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, 1996 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)
INTERSTATE 80 & HIGHWAY 50
POST OFFICE BOX 37308
OMAHA, NEBRASKA 68137 (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, 1996, 25,310,339 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 six-month periods ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. 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, 1995).
Consolidated Statements of Income for the
Three Months Ended June 30, 1996 and 1995.........................Page 3
Consolidated Statements of Income for the
Six Months Ended June 30, 1996 and 1995...........................Page 4
Consolidated Condensed Balance Sheets as of
June 30, 1996 and December 31, 1995...............................Page 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995...........................Page 6
Notes to Consolidated Financial Statements
as of June 30, 1996...............................................Page 7
2
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) June 30
1996 1995
(Unaudited)
Operating revenues $159,640 $143,325
Operating expenses:
Salaries, wages and benefits 56,781 54,238
Fuel 15,060 11,791
Supplies and maintenance 13,177 12,468
Taxes and licenses 13,027 12,326
Insurance and claims 4,610 4,709
Depreciation 15,849 14,906
Rent and purchased transportation 23,385 17,935
Communications and utilities 2,013 2,136
Other (907) (1,564)
Total operating expenses 142,995 128,945
Operating income 16,645 14,380
Other expense (income):
Interest expense 475 496
Interest income (371) (212)
Other 37 34
Total other expense 141 318
Income before income taxes 16,504 14,062
Income taxes 6,481 5,484
Net income $ 10,023 $ 8,578
Average common shares outstanding (Note 1) 25,197 25,161
Earnings per share (Note 1) $ .40 $ .34
3
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
(Amounts in thousands, except per share data) June 30
1996 1995
(Unaudited)
Operating revenues $307,543 $275,759
Operating expenses:
Salaries, wages and benefits 109,158 101,599
Fuel 28,428 22,632
Supplies and maintenance 25,900 25,263
Taxes and licenses 25,429 24,455
Insurance and claims 9,897 9,202
Depreciation 31,465 30,177
Rent and purchased transportation 46,315 34,386
Communications and utilities 3,889 4,218
Other (1,818) (3,151)
Total operating expenses 278,663 248,781
Operating income 28,880 26,978
Other expense (income):
Interest expense 1,124 989
Interest income (767) (453)
Other 73 65
Total other expense 430 601
Income before income taxes 28,450 26,377
Income taxes 11,139 10,287
Net income $ 17,311 $ 16,090
Average common shares outstanding (Note 1) 25,191 25,180
Earnings per share (Note 1) $ .69 $ .64
4
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 22,654 $ 16,227
Accounts receivable, net 62,368 57,871
Prepaid taxes, licenses and permits 4,575 7,752
Other current assets 17,293 19,145
Total current assets 106,890 100,995
Property and equipment 542,519 526,208
Less - accumulated depreciation 128,816 119,524
Property and equipment, net 413,703 406,684
$520,593 $507,679
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,039 $ 15,719
Insurance and claims accruals 19,832 19,073
Accrued payroll 9,725 7,718
Income taxes payable 1,776 3,226
Other current liabilities 8,711 8,455
Total current liabilities 55,083 54,191
Long-term debt 30,000 40,000
Insurance and claims accruals 27,000 26,000
Other long-term liabilities 2,784 2,736
Deferred income taxes 80,586 75,700
Stockholders' equity 325,140 309,052
$520,593 $507,679
5
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(In thousands) June 30
1996 1995
(Unaudited)
Cash flows from operating activities:
Net income $17,311 $16,090
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 31,465 30,177
Deferred income taxes 4,886 2,616
Gain on disposal of operating equipment (2,518) (3,750)
Long-term liabilities 1,048 (1,000)
Changes in certain working capital items:
Accounts receivable, net (4,497) (2,630)
Prepaid expenses and other current assets 5,029 3,847
Accounts payable (680) (1,280)
Accrued payroll 2,007 1,269
Other current liabilities (562) (152)
Net cash provided by operating activities 53,489 45,187
Cash flows from investing activities:
Additions to property and equipment (51,985) (70,920)
Retirements of property and equipment 16,019 19,630
Net cash used in investing activities (35,966) (51,290)
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 10,000
Repayments of long-term debt (10,000) -
Dividends on common stock (1,511) (1,385)
Repurchases of common stock - (1,013)
Stock options exercised 415 16
Net cash provided by (used in) financing
activities (11,096) 7,618
Net increase in cash and cash equivalents 6,427 1,515
Cash and cash equivalents, beginning of period 16,227 11,660
Cash and cash equivalents, end of period $22,654 $13,175
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,190 $ 1,993
Income taxes 7,664 9,530
6
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Common Stock Split
On July 16, 1996, the Company announced that its Board of Directors
declared a three-for-two split of the Company's common stock effected in the
form of a 50 percent stock dividend. The stock split will be payable on or
about August 9, 1996 to stockholders of record at the close of business on
July 26, 1996. No fractional shares of common stock will be issued in
connection with the stock split. Stockholders entitled to a fractional share
will receive a proportional cash payment based on the closing price of a
share of common stock on July 26, 1996.
