-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AM49cSYSVDSz4ViJTdjMiHk8I06C/QCEuE5NJ57RZBhM19CQ4b5G3prpCkT/RgJQ 5mdZCuQis4mZaScZgELXMg== 0000793074-01-500009.txt : 20010815 0000793074-01-500009.hdr.sgml : 20010815 ACCESSION NUMBER: 0000793074-01-500009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WERNER ENTERPRISES INC CENTRAL INDEX KEY: 0000793074 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 470648386 STATE OF INCORPORATION: NE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14690 FILM NUMBER: 1712258 BUSINESS ADDRESS: STREET 1: 14507 FRONTIER ROAD STREET 2: P O BOX 45308 CITY: OMAHA STATE: NE ZIP: 68145 BUSINESS PHONE: 4028956640 10-Q 1 wern10q2q01.txt WERNER ENTERPRISES, INC. FORM 10Q 6/30/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended Commission file number June 30, 2001 0-14690 WERNER ENTERPRISES, INC. (Exact name of registrant as specified in its charter) NEBRASKA 47-0648386 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 14507 FRONTIER ROAD POST OFFICE BOX 45308 OMAHA, NEBRASKA 68145-0308 (402) 895-6640 (Address of principal (Zip Code)(Registrant's telephone number) executive offices) _________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of July 31, 2001, 47,504,527 shares of the registrant's common stock, par value $.01 per share, were outstanding. INDEX TO FORM 10-Q PAGE PART I - FINANCIAL INFORMATION ---- Item 1 - Financial Statements Consolidated Statements of Income for the Three Months Ended June 30, 2001 and 2000 3 Consolidated Statements of Income for the Six Months Ended June 30, 2001 and 2000 4 Consolidated Condensed Balance Sheets as of June 30, 2001 and December 31, 2000 5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 6 Notes to Consolidated Financial Statements as of June 30, 2001 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 14 PART II - OTHER INFORMATION Items 1, 2, 3 and 5 - Not Applicable Item 4 - Submission of Matters to a Vote of Security Holders 15 Item 6 - Exhibits and Reports on Form 8-K 15 PART I FINANCIAL INFORMATION Item 1. Financial Statements. The interim consolidated financial statements contained herein reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the financial condition and results of operations for the periods presented. They have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three-month and six-month periods ended June 30, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. In the opinion of management, the information set forth in the accompanying consolidated condensed balance sheets is fairly stated in all material respects in relation to the consolidated balance sheets from which it has been derived. These interim consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 2 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended (In thousands, except per share amounts) June 30 - ------------------------------------------------------------------------- 2001 2000 - ------------------------------------------------------------------------- (Unaudited) Operating revenues $322,777 $307,242 ------------------------ Operating expenses: Salaries, wages and benefits 114,862 107,540 Fuel 35,714 31,839 Supplies and maintenance 29,275 26,327 Taxes and licenses 23,192 22,186 Insurance and claims 10,911 8,224 Depreciation 28,908 26,794 Rent and purchased transportation 55,245 59,338 Communications and utilities 3,567 3,475 Other 1,170 (899) ------------------------ Total operating expenses 302,844 284,824 ------------------------ Operating income 19,933 22,418 ------------------------ Other expense (income): Interest expense 834 1,978 Interest income (554) (625) Other 307 235 ------------------------ Total other expense 587 1,588 ------------------------ Income before income taxes 19,346 20,830 Income taxes 7,255 7,915 ------------------------ Net income $ 12,091 $ 12,915 ======================== Average common shares outstanding 47,270 47,061 ======================== Basic earnings per share $ .26 $ .27 ======================== Diluted shares outstanding 47,917 47,304 ======================== Diluted earnings per share $ .25 $ .27 ======================== Dividends declared per share $ .025 $ .025 ========================
3 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended (In thousands, except per share amounts) June 30 - ------------------------------------------------------------------------- 2001 2000 - ------------------------------------------------------------------------- (Unaudited) Operating revenues $627,354 $598,621 ------------------------ Operating expenses: Salaries, wages and benefits 223,936 210,852 Fuel 70,778 63,048 Supplies and maintenance 56,219 51,639 Taxes and licenses 46,270 43,648 Insurance and claims 21,652 15,204 Depreciation 58,103 53,115 Rent and purchased transportation 105,517 116,365 Communications and utilities 7,310 7,161 Other 1,577 (3,364) ------------------------ Total operating expenses 591,362 557,668 ------------------------ Operating income 35,992 40,953 ------------------------ Other expense (income): Interest expense 2,240 4,213 Interest income (1,448) (1,072) Other 726 340 ------------------------ Total other expense 1,518 3,481 ------------------------ Income before income taxes 34,474 37,472 Income taxes 12,928 14,239 ------------------------ Net income $ 21,546 $ 23,233 ======================== Average common shares outstanding 47,172 47,077 ======================== Basic earnings per share $ .46 $ .49 ======================== Diluted shares outstanding 47,792 47,277 ======================== Diluted earnings per share $ .45 $ .49 ======================== Dividends declared per share $ .050 $ .050 ========================
