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, 1997 0-14690
WERNER ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA 47-0648386
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14507 FRONTIER ROAD
POST OFFICE BOX 45308
OMAHA, NEBRASKA 68145-0308 (402)895-6640
(Address of principal (Zip Code) (Registrant's telephone number)
executive offices)
--------------------------------------
Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
As of October 31, 1997, 38,338,587 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, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. In the opinion of
management, the information set forth in the accompanying consolidated
condensed balance sheets is fairly stated in all material respects in
relation to the consolidated balance sheets from which it has been derived.
These interim consolidated financial statements should be read in
conjunction with the Company's latest annual report (which is incorporated by
reference in the Form 10-K for the year ended December 31, 1996).
Consolidated Statements of Income for the
Three Months Ended September 30, 1997 and 1996.....................Page 3
Consolidated Statements of Income for the
Nine Months Ended September 30, 1997 and 1996......................Page 4
Consolidated Condensed Balance Sheets as of
September 30, 1997 and December 31, 1996...........................Page 5
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996......................Page 6
Notes to Consolidated Financial Statements
as of September 30, 1997...........................................Page 7
2
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) September 30
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
(Unaudited)
Operating revenues $200,237 $167,155
---------------------
Operating expenses:
Salaries, wages and benefits 71,326 58,543
Fuel 16,060 15,515
Supplies and maintenance 16,588 14,289
Taxes and licenses 14,511 13,158
Insurance and claims 4,994 4,682
Depreciation 18,338 16,591
Rent and purchased transportation 35,399 24,227
Communications and utilities 2,123 2,087
Other (2,129) (1,175)
---------------------
Total operating expenses 177,210 147,917
---------------------
Operating income 23,027 19,238
---------------------
Other expense (income):
Interest expense 926 486
Interest income (385) (431)
Other 24 21
---------------------
Total other expense 565 76
---------------------
Income before income taxes 22,462 19,162
Income taxes 8,263 7,430
---------------------
Net income $ 14,199 $ 11,732
=====================
Average common shares outstanding 38,301 37,936
=====================
Earnings per share $ .37 $ .31
=====================
Dividends declared per share $ .025 $ .025
=====================
3
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
(Amounts in thousands, except per share data) September 30
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
(Unaudited)
Operating revenues $565,921 $474,698
---------------------
Operating expenses:
Salaries, wages and benefits 205,234 167,701
Fuel 50,044 43,943
Supplies and maintenance 47,081 40,189
Taxes and licenses 42,438 38,587
Insurance and claims 16,245 14,579
Depreciation 53,562 48,056
Rent and purchased transportation 96,051 70,542
Communications and utilities 6,244 5,976
Other (5,507) (2,993)
---------------------
Total operating expenses 511,392 426,580
---------------------
Operating income 54,529 48,118
---------------------
Other expense (income):
Interest expense 1,961 1,610
Interest income (1,099) (1,198)
Other 89 94
---------------------
Total other expense 951 506
---------------------
Income before income taxes 53,578 47,612
Income taxes 19,398 18,569
---------------------
Net income $ 34,180 $ 29,043
=====================
Average common shares outstanding 38,159 37,836
=====================
Earnings per share $ .90 $ .77
=====================
Dividends declared per share $ .075 $ .068
=====================
4
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) September 30 December 31
- ----------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 21,577 $ 22,136
Accounts receivable, net 92,439 67,928
Prepaid taxes, licenses and permits 2,606 7,753
Other current assets 21,666 18,347
----------------------
Total current assets 138,288 116,164
----------------------
Property and equipment 673,688 579,075
Less - accumulated depreciation 171,893 146,028
----------------------
Property and equipment, net 501,795 433,047
----------------------
$640,083 $549,211
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,959 $ 19,025
Insurance and claims accruals 22,791 19,758
Accrued payroll 12,096 8,970
Income taxes payable 5,560 3,752
Other current liabilities 8,900 7,560
----------------------
Total current liabilities 76,306 59,065
----------------------
Long-term debt 60,000 30,000
Insurance, claims and other long-term accruals 29,333 29,275
Deferred income taxes 90,434 82,500
Stockholders' equity 384,010 348,371
----------------------
$640,083 $549,211
======================
5
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
(In thousands) September 30
- ----------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
