-----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, BetqVvBk99ILrp47w0ev+q6SXeu72HWBs1oTyMx9C6/z4JxWQWVXIf0rATc6HpPF 1b3YEXh3qdAcy4vzexuWiA== 0000793074-02-000021.txt : 20020813 0000793074-02-000021.hdr.sgml : 20020813 20020813120221 ACCESSION NUMBER: 0000793074-02-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 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: 02728550 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 wern10q2q02.txt WERNER ENTERPRISES, INC. 10Q 6/30/02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 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) including area code) _________________________________ 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, 2002, 63,782,066 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, 2002 and 2001 3 Consolidated Statements of Income for the Six Months Ended June 30, 2002 and 2001 4 Consolidated Condensed Balance Sheets as of June 30, 2002 and December 31, 2001 5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 6 Notes to Consolidated Financial Statements as of June 30, 2002 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 13 PART II - OTHER INFORMATION Items 1, 2, 3 and 5 - Not Applicable Item 4 - Submission of Matters to a Vote of Security Holders 14 Item 6 - Exhibits and Reports on Form 8-K 14 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, results of operations, and cash flows 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 accounting principles generally accepted in the United States of America for complete financial statements. Operating results for the three-month and six-month periods ended June 30, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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, 2001. 2 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended (In thousands, except per share amounts) June 30 - ------------------------------------------------------------------------- 2002 2001 - ------------------------------------------------------------------------- (Unaudited) Operating revenues $340,405 $322,777 ---------------------- Operating expenses: Salaries, wages and benefits 122,417 114,862 Fuel 30,401 35,714 Supplies and maintenance 31,112 29,275 Taxes and licenses 24,723 23,192 Insurance and claims 12,793 10,911 Depreciation 29,521 28,908 Rent and purchased transportation 57,852 55,245 Communications and utilities 3,644 3,567 Other 804 1,170 ---------------------- Total operating expenses 313,267 302,844 ---------------------- Operating income 27,138 19,933 ---------------------- Other expense (income): Interest expense 801 834 Interest income (602) (554) Other 419 307 ---------------------- Total other expense 618 587 ---------------------- Income before income taxes 26,520 19,346 Income taxes 9,945 7,255 ---------------------- Net income $ 16,575 $ 12,091 ====================== Average common shares outstanding 63,801 63,027 ====================== Basic earnings per share $ .26 $ .19 ====================== Diluted shares outstanding 65,192 63,889 ====================== Diluted earnings per share $ .25 $ .19 ====================== Dividends declared per share $ .020 $ .019 ======================
3 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended (In thousands, except per share amounts) June 30 - ------------------------------------------------------------------------- 2002 2001 - ------------------------------------------------------------------------- (Unaudited) Operating revenues $652,980 $627,354 ---------------------- Operating expenses: Salaries, wages and benefits 237,919 223,936 Fuel 55,462 70,778 Supplies and maintenance 61,168 56,219 Taxes and licenses 48,605 46,270 Insurance and claims 24,399 21,652 Depreciation 58,723 58,103 Rent and purchased transportation 113,267 105,517 Communications and utilities 7,361 7,310 Other 1,653 1,577 ---------------------- Total operating expenses 608,557 591,362 ---------------------- Operating income 44,423 35,992 ---------------------- Other expense (income): Interest expense 1,559 2,240 Interest income (1,276) (1,448) Other 631 726 ---------------------- Total other expense 914 1,518 ---------------------- Income before income taxes 43,509 34,474 Income taxes 16,316 12,928 ---------------------- Net income $ 27,193 $ 21,546 ====================== Average common shares outstanding 63,802 62,896 ====================== Basic earnings per share $ .43 $ .34 ====================== Diluted shares outstanding 65,250 63,723 ====================== Diluted earnings per share $ .42 $ .34 ====================== Dividends declared per share $ .040 $ .038 ======================
