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Revenues decreased 30% to $403.1 million in second quarter 2009 compared to $578.2 million in second quarter 2008. Trucking revenues, excluding fuel surcharges, declined 16% to $310.1 million in second quarter 2009 compared to $368.6 million in second quarter 2008. Value Added Services ("VAS") revenues declined 25% for the reasons explained later in this earnings release and were $50.5 million in second quarter 2009 compared to $67.6 million in second quarter 2008. Earnings per diluted share decreased 31% to 18 cents per share in second quarter 2009 compared to 25 cents per diluted share in second quarter 2008. Earnings per diluted share increased from 10 cents per share in first quarter 2009 to 18 cents per share in second quarter 2009.
The freight market was very challenging in second quarter 2009, however freight volumes improved from the extremely weak shipping levels experienced during first quarter 2009. The Company experienced some seasonal freight improvement as the quarter progressed from April to May to June 2009. However, second quarter 2009 freight comparisons were well below volumes during the same period in 2008, in part since June 2008 was the strongest freight month for the Company during 2008. Management is cautiously optimistic that freight is bottoming, but it remains difficult thus far in July 2009.
Werner proactively adapted to the softer freight market conditions by reducing its fleet size by 10% when comparing second quarter 2009 to second quarter 2008. Fewer trucks and a 16% shorter length of haul reduced the Company's total miles by 14% over this same period. Having fewer trucks in service also lowered the Company's freight requirements and thereby reduced the Company's need to book less attractive and less profitable freight to keep its trucks and drivers productive. However, a smaller fleet results in lower revenues and operating income, assuming a constant operating margin percentage. The Company does not expect a meaningful improvement of its operating ratio in the near term, unless there is an improvement in the freight market or a reduction in capacity due to an increase in carrier failures. Management believes that excess capacity is being supported by lender leniency that is not ultimately sustainable. Based on current market conditions, the Company does not plan to make further significant reductions to its fleet, unless there is a significant decline in the freight market or a loss of customer business.
Werner continues to diversify its business model with the goal of a balanced portfolio of One-Way Truckload (which includes the Regional, medium-to-long haul Van, and Expedited fleets), Dedicated, and Logistics. Within One-Way Truckload, the Company continues to reduce its medium-to-long-haul Van fleet and grow its Regional fleet. The Company's specialized services division, primarily Dedicated, maintained its fleet size in a difficult market at 3,250 trucks.
Diesel fuel prices were lower by over $2.00 a gallon in second quarter 2009 compared to second quarter 2008. Diesel fuel prices rose during second quarter 2008 and into July 2008, before declining rapidly during the last five months of 2008. Lower fuel diesel prices in second quarter 2009 helped to reduce the cost of non-billable gallons used for truck idle time, empty miles, and out-of-route miles. In addition, the Company continued to achieve meaningful fuel miles per gallon ("mpg") improvements through its ongoing fuel management programs, which also helped reduce the Company's fuel costs. Due strictly to mpg improvements from these fuel management programs, which began in March 2008, Werner purchased 1.3 million fewer gallons of diesel fuel in second quarter 2009 compared to second quarter 2008. This fuel savings alone reduced the Company's carbon emissions by nearly 14,400 tons.
The large decline in diesel fuel prices in the second half of 2008 had a temporary favorable impact on net fuel costs (fuel and fuel tax expense, less fuel surcharge revenues) in third quarter 2008 and fourth quarter 2008.
In the latter months of 2008, the Company intensified its efforts to aggressively manage controllable costs and adapt to a smaller fleet. In addition to raising fuel mpg, during the first six months of 2009 Werner improved its tractor-to-non-driver ratio by 11% and reduced numerous other operating expenses. Superior service to customers, both external and internal, was not compromised. In addition, a broad-based, company-wide safety campaign was implemented in June 2009 with the objective of reducing the number of accidents and lowering insurance and claims expense.
