Werner Enterprises, Omaha, Neb., reported higher operating revenues and earnings for the third quarter ended Sept. 30.
Operating revenues increased 4% to $336.1 million compared to $322.6 million in third quarter 2001. Net income increased 35% to $16.8 million compared to $12.5 million in third quarter 2001. Earnings per share for third quarter 2002 were $.26 per share, or 33% higher than the $.19 per share earned in third quarter 2001.
"Continued stronger freight demand from our customers helped Werner Enterprises post its fourth consecutive quarter of improved operating revenues, improved operating margin and improved earnings," said Chairman and Chief Executive Officer, Clarence Werner. "Daily freight volumes during third quarter were consistently higher than the weaker volumes of a year ago. We improved our rate per mile by three cents a mile, or 2.5%, compared to the same quarter a year ago. A better economy and tightening truck capacity contributed to the improvement. Truck capacity is being constrained due to limited fleet growth at most truckload carriers, trucking company failures that are pulling capacity out of the market, and minimal industry-wide truck additions due to significant concerns with new truck engines manufactured after Oct. 1. Our people and advanced technology also deserve much of the credit for our improved results. We are making good freight decisions and delivering premium on-time service. This is helping us make steady progress toward our goal of better margins and returns."
Beginning mid-April of this year, the company's daily ratio of "loads available to trucks available" improved compared to a year ago. This trend continued during third quarter 2002 and through the first half of October 2002. Demand was strong in most geographic markets and in most freight markets. Werner continues to focus on serving a diversified group of service-sensitive customers in the consumer non-durable goods sector. Within the company's largest freight market, retail and consumer products, most of Werner's largest customers had solid increases in their freight shipments on a year-over-year basis. As trucking company failures remain high and insurance is not available for many small truckers, shippers are continuing to consolidate their core group of trucking company providers with carriers like Werner Enterprises.
Werner's concerns about the reliability, fuel efficiency, cost, and warranties regarding post-October engines led the company to reduce the average age of its already-young company truck fleet from 1.5 years as of December 2001 to 1.2 years as of September 2002. The company expects to take delivery of new trucks with pre-October engines during fourth quarter 2002. This is expected to further reduce the average age of the company truck fleet to about 1.0 years as of December 2002. Truck purchases in 2003 will be dependent on the results of the company's further testing and analysis of the new engines, including both the EGR engine manufactured by Detroit Diesel and the ACERT engine manufactured by Caterpillar.
Average diesel fuel prices were higher than historical levels and increased steadily throughout third quarter 2002. However, fuel prices averaged five cents per gallon lower than third quarter 2001. While fuel prices have been increasing during third quarter 2002 due to pending concerns in the Middle East, fuel prices in third quarter 2001 began to decrease toward the end of the quarter. As of Oct. 15, 2002, fuel prices are 18 cents per gallon higher than the fuel prices of Oct. 15, 2001. The company experienced a slight negative impact due to rising fuel prices in third quarter 2002 compared to third quarter 2001. To minimize the effect of fluctuating fuel prices on the company's business, Werner collects fuel surcharge revenues from its customers. These surcharge programs, which automatically adjust weekly based on fuel price changes, continued to be in effect during third quarter 2002. Most of the higher cost of fuel is recovered in higher fuel surcharge revenues, except for miles that are not billable to the customer, out-of-route miles, and truck engine idling. Fuel surcharge revenues were $3.6 million lower in third quarter 2002 compared to third quarter 2001.
Over the past several months, we have been meeting with customers to explain the current state of the truckload industry. Both truckload industry and company margins, while improving, are below acceptable levels for the investment and risk of operating in this industry. We are actively negotiating rate increases.
"We continue to be diligent with our plans to keep fleet growth at a slower rate until our margin and return percentages are at least consistent with historical percentages achieved during the 1990s. We fully expect there will be good opportunity to accelerate fleet growth in the future as the economic environment improves or as more truckload capacity leaves the marketplace."
During third quarter 2002, the company purchased 124,500 shares of its common stock at an average price of $17.75 per share, for a total of $2.2 million.
"The company's financial position remains very strong as invested cash of $91.7 million exceeds remaining debt of $50 million. $30 million of the remaining debt will be repaid when these notes mature in November 2002. The remaining $20 million of debt matures in December 2003. Werner has no equipment operating leases as of September 2002 and, therefore, has no off-balance sheet equipment debt. Stockholders' equity has grown to $629.9 million, or $9.89 per share. The company's cash flow from operations remains strong and was $77.5 million for third quarter 2002 compared to $65.3 million for third quarter 2001.
"I am proud of our consistent record of strong financial results in all types of economies. Today, Werner Enterprises is uniquely positioned with an extremely new fleet, a virtually debt-free balance sheet, strong cash flow and the best people and technology in the business," said Werner.
Werner Enterprises is a full-service transportation company providing truckload services throughout the 48 states, portions of Canada and Mexico. C.L. Werner founded the company in 1956. Werner is among the nation's largest truckload carriers with a fleet of 7,950 trucks and 20,200 trailers.