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Werner Enterprises Reports Fourth Quarter and Annual 2013 Revenues and Earnings

January, 28, 2014

OMAHA, Neb.--(BUSINESS WIRE)--Jan. 28, 2014-- Werner Enterprises, Inc. (NASDAQ: WERN), one of the nation's largest transportation and logistics companies, reported revenues and earnings for the fourth quarter and year ended December 31, 2013.

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


   
   
   
   



Three Months Ended




Year Ended





December 31,




December 31,





2013     2012

% Change

2013     2012

% Change
Total revenues

$ 517,920

$ 509,694

2%


$ 2,029,183  
$ 2,036,386

0%
Trucking revenues, net of fuel surcharge

332,592

330,081

1%


1,287,656

1,309,503

(2)%
Value Added Services (“VAS”) revenues

91,234

78,316

16%


361,384

324,155

11%
Operating income

36,089

43,124

(16)%


139,726

171,444

(19)%
Net income

22,175

25,981

(15)%


86,785

103,034

(16)%
Earnings per diluted share

0.30

0.35

(14)%


1.18

1.40

(16)%




















 

Operating income for fourth quarter 2013 of $36.1 million improved sequentially by 11% compared to $32.6 million for third quarter 2013 due primarily to a more favorable freight market. Fourth 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 October and November, with some further demand strengthening during this quarter’s compressed retail selling period between Thanksgiving and Christmas compared to the same holiday period a year ago. Freight trends thus far in 2014 have been better than the same period in 2013. Severe weather in December 2013 and early January 2014 created a build up of freight demand but also resulted in higher operating expenses such as maintenance and insurance and lower miles per truck.

Average revenues per total mile, net of fuel surcharge, rose 3.1% in fourth quarter 2013 compared to fourth quarter 2012 due partially to higher seasonal capacity surcharges in the One-Way Truckload fleet and higher average revenue per mile in the Specialized Services unit in fourth quarter 2013. During fourth quarter 2013, the Company increased its emphasis on minimizing empty miles and maximizing utilization in its One-Way Truckload fleet. We believe there are several truckload capacity constraints including an older industry truck fleet, the higher cost of new trucks and trailers, significant regulatory changes, increased trucking company failures 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 for the Company declined by 2.2% in fourth quarter 2013 compared to fourth quarter 2012 and increased by 2.6% compared to third quarter 2013. The Federal Motor Carrier Safety Administration (“FMCSA”) revised driver hours of service ("HOS”) rules 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. As expected, the Company believes that these hours of service changes negatively impacted miles per truck by two to three percent. The Company continues to work closely with its customers and drivers to minimize the impact of these changes and obtain adequate rate relief. In addition to the HOS changes, truck mix changes (more Specialized Services, less One-Way Truckload) and a 4% shorter length of haul in fourth quarter 2013 compared to fourth quarter 2012 also affected truck utilization.

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 fourth quarter 2013, we averaged 7,157 trucks in service in the Truckload segment and 50 intermodal drayage trucks in the VAS segment. We ended the quarter with 7,050 trucks in the Truckload segment and 49 intermodal drayage trucks in the VAS segment. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,425 trucks (or 49% of our total Truckload segment fleet).

Diesel fuel prices were 16 cents per gallon lower in fourth quarter 2013 than in fourth quarter 2012 and were 6 cents per gallon lower than in third quarter 2013. For the first 28 days of January 2014, the average diesel fuel price per gallon was 5 cents lower than the average diesel fuel price per gallon in the same period of 2013 and 15 cents lower than in first 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 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 including 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 in 2013 were $152 million. We estimate capital expenditures for the year 2014 to be in the range of $150 to $200 million. The average age of our truck fleet as of December 31, 2013, was 2.4 years, and our goal is to maintain our average truck age at approximately this level during 2014. 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 became even more challenging during fourth 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 the strengthening housing construction and hydraulic fracturing markets.

Gains on sales of assets were $3.7 million in fourth quarter 2013, including a $0.7 million gain from the sale of real estate. This compares to gains on sales of assets of $4.7 million in fourth quarter 2012 and $2.7 million in third quarter 2013. In fourth quarter 2013 we realized lower average gains per truck compared to fourth quarter 2012. 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

Year Ended



December 31,

December 31,



2013     2012

2013     2012

Value Added Services (amounts in thousands)



$     %

$     %

$     %

$     %
Operating revenues

$ 91,234

100.0

$ 78,316

100.0

$ 361,384

100.0

$ 324,155

100.0
Rent and purchased transportation expense

78,172

85.7

65,450

83.6

305,582

84.6

274,326

84.6
Gross margin

13,062

14.3

12,866

16.4

55,802

15.4

49,829

15.4
Other operating expenses

10,693

11.7

8,934

11.4

41,138

11.3

33,830

10.5
Operating income

$ 2,369

2.6

$ 3,932

5.0

$ 14,664

4.1

$ 15,999

4.9




























 

