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
June 30, 1998 0-14690
WERNER ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA 47-0648386
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14507 FRONTIER ROAD
POST OFFICE BOX 45308
OMAHA, NEBRASKA 68145-0308 (402)895-6640
(Address of principal (Zip Code) (Registrant's telephone number)
executive offices)
__________________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
As of July 31, 1998, 47,796,584 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 six-month periods ended
June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. In the opinion of
management, the information set forth in the accompanying consolidated
condensed balance sheets is fairly stated in all material respects in
relation to the consolidated balance sheets from which it has been derived.
These interim consolidated financial statements should be read in
conjunction with the Company's latest annual report (which is incorporated
by reference in the Form 10-K for the year ended December 31, 1997).
Consolidated Statements of Income for the Three Months Ended
June 30, 1998 and 1997 Page 3
Consolidated Statements of Income for the Six Months Ended
June 30, 1998 and 1997 Page 4
Consolidated Condensed Balance Sheets as of June 30, 1998
and December 31, 1997 Page 5
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 Page 6
Notes to Consolidated Financial Statements as of June 30, 1998 Page 7
2
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Amounts in thousands, except per share data) June 30
- -------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------
(Unaudited)
Operating revenues $211,678 $193,635
---------------------
Operating expenses:
Salaries, wages and benefits 79,679 70,635
Fuel 14,198 16,719
Supplies and maintenance 17,214 15,548
Taxes and licenses 16,679 15,208
Insurance and claims 5,978 4,901
Depreciation 20,372 17,976
Rent and purchased transportation 32,815 33,004
Communications and utilities 2,549 1,937
Other (2,848) (2,342)
---------------------
Total operating expenses 186,636 173,586
---------------------
Operating income 25,042 20,049
---------------------
Other expense (income):
Interest expense 1,238 588
Interest income (430) (299)
Other 21 36
---------------------
Total other expense 829 325
---------------------
Income before income taxes 24,213 19,724
Income taxes 9,201 7,192
---------------------
Net income $ 15,012 $ 12,532
=====================
Average common shares outstanding (Note 1) 47,883 47,728
=====================
Earnings per share (Note 1) $ .31 $ .26
=====================
Diluted shares outstanding (Note 1) 48,185 47,928
=====================
Diluted earnings per share (Note 1) $ .31 $ .26
=====================
Dividends declared per share (Note 1) $ .024 $ .020
=====================
3
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
(Amounts in thousands, except per share data) June 30
- -------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------
(Unaudited)
Operating revenues $411,385 $365,684
---------------------
Operating expenses:
Salaries, wages and benefits 153,982 133,908
Fuel 28,896 33,984
Supplies and maintenance 34,723 30,493
Taxes and licenses 32,531 27,927
Insurance and claims 12,623 11,251
Depreciation 39,831 35,224
Rent and purchased transportation 66,192 60,652
Communications and utilities 5,108 4,121
Other (5,686) (3,378)
---------------------
Total operating expenses 368,200 334,182
---------------------
Operating income 43,185 31,502
---------------------
Other expense (income):
Interest expense 2,244 1,035
Interest income (850) (714)
Other 41 65
---------------------
Total other expense 1,435 386
---------------------
Income before income taxes 41,750 31,116
Income taxes 15,865 11,135
---------------------
Net income $ 25,885 $ 19,981
=====================
Average common shares outstanding (Note 1) 47,852 47,608
=====================
Earnings per share (Note 1) $ .54 $ .42
=====================
Diluted shares outstanding (Note 1) 48,156 47,792
=====================
Diluted earnings per share (Note 1) $ .54 $ .42
=====================
Dividends declared per share (Note 1) $ .044 $ .040
=====================
4
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31
- -------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 20,111 $ 22,294
Accounts receivable, net 89,127 93,461
Prepaid taxes, licenses and permits 5,468 8,405
Other current assets 25,075 21,632
---------------------
Total current assets 139,781 145,792
---------------------
Property and equipment 755,851 698,099
Less - accumulated depreciation 188,930 176,253
---------------------
Property and equipment, net 566,921 521,846
---------------------
$706,702 $667,638
