UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1995
Commission file number 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
incorporation or organization) identification no.)
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)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K.
[ X ]
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 ___
The aggregate market value of the registrant's $.01 par value common stock
held by nonaffiliates of the registrant as of March 15, 1996 was $327,902,238
(based upon $23.75 per share closing price on that date, as reported by
NASDAQ). In making this calculation the registrant has assumed, without
admitting for any purpose, that all executive officers and directors of the
registrant, and no other persons, are affiliates.
As of March 15, 1996, 25,191,916 shares of the registrant's common stock were
outstanding.
Exhibit index is located on page 13. Portions of the 1995 Annual Report to
Stockholders are incorporated in Parts I, II and IV of this report. Portions
of the Proxy Statement of Registrant for the Annual Meeting of Stockholders
to be held May 14, 1996 are incorporated in Part III of this report.
PAGE 1 OF 29 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
General
Werner Enterprises, Inc. is a transportation company primarily engaged in
hauling truckload shipments of general commodities in both interstate and
intrastate commerce, with its headquarters in Omaha, Nebraska. References to
Werner or the Company are to Werner Enterprises, Inc. and its wholly-owned
subsidiaries. The Company operates throughout the 48 contiguous states
pursuant to operating authority, both common and contract, granted by the
Department of Transportation and pursuant to intrastate authority granted by
various states. The Company also has authority to operate in eight provinces
of Canada and has through trailer service in and out of Mexico. The
principal types of freight transported include retail store merchandise,
foodstuffs, beverages and beverage containers, paper products, plastic
products, metal products, lumber and building materials.
Marketing and Operations
Werner's business philosophy is to provide "high service, low cost"
transportation services. The Company has achieved this by (1) meeting the
special needs of its customers; (2) careful attention to its quality work
force; and (3) operating premium, modern equipment. Until 1992, the Company
operated in the high-service end of the dry van and flatbed medium-to-long-
haul segments of the truckload market which continues to be the Company's
major revenue source. In these markets, the Company focuses on shippers who
value the broad geographic coverage, customized services and flexibility
available from a larger, financially stable carrier. These shippers are
generally less sensitive to rate levels, preferring to have their freight
handled by a few "core" carriers with whom they can establish service-based,
long-term relationships.
In order to strengthen these customer relationships and to provide
opportunities for profitable growth, the Company began expanding into new
markets beginning in 1992. The Company's management analyzed possible new
markets based on the following criteria: market size, cost of entry,
potential long-term profitability and synergy with the Company's existing
business. It was decided to enter into three new markets: regional short-
haul, temperature-controlled and dedicated fleet services. Regional short-
haul consists of dry-van freight with a shorter length of haul, generally
around a major metropolitan area or areas. Temperature-controlled freight
requires specialized van trailers for products which are sensitive to
temperature conditions. Dedicated fleet services involves assuming total
responsibility for the transportation needs of a specific customer and
generally replacing their private fleet. In 1993, the Company also began
offering logistics services and rail intermodal transportation services.
These service offerings build on the Company's existing strengths in its
traditional markets and strategically position the Company to provide a broad
range of transportation services for its customers. See "Revenue Equipment"
for the number of tractors operated in each of the Company's service
divisions.
2
<PAGE>
The Company continues to improve its operational efficiencies by applying new
technologies and refining its management processes. In 1993 the Company
completed installation of two-way, satellite-based communications equipment
in the entire fleet. This technology streamlines communication between
drivers and the Company. Customers also benefit from the flexibility and
quick response provided by real-time communications. The Company's satellite
communication technology is complemented by a load optimization system which
considers factors such as transit time, maintenance, driver needs and
equipment needs in making optimal dispatch recommendations. The Company also
utilizes Electronic Data Interchange (EDI) which allows customers to network
with the Company to send and track orders, receive billing information, etc.
In addition, the Company continues to refine its formal quality improvement
program to satisfy customers' needs cost effectively.
The Company has a diversified customer base and is not dependent on a small
group of customers or a specific industry for its freight. During 1995, the
Company's largest 5, 10 and 25 customers comprised approximately 19%, 25% and
37% of the Company's revenues, respectively.
Seasonality
In the trucking industry, revenues generally show a seasonal pattern as some
customers reduce shipments during and after the winter holiday season. The
Company's operating expenses have historically been slightly higher in the
winter months due primarily to decreased fuel efficiency and increased
maintenance costs of revenue equipment in colder weather. However, the
Company attempts to minimize the impact of seasonality through its marketing
program which seeks additional freight from certain customers during
traditionally slower shipping periods. Revenue can also be affected by bad
weather and holidays, since revenue is directly related to available working
days of shippers.
Employees and Owner-Operator Drivers
As of December 31, 1995, the Company employed 4,542 drivers, 440 mechanics
and maintenance personnel, and 840 management, administrative and support
personnel. The Company also had contracts with independent contractors
(owner-operators) for the services of 676 tractors that provide both a
tractor and a qualified driver or drivers. None of the Company's employees
is represented by a collective bargaining unit, and the Company considers
relations with its employees to be good.
The Company recognizes that its professional driver work force is one of its
most valuable assets. Over the past four years, several driver retention
programs have been introduced by the Company - including creation of a pay
package that more fairly compensates drivers for work associated with their
job (loading and unloading, extra stops, and layovers, for example). These
extra pay items are in addition to the drivers' mileage based pay which
increases with a driver's length of service and incentive pay such as a fuel
efficiency bonus and a mileage bonus. Effective May 1, 1994, the Company
increased the mileage pay for Company drivers by two cents per mile. This
increase has helped the Company to attract and retain qualified drivers to
meet its growth plans. Also, a regular schedule of driver/top management
meetings was initiated approximately four years ago to share information and
concerns and seek mutually satisfactory solutions. As a result of
management's attention to driver retention, the Company has significantly
reduced its driver turnover over the past several years, to a level believed
to be below the industry average.
3
<PAGE>
At times, there are shortages of drivers in the trucking industry,
particularly the long-haul segment. The Company's management believes that
the number of qualified drivers in the industry has been reduced because of
the Federal License Program implemented during 1992, elimination of federal
funding for driving schools, as well as individual drivers' desire to be home
more often. 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.
The Company also recognizes that carefully selected owner-operators
complement its Company-employed drivers. Owner-operators supply their own
tractor and driver, and are responsible for their operating expenses in
return for a portion of the revenues generated. Because owner-operators
provide their own tractors, less capital is required for growth. Also,
owner-operators provide the Company with another source of drivers to support
its growth. The Company intends to continue its emphasis on recruiting
owner-operators.
