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Delaware (State or other jurisdiction of incorporation or organization) | 4213 (Primary Standard Industrial Classification Code Number) | 27-2646153 (I.R.S. Employer Identification Number) |
Phoenix, Arizona 85043
(602)��269-9700
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Executive Vice President, General Counsel and Corporate Secretary
Swift Holdings Corp.
2200 South 75th Avenue
Phoenix, Arizona 85043
(602) 269-9700
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Richard B. Aftanas, Esq. Stephen F. Arcano, Esq. Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York10036-6522 (212) 735-3000 | Mark A. Scudder, Esq. Earl H. Scudder, Esq. Scudder Law Firm, P.C., L.L.O. 411 South 13th Street Lincoln, Nebraska 68508 (402) 435-3223 | Andrew Keller, Esq. Lesley Peng, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017-3954 (212) 455-2000 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller Reporting company o |
Proposed Maximum | Amount of | |||||
Title of Each Class of | Aggregate | Registration | ||||
Securities to be Registered | Offering Price(1)(2) | Fee | ||||
Class A Common Stock, par value $0.001 per share | $700,000,000 | $49,910 | ||||
(1) | Includes shares to be sold upon exercise of the underwriters’ over-allotment option. See “Underwriting.” | |
(2) | Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act. |
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state where the offer or sale thereof is not permitted. |
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Per Share | Total | |||||||
Initial public offering price | $ | $ | ||||||
Underwriting discounts and commissions | $ | $ | ||||||
Proceeds to us, before expenses | $ | $ |
Morgan Stanley | BofA Merrill Lynch | Wells Fargo Securities |
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• | assumes the underwriters have not exercised their option to purchase additional shares of Class A common stock from us; and | |
• | assumes the consummation of the merger and recapitalization, as described under “Reorganization,” and the filing of our amended and restated certificate of incorporation, all of which will occur prior to the consummation of this offering. |
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Approximate | ||||||||
Percentage of Total | ||||||||
Operating Revenue | ||||||||
2009 | 2006 | |||||||
• General truckload service, which consists of one-way movements over irregular routes throughout the United States and in Canada through dry van, temperature controlled, flatbed, or specialized trailers, as well as drayage operations, using both company tractors and owner-operator tractors | 67.2 | % | 71.3 | % | ||||
• Dedicated truckload service, in which we devote exclusive use of equipment and offer tailored solutions under long-term contracts, generally with higher operating margins and lower driver turnover | 18.7 | % | 22.7 | % | ||||
• Cross-border Mexico/U.S. truckload service, through Trans-Mex, Inc. S.A. de C.V., or Trans-Mex, our wholly-owned subsidiary that is one of the largest trucking companies in Mexico with service throughout Mexico and through every major border crossing between the United States and Mexico | 2.4 | % | 1.6 | % | ||||
• Rail intermodal service, which involves arranging for rail service for primary freight movement and related drayage service and requires lower tractor investment than general truckload service, making it one of our less asset-intensive services | 6.2 | % | 2.9 | % | ||||
• Non-asset based freight brokerage and logistics management services, in which we offer our transportation management expertise and/or arrange for other trucking companies to haul freight that does not fit our network, earning us a revenue share with little investment | 1.4 | % | 0.3 | % | ||||
• Other revenue generating services. In addition to the services referenced above, we offer services that include providing tractor leasing arrangements through IEL to owner-operators, underwriting insurance through our wholly-owned captive insurance companies, and repair services through our maintenance and repair shops to our owner-operators and third parties | 4.1 | % | 1.2 | % |
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Source: ATA | Source: ACT Research |
• | North American market leader with broad terminal network and a modern fleet. The size and scope of our operations afford us significant advantages in a fragmented truckload industry. We operate North America’s |
