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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 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) including area code)
_________________________________
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, 2002, 63,782,066 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
INDEX TO FORM 10-Q
PAGE
PART I - FINANCIAL INFORMATION ----
Item 1 - Financial Statements
Consolidated Statements of Income for the Three Months Ended
June 30, 2002 and 2001 3
Consolidated Statements of Income for the Six Months Ended June
30, 2002 and 2001 4
Consolidated Condensed Balance Sheets as of June 30, 2002 and
December 31, 2001 5
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2002 and 2001 6
Notes to Consolidated Financial Statements as of June 30, 2002 7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 13
PART II - OTHER INFORMATION
Items 1, 2, 3 and 5 - Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 14
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, results of operations, and cash
flows 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 accounting principles generally accepted in the
United States of America for complete financial statements.
Operating results for the three-month and six-month periods ended June
30, 2002, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. 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, 2001.
2
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(In thousands, except per share amounts) June 30
- -------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------
(Unaudited)
Operating revenues $340,405 $322,777
----------------------
Operating expenses:
Salaries, wages and benefits 122,417 114,862
Fuel 30,401 35,714
Supplies and maintenance 31,112 29,275
Taxes and licenses 24,723 23,192
Insurance and claims 12,793 10,911
Depreciation 29,521 28,908
Rent and purchased transportation 57,852 55,245
Communications and utilities 3,644 3,567
Other 804 1,170
----------------------
Total operating expenses 313,267 302,844
----------------------
Operating income 27,138 19,933
----------------------
Other expense (income):
Interest expense 801 834
Interest income (602) (554)
Other 419 307
----------------------
Total other expense 618 587
----------------------
Income before income taxes 26,520 19,346
Income taxes 9,945 7,255
----------------------
Net income $ 16,575 $ 12,091
======================
Average common shares outstanding 63,801 63,027
======================
Basic earnings per share $ .26 $ .19
======================
Diluted shares outstanding 65,192 63,889
======================
Diluted earnings per share $ .25 $ .19
======================
Dividends declared per share $ .020 $ .019
======================
3
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
(In thousands, except per share amounts) June 30
- -------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------
(Unaudited)
Operating revenues $652,980 $627,354
----------------------
Operating expenses:
Salaries, wages and benefits 237,919 223,936
Fuel 55,462 70,778
Supplies and maintenance 61,168 56,219
Taxes and licenses 48,605 46,270
Insurance and claims 24,399 21,652
Depreciation 58,723 58,103
Rent and purchased transportation 113,267 105,517
Communications and utilities 7,361 7,310
Other 1,653 1,577
----------------------
Total operating expenses 608,557 591,362
----------------------
Operating income 44,423 35,992
----------------------
Other expense (income):
Interest expense 1,559 2,240
Interest income (1,276) (1,448)
Other 631 726
----------------------
Total other expense 914 1,518
----------------------
Income before income taxes 43,509 34,474
Income taxes 16,316 12,928
----------------------
Net income $ 27,193 $ 21,546
======================
Average common shares outstanding 63,802 62,896
======================
Basic earnings per share $ .43 $ .34
======================
Diluted shares outstanding 65,250 63,723
======================
Diluted earnings per share $ .42 $ .34
======================
Dividends declared per share $ .040 $ .038
======================
4
WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) June 30 December 31
- --------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 85,214 $ 74,366
Accounts receivable, trade, less allowance of
$5,393 and $4,966, respectively 127,803 121,354
Other receivables 10,375 8,527
Inventories and supplies 8,926 8,432
Prepaid taxes, licenses and permits 7,095 12,333
Other current assets 14,164 11,055
------------------------
Total current assets 253,577 236,067
------------------------
Property and equipment 1,107,695 1,069,605
Less - accumulated depreciation 366,332 354,122