In fourth quarter 2013, VAS revenues increased $12.9 million or 16%, and operating income dollars decreased $1.6 million or 40%, compared to fourth quarter 2012. The increase in VAS revenues was due primarily to an increase in Brokerage shipments, and to a lesser extent, an increase in Intermodal shipments offset partially by a decrease in average revenue per shipment. Operating income was impacted by a lower gross margin percentage due to higher third party carrier rates as capacity tightened during fourth quarter 2013 compared to fourth quarter 2012.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $86.9 million and $95.4 million in fourth quarters 2013 and 2012, respectively, and $354.6 million and $376.1 million in 2013 and 2012, respectively) and the VAS segment are shown below.


   
   
   
   



Three Months Ended




Year Ended





December 31,




December 31,


Operating Ratios



2013     2012

Difference

2013     2012

Difference
Truckload Transportation Services

89.8%


88.0%


1.8%


90.8%


88.4 %

2.4%
Value Added Services

97.4%


95.0%


2.4%


95.9%


95.1 %

0.8%
























 

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 fourth quarter 2013 and fourth quarter 2012 are 91.9% and 90.7%, respectively, and for 2013 and 2012 are 92.8% 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 December 31, 2013, we had $40.0 million of debt outstanding and $772.5 million of stockholders' equity.


   



INCOME STATEMENT



(Unaudited)



(In thousands, except per share amounts)



 



Three Months Ended     Year Ended



December 31,

December 31,



2013     2012  

2013     2012



$     %

$     %  

$     %

$     %
Operating revenues

$ 517,920  

100.0  

$ 509,694  

100.0  

$ 2,029,183  

100.0  

$ 2,036,386  

100.0  
























 
Operating expenses:























Salaries, wages and benefits

139,244


26.9


137,039


26.9


545,419


26.9


544,322


26.7
Fuel

91,915


17.7


100,353


19.7


371,789


18.3


401,417


19.7
Supplies and maintenance

45,572


8.8


41,338


8.1


179,172


8.8


172,505


8.5
Taxes and licenses

21,928


4.2


22,252


4.3


86,686


4.3


90,002


4.4
Insurance and claims

17,342


3.3


16,797


3.3


71,177


3.5


65,593


3.2
Depreciation

45,709


8.8


42,879


8.4


173,019


8.5


166,957


8.2
Rent and purchased transportation

117,856


22.8


103,979


20.4


456,885


22.5


420,480


20.7
Communications and utilities

3,423


0.7


3,200


0.6


13,506


0.7


13,745


0.7
Other

(1,158)


(0.2)


(1,267)


(0.2)


(8,196)


(0.4)


(10,079)


(0.5)
Total operating expenses

481,831  

93.0  

466,570  

91.5  

1,889,457  

93.1  

1,864,942  

91.6  
Operating income

36,089  

7.0  

43,124  

8.5  

139,726  

6.9  

171,444  

8.4  















 
Other expense (income):














Interest expense

118





63





454





288



Interest income

(640)


(0.1)


(521)


(0.1)


(2,269)


(0.1)


(1,837)


(0.1)
Other

(43)


 

(83)


 

(170)


 

(173)


 

Total other expense (income)



(565)


(0.1)


(541)


(0.1)


(1,985)


(0.1)


(1,722)


(0.1)































 
Income before income taxes

36,654


7.1


43,665


8.6


141,711


7.0


173,166


8.5
Income taxes

14,479  

2.8  

17,684  

3.5  

54,926  

2.7  

70,132  

3.4  
Net income

$ 22,175  

4.3  

$ 25,981  

5.1  

$ 86,785  

4.3  

$ 103,034  

5.1  
























 
Diluted shares outstanding

73,142  




73,584  




73,428  




73,453  


Diluted earnings per share

$ 0.30  




$ 0.35  




$ 1.18  




$ 1.40  


































 

   



SEGMENT INFORMATION



(Unaudited)



(In thousands)



 



Three Months Ended     Year Ended



December 31,

December 31,



2013     2012

2013     2012

Revenues













Truckload Transportation Services

$ 423,412


$ 428,968


$ 1,657,854


$ 1,699,349
Value Added Services

91,234


78,316


361,384


324,155
Other

3,847


2,372


11,342


11,782
Corporate

414  

689  

3,081  

4,322  
Subtotal

518,907


510,345


2,033,661


2,039,608
Inter-segment eliminations (1)

(987)


(651)


(4,478)


(3,222)
Total

$ 517,920  

$ 509,694  

$ 2,029,183  

$ 2,036,386  












 

Operating Income













Truckload Transportation Services

$ 34,439


$ 40,045


$ 119,597


$ 153,142
Value Added Services

2,369


3,932


14,664


15,999
Other

470


(549)


3,947


1,212
Corporate

(1,189)


(304)


1,518  

1,091  
Total

$ 36,089  

$ 43,124  

$ 139,726  

$ 171,444  




















 
(1)     Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation. 2012 VAS segment revenues have been revised to conform to the current presentation.



