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
September 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 October 31, 1996, 37,983,281 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 and nine-month periods ended
September 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 September 30, 1996 and 1995.....................Page 3
Consolidated Statements of Income for the
Nine Months Ended September 30, 1996 and 1995......................Page 4
Consolidated Condensed Balance Sheets as of
September 30, 1996 and December 31, 1995...........................Page 5
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995......................Page 6
Notes to Consolidated Financial Statements.............................Page 7
2
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) September 30
1996 1995
(Unaudited)
Operating revenues $167,155 $150,303
Operating expenses:
Salaries, wages and benefits 58,543 54,252
Fuel 15,515 11,803
Supplies and maintenance 14,289 12,766
Taxes and licenses 13,158 12,485
Insurance and claims 4,682 6,520
Depreciation 16,591 15,418
Rent and purchased transportation 24,227 19,480
Communications and utilities 2,087 1,992
Other (1,175) (1,422)
Total operating expenses 147,917 133,294
Operating income 19,238 17,009
Other expense (income):
Interest expense 486 672
Interest income (431) (291)
Other 21 30
Total other expense 76 411
Income before income taxes 19,162 16,598
Income taxes 7,430 6,473
Net income $ 11,732 $ 10,125
Average common shares outstanding (Note 1) 37,936 37,739
Earnings per share (Note 1) $ .31 $ .27
3
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
(Amounts in thousands, except per share data) September 30
1996 1995
(Unaudited)
Operating revenues $474,698 $426,062
Operating expenses:
Salaries, wages and benefits 167,701 155,851
Fuel 43,943 34,435
Supplies and maintenance 40,189 38,029
Taxes and licenses 38,587 36,940
Insurance and claims 14,579 15,722
Depreciation 48,056 45,595
Rent and purchased transportation 70,542 53,866
Communications and utilities 5,976 6,210
Other (2,993) (4,573)
Total operating expenses 426,580 382,075
Operating income 48,118 43,987
Other expense (income):
Interest expense 1,610 1,661
Interest income (1,198) (744)
Other 94 95
Total other expense 506 1,012
Income before income taxes 47,612 42,975
Income taxes 18,569 16,760
Net income $ 29,043 $ 26,215
Average common shares outstanding (Note 1) 37,836 37,760
Earnings per share (Note 1) $ .77 $ .69
4
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) September 30 December 31
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 30,164 $ 16,227
Accounts receivable, net 70,950 57,871
Prepaid taxes, licenses and permits 2,695 7,752
Other current assets 19,014 19,145
Total current assets 122,823 100,995
Property and equipment 564,649 526,208
Less - accumulated depreciation 137,401 119,524
Property and equipment, net 427,248 406,684
$550,071 $507,679
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,766 $ 15,719
Insurance and claims accruals 20,532 19,073
Accrued payroll 10,631 7,718
Income taxes payable 4,970 3,226
Other current liabilities 8,711 8,455
Total current liabilities 68,610 54,191
Long-term debt 30,000 40,000
Insurance and claims accruals 27,000 26,000
Other long-term liabilities 2,782 2,736
Deferred income taxes 83,949 75,700
Stockholders' equity 337,730 309,052
$550,071 $507,679
5
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
(In thousands) September 30
1996 1995
(Unaudited)
Cash flows from operating activities:
Net income $29,043 $26,215
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 48,056 45,595
Deferred income taxes 8,249 5,521
Gain on disposal of operating equipment (3,971) (5,324)
Tax benefit from exercise of stock options 782 -
Long-term liabilities 1,046 300
Changes in certain working capital items:
Accounts receivable, net (13,079) (11,254)
Prepaid expenses and other current assets 5,188 4,776
Accounts payable 8,047 766
Accrued payroll 2,913 (1,190)
Other current liabilities 3,265 6,588
Net cash provided by operating activities 89,539 71,993
Cash flows from investing activities:
Additions to property and equipment (89,011) (102,771)
Retirements of property and equipment 24,362 27,777
Net cash used in investing activities (64,649) (74,994)
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 (2,394) (2,140)
Repurchases of common stock - (1,013)
Stock options exercised 1,441 35
Net cash provided by (used in) financing
activities (10,953) 6,882
Net increase in cash and cash equivalents 13,937 3,881
Cash and cash equivalents, beginning of period 16,227 11,660
Cash and cash equivalents, end of period $30,164 $15,541
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,686 $ 2,625
Income taxes 7,756 10,944
6
<PAGE>
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Common Stock Split
On August 9, 1996, the Company issued shares for a three-for-two
common stock split effected in the form of a 50 percent stock dividend to
stockholders of record at the close of business on July 26, 1996. All
references in the consolidated financial statements with regard to the
number of shares of common stock and the per share amounts have been
adjusted to reflect the effect of the stock split.
(2) Commitments
As of September 30, 1996, the Company has committed to capital
expenditures of approximately $39,000,000 (net cost, after revenue
equipment trade-in allowances of approximately $16,000,000).
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition:
During the nine months ended September 30, 1996, the Company generated
cash flow from operations of $89.5 million. After the Company made net
property additions, primarily revenue equipment, of $64.6 million, repaid
long-term debt of $10.0 million and paid common stock dividends of $2.4
million, cash and cash equivalents increased by $13.9 million.
The Company's long-term debt to equity ratio at September 30, 1996 was
8.9%, compared with 12.9% at December 31, 1995.
