-----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, BBTATOibxXD9S/ViaXs/mQIXarxljLh5DpIh/cmSJL/SD+D+mSugP8Mp6nzMJHr/ u23LL9ErHN7YRX/EUAfhPA== 0000793074-99-000015.txt : 19990816 0000793074-99-000015.hdr.sgml : 19990816 ACCESSION NUMBER: 0000793074-99-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 000-14690 FILM NUMBER: 99688789 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 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, 1999 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, 1999, 47,433,249 shares of the registrant's common stock, par value $.01 per share, were outstanding. 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 the six-month periods ended June 30, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. 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 latest annual report (which is incorporated by reference in the Form 10-K for the year ended December 31, 1998). Consolidated Statements of Income for the Three Months Ended June 30, 1999 and 1998 Page 3 Consolidated Statements of Income for the Six Months Ended June 30, 1999 and 1998 Page 4 Consolidated Condensed Balance Sheets as of June 30, 1999 and December 31, 1998 Page 5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 Page 6 Notes to Consolidated Financial Statements as of June 30, 1999 Page 7 2 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended (In thousands) June 30 - ------------------------------------------------------------------------ 1999 1998 - ------------------------------------------------------------------------ (Unaudited) Operating revenues $ 260,646 $ 211,678 ------------------------ Operating expenses: Salaries, wages and benefits 95,246 79,679 Fuel 18,211 14,198 Supplies and maintenance 21,025 17,214 Taxes and licenses 19,838 16,679 Insurance and claims 7,881 5,978 Depreciation 24,656 20,372 Rent and purchased transportation 43,856 32,815 Communications and utilities 3,411 2,549 Other (3,169) (2,848) ------------------------ Total operating expenses 230,955 186,636 ------------------------ Operating income 29,691 25,042 ------------------------ Other expense (income): Interest expense 1,645 1,238 Interest income (343) (430) Other 40 21 ------------------------ Total other expense 1,342 829 ------------------------ Income before income taxes 28,349 24,213 Income taxes 10,773 9,201 ------------------------ Net income $ 17,576 $ 15,012 ======================== Average common shares outstanding 47,374 47,883 ======================== Earnings per share $ .37 $ .31 ======================== Diluted shares outstanding 47,627 48,185 ======================== Diluted earnings per share $ .37 $ .31 ======================== Dividends declared per share $ .025 $ .024 ========================
3 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended (In thousands) June 30 - ------------------------------------------------------------------------ 1999 1998 - ------------------------------------------------------------------------ (Unaudited) Operating revenues $ 501,626 $ 411,385 ------------------------ Operating expenses: Salaries, wages and benefits 184,567 153,982 Fuel 32,219 28,896 Supplies and maintenance 41,163 34,723 Taxes and licenses 39,604 32,531 Insurance and claims 17,271 12,623 Depreciation 48,191 39,831 Rent and purchased transportation 86,183 66,192 Communications and utilities 6,510 5,108 Other (5,016) (5,686) ------------------------ Total operating expenses 450,692 368,200 ------------------------ Operating income 50,934 43,185 ------------------------ Other expense (income): Interest expense 2,843 2,244 Interest income (673) (850) Other 57 41 ------------------------ Total other expense 2,227 1,435 ------------------------ Income before income taxes 48,707 41,750 Income taxes 18,509 15,865 ------------------------ Net income $ 30,198 $ 25,885 ======================== Average common shares outstanding 47,351 47,852 ======================== Earnings per share $ .64 $ .54 ======================== Diluted shares outstanding 47,599 48,156 ======================== Diluted earnings per share $ .63 $ .54 ======================== Dividends declared per share $ .050 $ .044 ========================