Revenue Equipment
As of December 31, 1995, the Company operated 3,674 Company-owned tractors
and had contracts for 676 tractors owned by owner-operators. The tractors as
of December 31, 1995 were operated in the Company's service divisions as
follows: 2,880 medium-to-long-haul dry vans; 340 medium-to-long-haul
flatbeds; 460 regional short-haul vans; 290 temperature-controlled; and 380
dedicated. Approximately 70% of the Company's tractors are manufactured by
Freightliner. This standardization decreases downtime by simplifying
maintenance. The Company adheres to a comprehensive maintenance program for
both tractors and trailers. Due to continuous upgrading of the Company-owned
tractor fleet, the average age was 1.5 years at December 31, 1995. Owner-
operator tractors are inspected prior to acceptance by the Company for
compliance with operational and safety requirements of the Company and the
Department of Transportation. These tractors are then periodically
inspected, similar to Company-owned tractors, to monitor continued
compliance.
The Company operated 11,060 trailers at December 31, 1995 in the Company's
service divisions as follows: 9,695 dry vans; 759 flatbed; 537 temperature
controlled; and 69 other specialized trailers. As of December 31, 1995, 96%
of the Company's fleet of van trailers consisted of 53-foot trailers of which
8,827 of these 53-foot trailers are the new "plate" trailer design which
provides more capacity. Other trailer lengths such as 27-foot and 57-foot
are also provided by the Company to meet the specialized needs of customers.
The average age of the trailer fleet was 1.9 years at December 31, 1995.
Fuel
Shortages of fuel, increases in fuel prices or rationing of petroleum
products could have a materially adverse effect on the operations and
profitability of the Company. During a portion of 1993, the Company
experienced a temporary increase in the cost of fuel. The Company collected
a temporary fuel surcharge from its customers for a majority of this cost
increase. The Company can not predict when future fuel price increases will
occur or if such fuel surcharges could be used to offset future price
increases.
4
<PAGE>
The Company maintains above-ground and underground fuel storage tanks at
certain of its terminals. Leakage or damage to these facilities could expose
the Company to environmental clean-up costs. The tanks are routinely
inspected to help prevent and detect such problems.
Regulation
The Company is a motor carrier formerly regulated by the Interstate Commerce
Commission (ICC). The ICC Termination Act of 1995 transferred regulation of
motor carriers to the Surface Transportation Board of the United States
Department of Transportation (DOT), which assumed some of the former
functions of the ICC effective January 1, 1996, generally governing matters
such as registration to engage in motor carrier operations, accounting
systems, certain mergers, consolidations, acquisitions, and periodic
financial reporting. Motor carrier operations are also subject to safety
requirements prescribed by the DOT governing interstate operation. The
Company currently has a satisfactory DOT safety rating, which is the highest
available rating. A conditional or unsatisfactory DOT safety rating could
have an adverse effect on the Company, as some of the Company's contracts
with customers require a satisfactory rating. Such matters as weight and
dimensions of equipment are also subject to federal, state and international
regulations.
The federal Motor Carrier Act of 1980 was enacted to increase competition
among motor carriers and limit the level of regulation in the industry
(commonly referred to as deregulation). The Motor Carrier Act of 1980
enabled applicants to obtain ICC operating authority more easily and allowed
interstate motor carriers to change rates without ICC approval. This law
also removed many route and commodity restrictions on the transportation of
freight. As a result, the Company has obtained unlimited authority to carry
general commodities in interstate commerce throughout the 48 contiguous
states.
The Company currently has authority to carry freight on an intrastate basis
in 39 states. The Federal Aviation Administration Authorization Act of 1994
(the FAAA Act) amended sections of the Interstate Commerce Act to prevent
states from regulating rates, routes or service of motor carriers after
January 1, 1995. The FAAA Act did not address state oversight of motor
carrier safety and financial responsibility, or state taxation of
transportation. If a carrier wishes to operate in a state where it did not
previously have intrastate authority, it must, in most cases, still apply for
authority. The Company is currently in the process of applying for
intrastate authority in several of the remaining states where it does not
currently have such authority.
Competition
The trucking industry is highly competitive and includes thousands of
trucking companies. The Company competes primarily with other truckload
carriers. Railroads, less-than-truckload carriers and private carriers also
provide competition, but to a lesser degree. Deregulation of the trucking
industry in 1980 created an influx of truckload carriers which, with other
factors, created downward pressure on the industry's price structure.
Competition for the freight transported by the Company is based primarily on
service and efficiency and, to some degree, on freight rates alone. Few
other truckload carriers have greater financial resources, own more equipment
or carry a larger volume of freight than the Company. The Company is one of
the five largest truckload carriers in the trucking industry.
5
<PAGE>
ITEM 2. PROPERTIES
Werner's headquarters is located along Interstate 80 just west of Omaha,
Nebraska, on approximately 210 acres, 171 of which are held for future
expansion. The headquarters consist of the Company's 108,000 square-foot
office building, a 5,000 square-foot computer center, and 73,000 square feet
of maintenance and repair facilities containing a central parts warehouse,
frame straightening and alignment machine, truck and trailer wash areas,
equipment safety lanes, body shops for tractors and trailers and a paint
booth. Additionally, the maintenance area includes a drivers' lounge, a
drivers' orientation section and a Company store.
The Company and its subsidiaries own a 22,000 square-foot terminal in
Springfield, Ohio, a 32,000 square-foot facility in Denver, a 18,000 square-
foot facility in Los Angeles, a 31,000 square-foot terminal in Atlanta, and
a 27,000 square-foot terminal in Dallas. All five locations include office
and maintenance space. The Company also is constructing a 25,000 square-foot
full-service terminal in Phoenix which is scheduled to open in the Spring of
1996.
Additionally, the Company leases several small sales offices and/or trailer
parking yards in various locations throughout the country.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred
in the transportation of freight. The Company has assumed liability up to
$500,000 per claim and a $1,000,000 annual aggregate amount of liability
between $500,000 and $1,000,000 for personal injury and property damage
claims. The Company maintains insurance which covers liability in excess of
this amount to coverage levels that management considers adequate. The
Company believes that adverse results in one or more of these claims would
not have a material adverse effect on its results of operations or financial
position. The information set forth in Note (1) "Insurance and Claims
Accruals" on page 20, Note (4) "Insurance and Claims" on page 21 and Note (7)
"Commitments and Contingencies" on page 23 of the Annual Report is
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1995, no matters were submitted to a vote of
security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information set forth under the captions "Price Range of Common Stock"
and "Dividend Policy" on page 24 of the Annual Report, "Consolidated
Statements of Stockholders' Equity" on page 19 of the Annual Report, and Note
(1) "Common Stock and Earnings Per Share" on page 21 of the Annual Report is
incorporated herein by reference.
