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8-K - 8-K - WERNER ENTERPRISES INCwern-20140630x8k.htm

Exhibit 99.1
WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145

FOR IMMEDIATE RELEASE
Contact: John J. Steele
 
Executive Vice President, Treasurer and
 
Chief Financial Officer
 
  (402) 894-3036

    
WERNER ENTERPRISES REPORTS SECOND QUARTER 2014 REVENUES AND EARNINGS

Omaha, Nebraska, July 21, 2014:

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, 2014.

Summarized financial results for second quarter 2014 compared to second quarter 2013 are as follows (dollars in thousands, except per share data):
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
 
  
2014
 
2013
 
% Change
 
2014
 
2013
 
% Change
Total revenues
$
542,120

 
$
506,648

 
7
 %
 
$
1,034,142

 
$
999,535

 
3
 %
Trucking revenues, net of fuel surcharge
332,025

 
320,000

 
4
 %
 
643,547

 
633,400

 
2
 %
Value Added Services (“VAS”) revenues
100,501

 
91,185

 
10
 %
 
185,655

 
173,695

 
7
 %
Operating income
42,330

 
42,361

 
0
 %
 
65,771

 
71,054

 
(7
)%
Net income
25,632

 
25,840

 
(1
)%
 
39,971

 
43,351

 
(8
)%
Earnings per diluted share
0.35

 
0.35

 
1
 %
 
0.55

 
0.59

 
(7
)%

Positive freight demand trends continued from first quarter 2014 into second quarter 2014. Freight demand (as measured by our daily morning ratio of loads available to trucks available in our One-Way Truckload network) showed consistent strength, and we were overbooked (more available freight than available trucks at the start of each day) throughout second quarter 2014. A tight capacity market combined with a gradually firming economy were the primary contributing factors. This trend has continued through the first three weeks of July 2014. Truck capacity is being constrained by an extremely challenging driver market, accelerating trucking company failures and heightened regulatory cost increases for truck ownership and safety; thus, we expect this favorable freight trend will continue.

Average revenues per tractor per week, net of fuel surcharge, increased 4.9% in second quarter 2014 compared to second quarter 2013. This was achieved as a result of planned network design changes that enabled us to increase our average trip length by 5.7% which improved average miles per truck and reduced empty miles while also producing an expected negative impact on revenue per mile. Even after these changes, average revenues per total mile, excluding fuel surcharge, rose 2.1% in second quarter 2014 compared to second quarter 2013. We made good progress working with our customers on sustainable rate increases during second quarter 2014. These efforts will continue as we move forward and work to recoup the cost increases associated with more expensive equipment, a shrinking supply of qualified drivers and an increasingly difficult regulatory environment. Strategic customers understand the collective capacity



Werner Enterprises, Inc. - Release of July 21, 2014
Page 2

and service challenges facing our company and our industry and are increasingly supportive of Werner's ongoing initiatives to provide sustainable transportation solutions in support of their supply chain needs.

We were pleased that our efforts to improve operational efficiency and productivity gained momentum in second quarter 2014. Despite the final quarter of an unfavorable headwind from the driver hours of service (HOS) changes, which became effective on July 1, 2013, our average monthly miles per truck increased 2.8% in second quarter 2014 compared to second quarter 2013 and grew sequentially by 5.6% from first quarter 2014. Better load planning and improved freight choices caused a 79 basis point reduction in our empty mile percentage to 12.14% in second quarter 2014 from 12.93% in second quarter 2013.

The Federal Motor Carrier Safety Administration's revised driver HOS rules referenced above included more restrictive requirements covering driver use of the 34-hour restart rule and a required 30-minute rest period after 8 hours on duty. We believe that these HOS changes negatively impacted our miles per truck by two to three percent. We are working closely with customers and drivers to minimize the impact of these changes and obtain adequate rate relief.

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 second quarter 2014, we averaged 7,055 trucks in service in the Truckload segment and 48 intermodal drayage trucks in the VAS segment. We ended the quarter with 7,035 trucks in the Truckload segment and 55 intermodal drayage trucks in the VAS segment. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,515 trucks (or 50% of our total Truckload segment fleet).

