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, 1997 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 45308
OMAHA, NEBRASKA 68145 (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, 1997, 38,289,327 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, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996).
Consolidated Statements of Income for the
Three Months Ended June 30, 1997 and 1996.........................Page 3
Consolidated Statements of Income for the
Six Months Ended June 30, 1997 and 1996...........................Page 4
Consolidated Condensed Balance Sheets as of
June 30, 1997 and December 31, 1996...............................Page 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996...........................Page 6
Notes to Consolidated Financial Statements
as of June 30, 1997...............................................Page 7
2
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) June 30
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
(Unaudited)
Operating revenues $193,635 $159,640
---------------------
Operating expenses:
Salaries, wages and benefits 70,635 56,781
Fuel 16,719 15,060
Supplies and maintenance 15,548 13,177
Taxes and licenses 15,208 13,027
Insurance and claims 4,901 4,610
Depreciation 17,976 15,849
Rent and purchased transportation 33,004 23,385
Communications and utilities 1,937 2,013
Other (2,342) (907)
---------------------
Total operating expenses 173,586 142,995
---------------------
Operating income 20,049 16,645
---------------------
Other expense (income):
Interest expense 588 475
Interest income (299) (371)
Other 36 37
---------------------
Total other expense 325 141
---------------------
Income before income taxes 19,724 16,504
Income taxes 7,192 6,481
---------------------
Net income $ 12,532 $ 10,023
=====================
Average common shares outstanding 38,182 37,795
=====================
Earnings per share $ .33 $ .27
=====================
Dividends declared per share $ .025 $ .023
=====================
3
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
(Amounts in thousands, except per share data) June 30
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
(Unaudited)
Operating revenues $365,684 $307,543
---------------------
Operating expenses:
Salaries, wages and benefits 133,908 109,158
Fuel 33,984 28,428
Supplies and maintenance 30,493 25,900
Taxes and licenses 27,927 25,429
Insurance and claims 11,251 9,897
Depreciation 35,224 31,465
Rent and purchased transportation 60,652 46,315
Communications and utilities 4,121 3,889
Other (3,378) (1,818)
---------------------
Total operating expenses 334,182 278,663
---------------------
Operating income 31,502 28,880
---------------------
Other expense (income):
Interest expense 1,035 1,124
Interest income (714) (767)
Other 65 73
---------------------
Total other expense 386 430
---------------------
Income before income taxes 31,116 28,450
Income taxes 11,135 11,139
---------------------
Net income $ 19,981 $ 17,311
=====================
Average common shares outstanding 38,086 37,787
=====================
Earnings per share $ .52 $ .46
=====================
Dividends declared per share $ .050 $ .043
=====================
4
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,525 $ 22,136
Accounts receivable, net 88,117 67,928
Prepaid taxes, licenses and permits 5,118 7,753
Other current assets 19,269 18,347
----------------------
Total current assets 131,029 116,164
----------------------
Property and equipment 648,966 579,075
Less - accumulated depreciation 164,737 146,028
----------------------
Property and equipment, net 484,229 433,047
----------------------
$615,258 $549,211
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,672 $ 19,025
Insurance and claims accruals 21,999 19,758
Accrued payroll 10,970 8,970
Income taxes payable 3,863 3,752
Other current liabilities 8,713 7,560
----------------------
Total current liabilities 79,217 59,065
----------------------
Long-term debt 50,000 30,000
Insurance and claims accruals 28,000 27,000
Other long-term liabilities 1,270 2,275
Deferred income taxes 86,986 82,500
Stockholders' equity 369,785 348,371
----------------------
$615,258 $549,211
======================
5
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(In thousands) June 30
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
Net income $19,981 $17,311
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 35,224 31,465
Deferred income taxes 4,486 4,886
Gain on disposal of operating equipment (3,700) (2,518)
Tax benefit from exercise of stock options 1,299 -
Long-term liabilities (5) 1,048
Changes in certain working capital items:
Accounts receivable, net (20,189) (4,497)
Prepaid expenses and other current assets 1,713 5,029
Accounts payable 14,647 (680)
Other current liabilities 5,498 1,445
---------------------
Net cash provided by operating activities 58,954 53,489
---------------------
Cash flows from investing activities:
Additions to property and equipment (103,413) (51,985)
Retirements of property and equipment 20,707 16,019
---------------------
Net cash used in investing activities (82,706) (35,966)
---------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 20,000 -
Repayments of long-term debt - (10,000)
Dividends on common stock (1,900) (1,511)
Stock options exercised 2,041 415
---------------------
Net cash provided by (used in) financing
activities 20,141 (11,096)
---------------------
Net increase(decrease) in cash and cash equivalents (3,611) 6,427
Cash and cash equivalents, beginning of period 22,136 16,227
---------------------
Cash and cash equivalents, end of period $18,525 $22,654
=====================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 971 $ 1,190
Income taxes 5,167 7,664
6
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Commitments
As of June 30, 1997, the Company has committed to capital expenditures
of approximately $31,000,000 (net cost, after revenue equipment trade-in
allowances of approximately $8,000,000).
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, 1996.
Financial Condition:
During the six months ended June 30, 1997, the Company generated cash
flow from operations of $59.0 million and made long-term borrowings of
$20.0 million, which enabled the Company to make net property additions,
primarily revenue equipment, of $82.7 million, and pay common stock
dividends of $1.9 million. If the Company continues to grow at its current
rate (as described below), additional debt borrowings 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.
The Company's long-term debt to equity ratio at June 30, 1997 was
13.5%, compared with 8.6% at December 31, 1996.