4 WERNER ENTERPRISES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31 - -------------------------------------------------------------------------- 2002 2001 - -------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 85,214 $ 74,366 Accounts receivable, trade, less allowance of $5,393 and $4,966, respectively 127,803 121,354 Other receivables 10,375 8,527 Inventories and supplies 8,926 8,432 Prepaid taxes, licenses and permits 7,095 12,333 Other current assets 14,164 11,055 ------------------------ Total current assets 253,577 236,067 ------------------------ Property and equipment 1,107,695 1,069,605 Less - accumulated depreciation 366,332 354,122 ------------------------ Property and equipment, net 741,363 715,483 ------------------------ Other non-current assets 14,999 12,464 ------------------------ $1,009,939 $ 964,014 ======================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 34,906 $ 33,188 Current portion of long-term debt 30,000 30,000 Insurance and claims accruals 46,566 40,254 Accrued payroll 17,348 15,008 Current deferred income taxes 20,473 20,473 Other current liabilities 12,010 13,334 ------------------------ Total current liabilities 161,303 152,257 ------------------------ Long-term debt, net of current portion 20,000 20,000 Insurance and claims accruals, net of current portion 42,301 38,801 Deferred income taxes 169,869 162,907 Stockholders' equity: Common stock, $.01 par value, 200,000,000 shares authorized; 64,427,780 shares issued; 63,794,567 and 63,636,823 shares outstanding, respectively 644 644 Paid-in capital 106,958 106,058 Retained earnings 515,582 490,942 Accumulated other comprehensive loss (81) (43) Treasury stock, at cost; 633,206 and 790,957 shares, respectively (6,637) (7,552) ------------------------ Total stockholders' equity 616,466 590,049 ------------------------ $1,009,939 $ 964,014 ========================
5 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended (In thousands) June 30 - ------------------------------------------------------------------------- 2002 2001 - ------------------------------------------------------------------------- (Unaudited) Cash flows from operating activities: Net income $ 27,193 $ 21,546 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 58,723 58,103 Deferred income taxes 6,962 32,504 Loss on disposal of property and equipment 61 465 Equity in loss of unconsolidated affiliate 637 637 Tax benefit from exercise of stock options 995 1,138 Other long-term assets (83) 236 Insurance claims and other long-term accruals 3,500 3,000 Changes in certain working capital items: Accounts receivable, net (6,449) (12,433) Prepaid expenses and other current assets (213) 10,987 Accounts payable 1,718 1,800 Other current liabilities 7,207 577 ---------------------- Net cash provided by operating activities 100,251 118,560 ---------------------- Cash flows from investing activities: Additions to property and equipment (117,359) (99,607) Retirements of property and equipment 32,646 22,429 (Increase) decrease in notes receivable (3,040) 427 ---------------------- Net cash used in investing activities (87,753) (76,751) ---------------------- Cash flows from financing activities: Proceeds from issuance of long-term debt - 5,000 Repayments of long-term debt - (55,000) Dividends on common stock (2,470) (2,360) Payment of stock split fractional shares (12) - Repurchases of common stock (1,556) - Stock options exercised 2,388 4,822 ---------------------- Net cash used in financing activities (1,650) (47,538) ---------------------- Net increase (decrease) in cash and cash equivalents 10,848 (5,729) Cash and cash equivalents, beginning of period 74,366 25,485 ---------------------- Cash and cash equivalents, end of period $ 85,214 $ 19,756 ====================== Supplemental disclosures of cash flow information: Cash paid (received) during the period for: Interest $ 1,559 $ 2,762 Income taxes $ 9,881 $(15,810) Supplemental schedule of non-cash investing activities: Notes receivable issued upon sale of revenue equipment $ 49 $ 205
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 (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, 2002, the investment in unconsolidated affiliate (in thousands), which is included in other non-current assets, is $3,023 (which includes a $5,000 cash investment in TPC less $1,977, which represents the Company's 15% equity in the loss from operations of unconsolidated affiliate since June 30, 2000). The Company is not responsible for the debt of Transplace. (2) Commitments As of June 30, 2002, the Company has commitments for net capital expenditures of approximately $135 million. (3) 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 --------------------- --------------------- 2002 2001 2002 2001 --------------------- --------------------- Net income $ 16,575 $ 12,091 $ 27,193 $ 21,546 ===================== ===================== Average common shares outstanding 63,801 63,027 63,802 62,896 Common stock equivalents 1,391 862 1,448 827 -------------------- --------------------- Diluted shares outstanding 65,192 63,889 65,250 63,723 ==================== ===================== Basic earnings per share $ .26 $ .19 $ .43 $ .34 ==================== ===================== Diluted earnings per share $ .25 $ .19 $ .42 $ .34 ==================== =====================
