WERNER ENTERPRISES, INC.
14507 Frontier Road
P. O. Box 45308
Omaha, Nebraska 68145
FOR IMMEDIATE RELEASE Contact: Robert E. Synowicki, Jr.
--------------------- Executive Vice President and
Chief Information Officer
(402) 894-3000
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
(402) 894-3036
WERNER ENTERPRISES REPORTS EIGHTH CONSECUTIVE QUARTER OF HIGHER
OPERATING REVENUES AND EARNINGS
Omaha, Nebraska, October 15, 2003:
---------------------------------
Werner Enterprises, Inc. (Nasdaq: WERN-news), one of the nation's
largest truckload transportation companies, reported its eighth
consecutive year-over-year quarter of higher operating revenues and
earnings for the third quarter ended September 30, 2003. Operating
revenues increased 10% to $368.0 million compared to $336.1 million in
third quarter 2002. Net income increased 22% to $20.5 million compared
to $16.8 million in third quarter 2002. Earnings per share for third
quarter 2003 were $.25 per share, or 21% higher than the $.21 per share
earned in third quarter 2002. On September 30, 2003, Werner
Enterprises issued a five-for-four stock split, in the form of a 25%
stock dividend. All share and per-share information is retroactively
adjusted to reflect the stock split.
"During third quarter, demand for our services was a little better
than third quarter a year ago," said Chairman and Chief Executive
Officer Clarence (C.L.) Werner. "We experienced slight improvement in
the freight of our diversified group of retail and consumer products
customers, which amounts to about 60% of our total revenues.
Manufacturing and industrial freight, which is about 20% of our total
revenues, was flat compared to a year ago. During the quarter, we made
progress by lowering driver turnover in a difficult driver market and
improving our miles per truck. We once again continued to raise our
revenue per total mile, achieving a 3.1% increase compared to the same
quarter a year ago."
Average fuel prices in third quarter 2003 were 7 cents a gallon, or
9%, higher than third quarter 2002. Average prices in the current
quarter were about the same as second quarter 2003. To lessen the
effect of fluctuating fuel prices on the Company's margins, Werner
collects fuel surcharge revenues from its customers. These surcharge
programs, which automatically adjust as fuel prices change, continued in
effect. Fuel surcharge revenues were $13.6 million in third quarter
2003 compared to $8.2 million in third quarter 2002. Fuel surcharge
revenues in third quarter 2003 positively impacted earnings by one cent
per share compared to third quarter 2002. This trend is not expected to
continue in fourth quarter 2003. As the Company noted in its prior
quarterly earnings release of July 16, earnings in second quarter 2003
were positively impacted by two cents per share compared to second
quarter 2002 due to the temporary lag benefit of fuel surcharge
revenues.
As discussed in previous quarterly earnings releases, the Company
delayed the business risk of buying new truck engines that are subject
to the more stringent emissions standards mandated by the Environmental
Protection Agency. The new regulations apply to all truck engines
manufactured after October 1, 2002. Last year, the Company purchased a
significant amount of new trucks with engines manufactured prior to
October 2002, in addition to the normal number of new trucks required
for the Company's three-year replacement cycle. This prebuy enabled the
Company to delay the impact of using trucks with new engines in its
fleet by approximately one year and provided for additional testing
time. The prebuy trucks have been gradually placed in service over the
past year, with the last group of these trucks being placed into service
during the current quarter. As of September 30, 2003, the average age
of our Company-owned truck fleet is 1.6 years.
Werner Enterprises is continuing ongoing testing of the new truck
engines, in particular the Caterpillar ACERT engines and the Detroit
Diesel EGR engines. The Company took delivery of approximately 325 new
trucks with Caterpillar ACERT engines in third quarter 2003. Werner
plans to take delivery of approximately 300 new trucks with Caterpillar
ACERT engines and 200 new trucks with Detroit Diesel EGR engines in
fourth quarter 2003. Final decisions on truck purchases for 2004 have
not been made at this time. Management may decide to extend the average
age of its truck fleet.
Effective January 4, 2004, the federal regulations that govern
driver hours of service for truckload carriers are changing. These are
clearly the most significant changes to the hours of service regulations
in over 60 years.
There are several hours of service changes that may have a positive
or negative effect on driver hours (and miles) once the new rules are
implemented. The rule changes include:
-Drivers may drive up to 11 hours instead of the current 10 hours,
subject to the new 14-hour on-duty maximum described below.