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largest truckload fleet, have 35 major terminals and multiple other locations strategically positioned throughout the United States and Mexico, and offer customers “one-stop-shopping” for a broad spectrum of their truckload transportation needs. Our fleet size offers wide geographic coverage while maintaining the efficiencies associated with significant traffic density within our operating regions. Our terminals are strategically located near key population centers, driver recruiting areas, and cross-border hubs, often in close proximity to our customers. This broad network offers benefits such as in-house maintenance, more frequent equipment inspections, localized driver recruiting, rapid customer response, and personalized marketing efforts. Our size allows us to achieve substantial economies of scale in purchasing items such as tractors, trailers, containers, fuel, and tires where pricing is volume sensitive. We believe our scale also offers additional benefits in brand awareness and access to capital. Additionally, our modern company tractor fleet, with an average age of 2.55 years for our approximately 9,000 linehaul sleeper units, lowers maintenance and repair expense, aids in driver recruitment, and increases asset utilization as compared with an older fleet. |
• | High quality customer service and extensive suite of services. Our intense focus on customer satisfaction contributed to 20 “carrier of the year” or similar awards in 2009 and has helped us establish a strong platform for cross-selling our other services. Our strong and diversified customer base, ranging from Fortune 500 companies to local shippers, has a wide variety of shipping needs, including general and specialized truckload, imports and exports, regional distribution, high-service dedicated operations, rail intermodal service, and surge capacity through fleet flexibility and brokerage and logistics operations. We believe customers continue to seek fewer transportation providers that offer a broader range of services to streamline their transportation management functions. For example, ten of our top fifteen customers used at least four of our services in the three months ended March 31, 2010. Our top fifteen customers by revenue in 2009 included Coors, Costco, Dollar Tree, Georgia-Pacific, Home Depot, Kimberly-Clark, Lowes, Menlo Logistics, Procter & Gamble, Quaker Oats, Ryder Logistics, Sears, Target, and Wal-Mart. We believe the breadth of our services helps diversify our customer base and provides us with a competitive advantage, especially for customers with multiple needs and international shipments. | |
• | Strong and growing owner-operator business. We supplement our company tractors with tractors provided by owner-operators, who operate their own tractors and are responsible for most ownership and operating expenses. We believe that owner-operators provide significant advantages that primarily arise from the entrepreneurial motivation of business ownership. Our owner-operators tend to be more experienced, have lower turnover, have fewer accidents per million miles, and produce higher weekly trucking revenue per tractor than our average company drivers. In 2009, our owner-operator tractors drove on average 34% more miles per week than our company tractors. | |
• | Leader in driver and owner-operator development. Driver recruiting and retention historically have been significant challenges for truckload carriers. To address these challenges, we employ nationwide recruiting efforts through our terminal network, operate five driver training schools, maintain an active and successful owner-operator development program, provide drivers modern tractors, and employ numerous driver satisfaction policies. We believe our extensive recruiting and training efforts will become increasingly advantageous to us in periods of economic growth when employment alternatives are more plentiful and also when new regulatory requirements begin to affect the size or effective capacity of the industry-wide driver pool. | |
• | Experienced management aligned with corporate success. Our management team has a proven track record of growth and cost control. The improvements we have made to our operations since going private have positioned us to benefit from the expected improvement in the freight environment. Management focuses on disciplined execution and financial performance by measuring our progress through a combination of Adjusted EBITDA growth, revenue growth, Adjusted Operating Ratio, and return on capital. We align management’s priorities with our own through equity option awards and an annual senior management incentive program linked to Adjusted EBITDA. |
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• | Profitable revenue growth. To increase freight volumes and yield, we intend to further penetrate our existing customer base, cross-sell our services, and pursue new customer opportunities. Our superior customer service and extensive suite of truckload services continue to contribute to recent new business wins from customers such as Costco, Procter & Gamble, Caterpillar, and Home Depot. In addition, we are further enhancing our sophisticated freight selection management tools to allocate our equipment to more profitable loads and complementary lanes. As freight volumes increase, we intend to prioritize the following areas for growth: |