4 WERNER ENTERPRISES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31 - ------------------------------------------------------------------------- 2001 2000 - ------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 19,756 $ 25,485 Accounts receivable, net 135,951 123,518 Receivable from unconsolidated affiliate - 5,332 Other receivables 9,082 10,257 Prepaid taxes, licenses and permits 6,918 12,396 Other current assets 30,787 29,789 ------------------------- Total current assets 202,494 206,777 ------------------------- Property and equipment 1,070,872 1,021,679 Less - accumulated depreciation 344,669 313,881 ------------------------- Property and equipment, net 726,203 707,798 ------------------------- Notes receivable 4,198 4,420 Investment in unconsolidated affiliate 4,687 5,324 Other non-current assets 2,652 2,888 ------------------------- $ 940,234 $ 927,207 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 32,510 $ 30,710 Insurance and claims accruals 37,426 36,057 Accrued payroll 15,614 12,746 Payable to unconsolidated affiliate 2,092 - Other current liabilities 16,163 21,906 ------------------------- Total current liabilities 103,805 101,419 ------------------------- Long-term debt 55,000 105,000 Insurance, claims and other long-term accruals 35,301 32,301 Deferred income taxes 184,907 152,403 Stockholders' equity 561,221 536,084 ------------------------- $ 940,234 $ 927,207 =========================
5 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended (In thousands) June 30 - ------------------------------------------------------------------------ 2001 2000 - ------------------------------------------------------------------------ (Unaudited) Cash flows from operating activities: Net income $ 21,546 $ 23,233 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 58,103 53,115 Deferred income taxes 32,504 5,808 Loss(gain) on disposal of property and equipment 465 (3,999) Equity in loss of unconsolidated affiliate 637 120 Tax benefit from exercise of stock options 1,138 65 Other long-term assets 236 - Insurance claims and other long-term accruals 3,000 - Changes in certain working capital items: Accounts receivable, net (12,433) (6,599) Prepaid expenses and other current assets 10,987 1,728 Accounts payable 1,800 (7,541) Other current liabilities 577 9,151 ------------------------- Net cash provided by operating activities 118,560 75,081 ------------------------- Cash flows from investing activities: Additions to property and equipment (99,607) (81,859) Proceeds from sales of property and equipment 22,429 44,013 Investment in unconsolidated affiliate - (750) Proceeds from collection of notes receivable 427 36 ------------------------- Net cash used in investing activities (76,751) (38,560) ------------------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 5,000 - Repayments of short-term debt - (25,000) Repayments of long-term debt (55,000) (5,000) Dividends on common stock (2,360) (2,356) Repurchases of common stock - (2,135) Stock options exercised 4,822 302 ------------------------- Net cash used in financing activities (47,538) (34,189) ------------------------- Net (decrease)increase in cash and cash equivalents (5,729) 2,332 Cash and cash equivalents, beginning of period 25,485 15,368 ------------------------- Cash and cash equivalents, end of period $ 19,756 $ 17,700 ========================= Supplemental disclosures of cash flow information: Cash paid (received) during the period for: Interest $ 2,762 $ 4,165 Income taxes $(15,810) $ 1,797 Supplemental schedule of non-cash investing activities: Notes receivable issued upon sale of revenue equipment $ 205 $ 2,406
6 WERNER ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Investment in Unconsolidated Affiliate Effective June 30, 2000, the Company contributed its non-asset based logistics business to Transplace, LLC (TPC), in exchange for an equity interest in TPC of approximately 15%. TPC is a joint venture of five large transportation companies - Covenant Transport, Inc.; J. B. Hunt Transport Services, Inc.; Swift Transportation Co., Inc.; U. S. Xpress Enterprises, Inc.; and Werner Enterprises, Inc. Accordingly, the Company is accounting for its investment in TPC using the equity method. Management believes this method is appropriate because the Company has the ability to exercise significant influence over operating and financial policies of TPC through its representation on the TPC board of directors. At June 30, 2001, the investment in unconsolidated affiliate includes a $5,000,000 investment in TPC less $313,100, which represents the Company's 15% equity in the operations of unconsolidated affiliate. (2) Long-Term Debt Long-term debt consists of the following (in thousands):
June 30, December 31, 2001 2000 ------- ----------- Notes payable to banks under committed credit facilities $ 5,000 $ 55,000 6.55% Series A Senior Notes, due November 2002 20,000 20,000 6.02% Series B Senior Notes, due November 2002 10,000 10,000 5.52% Series C Senior Notes, due December 2003 20,000 20,000 -------- -------- Long-term debt $ 55,000 $105,000 ======== ========
The notes payable to banks under committed credit facilities bear variable interest (4.14% at June 30, 2001) based on the London Interbank Offered Rate (LIBOR) and mature in August 2002. The Company has an additional $95 million of available long-term credit facilities with banks which bear variable interest based on LIBOR, on which no borrowings were outstanding at June 30, 2001. (3) Commitments As of June 30, 2001, the Company has commitments for net capital expenditures of approximately $25 million. 7 (4) Earnings Per Share A reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below. Common stock equivalents represent the dilutive effect of outstanding stock options for all periods presented.