Diesel fuel prices were 5 cents per gallon higher in second quarter 2014 than in second quarter 2013 and were 6 cents per gallon lower than in first quarter 2014. For the first 20 days of July 2014, the average diesel fuel price per gallon was 8 cents lower than the average diesel fuel price per gallon in the same period of 2013 and 15 cents lower than in third 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 the truckload industry remains constrained by economic and safety regulatory factors. It is very costly for many smaller and medium size private carriers to replace their older, lower-value trucks with much more expensive, EPA-compliant new trucks, which significantly reduces the risk of trucks being added to the market. 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 second quarter 2014 were $47 million. We estimate net capital expenditures for the year 2014 to be in the range of $210 to $230 million which reflects our plan to reduce the average age of our truck fleet during the second half of 2014. The average age of our truck fleet as of June 30, 2014, was 2.4 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 and retention market was extremely difficult during second quarter 2014. Significant problematical factors include a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate and job competition from the housing construction and hydraulic fracturing markets. We expect that competition for drivers will further intensify in the coming months.

Gains on sales of assets were $5.2 million in second quarter 2014, including a $1.6 million gain from the sale of real estate. This compares to gains on sales of assets of $6.5 million in second quarter 2013, which included a $1.1 million gain from the sale of real estate, and gains on sales of assets of $4.6 million



Werner Enterprises, Inc. - Release of July 21, 2014
Page 3

in first quarter 2014. In second quarter 2014, we realized lower average gains per truck and sold more trucks and trailers compared to second quarter 2013. 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
June 30,
 
Six Months Ended
June 30,
  
2014
 
2013
 
2014
 
2013
Value Added Services (amounts in thousands)
$
 
%
 
$
 
%
 
$
 
%
 
$
 
%
Operating revenues
$
100,501

 
100.0
 
$
91,185

 
100.0
 
$
185,655

 
100.0
 
$
173,695

 
100.0
Rent and purchased transportation expense
87,209

 
86.8
 
76,255

 
83.6
 
159,763

 
86.1
 
145,452

 
83.7
Gross margin
13,292

 
13.2
 
14,930

 
16.4
 
25,892

 
13.9
 
28,243

 
16.3
Other operating expenses
11,037

 
11.0
 
10,441

 
11.5
 
21,782

 
11.7
 
20,141

 
11.6
Operating income
$
2,255

 
2.2
 
$
4,489

 
4.9
 
$
4,110

 
2.2
 
$
8,102

 
4.7

In second quarter 2014, VAS revenues increased $9.3 million or 10%, and operating income dollars decreased $2.2 million or 50%, compared to second quarter 2013. The increase in VAS revenues was due primarily to growth in Intermodal and Werner Global Logistics revenues. Operating income was impacted by a lower gross margin percentage for contractual business due to rising third party carrier costs, as capacity was tighter during second quarter 2014 compared to second quarter 2013.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $92.7 million and $88.6 million in second quarters 2014 and 2013, respectively, and $179.8 million and $180.2 million in the year-to-date 2014 and 2013 periods, respectively) and the VAS segment are shown below.
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
 
Operating Ratios
2014
 
2013
 
Difference
 
2014
 
2013
 
Difference
Truckload Transportation Services
88.6
%
 
89.4
%
 
(0.8
)%
 
90.9
%
 
91.0
%
 
(0.1
)%
Value Added Services
97.8
%
 
95.1
%
 
2.7
 %
 
97.8
%
 
95.3
%
 
2.5
 %

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 2014 and second quarter 2013 are 91.1% and 91.7%, respectively, and are 92.9% for both the 2014 and 2013 year-to-date periods, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses.

Our financial position remains strong. As of June 30, 2014, we had $40.0 million of debt outstanding and $787.0 million of stockholders' equity. During second quarter 2014, the Company purchased 500,000 shares of its common stock for a total cost of $12.7 million.
        