— | Rail intermodal and port operations. Our growing rail intermodal presence allows us to better serve customers in longer haul lanes and reduce our investment in fixed assets. Since its inception in 2005, we have grown our rail intermodal business by adding approximately 4,300 containers, and we have ordered an additional 1,000 containers for delivery between August 2010 and June 2011. We have intermodal agreements with all major U.S. railroads and recently negotiated more favorable terms with our largest intermodal provider, which has helped increase our volumes through more competitive pricing. We also expanded our presence in the short-haul drayage business at the ports of Los Angeles and Long Beach in 2008 and are evaluating additional port opportunities. | |
— | Dedicated services and private fleet outsourcing. The size and scale of our fleet and terminal network allow us to provide the equipment availability and high service levels required for dedicated contracts. Dedicated contracts often are used for high-service and high-priority freight, sometimes to replace private fleets previously operated by customers. Dedicated operations generally produce higher margins and lower driver turnover than our general truckload operations. We believe these opportunities will increase in times of scarce capacity in the truckload industry. | |
— | Cross-border Mexico-U.S. freight. The combination of our U.S., cross-border, customs brokerage, and Mexican operations enables us to provide efficientdoor-to-door service between the United States and Mexico. We believe our sophisticated load security measures, as well as our Department of Homeland Security, or DHS, status as a C-TPAT carrier, allow us to offer more efficient service than most competitors and afford us substantial advantages with major international shippers. | |
— | Freight brokerage and third-party logistics. We believe we have a substantial opportunity to continue to increase our non-asset based freight brokerage and third-party logistics services. We believe many customers increasingly seek transportation companies that offer both asset-based and non-asset based services to gain additional certainty that safe, secure, and timely truckload service will be available on demand and to reward asset-based carriers for investing in fleet assets. We intend to continue growing our transportation management and freight brokerage capability to build market share with customers, earn marginal revenue on more loads, and preserve our assets for the most attractive lanes and loads. |
• | Increase asset productivity and return on capital. We believe we have a substantial opportunity to improve the productivity and yield of our existing assets through the following measures: |
— | increasing the percentage of our fleet provided by owner-operators, who generally produce higher weekly trucking revenue per tractor than our company drivers; | |
— | increasing company tractor utilization through measures such as equipment pools, relays, and team drivers; |
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— | capitalizing on a stronger freight market to increase average trucking revenue per mile by using sophisticated freight selection and network management tools to upgrade our freight mix and reduce deadhead miles; | |
— | maintaining discipline regarding the timing and extent of company tractor fleet growth based on availability of high-quality freight; and | |
— | rationalizing unproductive assets as necessary, thereby improving our return on capital. |
• | Continue to focus on efficiency and cost control. We intend to continue to implement the Lean Six Sigma, accountability, and discipline measures that helped us improve our Adjusted Operating Ratio in 2009 and in the first quarter of 2010. We presently have ongoing efforts in the following areas that we expect will yield benefits in future periods: |
— | managing the flow of our tractor capacity through our network to balance freight flows and reduce deadhead miles; | |
— | improving processes and resource allocation throughout our customer-facing functions to increase operational efficiencies while endeavoring to improve customer service; | |
— | streamlining driver recruiting and training procedures to reduce attrition costs; and | |
— | reducing waste in shop methods and procedures and in other administrative processes. |