6
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Financial Highlights" on page 1
of the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The information set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 13
through 15 of the Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth under the captions , "Consolidated Statements of
Income", "Consolidated Balance Sheets", "Consolidated Statements of Cash
Flows", "Consolidated Statements of Stockholders' Equity", "Report of
Independent Public Accountants" and "Notes to Consolidated Financial
Statements", on pages 16 through 23 of the Annual Report is incorporated
herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K have been filed within the twenty-four months prior to
December 31, 1995, involving a change of accountants or disagreements on
accounting and financial disclosure.
PART III
Certain information required by Part III is omitted from this report on Form
10-K in that the Company will file a definitive proxy statement pursuant to
Regulation 14A (Proxy Statement) not later than 120 days after the end of the
fiscal year covered by this report on Form 10-K, and certain information
included therein is incorporated herein by reference. Only those sections of
the Proxy Statement which specifically address the items set forth herein are
incorporated by reference. Such incorporation does not include the
Compensation Committee Report or the Performance Graph included in the Proxy
Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement.
7
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules.
(1) Financial Statements -- The information set forth under the
following captions on pages 16 through 23 of the Annual Report is
incorporated by reference. Page references are to page numbers in the Annual
Report.
Page
Consolidated Statements of Income 16
Consolidated Balance Sheets 17
Consolidated Statements of Cash Flows 18
Consolidated Statements of Stockholders' Equity 19
Report of Independent Public Accountants 19
Notes to Consolidated Financial Statements 20-23
(2) Financial Statement Schedules -- The consolidated financial
statement schedule set forth under the following caption is included herein.
The page reference is to the consecutively numbered pages of this report on
Form 10-K.
Page
Report of Independent Public Accountants on Schedule 11
Schedule II -- Valuation and Qualifying Accounts 12
(3) Exhibits -- The response to this portion of Item 14 is submitted as
a separate section of this report on Form 10-K (see Exhibit Index).
(4) Reports on Form 8-K -- There were no reports on Form 8-K filed by
the Company during the fourth quarter of 1995.
FORM 11-K INFORMATION INCLUDED HEREIN RELATED TO
STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
Stock Option Plan
The Company's Stock Option Plan (the Stock Option Plan) is a nonqualified
plan that provides for the grant of options to management employees. Options
are granted at prices equal to the market value of the common stock on the
date the option is granted. The options are exercisable over a period
(determined by the Option Committee of the Board of Directors) not to exceed
ten years and one day from the date of grant. Stock appreciation rights may
also be granted at the same time as participants are awarded stock options.
Stock appreciation rights are exercisable at a time when the related options
may be exercised. The maximum number of shares of common stock that may be
optioned under the Stock Option Plan is 2,000,000 shares. Additionally, the
maximum number of shares which may be optioned to any one person under the
Stock Option Plan is 500,000 shares. Members of the Option Committee are not
eligible to participate in the Stock Option Plan while members of the Option
Committee.
8
<PAGE>
Current members of the Option Committee are:
Clarence L. Werner Irving B. Epstein
Werner Enterprises, Inc. Epstein & Epstein
P.O. Box 37308 Suite 123
Omaha, NE 68137 10050 Regency Cr.
Omaha, NE 68114
Curtis G. Werner Martin F. Thompson
Werner Enterprises, Inc. 5145 S. 184th Plaza
P.O. Box 37308 Omaha, NE 68135
Omaha, NE 68137
These persons do not receive compensation for their services as members of
the Option Committee, except outside directors, who receive a fee of $2,000
for each meeting of the Option Committee they attend if not held on a day on
which a meeting of the Board of Directors is held.
The information set forth in Note (6) "Stock Option Plan" on page 22 of the
Annual Report is incorporated herein by reference. No stock appreciation
rights are outstanding. All employees to whom options were granted were
provided with a copy of the Stock Option Plan's Prospectus, as well as the
Company's most recent Annual Report.
Employee Stock Purchase Plan
Any person employed by the Company or any subsidiary at least 90 days and who
is employed at least 20 hours per week on a regular basis may participate in
the Company's Employee Stock Purchase Plan (the Purchase Plan). Eligible
participants designate the amount of regular payroll deductions and/or a
single annual payment, subject to a $1,950 yearly maximum amount, that will
be used to purchase shares of the Company's common stock on the Over-The-
Counter Market subject to the terms of the Purchase Plan. The Company
contributes an amount equal to 15% of each participant's contributions under
the Purchase Plan. Interest accrues on Purchase Plan contributions at a rate
of 5.25%. The broker's commissions and administrative charges related to
purchases of common stock under the Purchase Plan are paid by the Company.
As of December 31, 1995, 480 employees were participating in the Purchase
Plan.
The administrator of the Purchase Plan is John J. Steele, Vice President -
Controller and Secretary of the Company, Post Office Box 37308, Omaha,
Nebraska 68137. Mr. Steele has received no compensation for his services as
administrator.
The broker utilized by the Company to make purchases under the Purchase Plan
is Smith Barney, Inc., 388 Greenwich Street, New York, New York 10013. The
total amount of compensation received by Smith Barney, Inc. from the Purchase
Plan for services in all capacities during the year ended December 31, 1995
was $8,593. Participants are provided with a copy of the Purchase Plan's
Prospectus, as well as the Company's most recent Annual Report and any
quarterly reports prepared since the Annual Report.
Following each purchase under the Purchase Plan, each participant receives a
statement from the broker detailing the number of shares purchased, the
purchase price, and the accumulated number of shares owned by the
participant.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 26th day
of March, 1996.
WERNER ENTERPRISES, INC.
By: /s/ Robert E. Synowicki, Jr.
Robert E. Synowicki, Jr.