(in thousands, except per share amounts) Three Months Ended Six Months Ended June 30 June 30 -------------------- -------------------- 2001 2000 2001 2000 -------------------- -------------------- Net income $ 12,091 $ 12,915 $ 21,546 $ 23,233 ==================== ==================== Average common shares outstanding 47,270 47,061 47,172 47,077 Common stock equivalents 647 243 620 200 Diluted shares -------------------- -------------------- outstanding 47,917 47,304 47,792 47,277 ==================== ==================== Basic earnings per share $ .26 $ .27 $ .46 $ .49 ==================== ==================== Diluted earnings per share $ .25 $ .27 $ .45 $ .49 ===================== ====================
Options to purchase shares of common stock which were outstanding during the periods indicated above, but were excluded from the computation of diluted earnings per share because the option purchase price was greater than the average market price of the common shares, were:
Three Months Ended Six Months Ended June 30 June 30 --------------------- -------------------- 2001 2000 2001 2000 --------------------- -------------------- Number of shares under option 7,500 684,437 7,500 684,437 Range of option $19.13- $14.94- $19.13- $14.94- purchase prices $20.50 $20.50 $20.50 $20.50
(5) Segment Information The Company has one reportable segment- Truckload transportation services. This segment consists of five operating fleets that have been aggregated since they have similar economic characteristics and meet the other aggregation criteria of SFAS No. 131. The Medium- to Long-Haul Van fleet transports a variety of consumer, non-durable products and other commodities in truckload quantities over irregular routes using dry van trailers. The Regional Short-Haul fleet provides comparable truckload van service within five geographic areas. The Flatbed and Temperature- Controlled fleets provide truckload services for products with specialized trailers. The Dedicated Services fleet provides truckload services required by a specific company, plant, or distribution center. 8 The Company generates non-trucking revenues related to freight transportation management, third-party equipment maintenance, and other business activities. None of these operations meet the quantitative threshold reporting requirements of SFAS No. 131. As a result, these operations are grouped in "Other" in the table below. The Company does not prepare separate balance sheets by segments and, as a result, assets are not separately identifiable by segment. The Company has no significant intersegment sales or expense transactions that would result in adjustments necessary to eliminate amounts between the Company's segments. The following tables summarize the Company's segment information (in thousands of dollars):
Revenues -------- Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------- 2001 2000 2001 2000 ------------------- ------------------- Truckload Transportation Services $303,413 $286,502 $593,224 $558,661 Other 19,364 20,740 34,130 39,960 ------------------- ------------------- Total $322,777 $307,242 $627,354 $598,621 =================== =================== Operating Income ---------------- Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------- 2001 2000 2001 2000 ------------------- ------------------- Truckload Transportation Services $19,802 $22,819 $35,504 $41,614 Other 131 (401) 488 (661) ------------------- ------------------- Total $19,933 $22,418 $35,992 $40,953 =================== ===================
9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This report contains forward-looking statements which are based on information currently available to the Company's management. Actual results could differ materially from those anticipated in forward-looking statements as a result of a number of factors, including, but not limited to, those discussed in Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition", of the Company's Annual Report on Form 10-K for the year ended December 31, 2000. The Company assumes no obligation to update any forward-looking statement to the extent it becomes aware that it will not be achieved for any reason. Financial Condition: During the six months ended June 30, 2001, the Company generated cash flow from operations of $119 million. The portion of the increase in operating cash flow from deferred income taxes from the six months ended June 30, 2000 to the six months ended June 30, 2001 was due primarily to the implementation of certain tax strategies. The cash flow from operations enabled the Company to make net property additions, primarily revenue equipment, of $77.2 million, repay $50 million of debt, and pay common stock dividends of $2.4 million. Based on the Company's strong financial position, management foresees no significant barriers to obtaining sufficient financing, if necessary, to continue with its growth plans. The Company's debt to equity ratio at June 30, 2001 was 9.8%, compared with 19.6% at December 31, 2000. The Company's debt to total capitalization ratio (total capitalization equals total debt plus total stockholders' equity) was 8.9% at June 30, 2001 compared to 16.4% at December 31, 2000. 