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: 7
Three Months Ended Six Months Ended June 30 June 30 -------------------- -------------------- 2002 2001 2002 2001 -------------------- -------------------- Number of shares under option - 10,000 - 10,000 Range of option purchase prices - $14.35-$15.38 - $14.35-$15.38
(4) 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. 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 --------------------- -------------------- 2002 2001 2002 2001 --------------------- -------------------- Truckload Transportation Services $316,432 $303,413 $607,464 $593,224 Other 23,973 19,364 45,516 34,130 --------------------- -------------------- Total $340,405 $322,777 $652,980 $627,354 ===================== ==================== Operating Income ---------------- Three Months Ended Six Months Ended June 30 June 30 --------------------- -------------------- 2002 2001 2002 2001 --------------------- -------------------- Truckload Transportation Services $26,887 $19,802 $43,599 $35,504 Other 251 131 824 488 --------------------- -------------------- Total $27,138 $19,933 $44,423 $35,992 ===================== ====================
8 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, 2001. 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, 2002, the Company generated cash flow from operations of $100.3 million, a 5.4% increase ($5.1 million) in cash flow compared to the same six-month period a year ago, excluding the $23.4 million refund of income taxes received in first quarter 2001 which resulted from the implementation of certain tax strategies. Including the income tax refund, cash flow from operations was $118.6 million for the six months ended June 30, 2001. The cash flow from operations enabled the Company to make net property additions, primarily revenue equipment, of $84.7 million, repurchase common stock of $1.6 million, and pay common stock dividends of $2.5 million. The average age of the Company's truck fleet was reduced from 1.5 years as of December 31, 2001 to 1.4 years at March 31, 2002 and to 1.3 years at June 30, 2002. The decrease in the average age of the Company truck fleet is due to buying a large number of pre-October 2002 trucks which are not subject to the new engine emission standards mandated by the Environmental Protection Agency. Based on the Company's strong financial position, management foresees no significant barriers to obtaining sufficient financing, if necessary. The Company's debt to equity ratio at June 30, 2002 was 8.1%, compared with 8.5% at December 31, 2001. The Company's debt to total capitalization ratio (total capitalization equals total debt plus total stockholders' equity) was 7.5% at June 30, 2002 compared to 7.8% at December 31, 2001. 9 Results of Operations: The following table sets forth the percentage relationship of income and expense items to operating revenues for the periods indicated.
Three Months Ended Six Months Ended June 30 June 30 2002 2001 2002 2001 -------------------------------------------- Operating revenues 100.0% 100.0% 100.0% 100.0% -------------------------------------------- Operating expenses: Salaries, wages and benefits 36.0 35.6 36.4 35.7 Fuel 8.9 11.1 8.5 11.3 Supplies and maintenance 9.1 9.1 9.4 9.0 Taxes and licenses 7.3 7.2 7.4 7.4 Insurance and claims 3.7 3.4 3.7 3.4 Depreciation 8.7 8.9 9.0 9.3 Rent and purchased transportation 17.0 17.1 17.4 16.8 Communications and utilities 1.1 1.1 1.1 1.2 Other 0.2 0.3 0.3 0.2 ------------------------------------------- Total operating expenses 92.0 93.8 93.2 94.3 ------------------------------------------- Operating income 8.0 6.2 6.8 5.7 Net interest expense and other 0.2 0.2 0.1 0.2 ------------------------------------------- Income before income taxes 7.8 6.0 6.7 5.5 Income taxes 2.9 2.3 2.5 2.1 ------------------------------------------- Net income 4.9% 3.7% 4.2% 3.4% ==========================================
The following table sets forth certain industry data regarding the freight revenues and operations of the Company.
Three Months Ended Six Months Ended June 30 % June 30 % 2002 2001 Change 2002 2001 Change ------------------------------------------------- Average monthly miles per tractor 10,550 10,357 1.9% 10,320 10,300 0.2% Average revenues per total mile (1) $1.228 $1.204 2.0% $1.220 $1.197 1.9% Average revenues per loaded mile (1) $1.354 $1.335 1.4% $1.350 $1.333 1.3% Average percentage of empty miles 9.31% 9.81% (5.1%) 9.64% 10.23% (5.8%) ) Average tractors in service 7,973 7,746 2.9% 7,928 7,646 3.7% Average revenues per truck per week (1) $2,989 $2,878 3.9% $2,905 $2,845 2.1% Non-trucking revenues (in thousands) $23,973 $19,364 23.8% $45,516 $34,130 33.4% Total tractors (at quarter end) Company 6,800 6,590 6,800 6,590 Owner-operator 1,150 1,135 1,150 1,135 ------- ------- ------- ------- Total tractors 7,950 7,725 7,950 7,725 Total trailers (at quarter end) 19,855 19,850 19,855 19,850 (1) Net of fuel surcharge revenues.
