Werner Blames Truck Glut, Slowing Economy for Revenue Decline

The fourth quarter revenues of Werner Enterprises, Inc. (Omaha, Neb.) declined slightly in 2006 to $518 million compared to $526 million in the fourth quarter of last year. Excluding fuel charges, the company reports that revenues would have increased 1%. For the full year, revenues increased 6% to $2.081 billion.

As the company stated in a press release, the accelerated purchase of new trucks disrupted the freight supply and demand balance in the second half of 2006. Many carriers took delivery of more new trucks than normal in the second half of 2006 to delay the purchase of more costly new trucks that are required to meet federally-mandated engine emission requirements beginning with engines manufactured in January 2007. Approximately 331,000 class 8 trucks were built in 2006, compared to a normalized build level of approximately 230,000 trucks. As a result of the truck glut spot market truckload freight rates declined substantially in the latter part of the year.

Looking deeper into the quarter’s performance, the company reports that the truckload freight market in the fourth quarter was much softer than normal. It did not experience the normal peak-season increase in freight volume from mid-August through December, which led to a 5.3% decline in average miles per truck in the period. For the first three weeks of January 2007, its daily freight pre-bookings (freight available to trucks available) continued to trend lower than the same three weeks last year.

Company executives also said that the recent softness in housing and automotive--sectors not principally served by Werner Enterprises--caused carriers that depend on those freight markets to more aggressively compete in markets that the company serves. Other demand-related factors cited for lower freight demand in the fourth quarter were inventory tightening by some large retailers, some shippers shifting to more intermodal container shipments for lower value freight, and moderating economic growth.

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