Results of Operations:
Three Months Ended June 30, 1997 and 1996
Operating revenues increased 21% for the three months ended June 30,
1997, compared to the same period of the prior year. A two cent per mile
driver pay increase, effective January 1, 1997, helped the Company add and
retain experienced drivers and owner-operators and contributed to a 17%
increase in the average number of tractors compared to the same period of
the prior year. Revenue per truck per week increased 2% compared to the
same quarter of the previous year due to increases in tractor utilization
and increased revenue per mile. A $6.3 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 89.6% for the three months ended June 30, 1997 and 1996. The
Company's increase in logistics and other non-trucking transportation
services contributed to a shift in costs to the rent and purchased
transportation expense category from several other expense categories, as
described below.
8
Salaries, wages and benefits increased from 35.6% to 36.5% of revenues
due primarily to the impact of a two cent per mile driver pay increase
effective January 1, 1997. Fuel decreased from 9.4% to 8.6% of revenues,
due mainly to lower average fuel prices during the quarter, and increased
revenues from logistics and other non-trucking transportation services.
Supplies and maintenance decreased from 8.3% to 8.0% of revenues, and taxes
and licenses decreased from 8.2% to 7.9% of revenues due primarily to
increased revenues from logistics and other non-trucking transportation
services. Insurance and claims decreased from 2.9% to 2.5% of revenues due
to favorable claims experience during the quarter. Depreciation decreased
from 9.9% to 9.3% of revenues due primarily to the increase in the average
revenue per truck per week and the increase in logistics and other non-
trucking transportation revenues. Rent and purchased transportation
increased from 14.6% to 17.0% of revenues due primarily to the Company's
increase in logistics and other non-trucking transportation services. Other
operating expenses changed from (.6%) to (1.2%) of revenues due to an
increase in gains realized on the sale of equipment to third parties.
The Company's effective income tax rate (income taxes as a percentage
of income before income taxes) was 36.5% and 39.3% for the three month
periods ended June 30, 1997 and 1996, respectively. The decrease was due
to favorable settlement of income tax issues. The Company's effective
income tax rate is expected to continue at a lower rate for the remainder
of 1997 compared to the effective income tax rate in 1996 due to the impact
of the favorable settlement.
Six Months Ended June 30, 1997 and 1996
Operating revenues increased by 19% for the six months ended June 30,
1997, compared to the same period of the previous year. A two cent per
mile driver pay increase, effective January 1, 1997, helped the Company add
and retain experienced drivers and owner-operators and contributed to a 15%
increase in the average number of tractors. The Company added 550 tractors
to its fleet during the first six months of 1997, compared to 250 for all
of 1996. Revenue per truck per week increased 1% compared to the first six
months of 1996 due to increases in tractor utilization and increased
revenue per mile. A $9.7 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,
increased to 91.4% for the six months ended June 30, 1997, compared to
90.6% for the same period of 1996. Salaries, wages and benefits increased
from 35.5% to 36.6% of revenues due primarily to the impact of a two cent
per mile driver pay increase effective January 1, 1997. Fuel costs
increased from 9.2% to 9.3% of revenues due mainly to higher average fuel
prices at the beginning of first quarter 1997. Fuel prices began rising at
the end of first quarter 1996 and, for the most part, remained at elevated
9
price levels during much of 1996 and the beginning of first quarter 1997.
During April 1996, the Company began recovering the increased cost of fuel
from customers via a temporary fuel surcharge. The amount of fuel surcharge
recovered from customers typically varies as the price of fuel fluctuates
on a weekly or monthly basis. The Company cannot predict whether the
higher fuel prices will return or the extent to which fuel surcharges would
be collected to offset such increases if fuel prices were to return to
higher levels. Taxes and licenses decreased from 8.3% to 7.6% of revenues
due primarily to the increased revenues from logistics and other non-
trucking transportation services, and refunds and favorable development of
state tax issues. Depreciation decreased from 10.2% to 9.6% of revenues
due principally to the increase in the average revenue per truck per week
and increased revenues from logistics and other non-trucking transportation
services. Rent and purchased transportation increased from 15.1% to 16.6%
of revenues due primarily to the Company's increase in logistics and other
non-trucking transportation services. Other operating expenses changed
from (.6%) to (.9%) of revenues mainly due to an increase in gains realized
on the sale of equipment to third parties.
The Company's effective income tax rate was 35.8% and 39.2% for the
six month periods ended June 30, 1997 and 1996, respectively. The decrease
was due to favorable settlement of income tax issues. The Company's
effective income tax rate is expected to continue at a lower rate for the
remainder of 1997 compared to the effective income tax rate in 1996 due to
the impact of the favorable settlement.
New Accounting Standards:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
This statement establishes standards for computing and presenting earnings
per share (EPS). It requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital
structures. Currently, the Company presents a single disclosure of EPS.
The standard is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Based on information
currently available to management, the Company expects its diluted EPS will
not differ materially from basic EPS.
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 13, 1997, 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"
Clarence L. Werner 33,005,787 220,801
Irving B. Epstein 32,689,952 536,636
Jeffrey G. Doll 33,008,545 218,043
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 13 of sequentially
numbered pages
(b) Reports on Form 8-K.
A report on Form 8-K, filed April 9, 1997, regarding a news
release on April 3, 1997, announcing the promotion of Gregory L.
Werner to the position of President.
A report on Form 8-K, filed April 24, 1997, regarding a news
release on April 16, 1997, announcing the Company's operating
revenues and earnings for the first quarter ended March 31, 1997,
and a news release on April 21, 1997, announcing the
establishment of a new working relationship with Hub Group, Inc.,
a non-asset based full service transportation provider.
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 14, 1997 By: /s/John J. Steele
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: August 14, 1997 By: /s/James L. Johnson
James L. Johnson
Corporate Secretary and Controller