Results of Operations:
Three Months Ended September 30, 1996 and 1995
Operating revenues increased 11% for the three months ended
September 30, 1996, compared to the same period of the prior year. The
average number of tractors increased by 5%, 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 September 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 88.5% for the three months ended September 30, 1996, compared to 88.7%
for the three months ended September 30, 1995. Owner-operator tractors
represented a larger percentage of total tractors during the quarter ended
September 30, 1996 (16.9%), compared to the same period of 1995 (15.1%),
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 36.1% to 35.0% of revenues
due primarily to the increase in the percentage of owner-operator tractors.
On November 8, 1996, the Company announced that it would be increasing the
pay for its Company drivers and owner-operators by two cents per mile,
effective January 1, 1997. The Company is contacting customers to explain
8
<PAGE>
the reasons for the pay increase in an effort to obtain rate increases.
The Company cannot predict the extent to which rate increases will be
obtained to offset the additional cost associated with the pay increase.
Fuel increased from 7.9% to 9.3% of revenues, due mainly to a 23%
increase in average fuel prices during the quarter, partially offset by the
increase in the percentage of owner-operator tractors. In April 1996, the
Company began efforts to recover the increased cost of fuel from customers
via the use of fuel surcharges. The amount of fuel surcharges recovered
from customers typically varies as the price of fuel fluctuates on a weekly
or monthly basis. The higher average fuel prices, net of fuel surcharges
collected from customers, resulted in a $.03 per share decrease in earnings
for the quarter ended September 30, 1996 compared to the same quarter of
1995. The Company cannot predict whether the higher fuel prices will
continue or the extent to which fuel surcharges will be collected to offset
such increases.
Supplies and maintenance was unchanged as a percentage of revenues, as
higher driver advertising costs were offset by the increased percentage of
owner operator tractors. Taxes and licenses decreased from 8.3% to 7.9% of
revenues due primarily to the increased percentage of owner-operators, and
the increase in logistics revenues. Insurance and claims decreased from
4.3% to 2.8% of revenues due to improved claims experience. Depreciation
decreased from 10.3% to 9.9% of revenues due principally to the increased
percentage of owner-operator tractors and increased tractor utilization.
Other operating expenses changed from (.9%) to (.7%) 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 38.8% and 39.0% for the three month
periods ended September 30, 1996 and 1995, respectively.
Nine Months Ended September 30, 1996 and 1995
Operating revenues increased by 11% for the nine months ended
September 30, 1996, compared to the same period of the previous year. The
average number of tractors increased 6%. Miles per tractor during the nine
months ended September 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 89.9% for the nine months ended September 30, 1996, compared
to 89.7% for the same period of 1995. Salaries, wages and benefits
decreased from 36.6% to 35.3% of revenues due primarily to an increase in
the percentage of owner-operator tractors, partially offset by a reduction
9
<PAGE>
in the estimated liability for accrued driver payroll of $2,400,000 during
the first quarter of 1995. On November 8, 1996, the Company announced that
it would be increasing the pay for its Company drivers and owner-operators
by two cents per mile, effective January 1, 1997. The Company is
contacting customers to explain the reasons for the pay increase in an
effort to obtain rate increases. The Company cannot predict the extent to
which rate increases will be obtained to offset the additional cost
associated with the pay increase.
Fuel costs increased from 8.1% to 9.3% of revenues due mainly to a 21%
increase in average fuel prices, partially offset by the increase in the
percentage of owner-operator tractors. In April 1996, the Company began
efforts to recover the increased cost of fuel from customers via the use of
fuel surcharges. The higher average fuel prices, net of fuel surcharges
collected from customers, resulted in a $.09 per share decrease in earnings
for the nine months ended September 30, 1996 compared to the same period of
1995. The Company cannot predict whether the higher fuel prices will
continue or the extent to which fuel surcharges will be collected to offset
such increases.
Supplies and maintenance decreased from 8.9% to 8.5% of revenues due
primarily to the increased percentage of owner-operator tractors and the
increase in logistics transportation revenues. Taxes and licenses
decreased from 8.7% to 8.1% of revenues due primarily to the increased
percentage of owner-operators, increase in logistics revenues, and refunds
of state sales taxes. Depreciation decreased from 10.7% to 10.1% 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 changed 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 39.0% for the nine month periods ended
September 30, 1996 and 1995.
10
<PAGE>
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
27 Financial Data Schedule Page 12 of sequentially
numbered pages
(b) Reports on Form 8-K - None
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: November 13, 1996 By: /s/John J. Steele
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: November 13, 1996 By: /s/James L. Johnson
James L. Johnson
Corporate Secretary and Controller
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 30,164
<SECURITIES> 0
<RECEIVABLES> 70,950
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122,823
<PP&E> 564,649
<DEPRECIATION> 137,401
<TOTAL-ASSETS> 550,071
<CURRENT-LIABILITIES> 68,610
<BONDS> 0
0
0
<COMMON> 387
<OTHER-SE> 337,343
<TOTAL-LIABILITY-AND-EQUITY> 550,071
<SALES> 474,698
<TOTAL-REVENUES> 474,698
<CGS> 0
<TOTAL-COSTS> 426,580
<OTHER-EXPENSES> (1,104)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,610
<INCOME-PRETAX> 47,612
<INCOME-TAX> 18,569
<INCOME-CONTINUING> 29,043
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,043
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