• | Pursue selected acquisitions. In addition to expanding our company tractor fleet through organic growth, and to take advantage of opportunities to add complementary operations, we expect to pursue selected acquisitions. We operate in a highly fragmented and consolidating industry where we believe the size and scope of our operations afford us significant competitive advantages. Acquisitions can provide us an opportunity to expand our fleet with customer revenue and drivers already in place. In our history, we have completed twelve acquisitions, most of which were immediately integrated into our existing business. Given our size in relation to most competitors, we expect most future acquisitions to be integrated quickly. As with our prior acquisitions, our goal is for any future acquisitions to be accretive to our earnings within two full calendar quarters. |
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• | Our business is subject to general economic and business factors affecting the truckload industry such as fluctuations in the price or availability of fuel, increased prices for new revenue equipment, volatility in the used equipment market, increases in driver compensation, or difficulty in attracting or retaining drivers or owner-operators that are largely beyond our control, any of which could have a material adverse effect on our operating results. | |
• | We have several major customers, the loss of one or more of which could have a material adverse effect on our business. | |
• | We may not be able to sustain the cost savings realized as part of our recent cost reduction initiatives. | |
• | We may not be successful in achieving our strategy of growing revenues. We also have a recent history of net losses. We can make no assurances that we will achieve profitability, or if we do, that we will be able to sustain profitability in the future. | |
• | We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future regulations could have a material adverse effect on our operations and profitability. | |
• | We self-insure a significant portion of our claims exposure, which could significantly increase the volatility of, and decrease the amount of, our earnings. | |
• | We engage in transactions with other businesses controlled by Mr. Moyes and the interests of Mr. Moyes could conflict with the interests of other stockholders. | |
• | Mr. Moyes and certain of his affiliates will hold Class B shares which have greater voting rights than Class A shares and will have the power to direct and control our company as a result of their stock holdings. | |
• | We have significant ongoing capital requirements that could harm our financial condition, results of operations, and cash flows if we are unable to generate sufficient cash from operations, or obtain financing on favorable terms. | |
• | Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations under our new senior secured credit facility and our senior secured notes, and our debt agreements contain restrictions that limit our flexibility in operating our business. |
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Class A common stock offered by us | shares | |
Over-allotment option | shares | |
Class B common stock to be outstanding after this offering | 75,145,892 shares | |
Total common stock to be outstanding after this offering | shares (or shares if the underwriters’over-allotment option is exercised in full) | |
Voting rights | Holders of our Class A common stock and our Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as otherwise required by Delaware law or as provided in our amended and restated certificate of incorporation. The holders of our Class A common stock are entitled to one vote per share and the holders of our Class B common stock are entitled to two votes per share. Following this offering, assuming no exercise of the underwriters’ over-allotment option, (1) holders of the Class A common stock will control approximately % of our total voting power and will own % of our total outstanding shares of common stock, and (2) holders of Class B common stock will control approximately % of our total voting power and will own % of our total outstanding shares of common stock. All of our shares of Class B common stock are beneficially owned by Jerry Moyes and by Jerry and Vickie Moyes, jointly, the Jerry and Vickie Moyes Family Trust dated 12/11/87, and various Moyes children’s trusts or, collectively, the Moyes Affiliates. Shares of our Class B common stock automatically convert to Class A common stock on aone-for-one basis at the election of the holder or upon transfer of beneficial ownership to any person other than a Permitted Holder, as defined in “Certain Relationships and Related Party Transactions.” With the exception of voting rights and conversion rights, holders of Class A and Class B common stock have identical rights. See “Description of Capital Stock” for a description of the material terms of our common stock. | |