Werner's wholly owned subsidiary, Fleet Truck Sales, realized lower gains on sales of assets, primarily trucks and trailers, of $0.4 million in second quarter 2009 compared to $2.2 million in second quarter 2008. Buyer demand for used trucks and trailers remains low due to the weak freight market and recessionary economy. As a result, the average gains per truck and trailer sold decreased in second quarter 2009 compared to second quarter 2008. Gains on sales are reflected as a reduction of Other Operating Expenses in the Company's income statement.
To provide shippers with additional sources of managed capacity and network analysis, Werner continues to develop its non-asset-based VAS segment. VAS includes Brokerage, Freight Management, Intermodal and Werner Global Logistics.
Value Added Services (amounts in 000's) 2Q09 2Q08
Revenues $ 50,469 100.0 % $ 67,629 100.0 %
Rent and purchased transportation expense 41,841 82.9 57,841 85.5
Gross margin 8,628 17.1 9,788 14.5
Other operating expenses 5,837 11.6 6,104 9.1
Operating income $ 2,791 5.5 $ 3,684 5.4
YTD09 YTD08
Revenues $ 97,942 100.0 % $ 129,815 100.0 %
Rent and purchased transportation expense 81,279 83.0 110,520 85.1
Gross margin 16,663 17.0 19,295 14.9
Other operating expenses 12,139 12.4 11,944 9.2
Operating income $ 4,524 4.6 $ 7,351 5.7
VAS revenues, gross margins, and operating income declined in second quarter 2009 compared to second quarter 2008 due to three factors: (1) a reduction in the average revenue per shipment of 20% due to lower fuel prices and lower customer rates, (2) shifting significantly more shipments not committed to third-party capacity providers to our Truckload Transportation Services ("Truckload") segment to help cushion the impact of a soft freight market, which resulted in lower revenues and gross margin in our VAS segment and (3) a reduction in the number of industry freight shipments because of the weaker freight market and recessionary economy. The following table shows the change in shipment volume and average revenue (excluding logistics fee revenue) per shipment for all VAS shipments:
2Q09 2Q08 Difference % Change Total VAS shipments 57,415 58,299 (884 ) -2 % Less: Non-committed shipments to (21,656 ) (17,535 ) (4,121 ) 24 % Truckload segment Net VAS shipments 35,759 40,764 (5,005 ) -12 % Average revenue per shipment $ 1,303 $ 1,629 ($326 ) -20 %
Brokerage revenues declined due to the factors described in the paragraph above, however its gross margin percentage improved by 60 basis points. Freight Management revenues declined due to reduced shipments with existing customers. Intermodal revenues and gross margins declined due to an extremely weak and competitive intermodal market in second quarter 2009. Werner Global Logistics achieved meaningful revenue and profit improvement.
Comparisons of the operating ratios (net of fuel surcharge revenues) for the Truckload segment and VAS segment for second quarters 2009 and 2008 and year-to-date 2009 and 2008 are shown below.
Operating Ratios 2Q09 2Q08 Difference
Truckload Transportation Services 93.9 % 93.0 % 0.9 %
Value Added Services 94.5 94.6 (0.1 )
YTD09 YTD08 Difference
Truckload Transportation Services 95.5 % 95.1 % 0.4 %
Value Added Services 95.4 94.3 1.1
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 2009 and second quarter 2008 are 94.6% and 94.9%, respectively, and for year to date 2009 and 2008 are 96.0% and 96.3%, respectively, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses.
