Werner discusses HOS, fuel costs, driver availability and new engine testing

| 4/19/2004

As part of its most recent earnings report, Werner Enterprises Inc. discussed several issues affecting the trucking industry, including new hours-of-service regulations that became effective Jan. 4, 2004.

“We anticipated that the new regulations could have an overall negative impact on our average miles per tractor due to operational changes, primarily resulting from the new 14-hour on-duty rule. However, for first quarter 2004 compared to first quarter 2003, average miles per tractor increased 1.3 percent, even after considering the 13 percent decline in average trip length.”

Werner said those results are attributable to its HOS planning efforts and driver training, effective use of its paperless log software, improved freight demand, improved customer shipping and receiving operations, the new 34-hour restart driving rule, and one more business day in the first quarter of 2004 compared with the first quarter of 2003 (64 business days compared with 63 business days).

As a result of the HOS rule changes, Werner increased rates with customers for multiple-stop shipments and tractor detention in the first quarter of 2004.

“We were very pleased that our medium- to long-haul drivers did not experience a decline in miles per truck,” the company said. “We also increased driver pay for multiple stop shipments and unanticipated delays that cause truck downtime.”

The company also noted that tractor detention revenue increased only slightly because many customers made operational changes to improve shipping and receiving operations, thereby reducing tractor delays.

Driver recruitment, fuel costs remain problematic

The market for recruiting drivers became increasingly challenging in the first quarter of 2004, the company said.

“For over two years, the owner-operator driver market has been difficult. In recent months, the market for recruiting experienced drivers tightened. While also challenging, the company continues to have success recruiting drivers from driver training schools,” Werner said.

Meanwhile, the company said fuel prices in the first quarter of 2004 were significantly higher than historical price levels and were 33 cents a gallon higher than average prices during the first quarters of the four years prior to 2003.

To lessen the effect of fluctuating fuel prices, Werner collects fuel surcharges from its customers. The surcharge programs automatically adjust as fuel prices change.

“Assuming that current fuel price levels in the first half of April continue through the remainder of second quarter 2004, the company anticipates that fuel will have a negative impact of approximately five cents per share in second quarter 2004 compared to second quarter 2003,” the company said.

EPA-compliant engines

Werner said it was testing EPA-compliant truck engines, in particular the Caterpillar ACERT engines and the Detroit Diesel EGR engines. As of March 31, 2004, approximately 15 percent of the company's fleet consisted of company-owned trucks with these engines.

To date, the company's testing indicates that the fuel mile per gallon degradation is a reduction of approximately 0.3 mpg to 0.5 mpg. Also, depreciation expense is increasing due to the higher cost of the new engines. The company now plans to maintain its three-year sale/trade cycle for tractors and does not expect the age of its truck fleet to increase significantly during 2004.