-A driver's off-duty period must be 10 hours, compared to 8 hours
currently.
-In general, drivers may not drive beyond 14 hours in a 24-hour
period, compared to 15 hours in a 24-hour period currently.
-During the new 14-hour consecutive on-duty period, the only way to
extend the on-duty period is by the use of a sleeper berth period
of at least two hours that is later coupled with a second sleeper
berth break equal to 10 hours. Under existing rules, during the 15-
hour on-duty period, drivers are allowed to take multiple breaks of
varying lengths of time, which can be either off-duty time or
sleeper berth time, that do not count against the 15-hour period.
-There is no change to the rule that limits drivers to a maximum of
70 on-duty hours in 8 consecutive days. However, under the new
rules, drivers can "restart" their 8-day clock at zero hours by
taking at least 34 consecutive hours off duty.
While the Company believes the 11-hour and the 34-hour restart
rules may have a slight positive effect on driving hours, management
believes the 15-hour to 14-hour rule change could have a more
significant negative impact on driving hours for the truckload industry.
The existing 15-hour rule works like a stopwatch and allows drivers to
stop and start their on-duty time as they choose. The new 14-hour rule
is like a running clock. Once the driver goes on-duty and the clock
starts, the driver is limited to one timeout, or else the clock keeps
running. As a result of this change, issues that cause driver delays
such as multiple stop shipments, unloading/loading delays, and equipment
maintenance could result in a reduction in driver miles. Most truckload
carriers pay drivers by the mile, so a reduction in driver miles would
result in a reduction in driver pay. Since the annual driver turnover
rate in the truckload industry exceeds 100% per year, the competitive
market would likely require carriers to raise the rate of pay per mile
to drivers if miles decline.
During the course of our ongoing rate increase meetings with
customers this Fall, the Company is increasing charges for multiple stop
shipments and for equipment detention. If a customer's freight system
causes a driver delay that results in a reduction of the driver's
driving hours under the new hours of service rules, carriers will need
to work with customers to minimize such delays, such as improving the
efficiency of the loading or unloading process. If this cannot be
improved, customers will need to compensate carriers to make up for a
mileage shortfall.
Werner Enterprises has completed software reprogramming for the new
hours of service rules of its proprietary Paperless Log System (PLS)
that is used to (1) monitor driver hours of service on a real-time basis
and (2) preplan the assignment of shipments to drivers based on their
available driving hours. The Company has been using the PLS since 1996
and received regulatory approval for its use from the U.S. Federal Motor
Carrier Safety Administration in 1998. The PLS is a proactive planning
tool, as opposed to the reactive hours of service system used by other
truckload carriers. By using real-time available driving hours data,
Werner matches the optimum shipment to the optimum truck to maximize
miles per truck. Using the PLS, the Company regularly preplans and
executes the scheduled swapping of trailers between trucks to maximize
truck productivity. Other techniques used by the Company to maximize
truck productivity are the use of trailer pools and focusing on drop and
hook freight. As a result, the Company has historically produced one of
the higher average miles per truck in the industry.
Werner Enterprises is currently testing a sample of its drivers
using the new hours of service rules that can be tested at this time
(i.e., increasing off-duty time from 8 hours to 10 hours and
implementing the 14-hour consecutive rule). While the Company is unable
to predict the ultimate impact of the new hours of service rules because
it cannot yet test the positive aspects of the new rules (i.e., 11 hours
driving time vs. 10, and the 34 hour restart), management expects that
the Company's PLS and its proactive management of driver hours will help
the Company minimize any negative impact of the new rules, as compared
to other truckload carriers. However, the Company expects the initial
impact of the new rules will reduce its average miles per truck. As
time goes on and the Company and its drivers gain more experience with
the new rules, the Company expects to gradually reduce the expected
decline in average miles per truck.
Gains on sales of equipment, primarily trucks, are reflected as a
reduction of Other Operating Expenses in the Company's income statement
and amounted to a gain of $2.3 million in third quarter 2003 compared to
a gain of $0.6 million in third quarter 2002. Gains increased due to a
higher average sales price, and gain, per truck in third quarter 2003.
Insurance and claims costs continued to trend at a higher level and
were 5% of revenues in third quarter 2003. Higher incurred costs per
claim and rising excess insurance premiums caused the increase.
Management is continuing its focus on driver safety and risk management.