The Company's financial position remains strong. The Company ended second quarter 2009 with no debt and $87.3 million of cash. Stockholder's equity is $759.3 million.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Quarter % of Quarter % of
Ended Operating Ended Operating
6/30/09 Revenues 6/30/08 Revenues
Operating revenues $ 403,051 100.0 $ 578,181 100.0
Operating expenses:
Salaries, wages and benefits 128,385 31.8 148,588 25.7
Fuel 57,166 14.2 154,963 26.8
Supplies and maintenance 33,327 8.3 41,261 7.2
Taxes and licenses 23,962 5.9 27,886 4.8
Insurance and claims 22,591 5.6 23,907 4.2
Depreciation 39,214 9.7 41,683 7.2
Rent and purchased transportation 71,735 17.8 105,220 18.2
Communications and utilities 3,989 1.0 4,820 0.8
Other 672 0.2 (1,015 ) (0.2 )
Total operating expenses 381,041 94.5 547,313 94.7
Operating income 22,010 5.5 30,868 5.3
Other expense (income):
Interest expense 3 0.0 3 0.0
Interest income (437 ) (0.0 ) (964 ) (0.2 )
Other 20 0.0 1 0.0
Total other expense (income) (414 ) (0.0 ) (960 ) (0.2 )
Income before income taxes 22,424 5.5 31,828 5.5
Income taxes 9,732 2.4 13,716 2.4
Net income $ 12,692 3.1 $ 18,112 3.1
Diluted shares outstanding 72,010 71,417
Diluted earnings per share $ .18 $ .25
OPERATING STATISTICS
Quarter Ended Quarter Ended
6/30/09 % Change 6/30/08
Trucking revenues, net of fuel surcharge (1) $ 310,066 -15.9 % $ 368,577
Trucking fuel surcharge revenues (1) 38,506 -71.5 % 134,929
Non-trucking revenues, including VAS (1) 51,446 -26.0 % 69,510
Other operating revenues (1) 3,033 -41.3 % 5,165
Operating revenues (1) $ 403,051 -30.3 % $ 578,181
Average monthly miles per tractor 9,874 -5.0 % 10,397
Average revenues per total mile (2) $ 1.439 -1.8 % $ 1.465
Average revenues per loaded mile (2) $ 1.651 -2.3 % $ 1.690
Average percentage of empty miles 12.80 % -4.1 % 13.35 %
Average trip length in miles (loaded) 456 -15.6 % 540
Total miles (loaded and empty) (1) 215,412 -14.4 % 251,630
Average tractors in service 7,272 -9.9 % 8,068
Average revenues per tractor per week (2) $ 3,280 -6.7 % $ 3,514
Capital expenditures, net (1) ($ 16,487 ) $ 40,582
Cash flow from operations (1) $ 23,745 $ 40,164
Return on assets (annualized) 4.1 % 5.3 %
Total tractors (at quarter end)
Company 6,615 7,320
Owner-operator 670 730
Total tractors 7,285 8,050
Total trailers (truck and intermodal, quarter end) 24,515 24,700
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share amounts)
Six Months % of Six Months % of
Ended Operating Ended Operating
6/30/09 Revenues 6/30/08 Revenues
Operating revenues $ 797,559 100.0 $ 1,090,968 100.0
Operating expenses:
Salaries, wages and benefits 262,571 32.9 291,775 26.7
Fuel 108,776 13.6 278,799 25.6
Supplies and maintenance 71,224 8.9 81,770 7.5
Taxes and licenses 48,357 6.1 56,151 5.1
Insurance and claims 44,256 5.6 48,639 4.5
Depreciation 79,308 9.9 83,479 7.6
Rent and purchased transportation 140,328 17.6 199,683 18.3
Communications and utilities 8,391 1.1 10,059 0.9
Other 1,082 0.1 (3,673 ) (0.3 )
Total operating expenses 764,293 95.8 1,046,682 95.9
Operating income 33,266 4.2 44,286 4.1
Other expense (income):
Interest expense 79 0.0 6 0.0
Interest income (926 ) (0.1 ) (2,037 ) (0.1 )
Other (252 ) 0.0 52 0.0
Total other expense (income) (1,099 ) (0.1 ) (1,979 ) (0.1 )
Income before income taxes 34,365 4.3 46,265 4.2
Income taxes 14,777 1.8 19,778 1.8
Net income $ 19,588 2.5 $ 26,487 2.4
Diluted shares outstanding 71,962 71,438
Diluted earnings per share $ .27 $ .37
OPERATING STATISTICS
YTD 09 % Change YTD 08
Trucking revenues, net of fuel surcharge (1) $ 618,042 -13.8 % $ 717,001
Trucking fuel surcharge revenues (1) 73,159 -68.3 % 230,698
Non-trucking revenues, including VAS (1) 100,115 -25.1 % 133,629
Other operating revenues (1) 6,243 -35.2 % 9,640