4 WERNER ENTERPRISES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31 - ------------------------------------------------------------------------ 1999 1998 - ------------------------------------------------------------------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 10,531 $ 15,913 Accounts receivable, net 120,837 94,329 Prepaid taxes, licenses and permits 6,618 10,792 Other current assets 25,291 24,231 ----------------------- Total current assets 163,277 145,265 ----------------------- Property and equipment 913,186 829,461 Less - accumulated depreciation 234,392 205,530 ----------------------- Property and equipment, net 678,794 623,931 ----------------------- $842,071 $769,196 ======================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 37,070 $ 48,146 Short-term debt (Note 1) 30,000 - Insurance and claims accruals 28,405 23,250 Accrued payroll 12,595 10,051 Income taxes payable 6,980 471 Other current liabilities 12,176 9,989 ----------------------- Total current liabilities 127,226 91,907 ----------------------- Long-term debt 100,000 100,000 Insurance, claims and other long-term accruals 31,301 30,801 Deferred income taxes 113,450 105,900 Stockholders' equity 470,094 440,588 ----------------------- $842,071 $769,196 =======================
5 WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended (In thousands) June 30 - ------------------------------------------------------------------------ 1999 1998 - ------------------------------------------------------------------------ (Unaudited) Cash flows from operating activities: Net income $ 30,198 $ 25,885 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 48,191 39,831 Deferred income taxes 7,550 5,833 Gain on disposal of operating equipment (5,625) (6,411) Insurance, claims and other long-term accruals 500 972 Tax benefit from exercise of stock options 399 364 Changes in certain working capital items: Accounts receivable, net (26,508) 4,334 Prepaid expenses and other current assets 3,114 (506) Accounts payable (11,076) (17,902) Other current liabilities 16,392 4,593 ----------------------- Net cash provided by operating activities 63,135 56,993 ----------------------- Cash flows from investing activities: Additions to property and equipment (133,382) (122,038) Proceeds from sales of property and equipment 35,953 43,543 ----------------------- Net cash used in investing activities (97,429) (78,495) ----------------------- Cash flows from financing activities: Proceeds from issuance of long-term debt - 20,000 Proceeds from issuance of short-term debt 30,000 - Dividends on common stock (2,366) (1,916) Stock options exercised 1,278 1,235 ----------------------- Net cash provided by financing activities 28,912 19,319 ----------------------- Net decrease in cash and cash equivalents (5,382) (2,183) Cash and cash equivalents, beginning of period 15,913 22,294 ----------------------- Cash and cash equivalents, end of period $ 10,531 $ 20,111 ======================= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 2,979 $ 2,156 Income taxes $ 3,947 $ 12,323
6 WERNER ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Committed Credit Facilities The Company has 364-day committed credit facilities with two financial institutions totaling $30 million. Borrowings under these credit facilities, which mature in September 1999, bear variable interest based on the London Interbank Offered Rate (LIBOR) or, at the Company's option, the financial institutions' base lending rates. The Company expects to extend these credit facilities for another 364-day period or refinance this debt prior to the maturity date. The Company had borrowings of $30 million outstanding under these credit facilities as of June 30, 1999. (2) Commitments As of June 30, 1999, the Company has commitments for capital expenditures of approximately $55 million. 7 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, 1998. Year 2000 Readiness Disclosure: In January 1997, the Company began conducting a comprehensive review of its Year 2000 issue and has since completed its review of information technology (IT) systems. Most of the Company's critical software programs have been developed internally, with the remainder having been licensed from and maintained by software vendors. The Company completed substantially all its conversion of internally developed software programs to Year 2000 compliance in September 1998. The costs of converting these programs were not material. The Company is continuing to work with vendors to verify compliance of vendor-supplied software programs, and to evaluate compliance of non-IT systems. The following is an estimate of the status of the Company's IT systems and non-IT systems.