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,265 $ 44,167
Insurance and claims accruals 21,988 22,161
Accrued payroll 14,142 9,116
Income taxes payable 3,930 6,983
Other current liabilities 12,350 9,364
---------------------
Total current liabilities 78,675 91,791
---------------------
Long-term debt 80,000 60,000
Insurance, claims and other long-term accruals 30,301 29,329
Deferred income taxes 97,233 91,400
Stockholders' equity 420,493 395,118
---------------------
$706,702 $667,638
=====================
5
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(In thousands) June 30
- --------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
Net income $ 25,885 $ 19,981
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 39,831 35,224
Deferred income taxes 5,833 4,486
Gain on disposal of operating equipment (6,411) (3,700)
Insurance, claims and other long-term accruals 972 (5)
Tax benefit from exercise of stock options 364 1,299
Changes in certain working capital items:
Accounts receivable, net 4,334 (20,189)
Prepaid expenses and other current assets (506) 1,713
Accounts payable (17,902) 14,647
Other current liabilities 4,593 5,498
---------------------
Net cash provided by operating activities 56,993 58,954
---------------------
Cash flows from investing activities:
Additions to property and equipment (122,038) (103,413)
Proceeds from sales of property and equipment 43,543 20,707
---------------------
Net cash used in investing activities (78,495) (82,706)
---------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 20,000 20,000
Dividends on common stock (1,916) (1,900)
Stock options exercised 1,235 2,041
---------------------
Net cash provided by financing activities 19,319 20,141
---------------------
Net decrease in cash and cash equivalents (2,183) (3,611)
Cash and cash equivalents, beginning of period 22,294 22,136
---------------------
Cash and cash equivalents, end of period $ 20,111 $ 18,525
=====================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,156 $ 971
Income taxes 12,323 5,167
6
<PAGE>
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Common Stock Split
On May 13, 1998, the Company issued shares for a five-for-four common
stock split effected in the form of a twenty-five percent (25%) stock
dividend to stockholders of record at the close of business on April 27,
1998. 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 June 30, 1998, the Company has commitments for capital
expenditures of approximately $58,000,000.
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, 1997.
Financial Condition:
During the six months ended June 30, 1998, the Company generated cash
flow from operations of $57.0 million. Cash flow from operations decreased
compared to the same period of the previous year due to a reduction in
accounts payable resulting from the timing of payments for tractors and
trailers. At December 31, 1997, most of the accounts payable of $44.2
million was for tractors and trailers received not yet paid. Accounts
payable was $26.3 million at June 30, 1998. Accounts receivable
collections improved during the six months ended June 30, 1998 as accounts
receivable declined from $93.5 million to $89.1 million. The Company made
long-term borrowings of $20.0 million, which, along with the cash flow from
operations, enabled the Company to make net property additions, primarily
revenue equipment, of $78.5 million, and pay common stock dividends of $1.9
million. If the Company continues to grow at its current rate (as
described below), additional financing activities may occur. Based on the
Company's strong financial position, management foresees no significant
barriers to obtaining sufficient financing, if necessary, to continue with
its growth plans.
The Company's long-term debt to equity ratio at June 30, 1998 was
19.0%, compared with 15.2% at December 31, 1997.
Results of Operations:
Three Months Ended June 30, 1998 and 1997
- -----------------------------------------
Operating revenues increased 9% for the three months ended June 30,
1998, compared to the same period of the prior year, primarily due to a 10%
increase in the average number of tractors in service. Revenue per mile,
excluding fuel surcharges, increased 2% compared to second quarter of 1997
due partially to rate increases. These increases were partially offset by
lower revenues from logistics transportation services.
Operating expenses, expressed as a percentage of operating revenues,
were 88.2% for the three months ended June 30, 1998, compared to 89.6% for
the three months ended June 30, 1997. The Company's decrease in logistics
transportation services contributed to a shift in costs from the rent and
purchased transportation expense category to several other expense
categories, as described below.