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signature Position Date
/s/ Clarence L. Werner Chairman of the Board, March 26, 1996
Clarence L. Werner Chief Executive Officer
and Director
/s/ Gary L. Werner Vice Chairman, President March 26, 1996
Gary L. Werner and Director
/s/ Curtis G. Werner Executive Vice President, March 26, 1996
Curtis G. Werner Chief Operating Officer
and Director
/s/ Gregory L. Werner Executive Vice President March 26, 1996
Gregory L. Werner and Director
/s/ Robert E. Synowicki, Jr. Executive Vice President March 26, 1996
Robert E. Synowicki, Jr. and Chief Financial Officer
/s/ John J. Steele Vice President - Controller March 26, 1996
John J. Steele and Secretary
/s/ Irving B. Epstein Director March 26, 1996
Irving B. Epstein
/s/ Martin F. Thompson Director March 26, 1996
Martin F. Thompson
/s/ Gerald H. Timmerman Director March 26, 1996
Gerald H. Timmerman
/s/ Gail M. Werner-Robertson Director March 26, 1996
Gail M. Werner-Robertson
/s/ Donald W. Rogert Director March 26, 1996
Donald W. Rogert
10
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholders and Board of Directors of
Werner Enterprises, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Werner
Enterprises, Inc.'s annual report to stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon
dated January 24, 1996. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The
schedule listed in Item 14(a)(2) of this Form 10-K is the
responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's
rules and is not a part of the basic consolidated financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Omaha, Nebraska,
January 24, 1996
11
<PAGE>
SCHEDULE II
WERNER ENTERPRISES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Charged to Writeoff Balance at
Beginning Costs and of Doubtful End of
of Period Expenses Accounts Period
Year ended December 31, 1995:
Allowance for doubtful accounts $2,791 $606 $157 $3,240
Year ended December 31, 1994:
Allowance for doubtful accounts $2,552 $455 $216 $2,791
Year ended December 31, 1993:
Allowance for doubtful accounts $2,444 $360 $252 $2,552
12
<PAGE>
EXHIBIT INDEX
Exhibit Page Number or Incorporated
Number Description by Reference to
3(i)(A) Revised and Amended Articles Exhibit 3 to Registration
of Incorporation Statement on Form S-1,
Registration No. 33-5245
3(i)(B) Articles of Amendment to Exhibit 3(i) to the
Articles of Incorporation Company's report on Form
10-Q for the quarter ended
May 31, 1994
3(ii) Revised and Amended By-Laws Exhibit 3(ii) to the
Company's report on Form
10-K for the year ended
December 31, 1994
10 Amended and Restated Stock Exhibit 10 to the Company's
Option Plan report on Form 10-Q for the
quarter ended May 31, 1994
13 Incorporated by reference Page 14 of sequentially
sections of Annual Report numbered pages
to Stockholders for the
year ended December 31, 1995
21 Subsidiaries of the Page 27 of sequentially
Registrant numbered pages
23 Consent of Arthur Andersen LLP Page 28 of sequentially
numbered pages
27 Financial Data Schedule Page 29 of sequentially
numbered pages
13
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(Dollars in thousands, except per share amounts)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operating revenues $576,022 $516,006 $418,308 $361,791 $318,478
Income before cumulative
effect of change in
accounting principle 36,380 36,662 29,964 24,138 18,990
Net income 36,380 36,662 29,964 23,084 18,990
Earnings per share* 1.45 1.45 1.28 1.06 .83
Cash dividends
declared per share .12 .10 .09 .08 .07
Return on average
stockholders' equity* 12.5% 14.1% 15.9% 15.9% 14.4%
Operating ratio 89.4% 88.3% 87.8% 88.7% 89.7%
Book value per share* 12.27 10.97 9.68 7.12 6.17
Total assets 507,679 453,637 373,375 288,664 250,613
Long-term obligations 40,000 30,000 - 7,009 11,592
Stockholders' equity 309,052 276,414 245,004 162,872 140,481
*After giving retroactive effect for the September 1992, two-for-one stock
split (all years presented) and before the cumulative effect of a change
in accounting principle in 1992.
</TABLE>
1
14
<PAGE>
WERNER ENTERPRISES
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THE FOLLOWING TABLE SETS FORTH THE PERCENTAGE RELATIONSHIP
OF INCOME AND EXPENSE ITEMS TO OPERATING REVENUES FOR THE
YEARS INDICATED.
1995 1994 1993
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and benefits 36.2 35.6 35.8
Fuel 8.2 8.2 9.8
Supplies and maintenance 8.8 8.8 8.9
Taxes and licenses 8.6 8.7 8.8
Insurance and claims 3.5 3.3 3.8
Depreciation 10.6 10.4 10.6
Rent and purchased transportation 13.1 12.1 8.6
Communications and utilities 1.4 1.8 1.9
Other (1.0) (.6) (.4)
Total operating expenses 89.4 88.3 87.8
Operating income 10.6 11.7 12.2
Net interest expense and other .2 .1.3
Income before income taxes 10.4 11.6 11.9
Income taxes 4.1 4.5 4.7
Net income 6.3% 7.1% 7.2%
</TABLE>
<TABLE>
THE FOLLOWING TABLE SETS FORTH CERTAIN INDUSTRY DATA
REGARDING THE FREIGHT REVENUES AND OPERATIONS OF THE
COMPANY.
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operating ratio 89.4% 88.3% 87.8% 88.7% 89.7%
Average revenues per tractor per week (1) $2,606 $2,563 $2,507 $2,533 $2,430
Average annual miles per tractor 121,728 120,312 122,304 124,992 121,728
Average miles per trip 785 835 881 959 1,032
Average revenues per mile (1) $1.113 $1.108 $1.066 $1.054 $1.038
Total tractors operated (at year end)
Company owned 3,674 3,473 3,085 2,678 2,488
Owner-operator owned 676 527 442 222 78
Total tractors 4,350 4,000 3,527 2,900 2,566
Total trailers operated (at year end) 11,060 10,300 8,420 6,573 5,549
</TABLE>
(1) Net of fuel surcharge revenues.
13
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<PAGE>
WERNER ENTERPRISES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
1995 Compared to 1994
Operating revenues increased 12% due primarily to a 10%
increase in the average number of tractors in service and
increased revenue from intermodal and logistics
transportation services. Average miles per tractor
increased 1%, mostly due to increased empty miles resulting
from softer freight demand. Year over year growth in the
Company's regional short-haul and dedicated fleet divisions
contributed to a 6% decrease in the average miles per trip,
and a 17% increase in the total number of shipments,
although growth in the regional division was scaled back
later in 1995 as freight demand softened. The Company's
operating ratio (operating expenses expressed as a
percentage of operating revenues) increased from 88.3% to
89.4%, as described below.
Salaries, wages and benefits increased as a percentage of
operating revenues primarily due to a 2 cent per mile (or
about 9%) driver pay increase effective May 1, 1994; the
retention of more experienced, higher paid drivers; and
increased employee health benefit costs. These increases
were partially offset by reductions in the estimated
liability for accrued driver payroll of approximately $2.9
million during 1995.