Year 2000 Modifications being Compliant performed Internally-developed IT systems 100% 0% Vendor-supplied IT systems 90% 10% Non-IT systems 90% 10%
Based on information currently available, the Company believes that with the appropriate modifications to vendor-supplied software programs, the Year 2000 issue will not pose significant operational or administrative problems for the Company. The cost of such remaining modifications is not expected to be material. The Company will continue to evaluate the Year 2000 readiness of third parties (primarily vendors and customers) with whom the Company has material relationships. The Company cannot presently estimate the effect on its results of operations, liquidity, and financial condition should material vendors and customers fail to become Year 2000 compliant. The Company is not currently aware of any material vendors or customers which have represented to the Company that they are unlikely to achieve Year 2000 compliance. If the Company obtains information indicating it is likely that a material vendor or customer will not achieve Year 2000 compliance, the Company will develop a contingency plan at that time. Financial Condition: During the six months ended June 30, 1999, the Company generated cash flow from operations of $63.1 million. The Company received proceeds from the issuance of short-term borrowings of $30.0 million, which, along with the cash flow from operations, enabled the Company to make net property additions, primarily revenue equipment, of $97.4 million and pay common stock dividends of $2.4 million. If the Company continues to grow at its current rate (as described below), additional financing activities may occur. 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. 8 The Company's debt to equity ratio at June 30, 1999 was 27.7%, compared with 22.7% at December 31, 1998. The Company's debt to total capitalization ratio (total capitalization equals total debt plus total stockholders' equity) was 21.7% at June 30, 1999 compared to 18.5% at December 31, 1998. Results of Operations: Three Months Ended June 30, 1999 and 1998 - ----------------------------------------- Operating revenues increased 23.1% for the three months ended June 30, 1999, compared to the same period of the prior year, primarily due to a 20.5% increase in the average number of tractors in service. Average tractors in service increased from 5,559 in second quarter 1998 to 6,701 in second quarter 1999. Revenue per mile, excluding fuel surcharges, increased 1.1% compared to second quarter of 1998 due to rate increases and a shift in the mix of freight between fleets in the truckload division which decreased the average trip length by 3%. A $4.8 million increase in revenues from logistics and other non-trucking transportation services also contributed to the overall increase in operating revenues. Operating expenses, expressed as a percentage of operating revenues, were 88.6% for the three months ended June 30, 1999, compared to 88.2% for the three months ended June 30, 1998. The Company's increase in logistics and other non-trucking transportation services, and an increase in owner- operator miles as a percentage of total miles (17.9% in second quarter 1999 compared to 16.8% in second quarter 1998), contributed to a shift in costs to the rent and purchased transportation expense category from several other expense categories. 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. Salaries, wages and benefits decreased from 37.6% to 36.5% of revenues due primarily to the increase in logistics and other non-trucking revenues, more owner-operator miles as a percentage of total miles and a higher ratio of tractors to non-driver employees. Driver pay per mile decreased slightly due to more entry-level drivers earning a lower pay rate per mile. These decreases were partially offset by an increase in driver pay for drivers in training due to a 65% increase in the number of drivers in the training program, and more extra driver pay for multiple stops and driver assist loading/unloading. At times, there have been shortages of drivers in the trucking industry, particularly the medium-to-long haul segment. 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 6.7% to 7.0% of revenues, due mainly to slightly higher average fuel prices during the quarter compared to the same quarter of the prior year. Fuel prices began rising in March 1999 and remained at slightly higher levels throughout second quarter 1999 compared to the same period of 1998. See further discussion of fuel prices under the caption "Commodity Price Risk" in Item 3 of this Form 10-Q. Taxes and licenses decreased from 7.9% to 7.6% of revenues due primarily to the increases in logistics and other non-trucking revenues and owner-operator miles as a percentage of total miles. Insurance and claims increased from 2.8% to 3.0% of revenues due to an increased frequency of property damage and other claims during the current quarter. Rent and purchased transportation increased from 15.5% to 16.8% of revenues due primarily to the Company's increases in logistics and other non-trucking transportation services and owner-operator miles as a percentage of total miles. 