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
March 31, 1999 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 April 30, 1999, 47,347,492 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The interim consolidated financial statements contained herein reflect
all adjustments which, in the opinion of management, are necessary for a
fair statement of the financial condition and results of operations for the
periods presented. They have been prepared in accordance with the
instructions to Form 10-Q and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
Operating results for the three-month period ended March 31, 1999, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. 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, 1998).
Consolidated Statements of Income for the
Three Months Ended March 31, 1999 and 1998 Page 3
Consolidated Condensed Balance Sheets as of
March 31, 1999 and December 31, 1998 Page 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1999 and 1998 Page 5
Notes to Consolidated Financial Statements
as of March 31, 1999 Page 6
2
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) March 31
- ----------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Operating revenues $ 240,980 $ 199,707
----------------------------
Operating expenses:
Salaries, wages and benefits 89,321 74,303
Fuel 14,008 14,698
Supplies and maintenance 20,138 17,509
Taxes and licenses 19,766 15,852
Insurance and claims 9,390 6,645
Depreciation 23,535 19,459
Rent and purchased transportation 42,327 33,377
Communications and utilities 3,099 2,559
Other (1,847) (2,838)
----------------------------
Total operating expenses 219,737 181,564
----------------------------
Operating income 21,243 18,143
----------------------------
Other expense (income):
Interest expense 1,198 1,006
Interest income (330) (420)
Other 17 20
----------------------------
Total other expense 885 606
----------------------------
Income before income taxes 20,358 17,537
Income taxes 7,736 6,664
----------------------------
Net income $ 12,622 $ 10,873
============================
Average common shares outstanding 47,327 47,820
============================
Earnings per share $ .27 $ .23
============================
Diluted shares outstanding 47,570 48,164
============================
Diluted earnings per share $ .27 $ .23
============================
Dividends declared per share $ .025 $ .020
============================
</TABLE>
3
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) March 31 December 31
- ----------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,367 $ 15,913
Accounts receivable, net 107,258 94,329
Prepaid taxes, licenses and permits 9,143 10,792
Other current assets 23,887 24,231
----------------------------
Total current assets 154,655 145,265
----------------------------
Property and equipment 882,541 829,461
Less - accumulated depreciation 219,772 205,530
----------------------------
Property and equipment, net 662,769 623,931
----------------------------
$ 817,424 $ 769,196
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 52,210 $ 48,146
Short-term debt (Note 1) 20,000 -
Insurance and claims accruals 26,487 23,250
Accrued payroll 10,574 10,051
Income taxes payable 4,223 471
Other current liabilities 11,697 9,989
----------------------------
Total current liabilities 125,191 91,907
----------------------------
Long-term debt 100,000 100,000
Insurance, claims and other long-term accruals 30,801 30,801
Deferred income taxes 109,055 105,900
Stockholders' equity 452,377 440,588
----------------------------
$ 817,424 $ 769,196
============================
</TABLE>
4
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) March 31
- ---------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,622 $ 10,873
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 23,535 19,459
Deferred income taxes 3,155 2,446
Gain on disposal of operating equipment (2,191) (3,142)
Insurance, claims and other long-term accruals - (28)
Tax benefit from exercise of stock options 77 247
Changes in certain working capital items:
Accounts receivable, net (12,929) 8,071
Prepaid expenses and other current assets 1,993 130
Accounts payable 4,064 (15,306)
Other current liabilities 9,220 5,538
---------------------------
Net cash provided by operating activities 39,546 28,288
---------------------------
Cash flows from investing activities:
Additions to property and equipment (75,943) (56,260)
Proceeds from sales of property and equipment 15,761 20,686
---------------------------
Net cash used in investing activities (60,182) (35,574)
---------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 10,000
Proceeds from issuance of short-term debt 20,000 -
Dividends on common stock (1,183) (958)
Stock options exercised 273 874
---------------------------
Net cash provided by financing activities 19,090 9,916
---------------------------
Net increase (decrease) in cash and cash equivalents (1,546) 2,630
Cash and cash equivalents, beginning of period 15,913 22,294
---------------------------
Cash and cash equivalents, end of period $ 14,367 $ 24,924
===========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,589 $ 821
Income taxes $ 752 $ 3,424
</TABLE>
5
<PAGE>
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Committed Credit Facilities
The Company has 364-day committed credit facilities with two financial
institutions totaling $30 million. Borrowings under these credit
facilities, which mature in September 1999, bear variable interest based on
the London Interbank Offered Rate (LIBOR) or, at the Company's option, the
financial institutions' base lending rates. The Company expects to extend
these credit facilities for another 364-day period or refinance this debt
prior to September 1999. The Company had borrowings of $20 million
outstanding under these credit facilities as of March 31, 1999.