Werner Enterprises, Inc. - Release of July 21, 2014
Page 4

 
INCOME STATEMENT
 
(Unaudited)
 
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
$
 
%
 
$
 
%
 
$
 
%
 
$
 
%
Operating revenues
$
542,120

 
100.0

 
$
506,648

 
100.0

 
$
1,034,142

 
100.0

 
$
999,535

 
100.0

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
144,506

 
26.7

 
135,236

 
26.7

 
279,219

 
27.0

 
268,341

 
26.9

Fuel
92,131

 
17.0

 
90,191

 
17.8

 
183,206

 
17.7

 
186,984

 
18.7

Supplies and maintenance
45,887

 
8.5

 
43,934

 
8.7

 
91,741

 
8.9

 
87,062

 
8.7

Taxes and licenses
21,311

 
3.9

 
21,586

 
4.2

 
42,143

 
4.0

 
43,210

 
4.3

Insurance and claims
19,180

 
3.5

 
17,320

 
3.4

 
39,386

 
3.8

 
37,121

 
3.7

Depreciation
44,573

 
8.2

 
42,367

 
8.4

 
87,696

 
8.5

 
84,698

 
8.5

Rent and purchased transportation
128,239

 
23.7

 
115,060

 
22.7

 
239,885

 
23.2

 
221,378

 
22.2

Communications and utilities
3,409

 
0.6

 
3,187

 
0.6

 
6,908

 
0.7

 
6,329

 
0.6

Other
554

 
0.1

 
(4,594
)
 
(0.9
)
 
(1,813
)
 
(0.2
)
 
(6,642
)
 
(0.7
)
Total operating expenses
499,790

 
92.2

 
464,287

 
91.6

 
968,371

 
93.6

 
928,481

 
92.9

Operating income
42,330

 
7.8

 
42,361

 
8.4

 
65,771

 
6.4

 
71,054

 
7.1

Other expense (income):
 
 
 
Interest expense
136

 

 
91

 

 
230

 

 
235

 

Interest income
(660
)
 
(0.1
)
 
(535
)
 
(0.1
)
 
(1,315
)
 
(0.1
)
 
(1,040
)
 
(0.1
)
Other
(45
)
 

 
(82
)
 

 
(41
)
 

 
(92
)
 

Total other expense (income)
(569
)
 
(0.1
)
 
(526
)
 
(0.1
)
 
(1,126
)
 
(0.1
)
 
(897
)
 
(0.1
)
Income before income taxes
42,899


7.9

 
42,887

 
8.5

 
66,897

 
6.5

 
71,951

 
7.2

Income taxes
17,267

 
3.2

 
17,047

 
3.4

 
26,926

 
2.6

 
28,600

 
2.9

Net income
$
25,632

 
4.7

 
$
25,840

 
5.1

 
$
39,971

 
3.9

 
$
43,351

 
4.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted shares outstanding
72,597

 
 
 
73,598

 
 
 
72,882

 
 
 
73,690

 
 
Diluted earnings per share
$
0.35

 
 
 
$
0.35

 
 
 
$
0.55

 
 
 
$
0.59

 
 

 
SEGMENT INFORMATION
 
(Unaudited)
 
(In thousands)
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
Revenues
 
 


 
 
 
 
Truckload Transportation Services
$
429,390

 
$
412,869

 
$
832,575

 
$
821,769

Value Added Services
100,501

 
91,185

 
185,655

 
173,695

Other
12,258

 
2,083

 
16,247

 
4,127

Corporate
829

 
996

 
1,387

 
1,646

    Subtotal
542,978

 
507,133

 
1,035,864

 
1,001,237

Inter-segment eliminations (1)
(858
)
 
(485
)
 
(1,722
)
 
(1,702
)
     Total
$
542,120

 
$
506,648

 
$
1,034,142

 
$
999,535

 
 
 
 
 
 
 
 
Operating Income
 
 


 
 
 
 
Truckload Transportation Services
$
38,320

 
$
34,442

 
$
59,100

 
$
58,057

Value Added Services
2,255

 
4,489

 
4,110

 
8,102

Other
357

 
1,623

 
841

 
2,528

Corporate
1,398

 
1,807

 
1,720

 
2,367

     Total
$
42,330

 
$
42,361

 
$
65,771

 
$
71,054


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




Werner Enterprises, Inc. - Release of July 21, 2014
Page 5

 
OPERATING STATISTICS BY SEGMENT
 
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
 
 
2014
 
2013
 
% Change
 
2014
 
2013
 
% Change
Truckload Transportation Services segment
 
 
 
 

 
 
 
 
 
 