9 Six Months Ended June 30, 1999 and 1998 - --------------------------------------- Operating revenues increased by 21.9% for the six months ended June 30, 1999, compared to the same period of the previous year, primarily due to a 19.6% increase in the average number of tractors. Revenue per mile, excluding fuel surcharges, increased 1.3% due primarily to rate increases and changes in the mix of freight resulting in a decrease in the average trip length. A $10.0 million increase in revenues from logistics and other non-trucking transportation services also contributed to the overall increase in operating revenues. Operating expenses, expressed as a percentage of operating revenues, were 89.8% for the six months ended June 30, 1999, compared to 89.5% for the same period of the previous year. The increase in logistics and other non-trucking transportation services, and an increase in owner-operator miles as a percentage of total miles (17.4% in 1999 compared to 16.7% in 1998), resulted in a shift in costs to the rent and purchased transportation expense category from several other expense categories. Salaries, wages and benefits decreased from 37.4% to 36.8% of revenues, primarily due to the increase in logistics and other non-trucking transportation services, more owner-operator miles as a percentage of total miles, and a higher ratio of tractors to non-driver employees. Driver pay per mile decreased slightly due to more entry-level drivers earning a lower pay rate per mile. These factors were partially offset by an increase in driver pay for drivers in training due to an increase in the number of drivers in the training program, and more extra driver pay for multiple stops and driver assist loading/unloading. Fuel decreased from 7.0% to 6.4% of revenues due mainly to lower fuel prices, on average, during the six months ended June 30, 1999, compared to the same period of 1998. Supplies and maintenance decreased from 8.4% to 8.2% of revenues due primarily to the increased logistics and other non-trucking revenues and increased percentage of owner-operator miles. Insurance and claims increased from 3.1% to 3.4% of revenues due to unfavorable claims experience partly due to more severe winter driving conditions during the first quarter of 1999 and an increased frequency of property damage and other claims during the six months ended June 30, 1999. Rent and purchased transportation increased from 16.1% to 17.2% of revenues due to the increase in logistics and other non-trucking transportation services and increase in owner-operator miles as a percentage of total miles. Other operating expenses changed from (1.4%) to (1.0%) of revenues due in part to higher expense for repairs on equipment sales to third parties during 1999, which reduced the amount of gains recognized on these sales. 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 $80 million of variable rate debt at June 30, 1999. 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 $800,000. 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 portion of short-term fuel price increases from customers in the form of fuel surcharges. The Company cannot predict whether 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, 1999, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. 10 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 11, 1999 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 47,333,409 shares entitled to vote, stockholders representing 45,145,738 shares (95.4%) were present in person or by proxy. The voting tabulation was as follows:
Shares Voted Shares Voted "FOR" "ABSTAIN" Gary L. Werner 44,215,513 930,225 Gregory L. Werner 44,600,350 545,388 Martin F. Thompson 44,625,462 520,276
Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Incorporated Number Description by Reference to ------- ----------- --------------- 11 Statement Re: Computation of Per Share Earnings Filed herewith 27 June 30, 1999 Financial Data Schedule Filed herewith (b) Reports on Form 8-K. (i) A report on Form 8-K, filed April 16, 1999, regarding a news release on April 15, 1999, announcing the Company's operating revenues and earnings for the first quarter ended March 31, 1999. (ii) A report on Form 8-K, filed June 16, 1999, regarding a change in the Company's certifying accountants effective June 10, 1999. 11 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 13, 1999 By: /s/ John J. Steele ------------------- -------------------------------- John J. Steele Vice President, Treasurer and Chief Financial Officer Date: August 13, 1999 By: /s/ James L. Johnson ------------------- -------------------------------- James L. Johnson Corporate Secretary and Controller 12 EX-11 2 EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS ------------------------------------------------ (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ 1999 1998 1999 1998 ------------------ ------------------ Net income $17,576 $15,012 $30,198 $25,885 ================== ================== Average common shares outstanding 47,374 47,883 47,351 47,852 Common stock equivalents (1) 253 302 248 304 ------------------ ------------------ Diluted shares outstanding 47,627 48,185 47,599 48,156 ================== ================== Earnings per share $ .37 $ .31 $ .64 $ .54 ================== ================== Diluted earnings per share $ .37 $ .31 $ .63 $ .54 ================== ==================
(1) Common stock equivalents represent the dilutive effect of outstanding stock options for all periods presented. EX-27 3 JUNE 30, 1999 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-01-1999 10,531 0 120,837 0 0 163,277 913,186 234,392 842,071 127,226 0 0 0 483 469,611 842,071 501,626 501,626 0 450,692 (616) 0 2,843 48,707 18,509 30,198 0 0 0 30,198 .64 .63
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