------------------------
Property and equipment, net 741,363 715,483
------------------------
Other non-current assets 14,999 12,464
------------------------
$1,009,939 $ 964,014
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,906 $ 33,188
Current portion of long-term debt 30,000 30,000
Insurance and claims accruals 46,566 40,254
Accrued payroll 17,348 15,008
Current deferred income taxes 20,473 20,473
Other current liabilities 12,010 13,334
------------------------
Total current liabilities 161,303 152,257
------------------------
Long-term debt, net of current portion 20,000 20,000
Insurance and claims accruals, net of current
portion 42,301 38,801
Deferred income taxes 169,869 162,907
Stockholders' equity:
Common stock, $.01 par value, 200,000,000
shares authorized; 64,427,780 shares issued;
63,794,567 and 63,636,823 shares
outstanding, respectively 644 644
Paid-in capital 106,958 106,058
Retained earnings 515,582 490,942
Accumulated other comprehensive loss (81) (43)
Treasury stock, at cost; 633,206 and 790,957
shares, respectively (6,637) (7,552)
------------------------
Total stockholders' equity 616,466 590,049
------------------------
$1,009,939 $ 964,014
========================
5
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(In thousands) June 30
- -------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
Net income $ 27,193 $ 21,546
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 58,723 58,103
Deferred income taxes 6,962 32,504
Loss on disposal of property and equipment 61 465
Equity in loss of unconsolidated affiliate 637 637
Tax benefit from exercise of stock options 995 1,138
Other long-term assets (83) 236
Insurance claims and other long-term accruals 3,500 3,000
Changes in certain working capital items:
Accounts receivable, net (6,449) (12,433)
Prepaid expenses and other current assets (213) 10,987
Accounts payable 1,718 1,800
Other current liabilities 7,207 577
----------------------
Net cash provided by operating activities 100,251 118,560
----------------------
Cash flows from investing activities:
Additions to property and equipment (117,359) (99,607)
Retirements of property and equipment 32,646 22,429
(Increase) decrease in notes receivable (3,040) 427
----------------------
Net cash used in investing activities (87,753) (76,751)
----------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 5,000
Repayments of long-term debt - (55,000)
Dividends on common stock (2,470) (2,360)
Payment of stock split fractional shares (12) -
Repurchases of common stock (1,556) -
Stock options exercised 2,388 4,822
----------------------
Net cash used in financing activities (1,650) (47,538)
----------------------
Net increase (decrease) in cash and cash
equivalents 10,848 (5,729)
Cash and cash equivalents, beginning of period 74,366 25,485
----------------------
Cash and cash equivalents, end of period $ 85,214 $ 19,756
======================
Supplemental disclosures of cash flow
information:
Cash paid (received) during the period for:
Interest $ 1,559 $ 2,762
Income taxes $ 9,881 $(15,810)
Supplemental schedule of non-cash investing
activities:
Notes receivable issued upon sale of revenue
equipment $ 49 $ 205
6
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Investment in Unconsolidated Affiliate
Effective June 30, 2000, the Company contributed its non-asset based
logistics business to Transplace (TPC), in exchange for an equity interest
in TPC of approximately 15%. TPC is a joint venture of five large
transportation companies - Covenant Transport, Inc.; J. B. Hunt Transport
Services, Inc.; Swift Transportation Co., Inc.; U. S. Xpress Enterprises,
Inc.; and Werner Enterprises, Inc. Accordingly, the Company is accounting
for its investment in TPC using the equity method. Management believes
this method is appropriate because the Company has the ability to exercise
significant influence over operating and financial policies of TPC through
its representation on the TPC board of directors. At June 30, 2002, the
investment in unconsolidated affiliate (in thousands), which is included in
other non-current assets, is $3,023 (which includes a $5,000 cash
investment in TPC less $1,977, which represents the Company's 15% equity in
the loss from operations of unconsolidated affiliate since June 30, 2000).
The Company is not responsible for the debt of Transplace.
(2) Commitments
As of June 30, 2002, the Company has commitments for net capital
expenditures of approximately $135 million.
(3) Earnings Per Share
A reconciliation of the numerator and denominator of basic and diluted
earnings per share is shown below. Common stock equivalents represent the
dilutive effect of outstanding stock options for all periods presented.