 

   



OPERATING STATISTICS BY SEGMENT



(Unaudited)



 



Three Months Ended    
    Year Ended    



December 31,




December 31,





2013     2012

% Change

2013     2012

% Change

Truckload Transportation Services segment



















Average percentage of empty miles

11.91%


12.56%


(5.2)%


12.54%


12.29%


2.0%
Average trip length in miles (loaded)

461


482


(4.4)%


453


481


(5.8)%
Average tractors in service

7,157


7,156


—%


7,162


7,225


(0.9)%
Average revenues per tractor per week (1)

$ 3,575


$ 3,548


0.8%


$ 3,457


$ 3,486


(0.8)%
Total trailers (at quarter end)

21,980


22,415





21,980


22,415



Total tractors (at quarter end)

















Company

6,380


6,505





6,380


6,505



Independent contractor

670  

645  




670  

645  


Total tractors

7,050


7,150





7,050


7,150





















 

Value Added Services segment



















Total VAS shipments

71,471


64,226


11.3%


277,430


265,411


4.5%
Less: Non-committed shipments to truckload segment

17,299  

20,587  

(16.0)%


75,852  

79,025  

(4.0)%
Net VAS shipments

54,172  

43,639  

24.1%


201,578  

186,386  

8.2%
Average revenue per shipment

$ 1,560  

$ 1,643  

(5.0)%


$ 1,627  

$ 1,602  

1.6%


















 
Average tractors in service

50


40





45


22



Total trailers (at quarter end)

1,725


965





1,725


965



Total tractors (at quarter end)

49


39





49


39

























 

(1) Net of fuel surcharge revenues.

 

   



SUPPLEMENTAL INFORMATION



(Unaudited)



(In thousands)



 



Three Months Ended     Year Ended



December 31,

December 31,



2013     2012

2013     2012
Capital expenditures, net

$ 45,448


$ 44,680


$ 151,916


$ 224,927
Cash flow from operations

61,366


56,381


232,457


255,096
Return on assets (annualized)

6.5%


7.6%


6.5%


7.7%
Return on equity (annualized)

11.6%


13.7%


11.7%


13.6%
















 

   



CONDENSED BALANCE SHEET



(In thousands, except share amounts)




   



December 31,

December 31,



2013

2012



(Unaudited)








 
ASSETS





Current assets:





Cash and cash equivalents

$ 23,678


$ 15,428
Accounts receivable, trade, less allowance of $9,939 and $10,528, respectively

231,647


211,133
Other receivables

10,769


8,004
Inventories and supplies

15,743


23,260
Prepaid taxes, licenses and permits

15,064


14,893
Current deferred income taxes

25,315


25,139
Other current assets

27,445  

21,330  
Total current assets

349,661  

319,187  






 
Property and equipment

1,727,737


1,690,490
Less – accumulated depreciation

750,219  

696,647  
Property and equipment, net

977,518  

993,843  






 
Other non-current assets

26,918  

21,870  
Total assets

$ 1,354,097  

$ 1,334,900  






 
LIABILITIES AND STOCKHOLDERS’ EQUITY





Current liabilities:





Accounts payable

$ 66,678


$ 56,397
Current portion of long-term debt




20,000
Insurance and claims accruals

59,811


57,679
Accrued payroll

22,785


21,134
Other current liabilities

18,457  

20,983  
Total current liabilities

167,731  

176,193  






 
Long-term debt, net of current portion

40,000


70,000
Other long-term liabilities

14,710


15,779
Insurance and claims accruals, net of current portion

131,900


125,500
Deferred income taxes

227,237


232,531






 
Stockholders’ equity:





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





shares issued; 72,713,920 and 73,246,598 shares outstanding, respectively

805


805
Paid-in capital

98,534


97,457
Retained earnings

830,842


758,617
Accumulated other comprehensive loss

(4,631)


(4,156)
Treasury stock, at cost; 7,819,616 and 7,286,938 shares, respectively

(153,031)


(137,826)
Total stockholders’ equity

772,519  

714,897  
Total liabilities and stockholders' equity

$ 1,354,097  

$ 1,334,900  










 

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, 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

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