10 Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, - --------------------------------------------------------------------------- 2001 - ---- Operating revenues increased 5.5% for the three months ended June 30, 2002, compared to the same period of the prior year, due in part to a 2.9% increase in the average number of tractors in service and a 1.9% increase in average miles per tractor in service. Freight volumes were unusually stronger than normal in second quarter 2002, due in part to some shippers restocking low inventory levels and, to a lesser degree, increased shipping in the West Coast markets due to concerns about the potential for a work stoppage at the Los Angeles port. This enabled the Company to be more selective with the freight it hauls and resulted in a lower empty mile percentage, higher miles per truck, and higher revenue per mile. The Company does not know if it will experience these same unusually strong volumes in the third quarter and fourth quarter 2002. Revenue per total mile, excluding fuel surcharges, increased 2.0%. Fuel surcharges, which represent collections from customers for the higher cost of fuel, decreased from $13.6 million in second quarter 2001 to $6.6 million in second quarter 2002 due to lower average fuel prices (see fuel explanation below). Excluding fuel surcharge revenues, trucking revenues increased 6.9% for the three months ended June 30, 2002, compared to the same period of the prior year. Operating expenses, expressed as a percentage of operating revenues, were 92.0% for the three months ended June 30, 2002, compared to 93.8% for the three months ended June 30, 2001. Owner-operator miles as a percentage of total miles were 16.2% in second quarter 2002 compared to 16.5% in second quarter 2001. 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 been more difficult to attract and retain owner-operator drivers due to the challenging operating conditions. Salaries, wages and benefits increased from 35.6% to 36.0% of revenues due in part to an increase in the number of workers' compensation claims and the average cost per claim and an increase in the workers' compensation insurance premiums. The Company renewed its workers' compensation insurance coverage, and for the policy year beginning April 2002, the Company increased its self-insurance retention from $0.5 million to $1.0 million per claim and has premium-based coverage with a reputable insurance company for claims above this amount. The Company's premiums for this coverage increased by approximately $1.3 million over the premiums from the prior policy year. In addition, the Company increased employees in its maintenance department to reduce the higher cost of over-the-road repairs. The market for attracting company drivers is becoming more challenging, and the Company anticipates that the competition for qualified drivers will 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 decreased from 11.1% to 8.9% of revenues due to lower fuel prices. Average diesel fuel prices remained higher than normal compared to historical price levels, but were 18 cents per gallon lower in second quarter 2002 compared to the high prices of second quarter 2001. The Company's customer fuel surcharge reimbursement programs have historically enabled the Company to recover most of the higher fuel prices from its customers compared to normalized average fuel prices. These surcharge programs, which generally adjust weekly based on fuel pricing changes, continued to be in effect during second quarter 2002. After considering the amounts collected from customers through fuel surcharge programs, net of reimbursement to owner-operators, there was no significant impact on second quarter 2002 earnings per share compared to second quarter 2001 earnings per share due to lower 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 fuel price levels will increase or decrease in the future or the extent to which fuel surcharges will be collected from customers. As of June 30, 2002, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. 11 Insurance and claims increased from 3.4% to 3.7% of revenues due to higher excess insurance premiums and unfavorable claims experience in second quarter 2002. Insurance premiums in the liability insurance market have increased significantly for many truckload carriers. Since the Company is self-insured for $0.5 million of liability for each claim and varying annual aggregate amounts of liability for claims above $0.5 million and below $4.0 million, these premium increases only affect the Company for coverage above these amounts. The Company has been self-insured and managed its own claims for liability, cargo, and property damage for over ten years. The Company renewed its annual liability insurance coverage for coverage in excess of $0.5 million per claim effective August 1, 2001. The effect of the August 2001 insurance renewal was an increase in the Company's total insurance and claims expense of less than 10% of the Company's total annual insurance and claims expense. The Company's premium rate for liability coverage up to $3.0 million per claim is fixed through August 1, 2004, while coverage levels above $3.0 million per claim were renewed effective August 1, 2002. For the policy year beginning August 2002, the Company's total premiums for liability insurance remained almost the same as the prior policy year while the Company assumed liability for claims above $3.0 million and below $5.0 million per claim. Liability claims in excess of $5.0 million per claim, if they occur, are covered under premium-based policies with reputable insurance companies. Rent and purchased transportation decreased from 17.1% to 17.0% of revenues due primarily to a decrease in payments to owner-operators for fuel reimbursement. The Company reimburses owner-operators for the higher cost of fuel based on fuel surcharge reimbursements collected from customers. This decrease was offset by an increase in carrier charges for non-trucking services. Other operating expenses decreased from 0.3% to 0.2% of revenues due to improvements in the used truck market. Record levels of trucks manufactured during 1999 and 2000, 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. In the past few months, the pricing for the Company's used trucks has improved, and the Company has been selling more trucks. Over the last year, the Company has expanded its nationwide retail truck sales network that has been a leading seller of used Company trucks for over ten years. In second quarter 2002 the Company realized gains of $0.1 million on sales of used trucks to third parties through its Fleet Truck Sales Retail network compared to losses of $0.5 million in second quarter 2001. The Company's effective income tax rate (income taxes as a percentage of income before income taxes) was 37.5% for the three-month periods ended June 30, 2002 and 2001. Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 - ------------------------------------------------------------------------- Operating revenues increased by 4.1% for the six months ended June 30, 2002, compared to the same period of the previous year, primarily due to a 3.7% increase in the average number of tractors in service. Revenue per total mile, excluding fuel surcharges, increased 1.9%. Operating expenses, expressed as a percentage of operating revenues, were 93.2% for the six months ended June 30, 2002, compared to 94.3% for the same period of the previous year. Salaries, wages and benefits increased from 35.7% to 36.4% of revenues, due to the Company increasing employees in its maintenance department to reduce the higher cost of over-the-road repairs and increases in workers' compensation and health insurance expense due to rising medical costs and higher weekly state workers' compensation payment rates. Fuel decreased from 11.3% to 8.5% of revenues due to lower fuel prices. Supplies and maintenance increased from 9.0% to 9.4% of revenues due to 12 more maintenance being performed over-the-road than at company facilities. As referred to on page 11, the Company has begun adding more maintenance employees. Insurance and claims increased from 3.4% to 3.7% of revenues primarily due to higher excess insurance premiums and unfavorable claims experience. Rent and purchased transportation increased from 16.8% to 17.4% primarily due to an increase in purchased transportation relating to non-trucking operations, offset by a decrease in payments to owner- operators for fuel reimbursement. Accounting Standards: During June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of a tangible long-lived asset. SFAS 143 is effective for fiscal years beginning after June 15, 2002. As of June 30, 2002, management believes that SFAS 143 will have no significant effect on the financial position, results of operations, and cash flows of the Company. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The provisions of this statement related to the rescission of Statement No. 4 shall be applied in fiscal years beginning after May 15, 2002. As of June 30, 2002, management believes that SFAS 145 will have no significant effect on the financial position, results of operations, and cash flows of the Company. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. As of June 30, 2002, management believes that SFAS 146 will have no significant 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 commodity prices. 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, 2002, 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 higher fuel price levels may occur in the future or the extent to which fuel surcharges could be collected to offset such increases. As of June 30, 2002, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. The Company conducts business in Mexico and Canada. Foreign currency transaction gains and losses were not material to the Company's results of operations for second quarter 2002 and prior periods. The Company receives payment for freight services performed in Mexico and Canada primarily in U.S. dollars to reduce foreign currency risk. Accordingly, the Company is not currently subject to material foreign currency exchange rate risks from 13 the effects that exchange rate movements of foreign currencies would have on the Company's future costs or on future cash flows. 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 14, 2002 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 63,861,942 shares entitled to vote, stockholders representing 62,513,359 shares (97.9%) were present in person or by proxy. The voting tabulation was as follows: Shares Shares Voted Voted "FOR" "ABSTAIN" ---------- --------- Gary L. Werner 53,662,560 8,850,799 Gregory L. Werner 53,599,450 8,913,909 Michael L. Steinbach 61,272,703 1,240,656 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. (i) A report on Form 8-K, filed April 22, 2002, regarding a news release on April 16, 2002, announcing the Company's operating revenues and earnings for the first quarter ended March 31, 2002. 14 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 12, 2002 By: /s/ John J. Steele ---------------- ----------------------------- John J. Steele Vice President, Treasurer and Chief Financial Officer Date: August 12, 2002 By: /s/ James L. Johnson --------------- ----------------------------- James L. Johnson Vice President, Controller and Corporate Secretary 15 EX-99.1 3 ceocert.txt WERNER ENTERPRISES, INC. CEO CERTIFICATION Exhibit 99.1 CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 (SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) In connection with the Quarterly Report of Werner Enterprises, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002, (the "Report") filed with the Securities and Exchange Commission, I, Clarence L. Werner, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 12, 2002 /s/ Clarence L. Werner ----------------------- Clarence L. Werner Chairman and Chief Executive Officer EX-99.2 4 cfocert.txt WERNER ENTERPRISES, INC. CFO CERTIFICATION Exhibit 99.2 CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 (SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) In connection with the Quarterly Report of Werner Enterprises, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002, (the "Report") filed with the Securities and Exchange Commission, I, John J. Steele, Vice President, Treasurer, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 12, 2002 /s/ John J. Steele ---------------------- John J. Steele Vice President, Treasurer, and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----