UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 1998 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 incorporation or organization) identification no.) 14507 FRONTIER ROAD POST OFFICE BOX 45308 OMAHA, NEBRASKA 68145-0308 (402) 895-6640 (Address of principal executive offices) (Zip code) (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE 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 ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [ X ] The aggregate market value of the registrant's $.01 par value common stock held by nonaffiliates of the registrant as of March 15, 1999 was approximately $487.2 million (based upon $17.125 per share closing price on that date, as reported by Nasdaq). (Aggregate market value estimated solely for the purposes of this report. This shall not be construed as an admission for purposes of determining affiliate status.) As of March 15, 1999, 47,333,409 shares of the registrant's common stock were outstanding. Portions of the 1998 Annual Report to Stockholders are incorporated in Parts I, II and IV of this report. Portions of the Proxy Statement of Registrant for the Annual Meeting of Stockholders to be held May 11, 1999 are incorporated in Part III of this report.
PART I ITEM 1. BUSINESS General Werner Enterprises, Inc. ("Werner" or the "Company") is a transportation company engaged primarily in hauling truckload shipments of general commodities in both interstate and intrastate commerce. Werner is among the five largest truckload carriers in the United States and maintains its headquarters in Omaha, Nebraska, near the geographic center of its service area. Werner was founded by Chairman and Chief Executive Officer Clarence L. Werner in 1956 who started the business with one truck at the age of 19. Werner completed its initial public offering in April 1986 with a fleet of 630 trucks. Werner ended 1998 with a fleet of 6,150 trucks. The Company operates throughout the 48 contiguous states pursuant to operating authority, both common and contract, granted by the Department of Transportation and pursuant to intrastate authority granted by various states. The Company also has authority to operate in the ten provinces of Canada and provides through trailer service in and out of Mexico. The principal types of freight transported by the Company include consumer products, retail store merchandise, food products, paper products, beverages, industrial products and building materials. Marketing and Operations Werner's business philosophy is to provide superior on-time service to its customers at a low cost. To accomplish this, Werner operates premium, modern tractors and trailers which have a low frequency of breakdowns and help attract and retain qualified drivers. Werner has continually invested in technology to improve service to customers and improve retention of drivers. Werner focuses on shippers that value the broad geographic coverage, equipment capacity, technology, customized services, and flexibility available from a large, financially stable carrier. These shippers are generally less sensitive to rate levels, preferring to have their freight handled by a few core carriers with whom they can establish service-based, long-term relationships. Werner operates in the truckload segment of the trucking industry. Within the truckload segment, Werner provides specialized services to customers based on their trailer needs (van, flatbed, temperature controlled), geographic area (medium to long haul throughout the 48 contiguous states, regional), or conversion of their private fleet to Werner (dedicated). Werner also has a logistics division in which the Company manages the transportation requirements for individual customers. This can include transportation routing, transportation mode selection, truck brokerage, transloading and other services. Logistics is a non-asset based business that is highly dependent on information systems and qualified employees. As compared to trucking operations which requires a significant capital investment in equipment, logistics operating margins are generally lower than trucking operating margins. Werner has a diversified freight base and is not dependent on a small group of customers or a specific industry for a majority of its freight. During 1998, the Company's largest 5, 10, and 25 customers comprised 21%, 30%, and 43% of the Company's revenues, respectively. No one customer accounted for more than 7% of the Company's revenues in 1998. 2
Virtually all of Werner's company-owned and owner-operator tractors are equipped with satellite communications devices that enable the Company and drivers to conduct two-way communication using standardized and freeform messages. The satellite technology also enables the Company to monitor the progress of shipments. The Company obtains specific data on the location of all trucks in the fleet at least every hour of every day. Using the real- time data obtained from the satellite devices, Werner has developed advanced applications systems to improve customer service and driver service. Examples of such application systems include (1) an automated driver hours of service system which enables the Company to preplan and control driver hours of service, (2) automated engine diagnostics to continually monitor more than a dozen mechanical fault tolerances, (3) software which enables the Company to preplan shipments which can be swapped by drivers and trucks enroute to meet driver home time needs, without compromising on-time delivery requirements, and (4) automated "possible late load" tracking which informs the operations department of