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 quarterly period ended November 30, 1993
Commission file Number 0-14690
WERNER ENTERPRISES, INC.
(Exact name of registrant as specified in its charter.)
NEBRASKA 47-0648386
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
INTERSTATE 80 & HIGHWAY 50
POST OFFICE BOX 37308
OMAHA, NEBRASKA 68137
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(402) 895-6640
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, 25,322,716 shares of the registrant's common stock,
par value $.01 per share, were outstanding.
<PAGE>
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, 1993 are not necessarily indicative of the results that may be
expected for the year ending February 28, 1994. 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).
Consolidated Statements of Income for the
Three Months Ended November 30, 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, 1993 and February 28, 1993 ........................ Page 5
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 1993 and 1992 ................... Page 6
Notes to Consolidated Financial Statements
as of November 30, 1993 ........................................ Page 7
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<TABLE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
(Amounts in thousands, except per share data) November 30
1993 1992
(Unaudited)
<S> <C> <C>
Operating revenues $111,932 $ 94,024
Operating expenses:
Salaries, wages and benefits 37,905 36,377
Fuel 11,324 10,591
Supplies and maintenance 10,119 7,836
Taxes and licenses 10,039 8,709
Insurance and claims 4,713 3,964
Depreciation 11,494 9,980
Rent and purchased transportation 11,086 4,516
Communications and utilities 2,181 1,142
Other (781) (60)
Total operating expenses 98,080 83,055
Operating income 13,852 10,969
Other expense (income):
Interest expense 322 308
Interest income (199) (123)
Other 32 62
Total other expense 155 247
Income before income taxes 13,697 10,722
Income taxes (Note 2) 5,205 4,236
Net income $ 8,492 $ 6,486
Average common shares outstanding 24,195 22,822
Earnings per share $ .35 $.28
<FN>
</TABLE>
<PAGE>
<TABLE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Nine Months Ended
(Amounts in thousands, except per share data) November 30
1993 1992
(Unaudited)
<S> <C> <C>
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
<FN>
</TABLE>
<PAGE>
<TABLE>
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
(In thousands) November 30 February 28
1993 1993
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,997 $ 6,441
Accounts receivable, net 44,715 37,420
Prepaid expenses and other current assets 16,462 20,332
Total current assets 87,174 64,193
Property and equipment 373,004 329,139
Less - accumulated depreciation 91,794 87,460
Property and equipment, net 281,210 241,679
$368,384 $305,872
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,511 $ 21,363
Accrued payroll 9,374 6,876
Current maturities of long-term debt
and capitalized lease obligations (Note 1) 4,672 4,493
Other current liabilities 28,429 18,157
Total current liabilities 51,986 50,889
Long-term debt and capitalized lease
obligations, net of current
maturities (Note 1) - 16,652
Insurance and claims accruals 20,300 20,800
Other long-term liabilities 5,090 3,611
Deferred income taxes (Note 2) 47,247 48,033
Stockholders' equity (Note 1) 243,761 165,887
$368,384 $305,872
<FN>
</TABLE>
<PAGE>
<TABLE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
(In thousands) November 30
1993 1992
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $25,188 $19,522
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 33,226 29,928
Deferred income taxes 3,514 (105)
Tax benefit from exercise of stock options 900 326
Other long-term liabilities (1,475) 4,835
Changes in certain working capital items:
Accounts receivable, net (7,295) (5,110)
Prepaid expenses and other current assets 4,024 (1,172)
Accounts payable (11,852) (3,095)
Accrued payroll 2,498 2,942
Other current liabilities 8,272 3,430
Net cash provided by operating activities 57,000 51,501
Cash flows from investing activities:
Additions to property and equipment (85,411) (54,790)
Retirements of property and equipment 12,655 1,774
Net cash used in investing activities (72,756) (53,016)
Cash flows from financing activities:
Short-term borrowing 20,000 -
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 -
Dividends on common stock (1,375) (1,368)
Stock options exercised 978 450
Net cash provided by (used in)
financing activities 35,312 (3,452)
Net increase (decrease) in cash and cash equivalents 19,556 (4,967)
Cash and cash equivalents, beginning of period 6,441 12,655
Cash and cash equivalents, end of period $25,997 $ 7,688
<FN>
</TABLE>
<TABLE>
Supplemental disclosures of cash flow information:
<CAPTION>
<S> <C> <C>
Cash paid during the period for:
Interest $ 1,288 $ 1,351
Income taxes 5,855 12,194
<FN>
</TABLE>
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, the Company has committed to capital expenditures
of approximately $40,000,000 (net cost, after revenue equipment trade-in
allowances of approximately $33,000,000).
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition:
During the nine months ended November 30, 1993, cash flow from
operations generated $57.0 million and the Company had net proceeds from the
sale of common stock of $52.2 million, which enabled the Company to make net
property additions of $72.8 million, repay long-term debt and capitalized
lease obligations of $16.5 million and pay common stock dividends of $1.4
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 decrease
was due primarily to the repayment of long-term debt and capitalized lease
obligations from the net proceeds from the sale of common stock.
Results of Operations:
Three Months Ended November 30, 1993 and 1992
Operating revenues increased 19% in the three months ended November 30,
1993, compared to the same period in the prior year. The average number of
tractors increased by 18%. Revenue per mile increased about 1.5% while
tractor utilization (miles per tractor) decreased about 1%. These changes
were due to 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.
Operating expenses, expressed as a percentage of operating revenues,
were 87.6% for the three months ended November 30, 1993, compared to 88.3%
for the three months ended November 30, 1992. Salaries, wages and benefits
decreased from 38.7% of revenues to 33.9% of revenues due 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 the retention of more
experienced drivers who earn a higher pay rate. Fuel decreased from 11.3% of
revenues to 10.1% of revenues as a result of 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. Supplies and maintenance increased from 8.3% of
revenues to 9.0% 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% of revenues to 9.0% of revenues due to an
increase in the percentage of owner-operator tractors, offset by an increase
in the Federal diesel fuel tax of 4.3 cents per gallon which became effective
October 1, 1993. Depreciation decreased from 10.6% 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. 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)% of revenues to (.7)% of
revenues due to an increase in gains recognized on the sale of revenue
equipment.
Rent and purchased transportation increased from 4.8% of revenues to
9.9% 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, 1993 was
423 compared to an average of 183 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.
The Company's effective income tax rate (income tax expense divided by income
before income taxes) decreased to 38.0% for the three months ended November
30, 1993, compared to 39.5% 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 an increase in the percentage of
owner-operator tractors, offset partially by an increase in driver pay due to
the retention of more experienced drivers who earn a higher pay rate. Fuel
decreased from 10.9% 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 fleet 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, 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).
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the quarter ended November 30, 1993.
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, 1994 By: /s/ Robert E. Synowicki, Jr.
Robert E. Synowicki, Jr.,
Vice President of Finance, Treasurer and
Chief Financial Officer
Date: January 14, 1994 By: /s/ John J. Steele
John J. Steele
Secretary and Controller
