Werner Enterprises Reports Second Quarter 2015 Revenues and Record Second Quarter Earnings

OMAHA, Neb.--(BUSINESS WIRE)--

Werner Enterprises, Inc. WERN, one of the nation's largest transportation and logistics companies, reported revenues and record second quarter earnings for the second quarter ended June 30, 2015.

Summarized financial results for second quarter 2015 compared to second quarter 2014 are as follows (dollars in thousands, except per share data):

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2015				2014				% Change				2015					2014					% Change
Total revenues			$	534,644			$	542,120			(1	)%			$	1,030,298				$	1,034,142				0	%
Trucking revenues, net of fuel surcharge				353,051				332,025			6	%				682,185					643,547				6	%
Value Added Services ("VAS") revenues				103,450				100,501			3	%				194,310					185,655				5	%
Operating income				52,210				42,330			23	%				90,395					65,771				37	%
Net income				31,848				25,632			24	%				54,990					39,971				38	%
Earnings per diluted share				0.44				0.35			25	%				0.76					0.55				38	%

Freight demand in second quarter 2015 and so far in July 2015 continues to be stronger than the prior five years, with the exception of the same period in 2014 which was rebounding from severe winter weather in first quarter 2014 that temporarily backed up the freight network.

Constrained truck capacity combined with a gradually improving economy in the retail, consumer products and grocery products markets primarily served by us are contributing to strong freight demand. Truckload industry capacity is being challenged by an extremely competitive driver recruiting market and heightened regulatory cost increases for safety and truck ownership; we expect this favorable trend will continue. There are numerous pending and proposed federal safety initiatives that could further limit truckload and driver capacity in the next few years, including mandatory electronic logging devices (ELD's), a national drug and alcohol driver data base, increased minimum liability insurance requirements for carriers, more sophisticated drug screening procedures for drivers and mandatory truck speed limiter devices.

Average revenues per tractor per week, net of fuel surcharge, increased 3.5% in second quarter 2015 compared to second quarter 2014. Continued focus on securing driver friendly, highly productive freight and improved freight selection using our proprietary freight optimization system enabled us to essentially maintain our average miles per truck in a strong, but not as stellar a freight market as second quarter 2014. Our average miles per truck declined slightly by 0.2% in second quarter 2015 compared to second quarter 2014. Average revenues per total mile, net of fuel surcharge, increased 3.8% in second quarter 2015 compared to second quarter 2014.

We are making continued progress implementing sustainable rate increases with our customers. These efforts are ongoing as we move forward in 2015 and work to recoup the cost increases associated with more expensive equipment, a shrinking supply of qualified drivers and an increasingly challenging regulatory environment. Strategic customers understand the collective capacity and service challenges facing our company and our industry and are supportive of Werner's ongoing initiatives to provide sustainable transportation solutions in support of their supply chain needs.

In second quarter 2015, we averaged 7,247 trucks in service in the Truckload segment and 51 intermodal drayage trucks in the VAS segment. On the strength of an intense company-wide focus to improve our driver recruiting and retention, we ended second quarter 2015 with 7,275 trucks in the Truckload segment, a sequential improvement of 165 trucks compared to first quarter 2015 and a year-over-year improvement of 240 trucks compared to second quarter 2014. Our Specialized Services unit, primarily Dedicated, ended the quarter with 3,700 trucks (or 51% of our total Truckload segment fleet).

Diesel fuel prices were $1.15 per gallon lower in second quarter 2015 than in second quarter 2014 and were 9 cents per gallon higher than in first quarter 2015. For the first 20 days of July 2015, the average diesel fuel price per gallon was $1.16 lower than the average diesel fuel price per gallon in the same period of 2014 and $1.11 lower than in third quarter 2014. 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).

We continue to invest in equipment solutions to improve the safety, operational efficiency and fuel miles per gallon of our fleet. We increased our capital expenditures in the last 12 months to lower the average age of our truck fleet and attained an average age of 2.0 years as of June 30, 2015, which compares to an average age of 2.4 years as of June 30, 2014. Net capital expenditures in the first half of 2015 were $159 million compared to $63 million in the first half of 2014. We estimate net capital expenditures for the full year of 2015 to be in the range of $300 to $325 million, which we expect will enable us to further reduce the average age of our truck fleet to less than two 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 market remained very challenging during second quarter 2015. Several difficult market factors persist including a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate, aging truck driver demographics and increased truck safety regulations.

