SECURITIES AND EXCHANGE COMMISSION
Washington,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 quarterly periodquarter ended November 30, 1993 Commission file Numbernumber
May 31, 1994 0-14690
WERNER ENTERPRISES, INC.
(Exact name of registrant as specified in its charter.)
NEBRASKA 47-0648386
(State ofor other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization) Identification No.)
INTERSTATE 80 & HIGHWAY 50
POST OFFICE BOX 37308
OMAHA, NEBRASKA 68137 (402)895-6640
(Address of principal executive offices (Zip Code) Registrant's(registrant's telephone number, including area code:
(402) 895-6640number)
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 December 31, 1993, 25,322,716June 30, 1994, 25,334,016 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 period and nine-month period ended November 30, 1993May 31, 1994 are not
necessarily indicative of the results that may be expected for the year ending
February 28, 1994.1995. 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 fiscal year ended February 28, 1993)1994).
Consolidated Statements of Income for the
Three Months Ended November 30,May 31, 1994 and 1993 and 1992 ......................................... Page 3
Consolidated Statements of Income for the
Nine Months Ended November 30, 1993 and 1992 ................... Page 4
Consolidated Condensed Balance Sheets as of
November 30, 1993May 31, 1994 and February 28, 1993 ........................1994.............................. Page 54
Consolidated Statements of Cash Flows for the
NineThree Months Ended November 30, 1993May 31, 1994 and 1992 ...................1993........................ Page 65
Notes to Consolidated Financial Statements
as of November 30, 1993 ........................................May 31, 1994.............................................. Page 76
2
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) November 30May 31
1994 1993 1992
(Unaudited)
Operating revenues $111,932 $ 94,024$126,899 $101,228
Operating expenses:
Salaries, wages and benefits 37,905 36,37745,201 36,467
Fuel 11,324 10,59110,083 10,417
Supplies and maintenance 10,119 7,83610,994 9,204
Taxes and licenses 10,039 8,70911,204 9,066
Insurance and claims 4,713 3,9644,508 3,751
Depreciation 11,494 9,98012,694 10,694
Rent and purchased transportation 11,086 4,51615,434 7,868
Communications and utilities 2,181 1,1422,435 1,940
Other (781) (60)(638) (204)
Total operating expenses 98,080 83,055111,915 89,203
Operating income 13,852 10,96914,984 12,025
Other expense (income):
Interest expense 322 308136 450
Interest income (199) (123)(138) (81)
Other 32 6257 35
Total other expense 155 24755 404
Income before income taxes 13,697 10,72214,929 11,621
Income taxes (Note 2) 5,205 4,2365,822 4,100
Net income $ 8,4929,107 $ 6,4867,521
Average common shares outstanding 24,195 22,82225,334 22,886
Earnings per share $ .35 $.28.36 $.33
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
(Amounts in thousands, except per share data) November 30
1993 1992
(Unaudited)
Operating revenues $321,919 $276,695
Operating expenses:
Salaries, wages and benefits 112,356 107,389
Fuel 31,393 30,271
Supplies and maintenance 28,613 23,884
Taxes and licenses 28,259 26,168
Insurance and claims 11,946 11,006
Depreciation 33,226 29,928
Rent and purchased transportation 28,377 11,763
Communications and utilities 6,108 3,309
Other (1,268) 64
Total operating expenses 279,010 243,782
Operating income 42,909 32,913
Other expense (income):
Interest expense 1,257 957
Interest income (355) (495)
Other 107 182
Total other expense 1,009 644
Income before income taxes 41,900 32,269
Income taxes (Note 2) 16,712 12,747
Net income $ 25,188 $ 19,522
Average common shares outstanding 23,330 22,811
Earnings per share $1.08 $.86
3
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) November 30May 31 February 28
1993 19931994 1994
(Unaudited)
ASSETS
Current assets:
Current assets:
Cash and cash equivalents $ 25,9979,670 $ 6,44110,833
Accounts receivable, net 44,715 37,42048,759 45,681
Prepaid expenses and other current assets 16,462 20,33221,513 22,068
Total current assets 87,174 64,19379,942 78,582
Property and equipment 373,004 329,139421,160 399,129
Less - accumulated depreciation 91,794 87,460102,636 97,282
Property and equipment, net 281,210 241,679
$368,384 $305,872318,524 301,847
$398,466 $380,429
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,51118,993 $ 21,36313,825
Accrued payroll 9,374 6,87610,549 9,115
Current maturities of
long-term debt
and capitalized lease obligations (Note 1) 4,672 4,4932,066 4,310
Income taxes payable 7,692 3,189
Other current liabilities 28,429 18,15720,825 21,243
Total current liabilities 51,986 50,889
Long-term debt and capitalized lease
obligations, net of current
maturities (Note 1) - 16,65260,125 51,682
Insurance and claims accruals 20,300 20,80021,200 21,200
Other long-term liabilities 5,090 3,6113,136 3,136
Deferred income taxes (Note 2) 47,247 48,03356,220 55,100
Stockholders' equity (Note 1) 243,761 165,887
$368,384 $305,872257,785 249,311
$398,466 $380,429
4
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NineThree Months Ended