Operating revenues (1) $ 797,559 -26.9 % $ 1,090,968
Average monthly miles per tractor 9,710 -4.2 % 10,132
Average revenues per total mile (2) $ 1.439 -1.4 % $ 1.459
Average revenues per loaded mile (2) $ 1.656 -1.9 % $ 1.688
Average percentage of empty miles 13.15 % -2.8 % 13.53 %
Average trip length in miles (loaded) 463 -14.4 % 541
Total miles (loaded and empty) (1) 429,582 -12.6 % 491,374
Average tractors in service 7,374 -8.8 % 8,083
Average revenues per tractor per week (2) $ 3,224 -5.5 % $ 3,412
Capital expenditures, net (1) $ 26,745 $ 65,970
Cash flow from operations (1) $ 100,350 $ 120,210
Return on assets (annualized) 3.1 % 3.9 %
Total tractors (at quarter end)
Company 6,615 7,320
Owner-operator 670 730
Total tractors 7,285 8,050
Total trailers (truck and intermodal, quarter end) 24,515 24,700
(1) Amounts in thousands.
(2) Net of fuel surcharge revenues.
BALANCE SHEET DATA
(In thousands, except share amounts)
6/30/09 12/31/08
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 87,285 $ 48,624
Accounts receivable, trade, less allowance
of $9,183 and $9,555, respectively 168,674 185,936
Other receivables 23,998 18,739
Inventories and supplies 12,072 10,644
Prepaid taxes, licenses and permits 7,205 16,493
Current deferred income taxes 32,565 30,789
Other current assets 25,619 20,659
Total current assets 357,418 331,884
Property and equipment 1,556,033 1,613,102
Less - accumulated depreciation 681,324 686,463
Property and equipment, net 874,709 926,639
Other non-current assets 16,193 16,795
$ 1,248,320 $ 1,275,318
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,961 $ 46,684
Current portion of long-term debt - 30,000
Insurance and claims accruals 77,139 79,830
Accrued payroll 26,938 25,850
Other current liabilities 19,098 19,006
Total current liabilities 167,136 201,370
Other long-term liabilities 7,810 7,406
Insurance and claims accruals, net of current portion 119,500 120,500
Deferred income taxes 194,567 200,512
Stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares
authorized; 80,533,536 shares issued; 71,583,073
and 71,576,267 shares outstanding, respectively 805 805
Paid-in capital 93,947 93,343
Retained earnings 838,941 826,511
Accumulated other comprehensive loss (6,535 ) (7,146 )
Treasury stock, at cost; 8,950,463 and 8,957,269
shares, respectively (167,851 ) (167,983 )
Total stockholders' equity 759,307 745,530
$ 1,248,320 $ 1,275,318
Werner Enterprises, Inc. was founded in 1956 and is a premier transportation and logistics company, with coverage throughout the United States, Canada, Mexico, Asia, Europe and South America. Werner maintains its global headquarters in Omaha, Nebraska and maintains offices throughout North America and China. Werner is among the five largest truckload carriers in the United States, with a diversified portfolio of transportation services that includes dedicated, medium-to-long-haul, regional and local van capacity, expedited, temperature-controlled and flatbed services. Werner's Value Added Services portfolio includes freight management, truck brokerage, intermodal, load/mode and network optimization and freight forwarding. Werner, through its subsidiary companies, is a licensed U.S. NVOCC, U.S. Customs Broker, Class A Freight Forwarder in China, licensed China NVOCC, TSA-approved Indirect Air Carrier, and IATA Accredited Cargo Agent.
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.
Note: 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, 2008 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009. For those reasons, undue reliance should not be placed on any such 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 or Robert E. Synowicki, Jr., 402-894-3350 Executive Vice President and Chief Information Officer
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