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2002 2001 2002 2001
--------------------- ---------------------
Net income $ 16,575 $ 12,091 $ 27,193 $ 21,546
===================== =====================
Average common shares
outstanding 63,801 63,027 63,802 62,896
Common stock equivalents 1,391 862 1,448 827
-------------------- ---------------------
Diluted shares
outstanding 65,192 63,889 65,250 63,723
==================== =====================
Basic earnings per share $ .26 $ .19 $ .43 $ .34
==================== =====================
Diluted earnings per
share $ .25 $ .19 $ .42 $ .34
==================== =====================
Options to purchase shares of common stock which were outstanding
during the periods indicated above, but were excluded from the computation
of diluted earnings per share because the option purchase price was greater
than the average market price of the common shares, were:
7
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
2002 2001 2002 2001
-------------------- --------------------
Number of shares
under option - 10,000 - 10,000
Range of option
purchase prices - $14.35-$15.38 - $14.35-$15.38
(4) Segment Information
The Company has one reportable segment - Truckload Transportation
Services. This segment consists of five operating fleets that have been
aggregated since they have similar economic characteristics and meet the
other aggregation criteria of SFAS No. 131. The Medium- to Long-Haul Van
fleet transports a variety of consumer, non-durable products and other
commodities in truckload quantities over irregular routes using dry van
trailers. The Regional Short-Haul fleet provides comparable truckload van
service within five geographic areas. The Flatbed and Temperature-
Controlled fleets provide truckload services for products with specialized
trailers. The Dedicated Services fleet provides truckload services
required by a specific company, plant, or distribution center.
The Company generates non-trucking revenues related to freight
transportation management, third-party equipment maintenance, and other
business activities. None of these operations meet the quantitative
threshold reporting requirements of SFAS No. 131. As a result, these
operations are grouped in "Other" in the table below. The Company does not
prepare separate balance sheets by segments and, as a result, assets are
not separately identifiable by segment. The Company has no significant
intersegment sales or expense transactions that would result in adjustments
necessary to eliminate amounts between the Company's segments.
The following tables summarize the Company's segment information (in
thousands of dollars):
Revenues
--------
Three Months Ended Six Months Ended
June 30 June 30
--------------------- --------------------
2002 2001 2002 2001
--------------------- --------------------
Truckload Transportation
Services $316,432 $303,413 $607,464 $593,224
Other 23,973 19,364 45,516 34,130
--------------------- --------------------
Total $340,405 $322,777 $652,980 $627,354
===================== ====================
Operating Income
----------------
Three Months Ended Six Months Ended
June 30 June 30
--------------------- --------------------
2002 2001 2002 2001
--------------------- --------------------
Truckload Transportation
Services $26,887 $19,802 $43,599 $35,504
Other 251 131 824 488
--------------------- --------------------
Total $27,138 $19,933 $44,423 $35,992
===================== ====================
8
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, 2001. The Company
assumes no obligation to update any forward-looking statement to the extent
it becomes aware that it will not be achieved for any reason.
Financial Condition:
During the six months ended June 30, 2002, the Company generated cash
flow from operations of $100.3 million, a 5.4% increase ($5.1 million) in
cash flow compared to the same six-month period a year ago, excluding the
$23.4 million refund of income taxes received in first quarter 2001 which
resulted from the implementation of certain tax strategies. Including the
income tax refund, cash flow from operations was $118.6 million for the six
months ended June 30, 2001. The cash flow from operations enabled the
Company to make net property additions, primarily revenue equipment, of
$84.7 million, repurchase common stock of $1.6 million, and pay common
stock dividends of $2.5 million. The average age of the Company's truck
fleet was reduced from 1.5 years as of December 31, 2001 to 1.4 years at
March 31, 2002 and to 1.3 years at June 30, 2002. The decrease in the
average age of the Company truck fleet is due to buying a large number of
pre-October 2002 trucks which are not subject to the new engine emission
standards mandated by the Environmental Protection Agency. Based on the
Company's strong financial position, management foresees no significant
barriers to obtaining sufficient financing, if necessary.
The Company's debt to equity ratio at June 30, 2002 was 8.1%, compared
with 8.5% at December 31, 2001. The Company's debt to total capitalization
ratio (total capitalization equals total debt plus total stockholders'
equity) was 7.5% at June 30, 2002 compared to 7.8% at December 31, 2001.
9
Results of Operations:
The following table sets forth the percentage relationship of income
and expense items to operating revenues for the periods indicated.
