263


0.1
Total other expense (income)

  (450)


(0.1)


  (72)


(0.0)
Income before income taxes


51,563


9.9



46,839


9.1
Income taxes

  20,883


4.0


  19,321


3.8  
Net income

$ 30,680


5.9


$ 27,518


5.3  
















 
Diluted shares outstanding

  73,412






  73,239




Diluted earnings per share

$ 0.42






$ 0.38












 



OPERATING STATISTICS







Quarter Ended






Quarter Ended







6/30/12


% Change


6/30/11




Trucking revenues, net of fuel surcharge (1)

$ 331,974


-0.5%


$ 333,709




Trucking fuel surcharge revenues (1)


97,389


-5.6%



103,187




Non-trucking revenues, including VAS (1)


87,440


17.8%



74,240




Other operating revenues (1)

  5,009


5.2%


  4,761




Operating revenues (1)

$ 521,812


1.1%


$ 515,897




















 
Average monthly miles per tractor


9,713


-3.4%



10,059




Average revenues per total mile (2)

$ 1.555


2.6%


$ 1.516




Average revenues per loaded mile (2)

$ 1.772


3.1%


$ 1.719




Average percentage of empty miles


12.23%


3.6%



11.80%




Average trip length in miles (loaded) (3)


476


-3.4%



493




Total miles (loaded and empty) (1)


213,488


-3.0%



220,142




Average tractors in service


7,327


0.4%



7,295




Average revenues per tractor per week (2)

$ 3,485


-1.0%


$ 3,519




Capital expenditures, net (1)

$ 39,377






$ 85,886




Cash flow from operations (1)

$ 54,799






$ 63,230




Return on assets (annualized)


9.2%







9.1%




Total tractors (at quarter end)















Company


6,675







6,675




Independent contractor

  650






  625




Total tractors


7,325







7,300




















 
Total trailers (truck and intermodal, quarter end)


23,355







23,320




















 

(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) Quarter ended 6/30/11 trip length corrected. See www.werner.com (“Investors tab” under “Featured
     Documents”) for correction of prior quarterly and annual trip length data.

 

    INCOME STATEMENT DATA



(Unaudited)



(In thousands, except per share amounts)



 



Six Months
    % of
    Six Months
    % of



Ended


Operating


Ended


Operating



6/30/12


Revenues


6/30/11


Revenues

 

















Operating revenues

$ 1,020,188


100.0


$ 985,326


100.0
















 
Operating expenses:















Salaries, wages and benefits


272,360


26.7



268,128


27.2
Fuel


202,259


19.8



208,433


21.2
Supplies and maintenance


86,578


8.5



84,274


8.6
Taxes and licenses


45,499


4.5



46,440


4.7
Insurance and claims


34,327


3.4



34,591


3.5
Depreciation


82,177


8.0



78,964


8.0
Rent and purchased transportation


209,006


20.5



187,102


19.0
Communications and utilities


7,163


0.7



7,766


0.8
Other

  (5,696)


(0.6)


  (4,581)


(0.5)
Total operating expenses

  933,673


91.5


  911,117


92.5
Operating income

  86,515


8.5


  74,209


7.5






 
Other expense (income):





Interest expense


207


0.0



38


0.0
Interest income


(855)


(0.1)



(690)


(0.0)
Other

  (106)


(0.0)


  289


0.0
Total other expense (income)

  (754)


(0.1)


  (363)


(0.0)
Income before income taxes


87,269


8.6



74,572


7.5
Income taxes

  35,344


3.5


  30,761


3.1
Net income

$ 51,925


5.1


$ 43,811


4.4
















 
Diluted shares outstanding

  73,401






  73,190




Diluted earnings per share

$ 0.71






$ 0.60










 



OPERATING STATISTICS





YTD 12


% Change  

YTD 11




Trucking revenues, net of fuel surcharge (1)

$ 653,200


0.5%


$ 650,156




Trucking fuel surcharge revenues (1)


190,596


2.2%



186,460




Non-trucking revenues, including VAS (1)


167,223


19.1%



140,405




Other operating revenues (1)

  9,169


10.4%


  8,305




Operating revenues (1)

$ 1,020,188


3.5%


$ 985,326




















 
Average monthly miles per tractor


9,687


-2.0%



9,882




Average revenues per total mile (2)

$ 1.548


2.6%


$ 1.509




Average revenues per loaded mile (2)

$ 1.760


3.2%


$ 1.706




Average percentage of empty miles


12.06%


4.5%



11.54%




Average trip length in miles (loaded) (3)


483


-2.8%



497




Total miles (loaded and empty) (1)


421,995


-2.0%



430,776




Average tractors in service


7,261


-0.0%



7,265




Average revenues per tractor per week (2)

$ 3,460


0.5%


$ 3,442




Capital expenditures, net (1)

$ 121,926






$ 105,940




Cash flow from operations (1)

$ 138,798






$ 117,030




Return on assets (annualized)


7.8%







7.4%




Total tractors (at quarter end)















Company


6,675







6,675




Independent contractor

  650






  625




Total tractors


7,325







7,300




















 
Total trailers (truck and intermodal, quarter end)


23,355







23,320





 

(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) YTD 2011 trip length data corrected. See www.werner.com (“Investors tab” under “Featured
     Documents”) for correction of prior quarterly and annual trip length data.

 


BALANCE SHEET DATA

(In thousands, except share amounts)

 

 

   

   




6/30/12


12/31/11



(Unaudited)




ASSETS















 
Current assets:







Cash and cash equivalents

$ 18,184


$ 12,412
Accounts receivable, trade, less allowance







of $10,457 and $10,154, respectively


219,635



218,712
Other receivables


9,693



9,213
Inventories and supplies


26,070



30,212
Prepaid taxes, licenses and permits


7,037



15,094
Current deferred income taxes


26,901



25,805
Other current assets

  15,907


  29,883
Total current assets

  323,427


  341,331








 
Property and equipment


1,666,943



1,625,008
Less – accumulated depreciation

  686,737


  682,872
Property and equipment, net

  980,206


  942,136








 
Other non-current assets

  21,927


  18,949








 



$ 1,325,560


$ 1,302,416








 
LIABILITIES AND STOCKHOLDERS’ EQUITY















 
Current liabilities:







Checks issued in excess of cash balances

$ 0


$ 6,671
Accounts payable


77,153



93,486
Insurance and claims accruals


55,274



62,681
Accrued payroll


23,328



19,483
Other current liabilities

  23,017


  16,504
Total current liabilities

  178,772


  198,825








 
Other long-term liabilities


15,074



14,194








 
Insurance and claims accruals, net of current portion


120,950



121,250








 
Deferred income taxes


237,978



243,000








 
Stockholders’ equity:







Common stock, $.01 par value, 200,000,000 shares







authorized; 80,533,536 shares issued; 72,869,626







and 72,847,576 shares outstanding, respectively


805



805
Paid-in capital


96,628



94,396
Retained earnings


824,633



779,994
Accumulated other comprehensive loss


(4,804)



(5,170)
Treasury stock, at cost; 7,663,910 and 7,685,960







shares, respectively

  (144,476)


  (144,878)
Total stockholders’ equity

  772,786


  725,147



$ 1,325,560


$ 1,302,416








 

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, 2011. 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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