Salaries, wages and benefits increased from 36.5% to 37.6% of revenues
due to more experienced drivers and a decrease in logistics revenues. 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.
8
<PAGE>
Fuel decreased from 8.6% to 6.7% of revenues, due mainly to
significantly lower average fuel prices during the quarter compared to the
same quarter of the prior year. Depreciation increased from 9.3% to 9.6%
of revenues due primarily to the decrease in logistics revenues and an
increase in the trailer to tractor ratio. The increase in the trailer to
tractor ratio is the result of providing additional trailers to improve
customer service and tractor productivity. A decrease in the average
length of haul also contributed to the increased trailer to tractor ratio.
Rent and purchased transportation decreased from 17.0% to 15.5% of revenues
due primarily to the Company's decrease in logistics transportation
services.
The Company's effective income tax rate (income taxes as a percentage
of income before income taxes) was 38% and 36.5% for the three month
periods ended June 30, 1998 and 1997, respectively. The effective income
tax rate for the 1997 period was lower than normal due to favorable
settlement of income tax issues.
Six Months Ended June 30, 1998 and 1997
- ---------------------------------------
Operating revenues increased by 12% for the six months ended June 30,
1998, compared to the same period of the previous year, primarily due to a
12% increase in the average number of tractors. Revenue per mile,
excluding fuel surcharges, increased 1% compared to the first six months of
1997 partially due to rate increases. These increases were partially
offset by lower revenues from logistics transportation services.
Operating expenses, expressed as a percentage of operating revenues,
decreased to 89.5% for the six months ended June 30, 1998, compared to
91.4% for the same period of 1997. Salaries, wages and benefits increased
from 36.6% to 37.4% of revenues due primarily to more experienced drivers
and a decrease in logistics revenues. Fuel costs decreased from 9.3% to
7.0% of revenues due mainly to lower average fuel prices during the first
six months of 1998. Taxes and licenses increased from 7.6% to 7.9% of
revenues due primarily to the decreased revenues from logistics services
and refunds and favorable development of state tax issues during the prior
period. Rent and purchased transportation decreased from 16.6% to 16.1% of
revenues due primarily to the Company's decrease in logistics
transportation services. Other operating expenses changed from (.9%) to
(1.4%) of revenues mainly due to an increase in gains on sales of revenue
equipment to third parties resulting primarily from an increase in the
number of units sold.
The Company's effective income tax rate was 38.0% and 35.8% for the
six month periods ended June 30, 1998 and 1997, respectively. The
effective income tax rate for the 1997 period was lower than normal due to
favorable settlement of income tax issues.
9
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Werner Enterprises, Inc. was
held on May 12, 1998 for the purpose of electing three directors for three-
year terms and voting on the proposal described below. Proxies for the
meeting were solicited pursuant to Section 14(a) of the Securities Exchange
Act of 1934, and there was no solicitation in opposition to management's
nominees. Each of management's nominees for director as listed in the
Proxy Statement was elected. The voting tabulation was as follows:
Shares Voted Shares Voted
"FOR" "ABSTAIN"
------------ ------------
Curtis G. Werner 35,087,456 1,238,704
Gerald H. Timmerman 35,090,248 1,235,912
Donald W. Rogert 35,112,800 1,213,360
The Company's proposal to amend the Articles of Incorporation and
increase the number of authorized shares of common stock, par value of
$.01, from 60,000,000 to 200,000,000 shares, as set forth in the Proxy
Statement for Annual Meeting of Stockholders, May 12, 1998, was approved by
the following vote:
Shares Voted Shares Voted Shares Voted
"FOR" "AGAINST" "ABSTAIN"
------------ ------------ ------------
24,956,801 11,351,731 17,628
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Incorporated
Number Description by Reference to
------- ----------- ---------------
11 Statement Re: Computation
of Per Share Earnings Filed herewith
27 June 30, 1998 Financial Data Schedule Filed herewith
27.1 Restated 1997 Financial Data Schedule
for Interim Periods Filed herewith
27.2 Restated September 30, 1996 Financial
Data Schedule Filed herewith
(b) Reports on Form 8-K.