(In thousands) November 30May 31
1994 1993 1992
(Unaudited)
Cash flows from operating activities:
Net income $25,188 $19,522$ 9,107 $ 7,521
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 33,226 29,92812,694 10,694
Deferred income taxes 3,514 (105)1,120 556
Gain on disposal of operating equipment (853) (677)
Tax benefit from exercise of stock options 900 326
Other long-term liabilities (1,475) 4,835- 43
Changes in certain working capital items:
Accounts receivable, net (7,295) (5,110)(3,078) (2,923)
Prepaid expenses and other current assets 4,024 (1,172)555 2,421
Accounts payable (11,852) (3,095)5,168 (11,589)
Accrued payroll 2,498 2,9421,434 485
Other current liabilities 8,272 3,4304,085 3,492
Net cash provided by operating activities 57,000 51,50130,232 10,023
Cash flows from investing activities:
Additions to property and equipment (85,411) (54,790)(34,390) (25,765)
Retirements of property and equipment 12,655 1,7745,872 5,448
Net cash used in investing activities (72,756) (53,016)(28,518) (20,317)
Cash flows from financing activities:
Short-term borrowing 20,000 - 10,000
Repayments of short-term borrowing (20,000) -
Repayments of long-term debt and capitalized lease
obligations (16,473) (2,534)
Proceeds from issuance of common stock,
net of related expenses 52,182 -(2,244) (676)
Dividends on common stock (1,375) (1,368)(633) (458)
Stock options exercised 978 450- 65
Net cash provided by (used in)
financing activities 35,312 (3,452)(2,877) 8,931
Net increase (decrease)decrease in cash and cash equivalents 19,556 (4,967)(1,163) (1,363)
Cash and cash equivalents, beginning of period 10,833 6,441 12,655
Cash and cash equivalents, end of period $25,997 $ 7,6889,670 $ 5,078
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,288136 $ 1,351423
Income taxes 5,855 12,194199 (1,154)
5
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Common Stock Offering
On September 29, 1993, a special meeting of stockholders was held to vote
on the Board of Directors' resolution to amend the Company's Articles of
Incorporation and increase the number of authorized shares of common stock from
25,000,000 shares to 60,000,000 shares. The resolution was approved by the
necessary affirmative vote of over two-thirds of the outstanding common stock.
During October 1993, a public offering of the Company's common stock was
successfully completed. The Company sold a total of 2,300,000 shares and
1,150,000 shares were sold by Clarence L. Werner, Chairman and Chief Executive
Officer, and members of his family. The Company used the net proceeds from the
offering of $52,200,000 to repay short-term borrowings, retire long-term debt
and purchase revenue equipment.
(2) Accounting for Income Taxes
In accordance with the Financial Accounting Standards Board's Statement No.
109, "Accounting for Income Taxes," (Statement No. 109) the Company began
recognizing deferred income taxes using the asset and liability method beginning
March 1, 1993. Under this method, deferred income taxes are recorded based upon
the difference between the book and tax basis of the Company's assets and
liabilities at the enacted tax rates in effect when these differences reverse.
Prior to the adoption of Statement No. 109, deferred income taxes were
recognized for timing differences between financial and income tax reporting at
the tax rates in effect when these differences originated. The cumulative
effect of this accounting change as of March 1, 1993, of $200,000 or $.01 per
share, was not material and was reflected as a reduction of income tax expense
for the quarter ended May 31, 1993.
On August 10, 1993, legislation was enacted which increased the Federal
income tax rate on corporations, retroactive to January 1, 1993. This
legislation resulted in the Company's statutory income tax rate increasing by
one percent for the fiscal year ending February 28, 1994.
In addition, Statement No. 109 requires deferred tax liabilities and assets to
be adjusted for the effect of a change in tax rates. The effect of the rate
change is to be included in income tax expense for the period that includes the
enactment date. The quarter ended August 31, 1993, included an increase in
income tax expense of $1,106,000, or $.05 per share, for the effect of the tax
rate change on current and deferred income taxes, retroactive to January 1,
1993.
After recognizing the effect of Statement No. 109 and the enacted tax rate
change, the Company has recorded the following deferred tax liabilities (assets)
related to book and tax basis differences of the Company's assets and
liabilities as of March 1, 1993:
Deferred tax liabilities:
Property and equipment $54,410,000
Prepaids 2,252,000
Other 303,000
Total deferred tax liabilities 56,965,000
Deferred tax assets:
Insurance and claims accruals (13,006,000)
Other (3,862,000)
Total deferred tax assets (16,868,000)
Net deferred tax liability $40,097,000
(3) Commitments
As of November 30, 1993,May 31, 1994, the Company has committed to capital expenditures of
approximately $40,000,000$61,000,000 (net cost, after revenue equipment trade-in allowances
of approximately $33,000,000)$21,000,000).
