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
March 31, 1998 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 April 30, 1998, 38,305,519 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 ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. 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, 1997).
Consolidated Statements of Income for the
Three Months Ended March 31, 1998 and 1997..................... Page 3
Consolidated Condensed Balance Sheets as of
March 31, 1998 and December 31, 1997........................... Page 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997..................... Page 5
Notes to Consolidated Financial Statements
as of March 31, 1998........................................... Page 6
2
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) March 31
- -------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------
(Unaudited)
Operating revenues $199,707 $172,049
---------------------
Operating expenses:
Salaries, wages and benefits 74,303 63,273
Fuel 14,698 17,265
Supplies and maintenance 17,509 14,945
Taxes and licenses 15,852 12,719
Insurance and claims 6,645 6,350
Depreciation 19,459 17,248
Rent and purchased transportation 33,377 27,648
Communications and utilities 2,559 2,184
Other (2,838) (1,036)
---------------------
Total operating expenses 181,564 160,596
---------------------
Operating income 18,143 11,453
---------------------
Other expense (income):
Interest expense 1,006 447
Interest income (420) (415)
Other 20 29
---------------------
Total other expense 606 61
---------------------
Income before income taxes 17,537 11,392
Income taxes 6,664 3,943
---------------------
Net income $ 10,873 $ 7,449
=====================
Average common shares outstanding 38,256 37,990
=====================
Earnings per share (Note 1) $ .28 $ .20
=====================
Diluted shares outstanding (Note 1) 38,531 38,224
=====================
Diluted earnings per share (Note 1) $ .28 $ .19
=====================
Dividends declared per share (Note 1) $ .025 $ .025
=====================
3
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) March 31 December 31
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 24,924 $ 22,294
Accounts receivable, net 85,390 93,461
Prepaid taxes, licenses and permits 7,499 8,405
Other current assets 22,408 21,632
----------------------
Total current assets 140,221 145,792
----------------------
Property and equipment 726,244 698,099
Less - accumulated depreciation 185,141 176,253
----------------------
Property and equipment, net 541,103 521,846
----------------------
$681,324 $667,638
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,861 $ 44,167
Insurance and claims accruals 24,005 22,161
Accrued payroll 12,442 9,116
Income taxes payable 7,136 6,983
Other current liabilities 9,579 9,364
----------------------
Total current liabilities 82,023 91,791
----------------------
Long-term debt 70,000 60,000
Insurance, claims and other long-term accruals 29,301 29,329
Deferred income taxes 93,846 91,400
Stockholders' equity 406,154 395,118
----------------------
$681,324 $667,638
======================
4
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
(In thousands) March 31
- ---------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
Net income $ 10,873 $ 7,449
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 19,459 17,248
Deferred income taxes 2,446 1,512
Gain on disposal of operating equipment (3,142) (1,256)
Insurance, claims and other long-term accruals (28) (1,002)
Tax benefit from exercise of stock options 247 -
Changes in certain working capital items:
Accounts receivable, net 8,071 (8,108)
Prepaid expenses and other current assets 130 584
Accounts payable (15,306) 11,489
Other current liabilities 5,538 5,384
----------------------
Net cash provided by operating activities 28,288 33,300
----------------------
Cash flows from investing activities:
Additions to property and equipment (56,260) (38,464)
Retirements of property and equipment 20,686 7,442
----------------------
Net cash used in investing activities (35,574) (31,022)
----------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 10,000 -
Dividends on common stock (958) (950)
Stock options exercised 874 127
Net cash provided by (used in) financing ----------------------
activities 9,916 (823)
----------------------
Net increase in cash and cash equivalents 2,630 1,455
Cash and cash equivalents, beginning of period 22,294 22,136
----------------------
Cash and cash equivalents, end of period $ 24,924 $ 23,591
======================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 821 $ 458
Income taxes 3,424 776
5
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Common Stock Split
On April 15, 1998, the Company announced that its Board of Directors
declared a five-for-four split of the Company's common stock effected in
the form of a 25 percent stock dividend. The stock split will be payable
on or about May 13, 1998 to stockholders of record at the close of business
on April 27, 1998. 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 April 27, 1998.