(2) Commitments
As of March 31, 1999, the Company has commitments for capital
expenditures of approximately $82,400,000.
6
<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, 1998.
Year 2000 Readiness Disclosure:
In January 1997, the Company began conducting a comprehensive review
of its Year 2000 issue and has since completed its review of information
technology (IT) systems. Most of the Company's critical software programs
have been developed internally, with the remainder having been licensed
from and maintained by software vendors. The Company completed
substantially all of its conversion of internally developed software
programs to Year 2000 compliance in September 1998. The costs of
converting these programs was not material. The Company is now working
with vendors to verify compliance of vendor-supplied software programs, and
has also begun evaluating compliance of non-IT systems. The following is
an estimate of the status of the Company's IT systems and non-IT systems.
<TABLE>
<CAPTION>
Year 2000 Modifications being
Compliant performed
<S> <C> <C>
Internally-developed IT systems 100% 0%
Vendor-supplied IT systems 80% 20%
Non-IT systems 70% 30%
</TABLE>
Based on information currently available, the Company believes that
with the appropriate modifications to vendor-supplied software programs,
the Year 2000 issue will not pose significant operational or administrative
problems for the Company. The cost of such remaining modifications is not
expected to be material. The Company will continue to evaluate the Year
2000 readiness of third parties (primarily vendors and customers) with whom
the Company has material relationships. The Company cannot presently
estimate the effect on its results of operations, liquidity, and financial
condition should material vendors and customers fail to become Year 2000
compliant. If the Company believes it is likely that a material vendor or
customer will not achieve Year 2000 compliance, the Company will develop a
contingency plan at that time.
Financial Condition:
During the three months ended March 31, 1999, the Company generated
cash flow from operations of $39.5 million. The Company received proceeds
from the issuance of short-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 $60.2 million and pay common stock
dividends of $1.2 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.
7
<PAGE>
The Company's debt to equity ratio at March 31, 1999 was 26.5%,
compared with 22.7% at December 31, 1998. The Company's debt to total
capitalization ratio (total capitalization equals total debt plus total
stockholders' equity) was 21.0% at March 31, 1999 compared to 18.5% at
December 31, 1998.
Results of Operations:
Three Months Ended March 31, 1999 and 1998
- ------------------------------------------
Operating revenues increased 20.7% for the three months ended
March 31, 1999, compared to the same period of the prior year, primarily
due to a 18.5% increase in the average number of tractors in service.
Average tractors in service increased from 5,360 in first quarter 1998 to
6,354 in first quarter 1999. Revenue per mile, excluding fuel surcharges,
increased 1.5% compared to first quarter of 1998 due to rate increases and
a shift in the mix of freight between fleets in the truckload division
which decreased the average trip length by 5%. A $5.2 million increase in
revenues from logistics and other non-trucking transportation services also
contributed to the overall increase in operating revenues.
Operating expenses, expressed as a percentage of operating revenues,
were 91.2% for the three months ended March 31, 1999, compared to 90.9% for
the three months ended March 31, 1998. The Company's increase in logistics
and other non-trucking transportation services contributed to a shift in
costs to the rent and purchased transportation expense category from
several other expense categories, as described below.
