News Details

OMAHA, Neb.--(BUSINESS WIRE)--Oct. 17, 2012-- 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, 2012.

Summarized financial results for third quarter and year-to-date 2012 compared to third quarter and year-to-date 2011 are as follows (dollars in thousands, except per share data):

Werner Enterprises had a 15% decline in earnings per diluted share in third quarter 2012 compared to third quarter 2011, resulting from softer freight demand, rising fuel prices and other cost increases that exceeded rate increases. Earnings per diluted share for third quarter 2012 were in line with expectations that the Company announced on September 13, 2012.

Freight demand in third quarter 2012 did not show normal seasonal improvement from mid-August through September; in contrast, we experienced seasonal strengthening in demand during the same period in third quarter 2011. In third quarter 2012, our customers generally chose to keep their inventory levels leaner in a market with economic and political uncertainty. Freight trends for October 2012 to date have continued to trend below levels for the same period in 2011.

Average revenues per total mile, net of fuel surcharge, rose 1.9% in third quarter 2012 compared to third quarter 2011. Lower than anticipated freight volumes caused our loads to truck ratio in our truckload segment to be slightly below equilibrium for much of third quarter 2012. As a result, spot pricing rates trended lower, and the number of special freight projects with customers declined for both our truck fleets and VAS Brokerage unit in third quarter 2012 compared to third quarter 2011. Project freight is generally of a higher volume and shorter duration and therefore commands a premium price. While the recent freight trends have been disappointing, we believe truckload capacity constraints will continue due to an older industry truck fleet, the higher cost of new trucks and trailers, significant safety regulatory changes and a challenging driver market. We continue to work 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 third quarter 2012, we averaged 7,222 trucks in service and we ended the quarter with 7,110 trucks. This is a 215 truck decline from the end of second quarter 2012. This truck decline resulted primarily from our decision to exit certain less profitable customer business during third quarter 2012. 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 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 3,285 trucks (or 46% of our total fleet).

Diesel fuel prices were seven cents per gallon higher in third quarter 2012 than in third quarter 2011 and were 11 cents per gallon higher than in second quarter 2012. In second quarter 2012, the Department of Energy ("DOE") national average fuel survey price per gallon declined each week for the last eleven weeks. In a period of steadily declining fuel prices, the Company experiences a temporary favorable earnings lag effect, since fuel costs decline at a faster pace than the market indexes used to determine fuel surcharge collections. This occurred during second quarter 2012, enabling the Company to temporarily have lower net fuel expense, which helped to offset uncompensated fuel costs such as truck idling, empty miles, and out-of-route miles. In third quarter 2012, the DOE national average fuel price increased each week for eleven consecutive weeks. When fuel prices steadily rise each week, there is a temporary negative earnings lag effect that occurs because the cost of fuel rises immediately and the market indexes that are used to determine fuel surcharges increase at a slower pace. This occurred during third quarter 2012, causing the Company to have higher net fuel expense. For the first 17 days of October 2012, the average diesel fuel price per gallon was 40 cents higher than the average diesel fuel price per gallon in the same period of 2011 and 30 cents higher than in fourth 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 have been slowing during 2012. 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.

The driver recruiting and retention market became more challenging in third quarter 2012 compared to second quarter 2012. Driver pay increases by our competitors, a slightly lower number of and increased competition for truck driving school graduates and an improved housing construction market were all factors. Driver pay increased 1.4 cents per total mile in third quarter 2012 compared to third quarter 2011 as we made certain pay adjustments over the last year to attract and retain drivers for specific fleets. 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 approximately 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 $5.4 million in third quarter 2012 compared to $6.0 million in third quarter 2011 and $5.7 million in second quarter 2012. We sold fewer trucks and trailers in third quarter 2012 which resulted in slightly lower gains. We expect to sell fewer trucks and trailers in fourth quarter 2012 compared to fourth quarter 2011. Gains on sales are reflected as a reduction of Other Operating Expenses in our income statement.

We continued to buy new trucks and trailers to replace older equipment we sell or trade. The higher cost of new equipment results in higher depreciation expense. 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. Our net capital expenditures in third quarter 2012 were $58 million, which puts year-to-date net capital expenditures for 2012 at $180 million. We expect our net capital expenditures for the full year 2012 to be in a range of $210 million to $225 million. The average age of our truck fleet as of September 30, 2012 was 2.3 years, and we expect to further reduce our average truck age to approximately 2.2 years as of December 31, 2012.

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).

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

In third quarter 2012, VAS revenues increased $6 million or 8%, gross margin dollars increased 5% and operating income dollars decreased 7% compared to third quarter 2011.

Brokerage revenues in third quarter 2012 increased 7% compared to third quarter 2011 due to an 8% increase in average revenue per shipment, partially offset by a 1% decrease in shipment volume. Brokerage gross margin percentage declined 60 basis points due to lower special project business, and Brokerage operating income in third quarter 2012 was higher than in third quarter 2011. Intermodal revenues increased 10%, and Intermodal operating income was higher comparing third quarter 2012 to third quarter 2011. Werner Global Logistics revenues increased slightly in third quarter 2012 compared to third quarter 2011 while operating income declined.

Comparisons of the operating ratios (net of fuel surcharge revenues) for the Truckload segment and VAS segment for third quarters 2012 and 2011 and year-to-date 2012 and 2011 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 2012 and third quarter 2011 are 91.3% and 89.3%, respectively, and for year-to-date 2012 and 2011 are 91.1% and 91.0%, 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, 2012 we had no debt and $796.2 million of stockholders' equity.

(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
(3) Quarter ended 9/30/11 trip length corrected. See www.werner.com (“Investors tab” under “Featured Documents”) for correction of prior quarterly and annual trip length data.

(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.

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, 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