News Details

OMAHA, Neb.--(BUSINESS WIRE)--Oct. 17, 2013-- 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, 2013.

Summarized financial results for third quarter and year-to-date 2013 compared to third quarter and year-to-date 2012 are as follows (dollars in thousands, except per share data):

Earnings per diluted share for third quarter 2013 of $0.29 were within the expected range of $0.27 to $0.30 per share as announced by the Company on September 16, 2013. The Company’s effective income tax rate for third quarter 2013 was 35.8% primarily because of tax adjustments for uncertain tax positions. The impact of this lower effective income tax rate increased diluted earnings by two cents per share. The Company expects its fourth quarter 2013 effective income tax rate to be approximately 40.5%.

Third quarter 2013 freight demand (as measured by the daily morning ratio of loads to trucks in our One-Way Truckload network) showed normal seasonal improvement in August and September 2013. This was better than the softer freight demand during the same period a year ago when freight demand was essentially flat throughout the entire quarter. The Company believes that better freight conditions in third quarter 2013 resulted from slightly tighter capacity due to the July 1, 2013 implementation of government-mandated hours of service changes and slightly improved customer demand.

Average revenues per total mile, net of fuel surcharge, rose 2.4% in third quarter 2013 compared to third quarter 2012. We believe there are several truckload capacity constraints including 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.

Average monthly miles per truck declined by 3.5% in third quarter 2013 compared to third quarter 2012 and declined by 2.3% compared to second quarter 2013. The Federal Motor Carrier Safety Administration (“FMCSA”) published final driver hours of service ("HOS") rules in December 2011, which became effective July 1, 2013. Among the changes were more restrictive requirements covering driver use of the 34-hour restart rule and a new mandatory 30-minute rest period after 8 hours on duty. The Company modified and tested its electronic HOS system and began dispatching drivers under the revised HOS rules effective July 1. As expected, the Company believes that these hours of service changes negatively impacted miles per truck by two to three percent. The Company is working closely with its customers and drivers to minimize the impact of these changes or to obtain adequate rate relief. In addition to the HOS changes, truck mix changes (more Dedicated, less One-Way Truckload) and a 7% shorter length of haul in third quarter 2013 compared to third quarter 2012 also contributed to the lower miles per truck.

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 Logistics (VAS). In third quarter 2013, we averaged 7,200 trucks in service in the Truckload segment and 46 intermodal drayage trucks in the VAS segment. We ended the quarter with 7,245 trucks in the Truckload segment (an increase of 95 trucks from the end of second quarter 2013) and 50 trucks in the VAS segment. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,555 trucks (or 49% of our total Truckload segment fleet).

Diesel fuel prices were 6 cents per gallon lower in third quarter 2013 than in third quarter 2012 and were 9 cents per gallon higher than in second quarter 2013. For the first 17 days of October 2013, the average diesel fuel price per gallon was 31 cents lower than the average diesel fuel price per gallon in the same period of 2012 and 14 cents lower than in fourth quarter 2012. 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 our industry remains constrained by economic and safety regulatory factors. Following the 2008 recession, class 8 truck builds have been low, resulting in an industry average truck age that remains historically high at 6.6 years. It is very difficult for many smaller and medium size private carriers to replace their older, lower-value trucks with much higher cost, EPA-compliant new trucks, which significantly reduces the risk of trucks being added to the market. We reduced the average age of our much younger truck fleet by half a year during 2011 and 2012, with net capital expenditures totaling $457 million during that two-year period. The significantly higher cost of new trucks and resulting higher depreciation expense and related diesel exhaust fluid costs is not being recovered through a single year customer rate review cycle. We continue to invest in equipment solutions such as more aerodynamic truck features, idle reduction systems, tire inflation systems and trailer skirts to improve the mile per gallon efficiency of our fleet. Net capital expenditures of $71.9 million in third quarter 2013 were higher as planned. We expect our net capital expenditures for the full year 2013 to be in a range of $150 million to $175 million. The average age of our truck fleet as of September 30, 2013 was 2.3 years, and our goal is to maintain our average truck age at approximately this level during the remainder of 2013. 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 remained challenging during third quarter 2013. Significant factors included a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate, and increased job competition from strengthening housing construction and hydraulic fracturing markets.

Gains on sales of assets were $2.7 million in third quarter 2013. This compares to gains on sales of assets of $5.4 million in third quarter 2012 and $6.5 million in second quarter 2013, which included a $1.1 million gain from the sale of real estate. We sold fewer trucks and trailers in third quarter 2013 and realized lower average gains per truck. We expect gains on sales of trucks and trailers in fourth quarter 2013 to be at or below third quarter 2013 levels. 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 2013, VAS revenues increased $13.2 million or 16%, and operating income dollars increased $0.4 million or 11%, compared to third quarter 2012. For the same periods, VAS gross margin dollars increased $1.9 million or 15%, and other operating expenses increased $1.5 million or 17%; these changes are primarily attributed to Intermodal's development of its own drayage fleet, which had the effect of lowering rent and purchased transportation expense and increasing other operating expenses. Brokerage revenues in third quarter 2013 increased 17% compared to third quarter 2012 due primarily to a 20% increase in shipment volume. Brokerage operating income in third quarter 2013 was higher than in third quarter 2012, despite a 71 basis point decline in gross margin percentage. Intermodal revenues increased 28%, and Intermodal operating income increased at a higher percentage rate comparing third quarter 2013 to third quarter 2012. Werner Global Logistics revenues and operating income decreased slightly in third quarter 2013 compared to third quarter 2012.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $87.6 million and $90.1 million in third quarters 2013 and 2012, respectively, and $267.7 million and $280.7 million in the year-to-date 2013 and 2012 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 2013 and third quarter 2012 are 93.4% and 91.3%, respectively, and for year-to-date 2013 and 2012 are 93.1% and 91.1%, 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, 2013, we had $50.0 million of debt outstanding and $752.7 million of stockholders' equity. During third quarter 2013, the Company purchased 212,300 shares of its common stock for a total cost of $5.0 million.

(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, 2012.

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