Fuel costs were comparable to 1994, as slightly higher
average fuel prices were offset by improved fuel efficiency.
Supplies and maintenance costs were also comparable as a
percentage of operating revenues, as reduced driver
advertising and tire expenses were offset by increased third-
party loading and unloading costs. Taxes and licenses were
slightly lower as a percentage of operating revenues, due
primarily to the effect of increased revenues from
intermodal and logistics transportation services.
Insurance and claims expense increased slightly from 3.3%
to 3.5% of revenues due principally to accident claims
experience in 1995. Depreciation increased from 10.4% to
10.6% of revenues due primarily to the November 1994
purchase of satellite tracking equipment which had
previously been leased, and a higher average trailer to
tractor ratio during 1995, partially offset by the effect of
a change in the estimated salvage value for certain trailers
(See "Property, Equipment and Depreciation" in Note 1 of the
Notes to Consolidated Financial Statements).
Rent and purchased transportation increased by 1.0% of
revenues due mainly to an increase in the use of intermodal
and logistics services. The average percentage of owner-
operator tractors to total tractors was comparable to the
prior year, and therefore did not cause significant
fluctuations between years in this expense category (see
further discussion of owner-operators in the 1994 comparison
to 1993 described below).
Communications and utilities decreased from 1.8% to 1.4%
of revenues, essentially due to the purchase of previously
leased satellite tracking equipment. Other operating
expenses decreased to (1.0%) of revenues due to increased
gains recognized on the sale of revenue equipment to third
parties.
Interest expense increased from .2% to .4% of revenues,
due to an increase in the average outstanding amount of long-
term borrowings. The Company's effective income tax rate
(income tax expense as a percentage of income before income
taxes) was 39.0% for 1995, compared with 38.9% for 1994, as
described in Note 5 of the Notes to Consolidated Financial
Statements.
1994 Compared to 1993
Operating revenues grew 23% due to a 19% increase in the
average number of tractors in service and revenue per mile
increases averaging approximately 4%, net of a 2% decrease
in average annual miles per tractor. Continued expansion
into regional short-haul and dedicated markets caused a 5%
decrease in the average miles per trip, while the total
number of shipments increased 25%. The operating ratio
increased from 87.8% to 88.3%, as described below.
Owner-operator tractors represented a larger percentage of
total tractors during 1994 than during 1993, 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
14
16
<PAGE>
WERNER ENTERPRISES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
under their contracts with the
Company; conversely, the Company incurs such costs when a
Company driver is driving a Company-owned tractor) to the
rent and purchased transportation category.
Salaries, wages and benefits decreased as a percentage of
operating revenues due primarily to the increase in owner-
operators, partially offset by the 2 cent per mile (or about
9%) driver pay increase effective May 1, 1994, retention of
more experienced, higher paid drivers, and other driver pay
increases. These driver pay increases have continued to help
the Company attract and retain qualified drivers.
Fuel costs decreased as a percentage of operating revenues
due primarily to the increase in owner-operators who
purchase their own fuel, as well as improved fuel efficiency
and slightly lower average fuel prices during the year.
Supplies and maintenance decreased slightly as a percentage
of operating revenues, as the effect of the increase in
owner-operators was substantially offset by increased driver
advertising, tolls, and third-party loading and unloading
costs. Taxes and licenses decreased slightly as a percentage
of operating revenues due primarily to the increase in owner-
operators, partially offset by the effect of the Federal
diesel fuel tax increase of 4.3 cents per gallon effective
October 1, 1993.
Insurance and claims expense decreased from 3.8% to 3.3%
of operating revenues due principally to improvement in
claims handling and experience. Depreciation decreased as a
percentage of operating revenues due primarily to the
increase in owner-operators, partially offset by an increase
in the trailer to tractor ratio. Trailer additions were made
primarily to improve service for customers and maintain
tractor productivity.
Other operating expenses decreased to (.6%) of operating
revenues due to an increase in gains recognized on the sale
of revenue equipment, primarily tractors.
The Company's effective income tax rate decreased from
39.7% in 1993 to 38.9% in 1994, as described in Note 5 of
the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Historically, the Company has relied primarily on cash
generated from operations to fund working capital
requirements.
The growth of the Company's business has required
significant investment in new revenue equipment. Net capital
expenditures in 1995, 1994 and 1993 were $95.5 million,
$117.4 million, and $109.1 million, respectively. The 1995
and 1994 capital expenditures were financed primarily with
cash generated from operations and, to a lesser extent,
borrowings. The 1993 capital expenditures were financed with
cash generated from operations and a portion of the net
proceeds from the Company's October 1993 public stock
offering. The Company has committed to approximately $46
million of capital expenditures (after trade-in allowances)
which is a portion of its estimated 1996 capital
expenditures. The Company expects to fund these expenditures
primarily with cash generated from operations.
From time to time, the Company has and may continue to
repurchase shares of its common stock. The timing and amount
of such purchases depends on market and other factors.
The Company's financial position is strong. The current
ratio is 1.86. The Company has $40 million of long-term debt
and $309 million in stockholders' equity.
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.