Tractors in service increased by 47 trucks from second quarter 2003
to third quarter 2003, compared to a sequential decline of 40 trucks
from first quarter 2003 to second quarter 2003. While the market for
recruiting qualified company drivers and owner operators remains
challenging, the Company increased its average tractors in service
during third quarter by reducing driver turnover.
Werner was pleased to be recognized in August as the highest rated
truckload carrier in the United States in the 20th annual Logistics
Management "Quest for Quality" survey of thousands of shippers. This
independent survey rates carriers on a number of factors, including on-
time performance, value, information technology, customer service, and
equipment/operations.
During third quarter 2003, the Company purchased 229,625 shares of
common stock at an average price of $19.69 per share, for a total of
$4.5 million.
On June 12, the Company announced a 50% increase in its quarterly
cash dividend rate. At the Company's current quarterly dividend rate of
2.5 cents per share, dividends are tracking at an annual rate of $8
million per year. Werner Enterprises has been paying a quarterly cash
dividend for each of the last 17 years.
The Company's financial position remains strong. Cash increased
during the quarter by $24.0 million to $125.8 million. The Company's
cash exceeds its only remaining debt of $20.0 million, which matures and
is to be repaid during fourth quarter 2003. Werner has no truck or
trailer operating leases and, therefore, has no off-balance-sheet debt.
Stockholder's equity has grown to $694.3 million, or $8.68 per share.
The Company's continuing goal is to improve its annual operating
margin to 10% or better before increasing the Company's fleet growth
rate.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
9/30/03 Revenues 9/30/02 Revenues
-------- -------- -------- --------
Operating revenues $368,034 100.0 $336,096 100.0
-------- -------- -------- --------
Operating expenses:
Salaries, wages and
benefits 131,094 35.6 120,303 35.8
Fuel 38,119 10.4 32,321 9.6
Supplies and maintenance 32,568 8.8 28,798 8.6
Taxes and licenses 25,806 7.0 24,348 7.3
Insurance and claims 18,446 5.0 13,233 3.9
Depreciation 33,708 9.2 30,632 9.1
Rent and purchased
transportation 52,396 14.2 55,285 16.4
Communications and
utilities 4,340 1.2 3,610 1.1
Other (1,171) (0.3) 410 0.1
-------- -------- -------- --------
Total operating
expenses 335,306 91.1 308,940 91.9
-------- -------- -------- --------
Operating income 32,728 8.9 27,156 8.1
-------- -------- -------- --------
Other expense (income):
Interest expense 279 0.1 757 0.2
Interest income (430) (0.1) (628) (0.2)
Other 47 0.0 156 0.1
-------- -------- -------- --------
Total other expense
(income) (104) 0.0 285 0.1
-------- -------- -------- --------
Income before income taxes 32,832 8.9 26,871 8.0
Income taxes 12,316 3.3 10,076 3.0
-------- -------- -------- --------
Net income $20,516 5.6 $16,795 5.0
======== ======== ======== ========
Diluted shares outstanding 81,932 81,410
======== ========
Diluted earnings per share $.25 $.21
======== ========
OPERATING STATISTICS
(Quarter Ended September 30)
% Change
----------
Average monthly miles per
tractor 10,288 0.0% 10,283
Average revenues per total
mile (1) $1.281 3.1% $1.242
Average revenues per loaded
mile (1) $1.436 4.7% $1.372
Average percentage of empty
miles 10.82% 13.7% 9.52%
Average tractors in service 8,275 4.9% 7,885
Average revenues per truck
per week (1) $3,041 3.2% $2,947
Non-trucking revenues (in
thousands) $27,355 6.1% $25,792
Capital expenditures, net $31,213 $68,786
Cash flow from operations $58,576 $77,541
Total tractors (at quarter
end)
Company 7,400 6,900
Owner-operator 925 1,050
-------- --------
Total tractors 8,325 7,950
Total trailers (at quarter
end) 22,110 20,200
(1) Net of fuel surcharge revenues.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Nine Nine
Months % of Months % of
Ended Operating Ended Operating
9/30/03 Revenues 9/30/02 Revenues
---------- -------- -------- --------
Operating revenues $1,077,532 100.0 $989,076 100.0
---------- -------- -------- --------
Operating expenses:
Salaries, wages and
benefits 382,042 35.5 358,222 36.2
Fuel 120,252 11.2 87,783 8.9
Supplies and maintenance 91,036 8.4 89,966 9.1
Taxes and licenses 77,362 7.2 72,953 7.4
Insurance and claims 55,468 5.2 37,632 3.8
