UNITED STATES
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, 2000 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, 2000, 47,057,862 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, 2000, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. 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 Annual Report on Form 10-K for the year
ended December 31, 1999.
Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999 Page 3
Consolidated Condensed Balance Sheets as of
March 31, 2000 and December 31, 1999 Page 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 Page 5
Notes to Consolidated Financial Statements as of March 31, 2000 Page 6
2
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(In thousands, except per share amounts) March 31
- --------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Operating revenues $ 291,379 $ 240,980
-------------------------
Operating expenses:
Salaries, wages and benefits 103,312 89,321
Fuel 31,209 14,008
Supplies and maintenance 25,312 20,138
Taxes and licenses 21,462 19,766
Insurance and claims 6,980 9,390
Depreciation 26,321 23,535
Rent and purchased transportation 57,027 42,327
Communications and utilities 3,686 3,099
Other (2,465) (1,847)
-------------------------
Total operating expenses 272,844 219,737
-------------------------
Operating income 18,535 21,243
-------------------------
Other expense (income):
Interest expense 2,235 1,198
Interest income (447) (330)
Other 105 17
-------------------------
Total other expense 1,893 885
-------------------------
Income before income taxes 16,642 20,358
Income taxes 6,324 7,736
-------------------------
Net income $ 10,318 $ 12,622
=========================
Average common shares outstanding 47,092 47,327
=========================
Basic earnings per share $ .22 $ .27
=========================
Diluted shares outstanding 47,251 47,570
=========================
Diluted earnings per share $ .22 $ .27
=========================
Dividends declared per share $ .025 $ .025
=========================
</TABLE>
3
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) March 31 December 31
- --------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,409 $ 15,368
Accounts receivable, net 130,733 127,211
Other receivables 14,852 11,217
Prepaid taxes, licenses and permits 10,283 12,423
Other current assets 23,861 22,608
-------------------------
Total current assets 196,138 188,827
-------------------------
Property and equipment 957,087 970,609
Less - accumulated depreciation 266,735 262,557
-------------------------
Property and equipment, net 690,352 708,052
-------------------------
Notes receivable 1,423 -
-------------------------
$ 887,913 $ 896,879
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,901 $ 35,686
Short-term debt 5,000 25,000
Insurance and claims accruals 33,197 32,993
Accrued payroll 13,925 11,846
Other current liabilities 19,609 15,681
-------------------------
Total current liabilities 102,632 121,206
-------------------------
Long-term debt 120,000 120,000
Insurance, claims and other long-term accruals 30,301 30,301
Deferred income taxes 133,180 130,600
Stockholders' equity 501,800 494,772
-------------------------
$ 887,913 $ 896,879
=========================
</TABLE>
4
<PAGE>
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) March 31
- --------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,318 $ 12,622
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 26,321 23,535
Deferred income taxes 2,580 3,155
Gain on disposal of operating equipment (2,787) (2,191)
Tax benefit from exercise of stock options 3 77
Changes in certain working capital items:
Accounts receivable, net (3,522) (12,929)
Prepaid expenses and other current assets (2,748) 1,993
Accounts payable (4,785) 4,064
Other current liabilities 6,208 9,220
-------------------------
Net cash provided by operating activities 31,588 39,546
-------------------------
Cash flows from investing activities:
Additions to property and equipment (32,563) (75,943)
Proceeds from sales of property and equipment 25,306 15,761
-------------------------
Net cash used in investing activities (7,257) (60,182)
-------------------------
Cash flows from financing activities:
Proceeds from issuance of short-term debt - 20,000
Repayments of short-term debt (20,000) -
Dividends on common stock (1,180) (1,183)
Repurchases of common stock (2,113) -
Stock options exercised 3 273
-------------------------
Net cash provided by (used in) financing
activities (23,290) 19,090
-------------------------
Net increase (decrease) in cash and cash
equivalents 1,041 (1,546)
Cash and cash equivalents, beginning of period 15,368 15,913
-------------------------
Cash and cash equivalents, end of period $ 16,409 $ 14,367
=========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,844 $ 1,589
Income taxes $ 1,323 $ 752
Supplemental schedule of non-cash investing
activities:
Notes receivable issued upon sale of
revenue equipment $ 1,423 $ -
</TABLE>
5
<PAGE>
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Long-Term Debt
Long-term debt consists of the following (in thousands):
<TABLE
[CAPTION]
March 31 December 31
2000 1999
---------- -----------
[S] [C] [C]
Notes payable to banks under committed credit
facilities $ 75,000 $ 95,000
6.55% Series A Senior Notes, due November 2002 20,000 20,000
6.02% Series B Senior Notes, due November 2002 10,000 10,000
5.52% Series C Senior Notes, due December 2003 20,000 20,000
--------- ---------
125,000 145,000
Less short-term debt (5,000) (25,000)
--------- ---------
Long-term debt $ 120,000 $ 120,000
========= =========
[/TABLE]
The notes payable to banks under committed credit facilities bear
variable interest (6.4% at March 31, 2000) based on the London Interbank
Offered Rate (LIBOR) and mature at various dates from June 2000 to
September 2001. The Company has an additional $40 million of short-term
and $5 million of long-term credit facilities with banks which bear
variable interest based on LIBOR, on which no borrowings were outstanding
at March 31, 2000. The Company is completing new agreements with three
lending institutions to extend or expand its existing committed credit
facilities. These arrangements are expected to be finalized during the
second quarter of 2000.