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
--------------------------------------------
Operating revenues 100.0% 100.0% 100.0% 100.0%
--------------------------------------------
Operating expenses:
Salaries, wages and
benefits 36.0 35.6 36.4 35.7
Fuel 8.9 11.1 8.5 11.3
Supplies and maintenance 9.1 9.1 9.4 9.0
Taxes and licenses 7.3 7.2 7.4 7.4
Insurance and claims 3.7 3.4 3.7 3.4
Depreciation 8.7 8.9 9.0 9.3
Rent and purchased
transportation 17.0 17.1 17.4 16.8
Communications and utilities 1.1 1.1 1.1 1.2
Other 0.2 0.3 0.3 0.2
-------------------------------------------
Total operating
expenses 92.0 93.8 93.2 94.3
-------------------------------------------
Operating income 8.0 6.2 6.8 5.7
Net interest expense and other 0.2 0.2 0.1 0.2
-------------------------------------------
Income before income taxes 7.8 6.0 6.7 5.5
Income taxes 2.9 2.3 2.5 2.1
-------------------------------------------
Net income 4.9% 3.7% 4.2% 3.4%
==========================================
The following table sets forth certain industry data regarding the
freight revenues and operations of the Company.
Three Months Ended Six Months Ended
June 30 % June 30 %
2002 2001 Change 2002 2001 Change
-------------------------------------------------
Average monthly miles per
tractor 10,550 10,357 1.9% 10,320 10,300 0.2%
Average revenues per total
mile (1) $1.228 $1.204 2.0% $1.220 $1.197 1.9%
Average revenues per loaded
mile (1) $1.354 $1.335 1.4% $1.350 $1.333 1.3%
Average percentage of empty
miles 9.31% 9.81% (5.1%) 9.64% 10.23% (5.8%) )
Average tractors in service 7,973 7,746 2.9% 7,928 7,646 3.7%
Average revenues per truck
per week (1) $2,989 $2,878 3.9% $2,905 $2,845 2.1%
Non-trucking revenues (in
thousands) $23,973 $19,364 23.8% $45,516 $34,130 33.4%
Total tractors (at quarter
end)
Company 6,800 6,590 6,800 6,590
Owner-operator 1,150 1,135 1,150 1,135
------- ------- ------- -------
Total tractors 7,950 7,725 7,950 7,725
Total trailers (at quarter
end) 19,855 19,850 19,855 19,850
(1) Net of fuel surcharge revenues.
10
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30,
- ---------------------------------------------------------------------------
2001
- ----
Operating revenues increased 5.5% for the three months ended June 30,
2002, compared to the same period of the prior year, due in part to a 2.9%
increase in the average number of tractors in service and a 1.9% increase
in average miles per tractor in service. Freight volumes were unusually
stronger than normal in second quarter 2002, due in part to some shippers
restocking low inventory levels and, to a lesser degree, increased shipping
in the West Coast markets due to concerns about the potential for a work
stoppage at the Los Angeles port. This enabled the Company to be more
selective with the freight it hauls and resulted in a lower empty mile
percentage, higher miles per truck, and higher revenue per mile. The
Company does not know if it will experience these same unusually strong
volumes in the third quarter and fourth quarter 2002. Revenue per total
mile, excluding fuel surcharges, increased 2.0%. Fuel surcharges, which
represent collections from customers for the higher cost of fuel, decreased
from $13.6 million in second quarter 2001 to $6.6 million in second quarter
2002 due to lower average fuel prices (see fuel explanation below).
Excluding fuel surcharge revenues, trucking revenues increased 6.9% for the
three months ended June 30, 2002, compared to the same period of the prior
year.
Operating expenses, expressed as a percentage of operating revenues,
were 92.0% for the three months ended June 30, 2002, compared to 93.8% for
the three months ended June 30, 2001. Owner-operator miles as a percentage
of total miles were 16.2% in second quarter 2002 compared to 16.5% in
second quarter 2001. 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. Over the past year, it has been more difficult to attract and
retain owner-operator drivers due to the challenging operating conditions.