15
17
<PAGE>
WERNER ENTERPRISES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1995 1994 1993
<S> <C> <C> <C>
Operating revenues (Note 1) $576,022 $516,006 $418,308
Operating expenses:
Salaries, wages and benefits 208,669 183,851 149,901
Fuel 47,431 42,017 40,936
Supplies and maintenance 50,646 45,593 37,223
Taxes and licenses 49,636 44,729 36,972
Insurance and claims 19,776 17,208 15,876
Depreciation (Note 1) 61,195 53,722 44,153
Rent and purchased transportation 75,229 62,522 35,984
Communications and utilities 8,086 9,338 7,926
Other (5,662) (3,211) (1,586)
Total operating expenses 515,006 455,769 367,385
Operating income 61,016 60,237 50,923
Other expense (income):
Interest expense 2,317 743 1,540
Interest income (1,072) (649) (469)
Other 132 161 137
Total other expense 1,377 255 1,208
Income before income taxes 59,639 59,982 49,715
Income taxes (Notes 1 and 5) 23,259 23,320 19,751
Net income $ 36,380 $ 36,662 $ 29,964
Average common shares outstanding (Note 1) 25,172 25,303 23,427
Earnings per share (Note 1) $1.45 $1.45 $1.28
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
16
18
<PAGE>
WERNER ENTERPRISES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share amounts)
December 31
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1) $ 16,227 $ 11,660
Accounts receivable, less allowance of $3,240
and $2,791, respectively 57,871 52,522
Prepaid taxes, licenses, and permits 7,752 7,826
Current deferred income taxes (Notes 1 and 5) 6,500 5,000
Other 12,645 11,168
Total current assets 100,995 88,176
Property and equipment, at cost (Note 1)
Land 16,499 12,276
Buildings and improvements 26,471 23,885
Revenue equipment 435,159 401,481
Service equipment and other 48,079 41,647
Total property and equipment 526,208 479,289
Less - accumulated depreciation 119,524 113,828
Property and equipment, net 406,684 365,461
$507,679 $453,637
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,719 $ 18,564
Insurance and claims accruals (Notes 1 and 4) 19,073 15,642
Accrued payroll 7,718 9,888
Income taxes payable 3,226 5,659
Driver escrow 3,368 2,958
Other 5,087 4,576
Total current liabilities 54,191 57,287
Long-term debt, net of current maturities (Note 3) 40,000 30,000
Deferred income taxes (Notes 1 and 5) 75,700 65,500
Insurance and claims accruals (Notes 1 and 4) 26,000 21,300
Other long-term liabilities 2,736 3,136
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 1 and 6):
Common stock, $.01 par value, 60,000,000 shares
authorized; 25,771,200 shares issued; 25,180,816
and 25,206,816 shares outstanding, respectively 258 258
Paid-in capital 100,294 100,171
Retained earnings 214,959 181,599
Less - treasury stock, at cost (6,459) (5,614)
Total stockholders' equity 309,052 276,414
$507,679 $453,637
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
17
19
<PAGE>
WERNER ENTERPRISES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 36,380 $ 36,662 $ 29,964
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 61,195 53,722 44,153
Deferred income taxes 8,700 11,800 8,978
Gain on disposal of operating equipment (6,921) (4,042) (2,667)
Tax benefit from exercise of stock options 123 107 1,080
Long-term liabilities 4,300 1,046 1,004
Changes in certain working capital items:
Accounts receivable, net (5,349) (7,219) (8,089)
Prepaid expenses and other current assets (1,403) (3,659) 336
Accounts payable (2,845) (5,816) (2,058)
Accrued payroll (2,170) 2,098 2,349
Other current liabilities 1,794 (2,974) (2,573)
Net cash provided by operating activities 93,804 99,305 72,477
Cash flows from investing activities:
Additions to property and equipment (131,585) (145,369) (125,998)
Retirements of property and equipment 36,088 27,950 16,867
Net cash used in investing activities (95,497) (117,419) (109,131)
Cash flows from financing activities:
Short-term borrowings - - 20,000
Repayments of short-term borrowings - - (20,000)
Proceeds from issuance of debt (10,000) 30,000 -
Repayments of long-term debt and capitalized lease
obligations - (4,552) (7,036)
Proceeds from issuance of common stock, net of related
expenses - - 52,182
Dividends on common stock (2,895) (2,659) (1,832)
Repurchases of common stock (1,013) (2,939) -
Stock options exercised 168 109 1,040
Net cash provided by financing activities 6,260 19,959 44,354
Net increase in cash and cash equivalents 4,567 1,845 7,700
Cash and cash equivalents, beginning of year 11,660 9,815 2,115
Cash and cash equivalents, end of year $ 16,227 $ 11,660 $ 9,815
Supplemental disclosures of cash flow information:
Cash paid during year for:
Interest $ 3,294 $ 640 $ 1,634
Income taxes 15,822 10,508 8,591
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
18
20
<PAGE>
WERNER ENTERPRISES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands, except share amounts)
(Note 1)
Total
Common Paid-In Retained Treasury Stockholders'
Stock Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 $ 235 $ 46,830 $119,636 $ (3,829) $162,872
Dividends on common stock ($.09 per share) - - (2,134) - (2,134)
Exercise of stock options, 147,300 shares - 1,055 - 1,065 2,120
Proceeds from offering of 2,300,000 shares
of common stock, net of related expenses 23 52,159 - - 52,182
Net income - - 29,964 - 29,964
BALANCE, December 31, 1993 258 100,044 147,466 (2,764) 245,004
Purchases of 128,600 shares of common stock - - - (2,939) (2,939)
Dividends on common stock ($.10 per share) - - (2,529) - (2,529)
Exercise of stock options, 12,700 shares - 127 - 89 216
Net income - - 36,662 - 36,662
BALANCE, December 31, 1994 258 100,171 181,599 (5,614) 276,414
Purchases of 50,000 shares of common stock - - - (1,013) (1,013)
Dividends on common stock ($.12 per share) - - (3,020) - (3,020)
Exercise of stock options, 24,000 shares - 123 - 168 291
Net income - - 36,380 - 36,380
BALANCE, December 31, 1995 $ 258 $100,294 $214,959 $ (6,459) $309,052
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Werner
Enterprises, Inc.:
We have audited the accompanying consolidated balance
sheets of Werner Enterprises, Inc. (a Nebraska corporation)
and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Werner Enterprises, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Omaha, Nebraska,
January 24, 1996.
19
21
<PAGE>
WERNER ENTERPRISES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Werner Enterprises, Inc. (the Company) is a transportation
company operating under the jurisdiction of the Department
of Transportation and various state regulatory commissions.
The Company maintains a diversified freight base with no one
customer or industry making up a significant percentage of
the Company's receivables or revenues.
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Werner Enterprises, Inc. and its wholly-
owned subsidiaries. All significant intercompany accounts
and transactions relating to these entities have been
eliminated.
Use of Management Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the consolidated financial statements, and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments,
purchased with a maturity of three months or less, to be
cash equivalents.
Property, Equipment
and Depreciation
Additions and improvements to property and equipment are
capitalized at cost, while maintenance and repair
expenditures are charged to operations as incurred. At the
time of trade-in, the cost of new equipment is recorded at
an amount equal to the lower of the monetary consideration
paid plus the net book value of the traded property or the
fair value of the new equipment.
Depreciation is calculated based on the cost of the asset,
reduced by its estimated salvage value, using the straight
line method. Accelerated depreciation methods are used for
income tax purposes. The lives and salvage values assigned
to certain assets for financial reporting purposes are
different than for income tax purposes. For financial
reporting purposes, assets are depreciated over the
estimated useful lives of 30 years for buildings and
improvements, 5 to 7 years for revenue equipment and 3 to 8
years for service equipment and other.