The Company's average common shares outstanding and earnings per share, after
giving retroactive effect for the three-for-two stock split, are as follows:
Three Months Ended
June 30
1996 1995
Average common shares outstanding 37,795 37,742
Earnings per share $ .27 $ .23
Six Months Ended
June 30
1996 1995
Average common shares outstanding 37,786 37,770
Earnings per share $ .46 $ .43
(2) Commitments
As of June 30, 1996, the Company has committed to capital expenditures
of approximately $33,000,000 (net cost, after revenue equipment trade-in
allowances of approximately $13,000,000).
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition:
During the six months ended June 30, 1996, the Company generated cash
flow from operations of $53.5 million. After the Company made net property
additions, primarily revenue equipment, of $36.0 million, repaid long-term
debt of $10.0 million and paid common stock dividends of $1.5 million, cash
and cash equivalents increased by $6.4 million.
The Company's long-term debt to equity ratio at June 30, 1996 was
9.2%, compared with 12.9% at December 31, 1995.
Results of Operations:
Three Months Ended June 30, 1996 and 1995
Operating revenues increased 11% for the three months ended June 30,
1996, compared to the same period of the prior year. The average number of
tractors increased by 6%, primarily due to expansion in the long-haul van
fleet. Revenue per mile, excluding a temporary fuel surcharge, was
comparable to the same period of the previous year. Miles per tractor
during the three months ended June 30, 1996 increased 4% compared to the
same period of the prior year, due to management focus on maximizing
equipment utilization, an increase in freight serviced by team drivers and
an improvement in freight demand. Increased revenues from logistics
transportation services also contributed to the overall increase in
operating revenues.
Operating expenses, expressed as a percentage of operating revenues,
were 89.6% for the three months ended June 30, 1996, compared to 90.0% for
the three months ended June 30, 1995. Owner-operator tractors represented a
larger percentage of total tractors during the quarter ended June 30, 1996
(17.6%), compared to the same period of 1995 (14.6%), which caused a shift
in expenses as a percentage of operating revenues from the salaries, wages
and benefits; fuel; supplies and maintenance; taxes and licenses; and
depreciation categories (owner-operators are independent contractors and
are responsible for these costs under their contracts with the Company) to
the rent and purchased transportation category. The Company's increase in
logistics transportation services also contributed to the shift in costs to
the rent and purchased transportation category.
Salaries, wages and benefits decreased from 37.9% to 35.6% of revenues
due primarily to the increase in the percentage of owner-operator tractors.
8
Fuel increased from 8.2% to 9.4% of revenues, due mainly to increased
average fuel prices during the quarter, partially offset by the increase in
the percentage of owner-operator tractors. During April 1996, the Company
began collecting a temporary fuel surcharge from customers which partially
offset the increased fuel prices. Fuel prices returned to lower levels at
the end of the quarter. The Company cannot predict whether higher fuel
prices will occur in the future or the extent to which fuel surcharges will
be collected to offset such increases.