10 Results of Operations: The following table sets forth the percentage relationship of income and expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues -------------------------------------------- Three Months Ended Six Months Ended June 30 June 30 2001 2000 2001 2000 -------------------------------------------- Operating revenues 100.0 % 100.0 % 100.0 % 100.0 % -------------------------------------------- Operating expenses: Salaries, wages and benefits 35.6 35.0 35.7 35.2 Fuel 11.1 10.4 11.3 10.5 Supplies and maintenance 9.1 8.6 9.0 8.6 Taxes and licenses 7.2 7.2 7.4 7.3 Insurance and claims 3.4 2.7 3.4 2.5 Depreciation 8.9 8.7 9.3 8.9 Rent and purchased transportation 17.1 19.3 16.8 19.4 Communications and utilities 1.1 1.1 1.2 1.2 Other 0.3 (0.3) 0.2 (0.6) -------------------------------------------- Total operating expenses 93.8 92.7 94.3 93.2 -------------------------------------------- Operating income 6.2 7.3 5.7 6.8 Net interest expense and other 0.2 0.5 0.2 0.6 -------------------------------------------- Income before income taxes 6.0 6.8 5.5 6.3 Income taxes 2.3 2.6 2.1 2.4 -------------------------------------------- Net income 3.7 % 4.2 % 3.4 % 3.9 % ============================================ -------------------- Operating Statistics -------------------- Average monthly miles per tractor 10,357 10,647 Average revenues per total mile (1) $1.204 $1.187 Average revenues per loaded mile (1) $1.335 $1.315 Average percentage of empty miles 9.81% 9.74% Average tractors in service 7,746 7,271 Non-trucking revenues (in thousands) $19,364 $20,740 Total tractors (at quarter end) Company 6,590 6,125 Owner-operator 1,135 1,200 ------- ------- Total tractors 7,725 7,325 Total trailers (at quarter end) 19,850 19,200 (1) Net of fuel surcharge revenues.
11 Three Months Ended June 30, 2001 and 2000 - ----------------------------------------- Operating revenues increased 5.1% for the three months ended June 30, 2001, compared to the same period of the prior year, due in part to a 6.5% increase in the average number of tractors in service. Revenue per mile, excluding fuel surcharges, increased 1.4%, and revenue per mile, including fuel surcharges, increased 2.2% compared to second quarter 2000. Excluding fuel surcharge revenues, trucking revenues increased 5.1% for the three months ended June 30, 2001, compared to the same period of the prior year. These increases were offset by a 2.7% decrease in miles per truck compared to second quarter 2000 and a $1.4 million net decrease (6.6% decrease) in revenues from logistics and other non-trucking transportation services. Logistics business representing $11.6 million of revenues for the three months ended June 30, 2000 was transferred to Transplace; however, during the three months ended June 30, 2001, this was offset by an increase in other non-trucking transportation services. See discussion of Transplace on the following pages. Operating expenses, expressed as a percentage of operating revenues, were 93.8% for the three months ended June 30, 2001, compared to 92.7% for the three months ended June 30, 2000. The decrease in owner-operator miles as a percentage of total miles (16.5% in second quarter 2001 compared to 18.9% in second quarter 2000), contributed to a shift in costs from the rent and purchased transportation expense category to several other expense categories, as described on the following pages. Owner-operators are independent contractors who supply their own tractor and driver, and are responsible for their operating expenses including fuel, supplies and maintenance, and fuel taxes. Over the past year, it has become more difficult to retain owner-operator drivers due to the challenging operating conditions for owner-operators. Salaries, wages and benefits increased from 35.0% to 35.6% of revenues due to a higher percentage of company drivers as compared to owner- operators in second quarter 2001 and an increase in the number of student drivers. This was offset by a reduction in non-driver salaries due to a higher ratio of tractors to non-driver employees in second quarter 2001 compared to second quarter 2000. Workers' compensation expense increased due to rising medical costs and higher weekly claim payments. The market for attracting company drivers has improved during 2001; however, the Company anticipates that the competition for qualified drivers will continue to be high, and cannot predict whether it will experience shortages in the future. If such a shortage was to occur and increases in driver pay rates became necessary to attract and retain drivers, the Company's results of operations would be negatively impacted to the extent that corresponding freight rate increases were not obtained. Fuel increased from 10.4% to 11.1% of revenues due mainly to a higher percentage of company drivers compared to owner-operators during the quarter compared to the same quarter of the