Net income $ 34,180 $ 29,043
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 53,562 48,056
Deferred income taxes 7,934 8,249
Gain on disposal of operating equipment (6,006) (3,971)
Tax benefit from exercise of stock options 1,540 782
Insurance, claims and other long-term accruals 58 1,046
Changes in certain working capital items:
Accounts receivable, net (24,511) (13,079)
Prepaid expenses and other current assets 1,828 5,188
Accounts payable 7,934 8,047
Other current liabilities 9,298 6,178
----------------------
Net cash provided by operating activities 85,817 89,539
----------------------
Cash flows from investing activities:
Additions to property and equipment (151,993) (89,011)
Retirements of property and equipment 35,689 24,362
----------------------
Net cash used in investing activities (116,304) (64,649)
----------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 30,000 -
Repayments of long-term debt - (10,000)
Dividends on common stock (2,856) (2,394)
Stock options exercised 2,784 1,441
----------------------
Net cash provided by (used in) financing
activities 29,928 (10,953)
----------------------
Net increase(decrease) in cash and cash equivalents (559) 13,937
Cash and cash equivalents, beginning of period 22,136 16,227
----------------------
Cash and cash equivalents, end of period $ 21,577 $ 30,164
======================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,872 $ 1,686
Income taxes 8,043 7,756
6
<PAGE>
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Commitments
As of September 30, 1997, the Company has commitments for capital
expenditures of approximately $33,000,000 (net cost, after revenue
equipment trade-in allowances of approximately $2,000,000).
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This report contains forward-looking statements which are based on
information currently available to the Company's management. Actual
results could differ materially from those anticipated in forward-looking
statements as a result of a number of factors, including, but not limited
to, those discussed in Item 7, "Management's Discussion and Analysis of
Results of Operations and Financial Condition", of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Financial Condition:
During the nine months ended September 30, 1997, the Company generated
cash flow from operations of $85.8 million and made long-term borrowings of
$30.0 million, which enabled the Company to make net property additions,
primarily revenue equipment, of $116.3 million, and pay common stock
dividends of $2.9 million. If the Company continues to grow at its current
rate (as described below), additional debt borrowings may occur. Based on
the Company's strong financial position, management foresees no significant
barriers to obtaining sufficient financing, if necessary, to continue with
its growth plans.
The Company's long-term debt to equity ratio at September 30, 1997 was
15.6%, compared with 8.6% at December 31, 1996.
Results of Operations:
Three Months Ended September 30, 1997 and 1996
- ----------------------------------------------
Operating revenues increased 20% for the three months ended
September 30, 1997, compared to the same period of the prior year. A two
cent per mile driver pay increase, effective January 1, 1997, helped the
Company add and retain experienced drivers and owner-operators and
contributed to a 16% increase in the average number of tractors compared to
the same period of the prior year. Revenue per mile, excluding fuel
surcharges, increased 2% compared to third quarter of 1996. A $7.6 million
increase in revenues from logistics transportation services also
contributed to the overall increase in operating revenues.
Operating expenses, expressed as a percentage of operating revenues,
were 88.5% for the three months ended September 30, 1997 and 1996. The
Company's increase in logistics transportation services contributed to a
shift in costs to the rent and purchased transportation expense category
from several other expense categories, as described below.
8
<PAGE>
Salaries, wages and benefits increased from 35.0% to 35.6% of revenues
due primarily to the impact of a two cent per mile driver pay increase
effective January 1, 1997, partially offset by favorable workers
compensation claim experience and increased revenues from logistics
transportation services. At times, there have been shortages of drivers in
the trucking industry, particularly the medium-to-long haul segment. The
Company anticipates that the competition for qualified drivers will
continue to be high, and cannot predict whether it will experience
shortages in the future. If such a shortage were to occur and increases in
driver pay rates became necessary to attract and retain drivers, the
Company's results of operations would be negatively impacted to the extent
that corresponding freight rate increases were not obtained.
Fuel decreased from 9.3% to 8.0% of revenues, due mainly to lower
average fuel prices during the quarter compared to the same quarter of the
prior year, and increased revenues from logistics transportation services.