(2) Commitments
As of March 31, 2000, the Company has commitments for capital
expenditures of approximately $122 million.
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, 1999.
Financial Condition:
During the three months ended March 31, 2000, the Company generated
cash flow from operations of $31.6 million. The cash flow from operations
enabled the Company to make net property additions, primarily revenue
equipment, of $7.3 million, repay $20.0 million of debt, repurchase common
stock of $2.1 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.
The Company's debt to equity ratio at March 31, 2000 was 24.9%,
compared with 29.3% at December 31, 1999. The Company's debt to total
capitalization ratio (total capitalization equals total debt plus total
stockholders' equity) was 19.9% at March 31, 2000 compared to 22.7% at
December 31, 1999.
Results of Operations:
Three Months Ended March 31, 2000 and 1999
- ------------------------------------------
Operating revenues increased 21% for the three months ended March 31,
2000, compared to the same period of the prior year, due in part to a 12%
increase in the average number of tractors in service. Average tractors in
service increased from 6,354 in first quarter 1999 to 7,127 in first
quarter 2000. Over the past two quarters, the Company has focused its
efforts more on obtaining rate increases and improving fuel surcharge
reimbursements than on growth. As a result, revenue per mile, excluding
fuel surcharges, increased 2.4% and revenue per mile, including fuel
surcharges, increased 6.1% compared to first quarter of 1999. A shift in
the mix of freight between fleets in the truckload division, which
decreased the average trip length by 1.7%, also contributed to the
increased revenue per mile. Revenue per mile tends to increase as length
of haul decreases. A $3.5 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 93.6% for the three months ended March 31, 2000, compared to 91.2% for
the three months ended March 31, 1999. The Company's increase in logistics
and other non-trucking transportation services, and an increase in owner-
operator miles as a percentage of total miles (19.6% in first quarter 2000
compared to 16.8% in first quarter 1999), contributed to a shift in costs
to the rent and purchased transportation expense category from several
other expense categories, as described on the following page. Owner-
operators are independent contractors who supply their own tractor and
driver, and are responsible for their operating expenses including fuel,
supplies and maintenance, and fuel taxes.
On March 14, 2000, the Company announced that it had signed a letter
of intent to join five other large transportation companies and merge their
logistics business units into a commonly owned, Internet-based
transportation logistics company, Transplace.com. Transplace.com will
offer a Web-enabled transportation platform to bring together shippers and
7
<PAGE>
carriers to collaborate on their transportation logistics planning and
execution in the most efficient and effective manner. Transplace.com is
developing programs for the cooperative purchasing of products, supplies
and services with the goal of lowering the costs of member carriers. It is
expected that Werner Enterprises will transfer its existing logistics
business to Transplace.com during third quarter 2000. The transfer will
result in a decrease in logistics and other non-trucking revenue and
corresponding purchased transportation expense. This transfer is not
expected to materially impact the earnings of Werner Enterprises during the
year 2000.