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition:
During the ninethree months ended November 30, 1993,May 31, 1994, cash flow from operations
generated $57.0 million and the Company had net proceeds from the
sale of common stock of $52.2$30.2 million, which enabled the Company to make net property
additions of $72.8$28.5 million, repay long-term debt and capitalized lease obligations of $16.5$2.2
million and pay common stock dividends of $1.4$.6 million.
The Company's long-term debt obligations to equity ratio decreased to 0%
at November 30, 1993, compared to 10% at February 28,
1993. This decrease1994 and at May 31, 1994 was due primarily to the repayment of long-term debt and capitalized lease
obligations from the net proceeds from the sale of common stock.0%.
Results of Operations:
Three Months Ended November 30,May 31, 1994 and 1993 and 1992
Operating revenues increased 19%25% in the three months ended November 30,
1993,May 31, 1994,
compared to the same period in the prior year. The average number of
tractors increased by 18%21%. Revenue per mile increased about 1.5%3.6% while tractor
utilization (miles per tractor) decreased about 1%. These changes
were due towas almost unchanged. The increase in the
average number of tractors primarily reflects the Company's continued growth
in the regional, dedicated and temperature controlled markets as customer
demand remains strong. The revenue per mile increase was the result of the
Company's continued expansion into markets where the average revenue per mile
is higher and the average miles per trip are less and as a result of rate
increases obtained by the Company to offset higher fuel costs
and the increase in fuel taxes which became effective October 1, 1993.Company.
Operating expenses, expressed as a percentage of operating revenues,
were 87.6%88.2% for the three months ended November 30, 1993,May 31, 1994, compared to 88.3%88.1% for the
three months ended November 30, 1992.May 31, 1993. Salaries, wages and benefits decreased from
38.7%36.0% of revenues to 33.9%35.6% of revenues due primarily to favorable
workers' compensation claims experience and an increase in the
percentage of owner-operator tractors compared to company-owned or controlled
tractors, offset partially by an increase in driver pay due to a 2 cent per
mile driver pay increase effective May 1, 1994 and the retention of more
experienced, drivers who earn a higher pay rate.paid drivers. Owner-operators are independent contractors
under contract with the Company and are responsible for such costs as their
own salaries, wages and benefits; fuel; supplies and maintenance, taxes and
licenses and depreciation. Owner-operator costs are included in the rent and
purchased transportation expense category. Fuel decreased from 11.3%10.3% of
revenues to 10.1%7.9% of revenues as a result of lower fuel prices, improved fuel
efficiency, of
approximately 2% and an increase in the percentage of owner-operator tractors, offset partially by an increase in fuel prices of over 3% due to
the new federally mandated low sulphur fuel requirements which became
effective October 1, 1993.tractors.
Supplies and maintenance increaseddecreased from 8.3%9.1% of revenues to 9.0%8.7% of revenues
due to the Company's conversion from less
expensive recapped tires to new or newer tires for its trailer fleet during
the quarter ended November 30, 1993, offset partially by the increase in the percentage of owner-operator tractors. The purpose of the tire conversion
is to reduce the number and cost of trailer tire failures. Taxes and
licenses decreased from 9.3%8.9% of revenues to 9.0%8.8% of revenues due to an
increase in the percentage of owner-operator tractors, offset by an increase
in the Federal diesel fuel tax rate of 4.3 cents per gallon which became
effective October 1, 1993. Depreciation decreased from 10.6% of revenues to
10.3%10.0% of revenues due to the increase in the percentage of owner-operator
tractors, offset partially by an increase in the trailer to tractor ratio.
The increase in the trailer to tractor ratio provides additional trailers and
improved service for customers. Communications and utilities increased from
1.2% of revenues to 1.9% of revenues due to the installation of a satellite
communications system in the Company's entire fleet. Installation of this
system began in October 1992 and was substantially completed at May 31, 1993.
Other operating expenses decreased from
(.1)(.2)% of revenues to (.7)(.5)% of revenues due to an increase in gains recognizedrealized
on the sale of revenue equipment.
7
Rent and purchased transportation increased from 4.8%7.8% of revenues to
9.9%12.2% of revenues due to an increase in the percentage of owner-operator
tractors as compared to company-owned or controlled tractors. The average
number of owner-operator tractors for the quarter ended November 30, 1993May 31, 1994 was 423560
compared to an average of 183340 for the quarter ended November 30, 1992.