shipments that may be operating behind schedule, thereby allowing the Company to take preventive measures to avoid a late delivery, or to provide the customer with advance notice. In June 1998, Werner Enterprises became the first trucking company in the United States to receive authorization from the Federal Highway Administration to use the Company's proprietary Paperless Log System to automatically keep track of truck movement and drivers' hours of service. The Paperless Log System replaces the paper logbooks traditionally used by truck drivers to track their daily work activities. Seasonality In the trucking industry, revenues generally show a seasonal pattern as some customers reduce shipments during and after the winter holiday season. The Company's operating expenses have historically been higher in the winter months due primarily to decreased fuel efficiency, increased maintenance costs of revenue equipment in colder weather, and increased insurance and claims costs due to adverse winter weather conditions. The Company attempts to minimize the impact of seasonality through its marketing program which seeks additional freight from certain customers during traditionally slower shipping periods. Revenue can also be affected by bad weather and holidays, since revenue is directly related to available working days of shippers. Employees and Owner-Operator Drivers As of December 31, 1998, the Company employed 7,078 drivers, 543 mechanics and maintenance personnel, 1,188 office personnel for the trucking operation, and 62 office personnel for the non-trucking (logistics) operation. The Company also had contracts with independent contractors (owner-operators) for the services of 930 tractors that provide both a tractor and a qualified driver or drivers. None of the Company's employees is represented by a collective bargaining unit, and the Company considers relations with its employees to be good. The Company recognizes that its professional driver work force is one of its most valuable assets. Most of Werner's drivers are compensated based upon miles driven. The rate per mile increases with the drivers' length of service. Additional compensation may be earned through a fuel efficiency bonus, a mileage bonus, an annual achievement bonus and for extra work associated with their job (loading and unloading, extra stops, and shorter mileage trips, for example). The Company conducts a regular schedule of driver/top management meetings to share information and concerns and seek mutually satisfactory solutions. At times, there are shortages of drivers in the trucking industry. The Company's management believes the number of qualified drivers in the industry has been reduced because of the elimination of federal funding for driving schools, changes in the demographic composition of the work force, individual drivers' desire to be home more often, and a declining unemployment rate in the U.S. over the past several years. 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. 3
The Company also recognizes that carefully selected owner-operators complement its Company-employed drivers. Owner-operators supply their own tractor and driver, and are responsible for their operating expenses. Because owner-operators provide their own tractors, less capital is required from the Company for growth. Also, owner-operators provide the Company with another source of drivers to support its growth. The Company intends to continue its emphasis on recruiting owner-operators, as well as Company drivers. Revenue Equipment As of December 31, 1998, the Company operated 5,220 Company-owned tractors and had contracts for 930 tractors owned by owner-operators. The tractors as of December 31, 1998 that operated in the Company's Truckload Division were as follows: 3,640 medium-to-long-haul dry vans; 410 medium-to-long- haul flatbeds; 820 regional short-haul vans; 310 temperature-controlled; and 970 dedicated. Approximately 78% of the Company-owned tractors are manufactured by Freightliner, a subsidiary of DaimlerChrysler. Most of the remaining Company-owned tractors are manufactured by Peterbilt. This standardization decreases downtime by simplifying maintenance. The Company adheres to a comprehensive maintenance program for both tractors and trailers. Due to continuous upgrading of the Company-owned tractor fleet, the average age was 1.3 years at December 31, 1998. Owner-operator tractors are inspected prior to acceptance by the Company for compliance with operational and safety requirements of the Company and the Department of Transportation. These tractors are then periodically inspected, similar to Company-owned tractors, to monitor continued compliance. The Company operated 16,350 trailers at December 31, 1998: 14,714 dry vans; 752 flatbeds; 819 temperature controlled; and 65 other specialized trailers. As of December 31, 1998, 97% of the Company's fleet of dry van trailers consisted of 53-foot trailers. Other trailer lengths such as 27- foot and 57-foot are also provided by the Company to meet the specialized needs of customers. The average age of the trailer fleet was 3.1 years at December 31, 1998. Fuel Shortages of fuel, increases in fuel prices or rationing of petroleum products could have a materially adverse effect on the operations and profitability of the Company. At times, the Company has experienced significant increases in the cost of fuel. During past periods of high fuel costs, the Company has recovered a portion of the increased cost from customers via the use 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. The Company maintains above-ground and