Salaries, wages and benefits increased from 35.6% to 36.0% of revenues
due in part to an increase in the number of workers' compensation claims
and the average cost per claim and an increase in the workers' compensation
insurance premiums. The Company renewed its workers' compensation insurance
coverage, and for the policy year beginning April 2002, the Company
increased its self-insurance retention from $0.5 million to $1.0 million
per claim and has premium-based coverage with a reputable insurance company
for claims above this amount. The Company's premiums for this coverage
increased by approximately $1.3 million over the premiums from the prior
policy year. In addition, the Company increased employees in its
maintenance department to reduce the higher cost of over-the-road repairs.
The market for attracting company drivers is becoming more challenging,
and the Company anticipates that the competition for qualified drivers
will 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 11.1% to 8.9% of revenues due to lower fuel
prices. Average diesel fuel prices remained higher than normal compared to
historical price levels, but were 18 cents per gallon lower in second
quarter 2002 compared to the high prices of second quarter 2001. The
Company's customer fuel surcharge reimbursement programs have historically
enabled the Company to recover most of the higher fuel prices from its
customers compared to normalized average fuel prices. These surcharge
programs, which generally adjust weekly based on fuel pricing changes,
continued to be in effect during second quarter 2002. After considering
the amounts collected from customers through fuel surcharge programs, net
of reimbursement to owner-operators, there was no significant impact on
second quarter 2002 earnings per share compared to second quarter 2001
earnings per share due to lower fuel costs. Shortages of fuel, increases
in fuel prices, or rationing of petroleum products can have a materially
adverse effect on the operations and profitability of the Company. The
Company is unable to predict whether fuel price levels will increase or
decrease in the future or the extent to which fuel surcharges will be
collected from customers. As of June 30, 2002, the Company had no
derivative financial instruments to reduce its exposure to fuel price
fluctuations.
11
Insurance and claims increased from 3.4% to 3.7% of revenues due to
higher excess insurance premiums and unfavorable claims experience in
second quarter 2002. Insurance premiums in the liability insurance market
have increased significantly for many truckload carriers. Since the
Company is self-insured for $0.5 million of liability for each claim and
varying annual aggregate amounts of liability for claims above $0.5 million
and below $4.0 million, these premium increases only affect the Company for
coverage above these amounts. The Company has been self-insured and
managed its own claims for liability, cargo, and property damage for over
ten years. The Company renewed its annual liability insurance coverage for
coverage in excess of $0.5 million per claim effective August 1, 2001. The
effect of the August 2001 insurance renewal was an increase in the
Company's total insurance and claims expense of less than 10% of the
Company's total annual insurance and claims expense. The Company's premium
rate for liability coverage up to $3.0 million per claim is fixed through
August 1, 2004, while coverage levels above $3.0 million per claim were
renewed effective August 1, 2002. For the policy year beginning August
2002, the Company's total premiums for liability insurance remained almost
the same as the prior policy year while the Company assumed liability for
claims above $3.0 million and below $5.0 million per claim. Liability
claims in excess of $5.0 million per claim, if they occur, are covered
under premium-based policies with reputable insurance companies.
Rent and purchased transportation decreased from 17.1% to 17.0% of
revenues due primarily to a decrease in payments to owner-operators for
fuel reimbursement. The Company reimburses owner-operators for the higher
cost of fuel based on fuel surcharge reimbursements collected from
customers. This decrease was offset by an increase in carrier charges for
non-trucking services.
Other operating expenses decreased from 0.3% to 0.2% of revenues due
to improvements in the used truck market. Record levels of trucks
manufactured during 1999 and 2000, an increased supply of used trucks
caused in part by trucking company business failures, and slower fleet
growth by many carriers have all contributed to a decline in the market
value of used trucks. In the past few months, the pricing for the
Company's used trucks has improved, and the Company has been selling more
trucks. Over the last year, the Company has expanded its nationwide retail
truck sales network that has been a leading seller of used Company trucks
for over ten years. In second quarter 2002 the Company realized gains of
$0.1 million on sales of used trucks to third parties through its Fleet
Truck Sales Retail network compared to losses of $0.5 million in second
quarter 2001.
The Company's effective income tax rate (income taxes as a percentage
of income before income taxes) was 37.5% for the three-month periods ended
June 30, 2002 and 2001.