Supplies and maintenance decreased from 8.7% to 8.3% of revenues due
primarily to the increased percentage of owner-operator tractors, increase
in logistics transportation revenues, and decreased general administrative
costs. Taxes and licenses decreased from 8.6% to 8.2% of revenues due
primarily to the increased percentage of owner-operators, and the increase
in logistics revenues. Insurance and claims decreased from 3.3% to 2.9% of
revenues due to favorable claims experience. Depreciation decreased from
10.4% to 9.9% of revenues due principally to the increased percentage of
owner-operator tractors and increased tractor utilization. Other operating
expenses increased from (1.1%) to (.6%) of revenues mainly due to a
decrease in gains realized on the sale of revenue equipment to third
parties.
The Company's effective income tax rate (income taxes as a percentage
of income before income taxes) was 39.3% and 39.0% for the three month
periods ended June 30, 1996 and 1995,respectively.
Six Months Ended June 30, 1996 and 1995
Operating revenues increased by 12% for the six months ended June 30,
1996, compared to the same period of the previous year. The average number
of tractors increased 6%. Miles per tractor during the six months ended
June 30, 1996 increased 4% compared to the same period of the prior year,
due to management focus on maximizing equipment utilization, an increase in
freight serviced by team drivers and an improvement in freight demand.
Operating expenses, expressed as a percentage of operating revenues,
increased to 90.6% for the six months ended June 30, 1996, compared to
90.2% for the same period of 1995. Salaries, wages and benefits decreased
from 36.8% to 35.5% of revenues due primarily to the increase in the
percentage of owner-operator tractors, partially offset by a reduction in
the estimated liability for accrued driver payroll of $2,400,000 during the
first quarter of 1995. Fuel costs increased from 8.2% to 9.2% of revenues
due mainly to increased fuel prices, partially offset by the increase in
the percentage of owner-operator tractors. During April 1996, the Company
began collecting a temporary fuel surcharge from customers which partially
9
offset the increased fuel prices. Fuel prices returned to lower levels at
the end of the second quarter. The Company cannot predict whether higher
fuel prices will occur in the future or the extent to which fuel surcharges
will be collected to offset such increases. Supplies and maintenance
decreased from 9.2% to 8.4% of revenues due primarily to the increased
percentage of owner-operator tractors and the increase in logistics
transportation revenues. Taxes and licenses decreased from 8.9% to 8.3% of
revenues due primarily to the increased percentage of owner-operators,
increase in logistics revenues, and refunds of state sales taxes.
Depreciation decreased from 10.9% to 10.2% of revenues due principally to
the increased percentage of owner-operator tractors, increased tractor
utilization, and the effect of an increase in the estimated salvage value
of certain trailers effective April 1995. Other operating expenses
increased from (1.1%) to (.6%) of revenues mainly due to a decrease in
gains realized on the sale of revenue equipment to third parties.
The Company's effective income tax rate (income taxes as a percentage of
income before income taxes) was 39.2% and 39.0% for the six month periods
ended June 30, 1996 and 1995, respectively.
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, 1996, 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. The voting
tabulation was as follows:
Shares Shares
Voted Voted
"FOR" "ABSTAIN"
Gary L. Werner 23,560,799 148,427
Martin F. Thompson 23,578,012 131,214
Gregory L. Werner 23,560,709 148,517
10
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Page Number or Incorporated
Number Description by Reference to
27 Financial Data Schedule Page 12 of sequentially
numbered pages
(b) Reports on Form 8-K.
A report on Form 8-K, dated July 16, 1996, regarding the approval
by the Company's Board of Directors of a three for two split of
the Company's common stock effected in the form of a fifty
percent (50%) stock dividend. The stock split will be payable on
or about August 9, 1996 to stockholders of record at the close of
business on July 26, 1996.
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 8, 1996 By: /s/Robert E. Synowicki, Jr.
Robert E. Synowicki, Jr.
Executive Vice President and
Chief Financial Officer
Date: August 8, 1996 By: /s/John J. Steele
John J. Steele
Vice President - Controller and
Secretary
11