Salaries, wages and benefits decreased from 37.1% to 35.5% of revenues
due primarily to the increase in logistics and other non-trucking revenues
and more owner-operator miles. 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 increased from 5.8% to 10.7% of revenues due mainly to
significantly higher average fuel prices during the quarter compared to the
same quarter of the prior year. The average cost of fuel, excluding fuel
taxes, was 118% higher in first quarter 2000 compared to first quarter
1999. The increase was partially offset by increases in non-trucking
revenues and owner-operator miles. The Company's customer fuel surcharge
reimbursement programs recovered approximately 60% of the increased fuel
cost during first quarter 2000. A portion of the fuel expense increase was
not recovered during first quarter 2000 due to several factors, including:
the fuel price levels which determine when fuel surcharges are collected,
unreimbursed empty miles between freight shipments, unreimbursed out-of-
route miles caused in part by driver home time needs, and the unreimbursed
costs of truck idling. Management has focused its efforts on improving the
amount and percentage of fuel surcharge reimbursement. The Company cannot
predict whether higher fuel price levels will continue or the extent to
which fuel surcharges could be collected from customers to offset such
increases. If fuel prices remain at elevated levels, the Company's
operating results for 2000 and beyond will be adversely impacted to the
extent the higher costs are not recovered from customers.
Supplies and maintenance increased from 8.4% to 8.7% of revenues
primarily due to higher tractor and trailer maintenance costs, partially
offset by the increase in logistics and other non-trucking revenues and
more owner-operator miles. Taxes and licenses decreased from 8.2% to 7.4%
of revenues due in part to the increase in logistics and other non-trucking
revenues and more owner-operator miles. Insurance and claims decreased
from 3.9% to 2.4% of revenues due to favorable claims experience and from
milder winter weather conditions during the first quarter of 2000 compared
to the same quarter last year.
Depreciation decreased from 9.8% to 9.0% of revenues due to increases
in non-trucking revenues and owner-operator tractors as a percentage of
total tractors and leased tractors. Rent and purchased transportation
increased from 17.6% to 19.6% of revenues due primarily to the Company's
increase in logistics and other non-trucking transportation services, owner-
operator miles as a percentage of total miles, and rent expense associated
with tractors under operating leases. Interest expense increased from .5%
to .8% of revenues due to higher average debt outstanding and slightly
higher interest rates on the Company's variable rate debt.
8
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk from changes in interest rates
and commodity prices.
Interest Rate Risk
The Company had $75 million of variable rate debt at March 31, 2000.
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 $750,000.
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. As of March 31, 2000, the Company has implemented
customer fuel surcharges with a majority of its revenue base to offset a
portion of the higher fuel cost per gallon. The Company cannot predict
whether high fuel price levels will continue in the future or the extent to
which fuel surcharges can be collected to offset such increases. As of
March 31, 2000, 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, 2000 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K.
A report on Form 8-K, filed January 25, 2000, regarding a news release
on January 20, 2000, announcing the Company's operating revenues and
earnings for the fourth quarter and year ended December 31, 1999.
A report on Form 8-K, filed March 14, 2000, regarding a news release
on March 14, 2000, announcing that six of the nation's largest
transportation companies-Covenant Transport, Inc.; J. B. Hunt
Transport Services, Inc.; M. S. Carriers, Inc.; Swift Transportation
Co., Inc.; U.S. Xpress Enterprises, Inc.; and Werner Enterprises,
Inc.-are merging their logistics businesses in a new Internet venture,
Transplace.com.
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 15, 2000 By: /s/ John J. Steele
--------------------- ----------------------------------
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: May 15, 2000 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
------------------
2000 1999
------------------
<S> <C> <C>
Net income $ 10,318 $ 12,622
==================
Average common shares outstanding 47,092 47,327
Common stock equivalents (1) 159 243
------------------
Diluted shares outstanding 47,251 47,570
==================
Basic earnings per share $ .22 $ .27
==================
Diluted earnings per share $ .22 $ .27
==================
</TABLE>
(1) Common stock equivalents represent the dilutive
effect of outstanding stock options for all
periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 16409
<SECURITIES> 0
<RECEIVABLES> 130733
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 196138
<PP&E> 957087
<DEPRECIATION> 266735
<TOTAL-ASSETS> 887913
<CURRENT-LIABILITIES> 102632
<BONDS> 0
0
0
<COMMON> 483
<OTHER-SE> 501317
<TOTAL-LIABILITY-AND-EQUITY> 887913
<SALES> 291379
<TOTAL-REVENUES> 291379
<CGS> 0
<TOTAL-COSTS> 272844
<OTHER-EXPENSES> (342)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2235
<INCOME-PRETAX> 16642
<INCOME-TAX> 6324
<INCOME-CONTINUING> 10318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10318
<EPS-BASIC> .22
<EPS-DILUTED> .22
</TABLE>