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
- -------------------------------------------------------------------------
Operating revenues increased by 4.1% for the six months ended June 30,
2002, compared to the same period of the previous year, primarily due to a
3.7% increase in the average number of tractors in service. Revenue per
total mile, excluding fuel surcharges, increased 1.9%.
Operating expenses, expressed as a percentage of operating revenues,
were 93.2% for the six months ended June 30, 2002, compared to 94.3% for
the same period of the previous year.
Salaries, wages and benefits increased from 35.7% to 36.4% of
revenues, due to the Company increasing employees in its maintenance
department to reduce the higher cost of over-the-road repairs and increases
in workers' compensation and health insurance expense due to rising medical
costs and higher weekly state workers' compensation payment rates. Fuel
decreased from 11.3% to 8.5% of revenues due to lower fuel prices.
Supplies and maintenance increased from 9.0% to 9.4% of revenues due to
12
more maintenance being performed over-the-road than at company facilities.
As referred to on page 11, the Company has begun adding more maintenance
employees. Insurance and claims increased from 3.4% to 3.7% of revenues
primarily due to higher excess insurance premiums and unfavorable claims
experience. Rent and purchased transportation increased from 16.8% to
17.4% primarily due to an increase in purchased transportation relating to
non-trucking operations, offset by a decrease in payments to owner-
operators for fuel reimbursement.
Accounting Standards:
During June 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 143, Accounting for Asset Retirement Obligations. This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 requires an enterprise to
record the fair value of an asset retirement obligation as a liability in
the period in which it incurs a legal obligation associated with the
retirement of a tangible long-lived asset. SFAS 143 is effective for
fiscal years beginning after June 15, 2002. As of June 30, 2002,
management believes that SFAS 143 will have no significant effect on the
financial position, results of operations, and cash flows of the Company.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. The provisions of this statement related to the
rescission of Statement No. 4 shall be applied in fiscal years beginning
after May 15, 2002. As of June 30, 2002, management believes that SFAS 145
will have no significant effect on the financial position, results of
operations, and cash flows of the Company.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. The provisions of this
statement are effective for exit or disposal activities that are initiated
after December 31, 2002. As of June 30, 2002, management believes that
SFAS 146 will have no significant effect on the financial position, results
of operations, and cash flows of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk from changes in commodity
prices.
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 majority of fuel price increases from customers in the form of
fuel surcharges. As of June 30, 2002, the Company has implemented customer
fuel surcharges with most of its revenue base to offset most of the higher
fuel cost per gallon. The Company cannot predict the extent to which
higher fuel price levels may occur in the future or the extent to which
fuel surcharges could be collected to offset such increases. As of June
30, 2002, the Company had no derivative financial instruments to reduce its
exposure to fuel price fluctuations.
The Company conducts business in Mexico and Canada. Foreign currency
transaction gains and losses were not material to the Company's results of
operations for second quarter 2002 and prior periods. The Company receives
payment for freight services performed in Mexico and Canada primarily in
U.S. dollars to reduce foreign currency risk. Accordingly, the Company is
not currently subject to material foreign currency exchange rate risks from
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the effects that exchange rate movements of foreign currencies would have
on the Company's future costs or on future cash flows.
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 14, 2002 for the purpose of electing three directors for three-
year terms. 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. Of the 63,861,942
shares entitled to vote, stockholders representing 62,513,359 shares
(97.9%) were present in person or by proxy. The voting tabulation was as
follows:
Shares Shares
Voted Voted
"FOR" "ABSTAIN"
---------- ---------
Gary L. Werner 53,662,560 8,850,799
Gregory L. Werner 53,599,450 8,913,909
Michael L. Steinbach 61,272,703 1,240,656
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
(i) A report on Form 8-K, filed April 22, 2002, regarding a news
release on April 16, 2002, announcing the Company's operating
revenues and earnings for the first quarter ended March 31, 2002.
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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 12, 2002 By: /s/ John J. Steele
---------------- -----------------------------
John J. Steele
Vice President, Treasurer and
Chief Financial Officer
Date: August 12, 2002 By: /s/ James L. Johnson
--------------- -----------------------------
James L. Johnson
Vice President, Controller and
Corporate Secretary
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