Salaries, wages and benefits decreased from 37.2% to 37.1% of revenues
due primarily to the increase in logistics and other non-trucking revenues,
partially offset by an increase in driver pay for drivers in training due
to an 80% increase in the number of drivers in the training program. 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 was 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 7.4% to 5.8% of revenues, due mainly to
significantly lower average fuel prices during the quarter compared to the
same quarter of the prior year. In mid-March 1999, fuel prices increased
and prices as of the end of March 1999 were comparable, or slightly higher,
than prices as of the end of March 1998. Supplies and maintenance
decreased from 8.8% to 8.3% of revenues primarily due to a change in
classification of repairs and sales expenses for equipment sales from
supplies and maintenance to the other operating expense category to offset
gains on revenue equipment sales, partially offset by the increase in
logistics and other non-trucking revenues. Taxes and licenses increased
from 7.9% to 8.2% of revenues due to the impact of favorable development of
state tax issues on the prior year period, partially offset by the increase
in logistics and other non-trucking revenues. Insurance and claims
increased from 3.3% to 3.9% of revenues due to unfavorable claims
experience contributed to by more severe winter weather conditions during
the current quarter. Rent and purchased transportation increased from
16.7% to 17.6% of revenues due primarily to the Company's increase in
logistics and other non-trucking transportation services. Other operating
expenses changed from (1.4%) to (0.8%) of revenues due to the change in
classification of repairs on equipment sales from supplies and maintenance
to other operating expenses to offset gains on revenue equipment sales.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates
and commodity prices.
8
<PAGE>
Interest Rate Risk
The Company had $70 million of variable rate debt at March 31, 1999.
The interest rates on the variable rate debt are based on the London
Interbank Offered Rate (LIBOR). Assuming this level of borrowings, a
hypothetical one percentage point increase in the LIBOR interest rate would
increase the Company's annual interest expense by $700,000.
Commodity Price Risk
The price and availability of diesel fuel are subject to fluctuations
due to changes in the level of global oil production, seasonality, weather,
and other market factors. Historically, the Company has been able to
recover a portion of short-term fuel price increases from customers in the
form of fuel surcharges. The Company cannot predict whether high fuel
price levels will occur in the future or the extent to which fuel
surcharges could be collected to offset such increases. As of March 31,
1999, the Company had no derivative financial instruments to reduce its
exposure to fuel price fluctuations.
9
<PAGE>
PART II
OTHER INFORMATION
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 March 31, 1999 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K.
A report on Form 8-K, filed January 21, 1999, regarding a news release
on January 21, 1999, announcing the Company's operating revenues and
earnings for the fourth quarter and year ended December 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: May 7, 1999 By: /s/ John J. Steele
------------------ ----------------------------------
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: May 7, 1999 By: /s/ James L. Johnson
------------------ ----------------------------------
James L. Johnson
Corporate Secretary and Controller
11
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
------------------------------------------------
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------
1999 1998
---------------------
<S> <C> <C>
Net income $12,622 $10,873
=====================
Average common shares outstanding 47,327 47,820
Common stock equivalents (1) 243 344
---------------------
Diluted shares outstanding 47,570 48,164
=====================
Earnings per share $ .27 $ .23
=====================
Diluted earnings per share $ .27 $ .23
=====================
</TABLE>
(1) Common stock equivalents represent the dilutive effect of
outstanding stock options for all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,367
<SECURITIES> 0
<RECEIVABLES> 107,258
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 154,655
<PP&E> 882,541
<DEPRECIATION> 219,772
<TOTAL-ASSETS> 817,424
<CURRENT-LIABILITIES> 125,191
<BONDS> 0
0
0
<COMMON> 483
<OTHER-SE> 451,894
<TOTAL-LIABILITY-AND-EQUITY> 817,424
<SALES> 240,980
<TOTAL-REVENUES> 240,980
<CGS> 0
<TOTAL-COSTS> 219,737
<OTHER-EXPENSES> (313)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,198
<INCOME-PRETAX> 20,358
<INCOME-TAX> 7,736
<INCOME-CONTINUING> 12,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,622
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