By adding owner-operators, who pay their own salaries, fuel and fuel taxes,
maintenance, depreciation and insurance, these other operating expense
categories experienced a decrease as a percentage of total revenues.May 31, 1993.
The Company's effective income tax rate (income tax expense divided by
income before income taxes) decreasedincreased to 38.0%39.0% for the three months ended November
30, 1993,May
31, 1994, compared to 39.5%35.3% for the three months ended November 30, 1992.
Nine Months Ended November 30, 1993 and 1992
Operating revenues increased 16% in the nine months ended November 30,
1993, compared to the same period in the prior year. The average number of
tractors increased by 17%. Revenue per mile increased by about 1% while
tractor utilization decreased by about 1%.
Operating expenses, expressed as a percentage of operating revenues,
were 86.7% for the nine months ended November 30, 1993, compared to 88.1% for
the nine months ended November 30, 1992. Salaries, wages and benefits
decreased from 38.8% of revenues to 34.9% of revenues due to favorable
workers' compensation claims experience and anMay 31, 1993. This
increase in the percentage of
owner-operator tractors, offset partially by an increase in driver payeffective income tax rate was due primarily to the retentionFederal
income tax rate increase enacted August 10, 1993, and the adoption of
more experienced drivers who earnStatement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" effective March 1, 1993, which resulted in a higher pay rate. Fuel
decreased from 10.9%$200,000 reduction of
revenues to 9.8% of revenues as a result of improved
fuel efficiency of 1.5% and an increase in the percentage of owner-operator
tractors. Supplies and maintenance increased from 8.6% of revenues to 8.9%
of revenues due to the Company's conversion from less expensive recapped
tires to new or newer tires for its trailer fleetincome tax expense during the quarter ended November 30, 1993, offset partially by the increase in the percentage of
owner-operator tractors. Taxes and licenses decreased from 9.5% of revenues
to 8.8% of revenues due to the increase in the percentage of owner-operator
tractors, offset somewhat by an increase in the federal diesel fuel tax of
4.3 cents per gallon which became effective October 1,May 31, 1993. Insurance and
claims decreased from 4.0% of revenues to 3.7% of revenues as a result of
better claims experience. Depreciation decreased from 10.8% of revenues to
10.3% of revenues due to the increase in the percentage of owner-operator
tractors, offset partially by an increase in the trailer to tractor ratio.
Communication and utilities increased from 1.2% of revenues to 1.9% of
revenues due to the installation of a satellite communications system in the
Company's entire fleet. Other operating expenses decreased to (.4)% of
revenues due to an increase in gains recognized on the sale of revenue
equipment.
Rent and purchased transportation increased from 4.3% of revenues to
8.8% of revenues due to an increase in the percentage of owner-operator
tractors as compared to company-owned or controlled tractors. By adding
owner-operators, who pay their own salaries, fuel and fuel taxes,
maintenance, depreciation and insurance, these other operating expense
categories experienced a decrease as a percentage of total revenues.
Interest expense increased from $1.0 million for the nine months ended
November 30, 1992 to $1.3 million for the nine months ended November 30, 1993
due primarily to the temporary short-term borrowings made during 1993 that
were repaid as of November 30, 1993. The Company's effective income tax rate
increased to 39.9% for the nine months ended November 30, 1993, compared to
39.5% for the nine months ended November 30, 1992 (see Note 2 of Notes to
Consolidated Financial Statements).
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 June 21, 1994, for the purpose of electing a board of directors and voting
on the proposals described below. 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 solicitations. All of the
nominees for directors as listed in the proxy were elected.
The Company's proposal to amend the Company's Articles of Incorporation
to authorize the establishment of up to three classes of directors was
approved by the following vote:
Shares Shares Shares
Voted Voted Voted
"FOR" "AGAINST" "ABSTAIN"
17,269,401 6,795,069 26,215
The Company's proposal to amend the Company's Stock Option Plan as set
forth in the Proxy Statement for Annual Meeting of Stockholders, June 21,
1994, was approved by the following vote:
Shares Shares Shares
Voted Voted Voted
"FOR" "AGAINST" "ABSTAIN"
23,297,963 736,733 127,510
8
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
- None.Exhibit
Number Description
3(i) Articles of Amendment to Articles of Incorporation
of Werner Enterprises, Inc.
3(ii) Revised and Amended By-Laws of Werner Enterprises,
Inc.
10 Amended and Restated Stock Option Plan of Werner
Enterprises, Inc.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the quarter ended November 30, 1993.May 31, 1994.
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: January 14,July 13, 1994 By: /s/ /s/Robert E. Synowicki, Jr.
Robert E. Synowicki, Jr.,
Vice President of Finance, Treasurer and
Chief Financial Officer
Date: January 14,July 13, 1994 By: /s/ /s/John J. Steele
John J. Steele
Secretary and Controller
9