A report on Form 8-K, filed April 17, 1998, regarding a news
release on April 15, 1998, announcing the Company's operating
revenues and earnings for the first quarter ended March 31, 1998.
10
<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: August 13, 1998 By: /s/John J. Steele
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: August 13, 1998 By: /s/James L. Johnson
James L. Johnson
Corporate Secretary and Controller
11
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1998 1997 1998 1997
------------------ ----------------
Net income 15,012 12,532 25,885 19,981
================== ================
Average common shares outstanding 47,883 47,728 47,852 47,608
Common stock equivalents (1) 302 200 304 184
------------------ ----------------
Diluted shares outstanding 48,185 47,928 48,156 47,792
================== ================
Earnings per share $ .31 $ .26 $ .54 $ .42
================== ================
Diluted earnings per share $ .31 $ .26 $ .54 $ .42
================== ================
(1) Common stock equivalents represent the dilutive effect of outstanding
stock options for all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 20,111
<SECURITIES> 0
<RECEIVABLES> 89,127
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 139,781
<PP&E> 755,851
<DEPRECIATION> 188,930
<TOTAL-ASSETS> 706,702
<CURRENT-LIABILITIES> 78,675
<BONDS> 0
0
0
<COMMON> 483
<OTHER-SE> 420,010
<TOTAL-LIABILITY-AND-EQUITY> 706,702
<SALES> 411,385
<TOTAL-REVENUES> 411,385
<CGS> 0
<TOTAL-COSTS> 368,200
<OTHER-EXPENSES> (809)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,244
<INCOME-PRETAX> 41,750
<INCOME-TAX> 15,865
<INCOME-CONTINUING> 25,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,885
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<FN>
STOCK SPLIT
On May 13, 1998, the Company issued shares for a five-for-four common stock
split effected in the form of a twenty-five percent (25%) stock dividend to
stockholders of record at the close of business on April 27, 1998. Prior
Financial Data Schedules have not been restated for this stock split.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 23,591 18,525 21,577
<SECURITIES> 0 0 0
<RECEIVABLES> 76,036 88,117 92,439
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 125,143 131,029 138,288
<PP&E> 604,214 648,966 673,688
<DEPRECIATION> 156,137 164,737 171,893
<TOTAL-ASSETS> 573,220 615,258 640,083
<CURRENT-LIABILITIES> 75,938 79,217 76,306
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 387 387 387
<OTHER-SE> 354,610 369,398 383,623
<TOTAL-LIABILITY-AND-EQUITY> 573,220 615,258 640,083
<SALES> 172,049 365,684 565,921
<TOTAL-REVENUES> 172,049 365,684 565,921
<CGS> 0 0 0
<TOTAL-COSTS> 160,596 334,182 511,392
<OTHER-EXPENSES> (386) (649) (1,010)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 447 1,035 1,961
<INCOME-PRETAX> 11,392 31,116 53,578
<INCOME-TAX> 3,943 11,135 19,398
<INCOME-CONTINUING> 7,449 19,981 34,180
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 7,449 19,981 34,180
<EPS-PRIMARY> .20 .52 .90
<EPS-DILUTED> .19 .52 .89
<FN>
This Financial Data Schedule reflects restated amounts for the EPS-DILUTED
caption due to the Company's adoption of Statement of Financial Accounting
Standards No. 128 "Earnings per Share".
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<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> .76
<FN>
STOCK SPLIT
On August 9, 1996, the Company issued shares for a three-for-two common stock
split effected in the form of a fifty percent (50%) stock dividend to
stockholders of record at the close of business on July 26, 1996. Prior
Financial Data Schedules have not been restated for this stock split.
</FN>
<FN>
This Financial Data Schedule reflects restated amounts for the EPS-DILUTED
caption due to the Company's adoption of Statements of Financial Accounting
Standards No. 128 "Earnings per Share".
</FN>
</TABLE>