prior year. Diesel fuel prices were about 6% higher during second quarter 2001 compared to second quarter 2000. The Company's customer fuel surcharge reimbursement programs recovered most of the increase in fuel cost. After considering the amounts collected from customers through fuel surcharge programs, net of reimbursements to owner-operators, there was no significant impact on second quarter 2001 earnings per share compared to second quarter 2000 earnings per share due to higher fuel costs. Shortages of fuel, increases in fuel prices or rationing of petroleum products can have a materially adverse effect on the operations and profitability of the Company. The Company is unable to predict whether higher fuel price levels will continue or the extent to which fuel surcharges will be collected from customers. As of June 30, 2001, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. Supplies and maintenance increased from 8.6% to 9.1% of revenues due to a higher percentage of company drivers compared to owner-operators during the second quarter 2001. 12 Insurance and claims increased from 2.7% to 3.4% of revenues due primarily to unfavorable claims experience in second quarter 2001. Insurance premiums in the liability insurance market have increased in recent months. Since the Company is self-insured for $500,000 of liability for each claim, these premium increases only affect the Company for coverage above this amount. The Company anticipates that the cost of liability coverage above this level will increase the Company's total insurance and claims expense by approximately 5% beginning in August 2001. Depreciation increased from 8.7% to 8.9% of revenues because of the larger percentage of company-owned trucks versus owner-operator trucks. Rent and purchased transportation decreased from 19.3% to 17.1% of revenues due primarily to transferring most of the Company's logistics business to Transplace and the decrease in owner-operator miles as a percentage of total miles. The Company has experienced difficulty in recruiting and retaining owner-operators because of high fuel prices, a weak used truck pricing market, and other factors. This has resulted in a reduction of the number of owner-operator tractors from 1,200 as of June 30, 2000, to 1,135 as of June 30, 2001. The Company reimburses owner- operators for the higher cost of fuel based on fuel surcharge reimbursements collected from customers. On June 30, 2000, the Company transferred its logistics business unit to Transplace. The Company is one of six large truckload transportation companies that contributed their logistics businesses to this commonly owned, Internet-based logistics company. Each of the six founding members of Transplace contributed their logistics business, related intangible assets, and $5 million of cash. The Company transferred logistics business representing $11.6 million of revenues for the three months ended June 30, 2000 to Transplace. The Company is recording its approximate 15% investment in Transplace using the equity method of accounting and is accruing its percentage share of Transplace's earnings as an other non- operating item. In second quarter 2001, the Company recorded a loss of approximately $0.2 million as its percentage share of estimated Transplace losses. Other operating expenses changed from a credit of (0.3)% to 0.3% of revenues due to a weak market for the sale of used trucks. Record levels of trucks manufactured over the past two years, an increased supply of used trucks caused in part by trucking company business failures, and slower fleet growth by many carriers have all contributed to a decline in the market value of used trucks. During second quarter 2001, the Company traded more of its used trucks, and the excess of the trade price over the net book value of the truck reduced the cost basis of the new truck. In second quarter of 2000, the Company sold most of its used trucks to third parties through its Fleet Truck Sales retail network and realized gains of $1.2 million. Due to a reduced number of trucks sold to third parties and a lower average sale price per truck, in second quarter 2001 the Company realized losses of $0.5 million. The Company cannot predict whether the current state of the used truck market will continue. Interest expense decreased from 0.6% to 0.3% of revenues due to a reduction in the Company's borrowings. Average debt outstanding in second quarter 2001 was $57.5 million versus $120 million in second quarter 2000. The Company's effective income tax rate (income taxes as a percentage of income before income taxes) was 37.5% and 38.0% for the three-month periods ended June 30, 2001 and 2000, respectively. The effective income tax rate for the 2001 period decreased due to the implementation of certain tax strategies. 