underground fuel storage tanks at some of its terminals. Leakage or damage to these facilities could expose the Company to environmental clean-up costs. The tanks are routinely inspected to help prevent and detect such problems. Regulation The Company is a motor carrier regulated by the Surface Transportation Board of the United States Department of Transportation (DOT). The DOT generally governs matters such as safety requirements, registration to engage in motor carrier operations, accounting systems, certain mergers, consolidations, acquisitions, and periodic financial reporting. The Company currently has a satisfactory DOT safety rating, which is the highest available rating. A conditional or unsatisfactory DOT safety rating could have an adverse effect on the Company, as some of the Company's contracts with customers require a satisfactory rating. Such matters as weight and dimensions of equipment are also subject to federal, state, and international regulations. The Company has unlimited authority to carry general commodities in interstate commerce throughout the 48 contiguous states. The Company currently has authority to carry freight on an intrastate basis in 43 states. The Federal Aviation Administration Authorization Act of 1994 (the FAAA Act) amended sections of the Interstate 4
Commerce Act to prevent states from regulating rates, routes or service of motor carriers after January 1, 1995. The FAAA Act did not address state oversight of motor carrier safety and financial responsibility, or state taxation of transportation. If a carrier wishes to operate in a state where it did not previously have intrastate authority, it must, in most cases, still apply for authority. The Company's operations are subject to various federal, state and local environmental laws and regulations, implemented principally by the EPA and similar state regulatory agencies, governing the management of hazardous wastes, other discharge of pollutants into the air and surface and underground waters, and the disposal of certain substances. The Company believes that its operations are in material compliance with current laws and regulations. Competition The trucking industry is highly competitive and includes thousands of trucking companies. The Company has a small but growing share (estimated at approximately 1%) of the markets targeted by the Company. The Company competes primarily with other truckload carriers. Railroads, less-than- truckload carriers and private carriers also provide competition, but to a lesser degree. Competition for the freight transported by the Company is based primarily on service and efficiency and, to some degree, on freight rates alone. Few other truckload carriers have greater financial resources, own more equipment or carry a larger volume of freight than the Company. The Company is believed to be one of the five largest truckload carriers in the trucking industry. Forward Looking Information The forward-looking statements in this report, which reflect management's best judgment based on factors currently known, involve risks and uncertainties. Actual results could differ materially from those anticipated in the forward-looking statements included herein 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", incorporated herein by reference to pages 13 through 15 of the Annual Report. ITEM 2. PROPERTIES Werner's headquarters is located along Interstate 80 just west of Omaha, Nebraska, on approximately 210 acres, 171 of which are held for future expansion. The headquarters consist of the Company's 108,000 square-foot office building, a 5,000 square-foot computer center, and 73,000 square feet of maintenance and repair facilities containing a central parts warehouse, frame straightening and alignment machine, truck and trailer wash areas, equipment safety lanes, body shops for tractors and trailers and a paint booth. Additionally, the Omaha headquarters includes a drivers' lounge, a drivers' orientation section, a cafeteria and a Company store. The Company is completing construction of a 144,000 square-foot addition to the Company's headquarters office building. Most of the Omaha maintenance and repair facilities will eventually be relocated to the land nearby the corporate headquarters that is being held for future expansion. 5
The Company and its subsidiaries own a 22,000 square-foot terminal in Springfield, Ohio, a 32,000 square-foot facility near Denver, a 18,000 square-foot facility near Los Angeles, a 31,000 square-foot terminal near Atlanta, a 27,000 square-foot terminal in Dallas, and a 32,000 square-foot terminal in Phoenix. The Company leases terminal facilities in Allentown, Pennsyvania and in Indianapolis, Indiana. All eight locations include office and maintenance space. Additionally, the Company leases several small sales offices and trailer parking yards in various locations throughout the country. ITEM 3. LEGAL PROCEEDINGS The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company has assumed liability up to $500,000 for each occurrence involving personal injury or property damage. The Company is also responsible for $1,500,000 annual aggregate amount of liability for claims between $500,000 and $1,000,000, and a $1,000,000 annual aggregate amount for claims between $1,000,000 and $2,000,000. The Company maintains insurance, which covers liability in excess of this amount to coverage levels that management considers adequate. The Company believes that adverse results in one or more of these claims would not have a material adverse effect on its results of operations or financial position. The information set forth in Note (1) "Insurance and Claims Accruals" on page 20 and Note (5) "Commitments and Contingencies" on page 23 of the Annual Report is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of 1998, no matters were submitted to a vote of security holders. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under the captions "Price Range of Common Stock" and "Dividend Policy" on page 24 of the Annual Report, "Consolidated Statements of Stockholders' Equity" on page 19 of the Annual Report, and Note (1) "Common Stock and Earnings Per Share" on page 21 of the Annual Report is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information set forth under the caption "Financial Highlights" on page 1 of the Annual Report is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 13 through 15 of the Annual Report is incorporated herein by reference. 6
ITEM 7A. 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 $50 million of variable rate debt at December 31, 1998. 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 $500,000. 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 December 31, 1998, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth under the captions "Consolidated Statements of Income", "Consolidated Balance Sheets", "Consolidated Statements of Cash Flows", "Consolidated Statements of Stockholders' Equity", "Report of Independent Public Accountants", and "Notes to Consolidated Financial Statements", on pages 16 through 23 of the Annual Report is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No reports on Form 8-K have been filed within the twenty-four months prior to December 31, 1998 involving a change of accountants or disagreements on accounting and financial disclosure. PART III Certain information required by Part III is omitted from this report on Form 10-K in that the Company will file a definitive proxy statement pursuant to Regulation 14A (Proxy Statement) not later than 120 days after the end of the fiscal year covered by this report on Form 10-K, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference. Such incorporation does not include the Compensation Committee Report or the Performance Graph included in the Proxy Statement. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is incorporated herein by reference to the Company's Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to the Company's Proxy Statement. 7
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated herein by reference to the Company's Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated herein by reference to the Company's Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements and Schedules. (1) Financial Statements: See Part II, Item 8 hereof. (2) Financial Statement Schedules: The consolidated financial statement schedule set forth under the following caption is included herein. The page reference is to the consecutively numbered pages of this report on Form 10-K. Page ---- Report of Independent Public Accountants on Schedule 11 Schedule II - Valuation and Qualifying Accounts 12 Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto. (3) Exhibits: The response to this portion of Item 14 is submitted as a separate section of this report on Form 10-K (see Exhibit Index). (b) Reports on Form 8-K: A report on Form 8-K, filed October 19, 1998, regarding a news release on October 14, 1998, announcing the Company's operating revenues and earnings for the third quarter ended September 30, 1998. FORM 11-K INFORMATION INCLUDED HEREIN RELATED TO STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS Stock Option Plan The Company's Stock Option Plan (the Stock Option Plan) is a nonqualified plan that provides for the grant of options to management employees. Options are granted at prices equal to the market value of the common stock on the date the option is granted. The options are exercisable over a period (determined by the Option Committee of the Board of Directors) not to exceed ten years and one day from the date of grant. Stock appreciation rights may also be granted at the same time as participants are awarded stock options. Stock appreciation rights are exercisable at a time when the related options may be exercised. The maximum number of shares of common stock that may be optioned under the Stock Option Plan is 3,750,000 shares. Additionally, the maximum number of shares which may be optioned to any one person under the Stock Option 8
Plan is 937,500 shares. Members of the Option Committee are not eligible to participate in the Stock Option Plan while members of the Option Committee. Current members of the Option Committee are: Clarence L. Werner Irving B. Epstein Werner Enterprises, Inc. Epstein & Epstein PO Box 45308 Suite 123 Omaha, NE 68145 10050 Regency Circle Omaha, NE 68114 Curtis G. Werner Martin F. Thompson Werner Enterprises, Inc. c/o Werner Enterprises, Inc. PO Box 45308 PO Box 45308 Omaha, NE 68145 Omaha, NE 68145 These persons do not receive compensation for their services as members of the Option Committee, except outside directors, who receive a fee of $2,000 for each meeting of the Option Committee they attend if not held on a day on which a meeting of the Board of Directors is held. The information set forth in Note (4) "Stock Option and Employee Benefit Plans" on pages 22 and 23 of the Annual Report is incorporated herein by reference. No stock appreciation rights are outstanding. All employees to whom options were granted were provided with a copy of the Stock Option Plan's Prospectus, as well as the Company's most recent Annual Report. Employee Stock Purchase Plan Any person employed by the Company