Depreciation 99,410 9.2 89,355 9.0
Rent and purchased
transportation 157,439 14.6 168,552 17.1
Communications and
utilities 12,315 1.1 10,971 1.1
Other (1,079) (0.1) 2,063 0.2
---------- -------- -------- --------
Total operating
expenses 994,245 92.3 917,497 92.8
---------- -------- -------- --------
Operating income 83,287 7.7 71,579 7.2
---------- -------- -------- --------
Other expense (income):
Interest expense 867 0.1 2,316 0.2
Interest income (1,212) (0.1) (1,904) (0.2)
Other 84 0.0 787 0.1
---------- -------- -------- --------
Total other expense
(income) (261) 0.0 1,199 0.1
---------- -------- -------- --------
Income before income taxes 83,548 7.7 70,380 7.1
Income taxes 31,334 2.9 26,392 2.7
---------- -------- -------- --------
Net income $52,214 4.8 $43,988 4.4
========== ======== ======== ========
Diluted shares outstanding 81,703 81,511
========== ========
Diluted earnings per share $.64 $.54
========== ========
OPERATING STATISTICS
(Nine Months Ended September 30)
% Change
----------
Average monthly miles per
tractor 10,148 (1.6%) 10,308
Average revenues per total
mile (1) $1.267 3.3% $1.227
Average revenues per loaded
mile (1) $1.418 4.5% $1.357
Average percentage of empty
miles 10.65% 10.9% 9.60%
Average tractors in service 8,257 4.3% 7,914
Average revenues per truck
per week (1) $2,966 1.6% $2,919
Non-trucking revenues (in
thousands) $75,420 5.8% $71,308
Capital expenditures, net $55,653 $153,499
Cash flow from operations $157,747 $177,792
Total tractors (at quarter
end)
Company 7,400 6,900
Owner-operator 925 1,050
-------- --------
Total tractors 8,325 7,950
Total trailers (at quarter
end) 22,110 20,200
(1) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands)
9/30/03 12/31/02
---------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $125,824 $29,885
Accounts receivable, trade, less
allowance of $5,754 and $4,459,
respectively 150,129 131,889
Other receivables 14,725 10,335
Inventories and supplies 9,147 9,777
Prepaid taxes, licenses and permits 3,798 13,535
Income taxes receivable - 9,811
Other current assets 21,684 14,317
---------- ----------
Total current assets 325,307 219,549
---------- ----------
Property and equipment 1,225,607 1,212,488
Less - accumulated depreciation 433,527 380,221
---------- ----------
Property and equipment, net 792,080 832,267
---------- ----------
Other non-current assets 11,425 11,062
---------- ----------
$1,128,812 $1,062,878
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $37,906 $50,546
Current portion of long-term debt 20,000 20,000
Insurance and claims accruals 58,216 47,358
Accrued payroll 24,189 18,374
Current deferred income taxes 17,710 17,710
Other current liabilities 13,766 11,885
---------- ----------
Total current liabilities 171,787 165,873
---------- ----------
Insurance and claims accruals,
net of current portion 63,301 47,801
Deferred income taxes 199,391 201,561
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized;
80,533,536 shares issued;
79,951,650 and 79,726,180 shares
outstanding, respectively 805 805
Paid-in capital 108,970 107,366
Retained earnings 594,491 547,467
Accumulated other comprehensive
loss (540) (216)
Treasury stock, at cost; 581,886
and 807,356 shares, respectively (9,393) (7,779)
---------- ----------
Total stockholders' equity 694,333 647,643
---------- ----------
$1,128,812 $1,062,878
========== ==========
Werner Enterprises is a full-service transportation company
providing truckload and logistics services throughout the 48 states,
portions of Canada and Mexico. C.L. Werner founded the Company in 1956.
Werner is one of the nation's largest truckload carriers with a fleet of
8,325 trucks and 22,110 trailers.
Werner Enterprises' common stock is traded on The Nasdaq Stock
Market under the symbol WERN. The Werner Enterprises web site address
is www.werner.com.
Note: This press release contains forward-looking statements,
which are based on information currently available. Actual results
could differ materially from those anticipated as a result of a number
of factors, including, but not limited to, those discussed in Item 7 of
the Company's Annual Report on Form 10-K for the year ended December 31,
2002. The Company assumes no obligation to update any forward-looking
statement to the extent it becomes aware that it will not be achieved
for any reason.