13 Six Months Ended June 30, 2001 and 2000 - --------------------------------------- Operating revenues increased by 4.8% for the six months ended June 30, 2001, compared to the same period of the previous year, primarily due to a 6.2% increase in the average number of tractors. Revenue per mile, excluding fuel surcharges, increased 1.4% due primarily to rate increases. Operating expenses, expressed as a percentage of operating revenues, were 94.3% for the six months ended June 30, 2001, compared to 93.2% for the same period of the previous year. Salaries, wages and benefits increased from 35.2% to 35.7% of revenues, primarily due to a higher percentage of company drivers as compared to owner-operators and an increase in the number of student drivers. Fuel increased from 10.5% to 11.3% of revenues due to higher fuel prices and an increase in the percentage of company drivers. Supplies and maintenance increased from 8.6% to 9.0% of revenues due to an increase in the number of company drivers. Insurance and claims increased from 2.5% to 3.4% of revenues due to unfavorable claims experience, including an increase in the frequency of property damage and cargo damage accidents. Depreciation increased from 8.9% to 9.3% due to the increase in the percentage of company drivers. Rent and purchased transportation decreased from 19.4% to 16.8% of revenues due to a decrease in the number of owner- operator trucks and a decrease in purchased transportation from logistics business that was transferred to Transplace. Other operating expenses changed from (0.6)% to 0.2% of revenues due to a weaker used truck market. Interest expense decreased from 0.7% to 0.3% of revenues due to a reduction in borrowings. Accounting Standards: On July 20, 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations and No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Business combinations accounted for as poolings-of-interests and initiated prior to June 30, 2001 are grandfathered. SFAS 142 replaces the requirement to amortize intangible assets with indefinite lives and goodwill with a requirement for an impairment test. SFAS 142 also requires an evaluation of intangible assets and their useful lives and a transitional impairment test for goodwill and certain intangible assets upon adoption. After transition, the impairment tests will be performed annually. SFAS 142 is effective for fiscal years beginning after December 15, 2001, as of the beginning of the year. As of June 30, 2001, the Company has no goodwill or intangible assets recorded in its financial statements. Management believes that SFAS 141 and SFAS 142 will have no effect on the financial position, results of operations and cash flows of the Company. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to market risk from changes in interest rates and commodity prices. Interest Rate Risk The Company had $5 million of variable rate debt at June 30, 2001. The interest rates on the variable rate debt are based on the London Interbank Offered Rate (LIBOR). Assuming this level of borrowings, a hypothetical one-percentage point increase in the LIBOR interest rate would increase the Company's annual interest expense by $50,000. 14 Commodity Price Risk The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, the Company has been able to recover a majority of fuel price increases from customers in the form of fuel surcharges. As of June 30, 2001, the Company has implemented customer fuel surcharges with most of its revenue base to offset most of the higher fuel cost per gallon. The Company cannot predict the extent to which high fuel price levels will occur in the future or the extent to which fuel surcharges could be collected to offset such increases. As of June 30, 2001, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of Werner Enterprises, Inc. was held on May 1, 2001 for the purpose of electing three directors for three- year terms. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management's nominees. Each of management's nominees for director as listed in the Proxy Statement was elected. Of the 47,091,895 shares entitled to vote, stockholders representing 45,007,010 shares (95.6%) were present in person or by proxy. The voting tabulation was as follows: Shares Shares Voted Voted "FOR" "ABSTAIN" ---------- --------- Curtis G. Werner 41,551,937 3,455,073 Gerald H. Timmerman 44,023,462 983,548 Donald W. Rogert 44,017,959 989,051 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits None (b) Reports on Form 8-K. (i) A report on Form 8-K, filed April 19, 2001, regarding a news release on April 16, 2001, announcing the Company's operating revenues and earnings for the first quarter ended March 31, 2001. (ii) A report on Form 8-K, filed May 18, 2001, regarding a news release on May 18, 2001, announcing the opening of the Laredo, Texas terminal. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WERNER ENTERPRISES, INC. Date: August 14, 2001 By: /s/ John J. Steele ---------------------- ------------------------------ John J. Steele Vice President, Treasurer and Chief Financial Officer Date: August 14, 2001 By: /s/ James L. Johnson ---------------------- ------------------------------ James L. Johnson Vice President, Controller and Corporate Secretary 16 -----END PRIVACY-ENHANCED MESSAGE-----