Average percentage of empty miles
12.14
%
 
12.93
%
 
(6.1
)%
 
12.06
%
 
12.98
%
 
(7.1
)%
Average trip length in miles (loaded)
466

 
441

 
5.7
 %
 
466

 
453

 
2.9
 %
Average tractors in service
7,055

 
7,134

 
(1.1
)%
 
7,029

 
7,146

 
(1.6
)%
Average revenues per tractor per week (1)
$
3,620

 
$
3,450

 
4.9
 %
 
$
3,521

 
$
3,409

 
3.3
 %
Total trailers (at quarter end)
21,865

 
22,005

 
 
 
21,865

 
22,005

 
 
Total tractors (at quarter end)
 
 
 
 
 
 
 
 
 
 
 
    Company
6,375

 
6,480

 
 
 
6,375

 
6,480

 
 
    Independent contractor
660

 
670

 
 
 
660

 
670

 
 
        Total tractors
7,035

 
7,150

 
 
 
7,035

 
7,150

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Value Added Services segment
 
 
 
 
 
 
 
 
 
 
 
Total VAS shipments
74,660

 
70,383

 
6.1
 %
 
136,952

 
134,749

 
1.6
 %
Less: Non-committed shipments to truckload segment
20,163

 
19,411

 
3.9
 %
 
36,660

 
39,357

 
(6.9
)%
Net VAS shipments
54,497

 
50,972

 
6.9
 %
 
100,292

 
95,392

 
5.1
 %
Average revenue per shipment
$
1,699

 
$
1,632

 
4.1
 %
 
$
1,707

 
$
1,653

 
3.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average tractors in service
48

 
45

 
 
 
47

 
42

 
 
Total trailers (at quarter end)
1,730

 
1,755

 
 
 
1,730

 
1,755

 
 
Total tractors (at quarter end)
55

 
43

 
 
 
55

 
43

 
 

(1) Net of fuel surcharge revenues.


 
SUPPLEMENTAL INFORMATION
 
(Unaudited)
 
(In thousands)
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
Capital expenditures, net
$
46,761

 
$
13,223

 
$
62,807

 
$
34,529

Cash flow from operations
31,336

 
34,302

 
90,545

 
110,908

Return on assets (annualized)
7.4
%
 
7.8
%
 
5.8
%
 
6.5
%
Return on equity (annualized)
13.1
%
 
14.0
%
 
10.3
%
 
11.9
%





Werner Enterprises, Inc. - Release of July 21, 2014
Page 6

 
CONDENSED BALANCE SHEET
 
(In thousands, except share amounts)
 
 
 
 
 
June 30,
2014
 
December 31,
2013
 
(Unaudited)
 
 
 
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
27,714

 
$
23,678

Accounts receivable, trade, less allowance of $10,166 and $9,939, respectively
261,305

 
231,647

Other receivables
20,888

 
10,769

Inventories and supplies
15,088

 
15,743

Prepaid taxes, licenses and permits
6,894

 
15,064

Current deferred income taxes
26,389

 
25,315

Other current assets
32,248

 
27,445

Total current assets
390,526

 
349,661

 
 
 
 
Property and equipment
1,724,963

 
1,727,737

Less – accumulated depreciation
762,991

 
750,219

Property and equipment, net
961,972

 
977,518

 
 
 
 
Other non-current assets
38,372

 
26,918

Total assets
$
1,390,870

 
$
1,354,097

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
84,902

 
$
66,678

Insurance and claims accruals
62,301

 
59,811

Accrued payroll
27,250

 
22,785

Other current liabilities
20,292

 
18,457

Total current liabilities
194,745

 
167,731

 
 
 
 
Long-term debt, net of current portion
40,000

 
40,000

Other long-term liabilities
19,085

 
14,710

Insurance and claims accruals, net of current portion
132,250

 
131,900

Deferred income taxes
217,779

 
227,237

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536
 
 
 
shares issued; 71,950,164 and 72,713,920 shares outstanding, respectively
805

 
805

Paid-in capital
101,419

 
98,534

Retained earnings
863,596

 
830,842

Accumulated other comprehensive loss
(4,531
)
 
(4,631
)
Treasury stock, at cost; 8,583,372 and 7,819,616 shares, respectively
(174,278
)
 
(153,031
)
Total stockholders’ equity
787,011

 
772,519

Total liabilities and stockholders' equity
$
1,390,870

 
$
1,354,097





Werner Enterprises, Inc. - Release of July 21, 2014
Page 7

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, 2013.

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.