or any subsidiary at least 90 days and who is employed at least 20 hours per week on a regular basis may participate in the Company's Employee Stock Purchase Plan (the Purchase Plan). Eligible participants designate the amount of regular payroll deductions and/or a single annual payment, subject to a $1,950 yearly maximum amount, that will be used to purchase shares of the Company's common stock on the Over-The-Counter Market subject to the terms of the Purchase Plan. The Company contributes an amount equal to 15% of each participant's contributions under the Purchase Plan. Interest accrues on Purchase Plan contributions at a rate of 5.25%. The broker's commissions and administrative charges related to purchases of common stock under the Purchase Plan are paid by the Company. As of December 31, 1998, 642 employees were participating in the Purchase Plan. The administrator of the Purchase Plan is John J. Steele, Vice President, Treasurer and Chief Financial Officer of the Company, Post Office Box 45308, Omaha, Nebraska 68145. Mr. Steele has received no compensation for his services as administrator. The broker utilized by the Company to make purchases under the Purchase Plan is Salomon Smith Barney, Inc., 388 Greenwich Street, New York, New York 10013. The total amount of compensation received by Salomon Smith Barney, Inc. from the Purchase Plan for services in all capacities during the year ended December 31, 1998 was $7,631. Participants are provided with a copy of the Purchase Plan's Prospectus, as well as the Company's most recent Annual Report and any quarterly reports prepared since the Annual Report. Following each purchase under the Purchase Plan, each participant receives a statement from the broker detailing the number of shares purchased, the purchase price, and the accumulated number of shares owned by the participant. 9
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 24th day of March, 1999. WERNER ENTERPRISES, INC. By: /s/ John J. Steele ---------------------------------------- John J. Steele Vice President, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. <TABLE> <CAPTION> Signature Position Date --------- -------- ---- <S> <C> <C> /s/ Clarence L. Werner Chairman of the Board, Chief March 24, 1999 - -------------------------- Executive Officer and Director Clarence L. Werner /s/ Gary L. Werner Vice Chairman and March 24, 1999 - -------------------------- Director Gary L. Werner /s/ Curtis G. Werner Vice Chairman - Corporate March 24, 1999 - -------------------------- Development and Director Curtis G. Werner /s/ Gregory L. Werner President and Director March 24, 1999 - -------------------------- Gregory L. Werner /s/ John J. Steele Vice President, Treasurer and March 24, 1999 - -------------------------- Chief Financial Officer John J. Steele /s/ James L. Johnson Corporate Secretary and March 24, 1999 - -------------------------- Controller James L. Johnson /s/ Irving B. Epstein Director March 24, 1999 - -------------------------- Irving B. Epstein /s/ Martin F. Thompson Director March 24, 1999 - -------------------------- Martin F. Thompson /s/ Gerald H. Timmerman Director March 24, 1999 - -------------------------- Gerald H. Timmerman /s/ Donald W. Rogert Director March 24, 1999 - -------------------------- Donald W. Rogert /s/ Jeffrey G. Doll Director March 24, 1999 - -------------------------- Jeffrey G. Doll </TABLE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE ---------------------------------------------------- To the Stockholders and Board of Directors of Werner Enterprises, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Werner Enterprises, Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 20, 1999. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14(a)(2) of this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Omaha, Nebraska, January 20, 1999 11
SCHEDULE II WERNER ENTERPRISES, INC. VALUATION AND QUALIFYING ACCOUNTS (In thousands) <TABLE> <CAPTION> Balance Charged Write- Balance At To Off At Beginning Costs Of End Of And Doubtful Of Period Expenses Accounts Period ------ -------- -------- ------ <S> <C> <C> <C> <C> Year ended December 31, 1998: Allowance for doubtful accounts $3,126 $206 $399 $2,933 ===================================== Year ended December 31, 1997: Allowance for doubtful accounts $3,359 $206 $439 $3,126 ===================================== Year ended December 31, 1996: Allowance for doubtful accounts $3,240 $606 $487 $3,359 ===================================== </TABLE> 12
EXHIBIT INDEX <TABLE> <CAPTION> Exhibit Number Description Page Number or Incorporated by Reference to - ------- ----------- ------------------------------------------- <S> <C> <C> 3(i)(A) Revised and Amended Exhibit 3 to Registration Statement on Form Articles of S-1, Registration No. 33-5245 Incorporation 3(i)(B) Articles of Amendment Exhibit 3(i) to the Company's report on to Articles of Form 10-Q for the quarter ended May 31, Incorporation 1994 3(i)(C) Articles of Amendment Filed herewith to Articles of Incorporation 3(ii) Revised and Amended Exhibit 3(ii) to the Company's report on By-Laws Form 10-K for the year ended December 31, 1994 10 Amended and Restated Exhibit 10 to the Company's report on Form Stock Option Plan 10-Q for the quarter ended May 31, 1994 11 Statement Re: Filed herewith Computation of Per Share Earnings 13 Incorporated by Filed herewith reference sections of Annual Report to Stockholders for the year ended December 31, 1998 21 Subsidiaries of the Filed herewith Registrant 23 Consent of Arthur Filed herewith Andersen LLP 27 Financial Data Filed herewith Schedule </TABLE> 13