Werner: Double Digit Growth May be Over
May 11, 2000
Werner Enterprises may be about to end its eight-year run of double-digit income growth.
Although the company’s first quarter 2000 revenue was up 21% from first quarter 1999, Chairman and CEO Clarence Werner reportedly told stockholders that, under current conditions, he doesn’t expect revenue for the year to be up more than 8% to 10%. This would be the first time since 1991 that the carrier’s growth was less than 10%.
According to the Omaha World-Herald, Werner based his projections on fuel price hikes, a glut of trucks on the road, the driver shortage and proposed new hours-of-service rules.
The recent price spike hurt earnings in 1999 and the first quarter of this year. It also forced the Omaha-based carrier to curb growth last year. Used truck sales, which account for 10% of the company’s profits, are weak and are expected to remain that way for some time. Werner pointed out that the industry “produced too many trucks.” Now the inventory of new and used trucks is high and there are more trucks on the road than shipper demand warrants. At the same time, stiff competition makes it tough to raise rates.
“Over 80% of the truck lines are not making money,” he said.
The company says its turnover rate is 75% -- much lower than the industry average -- yet it still struggles with the driver shortage. That problem could get worse if driver work schedules are further restricted by proposed new hours-of-service rules. If the changes are adopted, carriers would likely be forced to put more trucks on the road, Werner said. For them, the proposal could mean a 20% increase in costs. New rules would also mandate electronic onboard records to keep track of driver hours -- something Werner Enterprises has done for a couple of years. Their experience could give them an edge over competitors, he acknowledged, but added that he still opposes the proposal.
Werner Enterprises is a full-service transportation company providing truckload and other transportation services throughout the 48 states, portions of Canada and Mexico. It has a fleet of 7,175 trucks and 18,900 trailers. Its first quarter revenues were $291.4 million compared to $241.0 million in the first quarter of 1999. Its net income was $10.3 million compared to $12.6 million a year earlier.