Gains on sales of assets were $6.7 million in second quarter 2015. This compares to gains on sales of assets of $5.2 million in second quarter 2014, which included a $1.6 million gain from the sale of real estate, and gains on sales of assets of $5.5 million in first quarter 2015. In second quarter 2015, we realized higher average gains per truck and trailer and sold more trucks and trailers than in second quarter 2014. 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														Six Months Ended
			June 30,														June 30,
			2015							2014							2015							2014
Value Added Services (amounts in thousands)			$				%			$				%			$				%			$				%
Operating revenues			$	103,450			100.0			$	100,501			100.0			$	194,310			100.0			$	185,655			100.0
Rent and purchased transportation expense				87,448			84.5				87,209			86.8				165,321			85.1				159,763			86.1
Gross margin				16,002			15.5				13,292			13.2				28,989			14.9				25,892			13.9
Other operating expenses				10,998			10.7				11,037			11.0				21,536			11.1				21,782			11.7
Operating income			$	5,004			4.8			$	2,255			2.2			$	7,453			3.8			$	4,110			2.2

In second quarter 2015, VAS revenues increased $2.9 million or 3%, and operating income dollars increased $2.7 million or 122%, compared to second quarter 2014. Our on-going efforts to address customer pricing, contractual and operational issues within VAS resulted in the best quarterly gross margin and operating income percentages since second quarter 2013. The VAS gross margin percentage in second quarter 2015 of 15.5% improved year over year compared to the gross margin percentage of 13.2% in second quarter 2014 and also improved sequentially from the 14.3% gross margin in first quarter 2015. The VAS operating income percentage in second quarter 2015 of 4.8% improved from second quarter 2014 of 2.2% and first quarter 2015 of 2.7%.

Comparisons of the operating ratios for the Truckload segment (net of fuel surcharge revenues of $58.3 million and $92.7 million in second quarters 2015 and 2014, respectively, and $114.7 million and $179.8 million in the year-to-date 2015 and 2014 periods, respectively) and the VAS segment are shown below.

			Three Months Ended												Six Months Ended
			June 30,												June 30,
Operating Ratios			2015				2014				Difference				2015				2014				Difference
Truckload Transportation Services			86.8	%			88.6	%			(1.8	)%			88.0	%			90.9	%			(2.9	)%
Value Added Services			95.2	%			97.8	%			(2.6	)%			96.2	%			97.8	%			(1.6	)%

Fluctuating fuel prices and fuel surcharge revenues 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 2015 and second quarter 2014 are 88.7% and 91.1%, respectively, and for year-to-date 2015 and 2014 are 89.7% and 92.9%, respectively, when fuel surcharge revenues are reported as revenues instead of a reduction of operating expenses.

Our financial position remains strong. As of June 30, 2015, we had $75.0 million of debt outstanding and $878.2 million of stockholders' equity. During second quarter 2015, the Company purchased 225,000 shares of its common stock for a total cost of $6.4 million.

			INCOME STATEMENT
			(Unaudited)
			(In thousands, except per share amounts)
			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2015									2014									2015									2014
			$					%				$					%				$					%				$				%
Operating revenues			$	534,644				100.0				$	542,120				100.0				$	1,030,298				100.0				$	1,034,142			100.0
Operating expenses:
Salaries, wages and benefits				160,376				30.0					144,506				26.7					311,841				30.3					279,219			27.0
Fuel				57,381				10.7					92,131				17.0					110,141				10.7					183,206			17.7
Supplies and maintenance				46,388				8.7					45,887				8.5					94,045				9.1					91,741			8.9
Taxes and licenses				22,763				4.3					21,311				3.9					43,843				4.3					42,143			4.0
Insurance and claims				20,615				3.8					19,180				3.5					42,662				4.1					39,386			3.8
Depreciation				48,264				9.0					44,573				8.2					93,984				9.1					87,696			8.5
Rent and purchased transportation				124,952				23.4					128,239				23.7					238,700				23.2					239,885			23.2
Communications and utilities				3,837				0.7					3,409				0.6					7,515				0.7					6,908			0.7
Other				(2,142	)			(0.4	)				554				0.1					(2,828	)			(0.3	)				(1,813	)		(0.2	)
Total operating expenses				482,434				90.2					499,790				92.2					939,903				91.2					968,371			93.6
Operating income				52,210				9.8					42,330				7.8					90,395				8.8					65,771			6.4
Other expense (income):
Interest expense				583				0.1					136				—					1,058				0.1					230			—
Interest income				(697	)			(0.1	)				(660	)			(0.1	)				(1,328	)			(0.1	)				(1,315	)		(0.1	)
Other				135				—					(45	)			—					225				—					(41	)		—
Total other expense (income)				21				—					(569	)			(0.1	)				(45	)			—					(1,126	)		(0.1	)
Income before income taxes				52,189				9.8					42,899				7.9					90,440				8.8					66,897			6.5
Income taxes				20,341				3.8					17,267				3.2					35,450				3.5					26,926			2.6
Net income			$	31,848				6.0				$	25,632				4.7				$	54,990				5.3				$	39,971			3.9
Diluted shares outstanding				72,424									72,597									72,482									72,882
Diluted earnings per share			$	0.44								$	0.35								$	0.76								$	0.55

