Omaha, Neb.-based Werner Enterprises Inc., one of the nation's largest truckload transportation companies, has reported higher operating revenues and earnings for the first quarter ended March 31, 2003.
Operating revenues increased 11% to $347.2 million compared to $312.6 million in first quarter 2002. Net income increased 11% to $11.8 million compared to $10.6 million in first quarter 2002. Earnings per share for first quarter 2003 were $.18 per share, or 12% higher than the $.16 per share earned in first quarter 2002.
"Considering the difficult operating conditions we faced during first quarter, I am pleased with our performance," said Chairman and Chief Executive Officer Clarence (C.L.) Werner. "A lackluster freight environment and record high fuel prices were challenges for much of the quarter. However, as the quarter ended we were pleased to see improvement in both of these areas."
Freight demand in January and much of February was disappointing, no better than the weaker demand the company experienced during the same period a year ago. The normal seasonal freight pickup this March was a bit stronger than in March a year ago. The company continued to make good rate progress, and revenue per loaded mile in first quarter 2003 increased by five cents a mile, or 4%, compared to first quarter a year ago.
Average diesel fuel prices during first quarter 2003 reached a 20-year high. This increased the company's fuel cost by more than seven cents per mile. 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 weekly through fuel surcharge price brackets, continued in effect. However, when fuel prices are increasing, the company does not immediately recover the price increase until the price reaches a higher surcharge price bracket. The company recouped much of the higher cost of fuel, except for miles not billable to customers, out-of-route miles, and truck engine idling.
For the first time in the company's history, there was inadequate time prior to implementation for the engine manufacturers to provide a sufficient sample of new Oct.'02 engines for testing. To delay the business risk of buying new engines until adequate testing is completed, Werner Enterprises significantly increased the purchase of trucks with pre-October engines. This reduced the average age of the company truck fleet from 1.5 years at Dec. 31, 2001 to 1.2 years as of Dec. 31, 2002. The company received its remaining order of new trucks with pre-October engines from its truck manufacturers in January 2003. The average age of the company truck fleet at March 31, 2003 is 1.3 years. The company expects its new truck purchases during second quarter 2003 will be minimal. Truck purchases in the second half of 2003 will depend on the company's ongoing testing and evaluation of the new engines.
Because of truckload carrier concerns with new truck engines and lower industry production of new trucks over the last three years, the resale value of Werner's premium used trucks has improved from the historically low values of 2001. Gains on sales of equipment are reflected as a reduction of Other Operating Expenses in the company's income statement and amounted to a gain of $1.4 million in first quarter 2003 compared to a loss of $0.2 million in first quarter of 2002. To the extent the company purchases fewer new trucks in 2003, it may have fewer used trucks to sell in 2003. The extent of the company's sales of used trucks in 2003 will depend on the ongoing testing of the new engines, freight demand, driver availability and used-truck pricing.
Operating revenues increased 11% to $347.2 million compared to $312.6 million in first quarter 2002. Net income increased 11% to $11.8 million compared to $10.6 million in first quarter 2002. Earnings per share for first quarter 2003 were $.18 per share, or 12% higher than the $.16 per share earned in first quarter 2002.
"Considering the difficult operating conditions we faced during first quarter, I am pleased with our performance," said Chairman and Chief Executive Officer Clarence (C.L.) Werner. "A lackluster freight environment and record high fuel prices were challenges for much of the quarter. However, as the quarter ended we were pleased to see improvement in both of these areas."
Freight demand in January and much of February was disappointing, no better than the weaker demand the company experienced during the same period a year ago. The normal seasonal freight pickup this March was a bit stronger than in March a year ago. The company continued to make good rate progress, and revenue per loaded mile in first quarter 2003 increased by five cents a mile, or 4%, compared to first quarter a year ago.
Average diesel fuel prices during first quarter 2003 reached a 20-year high. This increased the company's fuel cost by more than seven cents per mile. 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 weekly through fuel surcharge price brackets, continued in effect. However, when fuel prices are increasing, the company does not immediately recover the price increase until the price reaches a higher surcharge price bracket. The company recouped much of the higher cost of fuel, except for miles not billable to customers, out-of-route miles, and truck engine idling.
For the first time in the company's history, there was inadequate time prior to implementation for the engine manufacturers to provide a sufficient sample of new Oct.'02 engines for testing. To delay the business risk of buying new engines until adequate testing is completed, Werner Enterprises significantly increased the purchase of trucks with pre-October engines. This reduced the average age of the company truck fleet from 1.5 years at Dec. 31, 2001 to 1.2 years as of Dec. 31, 2002. The company received its remaining order of new trucks with pre-October engines from its truck manufacturers in January 2003. The average age of the company truck fleet at March 31, 2003 is 1.3 years. The company expects its new truck purchases during second quarter 2003 will be minimal. Truck purchases in the second half of 2003 will depend on the company's ongoing testing and evaluation of the new engines.
Because of truckload carrier concerns with new truck engines and lower industry production of new trucks over the last three years, the resale value of Werner's premium used trucks has improved from the historically low values of 2001. Gains on sales of equipment are reflected as a reduction of Other Operating Expenses in the company's income statement and amounted to a gain of $1.4 million in first quarter 2003 compared to a loss of $0.2 million in first quarter of 2002. To the extent the company purchases fewer new trucks in 2003, it may have fewer used trucks to sell in 2003. The extent of the company's sales of used trucks in 2003 will depend on the ongoing testing of the new engines, freight demand, driver availability and used-truck pricing.
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