The Company periodically reviews its estimates related to
the useful lives and salvage values of its revenue
equipment. Effective April 1, 1995, the Company changed, on
a prospective basis, the estimated salvage value for certain
trailers. This change was to better reflect the value of
used equipment and lower trailer utilization due to a higher
trailer to tractor ratio and a decrease in the average miles
per trip. The change resulted in a decrease in depreciation
expense of approximately $2,600,000 and an increase in net
income of approximately $1,600,000 ($.06 per share) for the
year ended December 31, 1995.
Tires
Tires placed on new revenue equipment are capitalized as a
part of the equipment cost. Replace-ment tires are expensed
when placed in service.
Insurance and Claims Accruals
Insurance and claims accruals, both current and noncurrent,
reflect the estimated cost for cargo loss and damage, bodily
injury and property damage (BI/PD), group health and
workers' compensation claims, including estimated loss
development and loss adjustment expenses, not covered by
insurance. The costs for cargo and BI/PD are included in
insurance and claims, while the costs of group health and
workers' compensation claims are included in salaries, wages
and benefits in the Consolidated Statements of Income.
Revenue Recognition
The Consolidated Statements of Income reflect recognition
of operating revenues and related direct costs when the
shipment is delivered.
Income Taxes
The Company uses the asset and liability method of
Statement of Financial Accounting
20
22
<PAGE>
Standards (SFAS) No. 109 in
accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in
which those temporary differences are expected to be
recovered or settled.
Common Stock and
Earnings Per Share
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 $52,182,000 to repay short-term
borrowings, retire long-term debt and purchase revenue
equipment.
Earnings per share have been computed based on the weighted
average number of common shares outstanding.
(2) LEASE OBLIGATIONS
In September 1992, the Company entered into a three-year
operating lease for communications equipment. In November
1994, the Company purchased this equipment and terminated
the lease agreement. Communications and utilities expense in
the accompanying Consolidated Statements of Income includes
$4,247,000 and $3,923,000 for lease of communications
equipment during 1994 and 1993, respectively.
(3) LONG-TERM DEBT
The Company had borrowings of $30,000,000 at December 31,
1994. These borrowings bore variable interest based on the
London Interbank Offered Rate (LIBOR). In January 1995, the
borrowings were refinanced with a $30,000,000 long-term
credit facility. The new credit facility bears variable
interest (6.15% at December 31, 1995) based on LIBOR or the
overnight federal funds rate, at the Company's option, and
matures in January 1999. The new facility requires, among
other things, that the Company not exceed a maximum ratio of
indebtedness to total capitalization of .6 to 1.
In June 1995, the Company borrowed $10,000,000 under a
separate long-term credit facility. This borrowing bears
variable interest based on LIBOR (6.31% at December 31,
1995) and matures in July 1997.
The carrying amount of the Company's long-term debt
approximates fair value due to its variable interest rates.
(4) INSURANCE AND CLAIMS
The Company annually reviews its public liability and
property damage insurance coverage in August. Effective
August 1992, the Company assumed responsibility for
liability up to $500,000, plus administrative expenses, for
each occurrence involving personal injury or property
damage. Effective August 1993, the Company also assumed
responsibility for a $1,000,000 annual aggregate amount of
liability for claims between $500,000 and $1,000,000.
Liability in excess of these amounts is assumed by the
insurance carriers in amounts which management considers
adequate.
The Company's public liability and property damage premiums
for coverage between $50,000 and $1,000,000 per claim prior
to August 1992 are subject to retrospective adjustments
based on actual incurred losses until all claims are
settled. Management does not expect any significant
adjustment will be made to the premiums paid or accrued for
these policy years.
The Company has assumed responsibility for workers'
compensation, maintains a $6,000,000 bond, has statutory
coverage and has obtained insurance for individual claims
above $500,000.
Under these insurance arrangements, the Company maintains
$10,450,000 in letters of credit, as of December 31, 1995.
21
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<PAGE>
WERNER ENTERPRISES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) INCOME TAXES
Income tax expense consists of the following (in thousands):
1995 1994 1993
Current
Federal $12,472 $ 9,364 $ 8,389
State 2,087 2,156 2,384
14,559 11,520 10,773
Deferred
Federal 6,887 9,804 7,920
State 1,813 1,996 1,058
8,700 11,800 8,978
Total income
tax expense $23,259 $23,320 $19,751
The effective income tax rate differs from the federal
corporate tax rate of 35% in 1995, 1994 and 1993 as follows
(in thousands):
1995 1994 1993
Tax at statutory rate $20,874 $20,994 $17,400
State income taxes,
net of federal tax
benefits 2,535 2,699 2,237
Effect of tax rate
change on deferred
tax assets and
liabilities - - 990
Adoption of SFAS
No. 109 - - (200)
Other, net (150) (373) (676)
$23,259 $23,320 $19,751
At December 31, deferred tax assets and liabilities
consisted of the following (in thousands):
1995 1994
Deferred tax assets:
Insurance and claims accruals $17,981 $14,757
Allowance for uncollectible accounts 1,300 1,116
Other 3,230 3,236
$22,511 $19,109
Deferred tax liabilities:
Property and equipment $87,314 $75,404
Prepaid taxes, licenses and insurance 3,944 3,767
Other 453 438
$91,711 $79,609
(6) STOCK OPTION AND EMPLOYEE BENEFIT PLANS
Stock Option Plan
The Company's Stock Option Plan (the Stock Option Plan) is
a nonqualified plan that provides for the grant of options to
management employees. Options are granted at prices equal to
the market value of the common stock on the date the option
is granted. The options are exercisable over a period not to
exceed ten years and one day from the date of grant. The
maximum number of shares of common stock that may be
optioned under the Stock Option Plan is 2,000,000 shares.
At December 31, 1995, 699,275 shares were available for
granting further options and options for 990,325 shares were
outstanding at prices of $6.625 to $24.00 per share, of
which options for 391,025 shares with a weighted average
exercise price of $11.59 were exercisable. Options granted
become exercisable in installments from six to sixty-six
months after the date of grant.