			SEGMENT INFORMATION
			(Unaudited)
			(In thousands)
			Three Months Ended										Six Months Ended
			June 30,										June 30,
			2015					2014					2015					2014
Revenues
Truckload Transportation Services			$	417,015				$	429,390				$	807,578				$	832,575
Value Added Services				103,450					100,501					194,310					185,655
Other				13,924					12,258					27,909					16,247
Corporate				725					829					1,246					1,387
Subtotal				535,114					542,978					1,031,043					1,035,864
Inter-segment eliminations (1)				(470	)				(858	)				(745	)				(1,722	)
Total			$	534,644				$	542,120				$	1,030,298				$	1,034,142
Operating Income
Truckload Transportation Services			$	47,312				$	38,320				$	83,154				$	59,100
Value Added Services				5,004					2,255					7,453					4,110
Other				(239	)				357					(684	)				841
Corporate				133					1,398					472					1,720
Total			$	52,210				$	42,330				$	90,395				$	65,771
(1) Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation.

			OPERATING STATISTICS BY SEGMENT
			(Unaudited)
			Three Months Ended														Six Months Ended
			June 30,														June 30,
			2015					2014					% Change				2015					2014					% Change
Truckload Transportation Services segment
Average percentage of empty miles				12.21	%				12.14	%			0.6	%				12.18	%				12.06	%			1.0	%
Average trip length in miles (loaded)				476					466				2.1	%				479					466				2.8	%
Average tractors in service				7,247					7,055				2.7	%				7,130					7,029				1.4	%
Average revenues per tractor per week (1)			$	3,748				$	3,620				3.5	%			$	3,680				$	3,521				4.5	%
Total trailers (at quarter end)				22,070					21,865									22,070					21,865
Total tractors (at quarter end)
Company				6,615					6,375									6,615					6,375
Independent contractor				660					660									660					660
Total tractors				7,275					7,035									7,275					7,035
Value Added Services segment
Average tractors in service				51					48									51					47
Total trailers (at quarter end)				1,695					1,730									1,695					1,730
Total tractors (at quarter end)				57					55									57					55
(1) Net of fuel surcharge revenues.

			SUPPLEMENTAL INFORMATION
			(Unaudited)
			(In thousands)
			Three Months Ended										Six Months Ended
			June 30,										June 30,
			2015					2014					2015					2014
Capital expenditures, net			$	74,541				$	46,761				$	159,406				$	62,807
Cash flow from operations				69,469					31,336					190,455					90,545
Return on assets (annualized)				8.3	%				7.4	%				7.3	%				5.8	%
Return on equity (annualized)				14.7	%				13.1	%				12.9	%				10.3	%

			CONDENSED BALANCE SHEET
			(In thousands, except share amounts)
			June 30,					December 31,
			2015					2014
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	47,491				$	22,604
Accounts receivable, trade, less allowance of $9,616 and $10,017, respectively				258,823					266,727
Other receivables				21,283					20,316
Inventories and supplies				16,756					17,824
Prepaid taxes, licenses and permits				7,374					14,914
Current deferred income taxes				34,568					34,066
Income taxes receivable				2,950					23,435
Other current assets				26,827					26,458
Total current assets				416,072					426,344
Property and equipment				1,850,826					1,786,229
Less – accumulated depreciation				766,340					772,447
Property and equipment, net				1,084,486					1,013,782
Other non-current assets				42,857					40,336
Total assets			$	1,543,415				$	1,480,462
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	87,981				$	64,827
Insurance and claims accruals				62,067					73,814
Accrued payroll				32,286					28,121
Other current liabilities				21,445					19,768
Total current liabilities				203,779					186,530
Long-term debt, net of current portion				75,000					75,000
Other long-term liabilities				17,940					20,021
Insurance and claims accruals, net of current portion				130,545					123,445
Deferred income taxes				237,911					241,606
Stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536
shares issued; 71,882,822 and 72,038,368 shares outstanding, respectively				805					805
Paid-in capital				104,909					101,803
Retained earnings				962,876					915,085
Accumulated other comprehensive loss				(10,672	)				(9,375	)
Treasury stock, at cost; 8,650,714 and 8,495,168 shares, respectively				(179,678	)				(174,458	)
Total stockholders' equity				878,240					833,860
Total liabilities and stockholders' equity			$	1,543,415				$	1,480,462

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, 2014.

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.

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