Supplies and maintenance decreased from 8.5% to 8.3% of revenues, and taxes
and licenses decreased from 7.9% to 7.2% of revenues due primarily to
increased revenues from logistics transportation services. Refunds and
state sales tax incentives also contributed to the decrease in taxes and
licenses. Insurance and claims decreased from 2.8% to 2.5% of revenues due
to favorable claims experience during the quarter and increased revenues
from logistics transportation services. Depreciation decreased from 9.9% to
9.2% of revenues due primarily to the increase in logistics transportation
revenues. Rent and purchased transportation increased from 14.5% to 17.7%
of revenues due primarily to the Company's increase in logistics
transportation services. Other operating expenses changed from (.7%) to
(1.1%) of revenues due to an increase in gains on sales of revenue
equipment to third parties resulting from an increase in the number of
units sold.
The Company's effective income tax rate (income taxes as a percentage
of income before income taxes) was 36.8% and 38.8% for the three month
periods ended September 30, 1997 and 1996, respectively. The decrease was
due to favorable settlement of income tax issues.
Nine Months Ended September 30, 1997 and 1996
- ---------------------------------------------
Operating revenues increased by 19% for the nine months ended
September 30, 1997, compared to the same period of the previous year. A
two cent per mile driver pay increase, effective January 1, 1997, helped
the Company add and retain experienced drivers and owner-operators and
contributed to a 15% increase in the average number of tractors. Revenue
per mile, excluding fuel surcharges, increased 1% compared to the first
nine months of 1996. A $17.2 million increase in revenues from logistics
transportation services also contributed to the overall increase in
operating revenues.
9
<PAGE>
Operating expenses, expressed as a percentage of operating revenues,
increased to 90.4% for the nine months ended September 30, 1997, compared
to 89.9% for the same period of 1996. Salaries, wages and benefits
increased from 35.3% to 36.3% of revenues due primarily to the impact of a
two cent per mile driver pay increase effective January 1, 1997.
Fuel costs decreased from 9.3% to 8.8% of revenues due mainly to lower
average fuel prices during most of 1997 compared to the same period of 1996
and the increased revenues from logistics transportation services. Fuel
prices began rising at the end of first quarter 1996 and, for the most
part, remained at elevated price levels during much of 1996 and the
beginning of first quarter 1997. During April 1996, the Company began
recovering the increased cost of fuel from customers via a temporary fuel
surcharge. The amount of fuel surcharge recovered from customers typically
varies as the price of fuel fluctuates on a weekly or monthly basis. The
Company cannot predict whether the higher fuel prices will return or the
extent to which fuel surcharges would be collected to offset such increases
if fuel prices were to return to higher levels.
Taxes and licenses decreased from 8.1% to 7.5% of revenues due
primarily to the increased revenues from logistics transportation services,
and refunds and favorable development of state tax issues. Depreciation
decreased from 10.1% to 9.5% of revenues due principally to increased
revenues from logistics transportation services. Rent and purchased
transportation increased from 14.9% to 17.0% of revenues due primarily to
the Company's increase in logistics transportation services. Other
operating expenses changed from (.6%) to (1.0%) of revenues mainly due to
an increase in gains on sales of revenue equipment to third parties
resulting from an increase in the number of units sold.
The Company's effective income tax rate was 36.2% and 39.0% for the
nine month periods ended September 30, 1997 and 1996, respectively. The
decrease was due to favorable settlement of income tax issues.
New Accounting Standards:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
This statement establishes standards for computing and presenting earnings
per share (EPS). It requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital
structures. Currently, the Company presents a single disclosure of EPS.
The standard is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Based on information
currently available to management, the Company expects its diluted EPS will
not differ materially from basic EPS.
10
<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 13 of sequentially
numbered pages
(b) Reports on Form 8-K.
A report on Form 8-K, filed July 18, 1997, regarding a news
release on July 16, 1997, announcing the Company's operating
revenues and earnings for the second quarter ended June 30, 1997.
11
<PAGE>
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 7, 1997 By: /s/John J. Steele
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: November 7, 1997 By: /s/James L. Johnson
James L. Johnson
Corporate Secretary and Controller
12
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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<SECURITIES> 0
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0
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<COMMON> 387
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