Options Outstanding
Weighted-Average
Shares Exercise Price
Balance, December 31, 1992 473,400 $ 7.44
Options Granted 439,750 22.78
Options Exercised (147,300) 7.06
Options Canceled (5,750) 22.50
Balance, December 31, 1993 760,100 16.27
Options Exercised (12,700) 8.61
Options Canceled (14,000) 21.90
Balance, December 31, 1994 733,400 16.30
Options Granted 291,425 19.62
Options Exercised (24,000) 7.00
Options Canceled (10,500) 22.50
Balance, December 31, 1995 990,325 17.44
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This new standard requires all companies to
change their disclosures related to employee stock-based
compensation plans, encourages but does not require a change
in the method of accounting for these plans, and requires
companies who do not change their accounting method to make
pro forma footnote disclosures of what earnings and earnings
per share would have been had the companies adopted the
accounting method. Companies that do not adopt the
accounting method will continue to account
22
24
<PAGE>
WERNER ENTERPRISES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for these plans
under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has
elected not to adopt SFAS No. 123's accounting method, but
will instead comply with the statement's disclosure
requirements, which are effective for financial statements
for fiscal years beginning after December 15, 1995.
Employee Stock Purchase Plan
Employees meeting certain eligibility requirements may
participate in the Company's Employee Stock Purchase Plan
(the Purchase Plan). Eligible participants designate the
amount of regular payroll deductions and/or single annual
payment, subject to a yearly maximum amount, that is used to
purchase shares of the Company's common stock on the Over-
The-Counter Market subject to the terms of the Purchase
Plan. The Company contributes an amount equal to 15% of each
participant's contributions under the Purchase Plan. Company
contributions for the Purchase Plan were $79,977, $58,072
and $42,634 for 1995, 1994 and 1993, respectively. Interest
accrues on Purchase Plan contributions at a rate of 5.25%.
The broker's commissions and administrative charges related
to purchases of common stock under the Purchase Plan are
paid by the Company.
401(k) Retirement Savings Plan
The Company has an Employees' 401(k) Retirement Savings Plan
(the 401(k) Plan). Employees are eligible to participate in
the 401(k) Plan if they have been continuously employed with
the Company or its subsidiaries for six months or more. The
Company matches a portion of the amount each employee
contributes to the 401(k) Plan. It is the Company's
intention, but not its obligation, that the Company's total
annual contribution for employees will equal 2 1/2 percent
of net income (exclusive of extraordinary items). Salaries,
wages and benefits expense in the accompanying Consolidated
Statements of Income includes Company 401(k) Plan
contributions and administrative expenses of $952,129,
$950,740 and $778,344 for 1995, 1994 and 1993, respectively.
(7) COMMITMENTS AND CONTINGENCIES
The Company has committed to approximately $46,000,000 of
capital expenditures (net cost, after revenue equipment
trade-in allowances of approximately $28,000,000) which is a
portion of its estimated 1996 capital expenditures.
The Company is involved in certain claims and pending
litigation arising in the normal course of business.
Management believes the ultimate resolution of these matters
will not have a material effect on the financial condition
of the Company.
(8) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
1995:
Operating revenues $132,434 $143,325 $150,303 $149,960
Operating income 12,598 14,380 17,009 17,029
Net income 7,512 8,578 10,125 10,165
Earnings per share .30 .34 .40 .40
1994:
Operating revenues $115,993 $129,623 $134,614 $135,776
Operating income 11,666 15,436 17,076 16,059
Net income 7,178 9,384 10,387 9,713
Earnings per share .28 .37 .41 .38
</TABLE>
23
25
<PAGE>
WERNER ENTERPRISES
CORPORATE INFORMATION
Price Range of Common Stock
The Company's common stock is traded in the NASDAQ National
Market System under the symbol WERN. The following table
sets forth for the quarters indicated the high and low sale
prices per share of the Company's common stock in the NASDAQ
National Market System from January 1, 1994, through
December 31, 1995.
High Low
1995
Quarter ended:
March 31 25 3/4 18 47/64
June 30 21 1/4 17 1/2
September 30 23 19
December 31 22 18 1/2
1994
Quarter ended:
March 31 33 3/4 27
June 30 30 3/4 24 1/2
September 30 28 1/4 22 3/4
December 31 26 1/4 21 1/4
As of February 29, 1996, the Company's common stock was held
by 305 stockholders of record and approximately 4,400
stockholders through nominee or street name accounts with
brokers.
Dividend Policy
The Company has been paying cash dividends on its common
stock following each of its quarters since the fiscal
quarter ended May 31, 1987. The Company intends to continue
payment of dividends on a quarterly basis and does not
anticipate any restrictions on its future ability to pay
such dividends.
Corporate Offices
Werner Enterprises, Inc.
Interstate 80 & Highway 50
P.O. Box 37308
Omaha, Nebraska 68137
Telephone: (402) 895-6640
http://www.werner.com
e mail: [email protected]
Annual Meeting
The Annual Meeting will be held on Tuesday, May 14, 1996 at
10:00 a.m. in the Peter Kiewit Conference Center, 1313
Farnam Street, Omaha, Nebraska.
Stock Listing
The Company's common stock is traded in the NASDAQ National
Market System under the symbol WERN.
Independent Public Accountants
Arthur Andersen LLP
1700 Farnam Street
Omaha, Nebraska 68102
Stock Transfer Agent and Registrar
Chemical Mellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
Form 10-K
A copy of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission may be obtained
by calling or writing the Investor Relations Department,
P.O. Box 37308, Omaha, Nebraska 68137, (402) 895-6640.
24
26
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF WERNER ENTERPRISES, INC.
SUBSIDIARY STATE OF INCORPORATION
1. Werner Leasing, Inc. Nebraska
2. Werner Aire, Inc. Nebraska
3. Gra-Gar, Inc. Nebraska
4. Drivers Management, Inc. Nebraska
5. Frontier Clinic, Inc. Nebraska
6. Fleet Truck Sales, Inc. Nebraska
7. Professional Truck Drivers School, Inc. Nebraska
8. Werner Transportation, Inc. Nebraska
9. Worley Enterprises, Inc. Nebraska
.
27
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 33-15894 and 33-15895.
ARTHUR ANDERSEN LLP
Omaha, Nebraska,
March 27, 1996
28
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,227
<SECURITIES> 0
<RECEIVABLES> 57,871
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,995
<PP&E> 526,208
<DEPRECIATION> 119,524
<TOTAL-ASSETS> 507,679
<CURRENT-LIABILITIES> 54,191
<BONDS> 0
0
0
<COMMON> 258
<OTHER-SE> 308,794
<TOTAL-LIABILITY-AND-EQUITY> 507,679
<SALES> 576,022
<TOTAL-REVENUES> 576,022
<CGS> 0
<TOTAL-COSTS> 515,006
<OTHER-EXPENSES> (940)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,317
<INCOME-PRETAX> 59,639
<INCOME-TAX> 23,259
<INCOME-CONTINUING> 36,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,380
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
</TABLE>