The Company's average common shares outstanding and earnings per
share, after giving retroactive effect for the five-for-four stock split,
are as follows:
Three Months Ended
March 31
------------------
1998 1997
------------------
Average common shares outstanding 47,820 47,488
====== ======
Earnings per share $ .23 $ .16
====== ======
Diluted shares outstanding 48,164 47,780
====== ======
Diluted earnings per share $ .23 $ .16
====== ======
(2) Commitments
As of March 31, 1998, the Company has commitments for capital
expenditures of approximately $63,000,000.
6
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, 1997.
Financial Condition:
During the three months ended March 31, 1998, the Company generated
cash flow from operations of $28.3 million. Cash flow from operations
decreased due to a reduction in accounts payable resulting from the timing
of payments for tractors and trailers. At December 31, 1997, most of the
accounts payable of $44.2 million was for tractors and trailers received
not yet paid. Accounts payable was $28.9 million at March 31, 1998.
Accounts receivable collections improved during first quarter 1998 as
accounts receivable declined from $93.5 million to $85.4 million. The
Company made long-term borrowings of $10.0 million, which, along with the
cash flow from operations, enabled the Company to make net property
additions, primarily revenue equipment, of $35.6 million, and pay common
stock dividends of $1.0 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.
The Company's long-term debt to equity ratio at March 31, 1998 was
17.2%, compared with 15.2% at December 31, 1997.
Results of Operations:
Three Months Ended March 31, 1998 and 1997
- ------------------------------------------
Operating revenues increased 16% for the three months ended March 31,
1998, compared to the same period of the prior year, primarily due to a 14%
increase in the average number of tractors in service. Revenue per mile,
excluding fuel surcharges, increased 1% compared to first quarter of 1997
due partially to rate increases. A $2.9 million increase in revenues from
logistics transportation services also contributed to the overall increase
in operating revenues.
Operating expenses, expressed as a percentage of operating revenues,
were 90.9% for the three months ended March 31, 1998, compared to 93.3% for
the three months ended March 31, 1997. The Company's increase in logistics
7
transportation services contributed to a shift in costs to the rent and
purchased transportation expense category from several other expense
categories, as described below.
Salaries, wages and benefits increased from 36.8% to 37.2% of revenues
due primarily to an increase in experienced drivers and to a lesser degree
higher workers compensation costs, partially offset by increased revenues
from logistics transportation services. 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 were 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 10.0% to 7.4% of revenues, due mainly to lower
average fuel prices during the quarter compared to the same quarter of the
prior year, and increased revenues from logistics transportation services.
Taxes and licenses increased from 7.4% to 7.9% of revenues due primarily to
the effect of refunds and state sales tax incentives during first quarter
1997. Insurance and claims decreased from 3.7% to 3.3% of revenues due to
favorable claims experience during the quarter and increased revenues from
logistics transportation services. Depreciation decreased from 10.0% to
9.7% of revenues due primarily to the increase in logistics transportation
revenues and a slight increase in miles per tractor. Rent and purchased
transportation increased from 16.1% to 16.7% of revenues due primarily to
the Company's increase in logistics transportation services. Other
operating expenses changed from (.6%) to (1.4%) of revenues due to an
increase in gains on sales of revenue equipment to third parties resulting
from an increase in the number of units sold.
The Company's effective income tax rate (income taxes as a percentage
of income before income taxes) was 38% and 34.6% for the three month
periods ended March 31, 1998 and 1997, respectively. The increase was due
to favorable settlement of income tax issues during the prior year.
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Page Number or Incorporated
Number Description by Reference to
------- ----------- ---------------------------
11 Statement Re Computation Filed herewith
of Per Share Earnings
27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K.
A report on Form 8-K, filed January 23, 1998, regarding a news
release on January 21, 1998, announcing the Company's operating
revenues and earnings for the fourth quarter and year ended
December 31, 1997.
A report on Form 8-K, filed February 17, 1998, regarding a news
release on February 12, 1998, announcing the Company's
transportation agreement with Dollar General Corporation.
9
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: May 11, 1998 By: /s/John J. Steele
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: May 11, 1998 By: /s/James L. Johnson
James L. Johnson
Corporate Secretary and Controller
10