Dividend policy | We anticipate that we will retain all of our future earnings, if any, for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends and other distributions in cash, stock, or property by Swift in the future will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial condition and results of operations, contractual restrictions, including restrictive covenants contained in a new post-offering senior secured credit facility and the indentures governing our outstanding senior secured notes, capital requirements, and other factors. See “Dividend Policy.” | |
Use of proceeds | We estimate that the net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $ million at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus. We intend to use $ million of the net proceeds to repay a portion of our existing |
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senior secured credit facility. The balance of the existing senior secured credit facility will be refinanced by borrowings under our new senior secured credit facility, which we will enter into in connection with this offering. The remaining net proceeds will be used for general corporate purposes. See “Use of Proceeds.” | ||
Risk factors | You should carefully consider the information set forth under “Risk Factors” together with all of the other information set forth in this prospectus before deciding to invest in shares of our Class A common stock. | |
Proposed listing symbol | “SWFT” |
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Successor | Predecessor | |||||||||||||||||||||||||||||||||
Three | January 1, | |||||||||||||||||||||||||||||||||
Months | 2007 | |||||||||||||||||||||||||||||||||
Ended | Year Ended | Year Ended | through | |||||||||||||||||||||||||||||||
March 31, | December 31, | December 31, | May 10, | Year Ended December 31, | ||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | 2010 | 2009 | 2009 | 2008 | 2007(1) | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||
Consolidated statement of operations data: | ||||||||||||||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||||||||||
Trucking revenue | $ | 503,507 | $ | 509,320 | $ | 2,062,296 | $ | 2,443,271 | $ | 1,674,835 | $ | 876,042 | $ | 2,585,590 | $ | 2,722,648 | ||||||||||||||||||
Fuel surcharge revenue | 88,816 | 52,986 | 275,373 | 719,617 | 344,946 | 147,507 | 462,529 | 391,942 | ||||||||||||||||||||||||||
Other revenue | 62,507 | 52,450 | 233,684 | 236,922 | 160,512 | 51,174 | 124,671 | 82,865 | ||||||||||||||||||||||||||
Total operating revenue | 654,830 | 614,756 | 2,571,353 | 3,399,810 | 2,180,293 | 1,074,723 | 3,172,790 | 3,197,455 | ||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||
Salaries, wages, and employee benefits | 177,803 | 189,377 | 728,784 | 892,691 | 611,811 | 364,690 | 899,286 | 1,008,833 | ||||||||||||||||||||||||||
Operating supplies and expenses | 47,830 | 56,723 | 209,945 | 271,951 | 187,873 | 119,833 | 268,658 | 286,261 | ||||||||||||||||||||||||||
Fuel expense | 106,082 | 85,868 | 385,513 | 768,693 | 474,825 | 223,579 | 632,824 | 610,919 | ||||||||||||||||||||||||||
Purchased transportation | 175,702 | 135,753 | 620,312 | 741,240 | 435,421 | 196,258 | 586,252 | 583,380 | ||||||||||||||||||||||||||
Rental expense | 18,903 | 20,391 | 79,833 | 76,900 | 51,703 | 20,089 | 50,937 | 57,669 | ||||||||||||||||||||||||||
Insurance and claims | 20,207 | 25,481 | 81,332 | 141,949 | 69,699 | 58,358 | 153,728 | 156,525 | ||||||||||||||||||||||||||
Depreciation and amortization(2) | 65,497 | 66,956 | 253,531 | 275,832 | 187,043 | 82,949 | 222,376 | 199,777 | ||||||||||||||||||||||||||
Impairments(3) | 1,274 | 515 | 515 | 24,529 | 256,305 | — | 27,595 | 6,377 | ||||||||||||||||||||||||||
(Gain) loss on disposal of property and equipment | (1,448 | ) | (19 | ) | (2,244 | ) | (6,466 | ) | (397 | ) | 130 | (186 | ) | (942 | ) | |||||||||||||||||||
Communication and utilities | 6,422 | 7,091 | 24,595 | 29,644 | 18,625 | 10,473 | 28,579 | 30,920 | ||||||||||||||||||||||||||
Operating taxes and licenses | 13,365 | 14,381 | 57,236 | 67,911 | 42,076 | 24,021 | 59,010 | 69,676 | ||||||||||||||||||||||||||
Total operating expenses | 631,637 | 602,517 | 2,439,352 | 3,284,874 | 2,334,984 | 1,100,380 | 2,929,059 | 3,009,395 | ||||||||||||||||||||||||||
Operating income (loss) | 23,193 | 12,239 | 132,001 | 114,936 | (154,691 | ) | (25,657 | ) | 243,731 | 188,060 | ||||||||||||||||||||||||
Other (income) expenses: | ||||||||||||||||||||||||||||||||||
Interest expense(4) | 62,596 | 47,702 | 200,512 | 222,177 | 171,115 | 9,454 | 26,870 | 29,946 | ||||||||||||||||||||||||||
Derivative interest expense (income)(5) | 23,714 | 7,549 | 55,634 | 18,699 | 13,233 | (177 | ) | (1,134 | ) | (3,314 | ) | |||||||||||||||||||||||
Interest income | (220 | ) | (428 | ) | (1,814 | ) | (3,506 | ) | (6,602 | ) | (1,364 | ) | (2,007 | ) | (1,713 | ) | ||||||||||||||||||
Other(4) | (371 | ) | 675 | (13,336 | ) | 12,753 | (1,933 | ) | 1,429 | (1,272 | ) | (1,209 | ) | |||||||||||||||||||||
Total other (income) expenses | 85,719 | 55,498 | 240,996 | 250,123 | 175,813 | 9,342 | 22,457 | 23,710 | ||||||||||||||||||||||||||
Income (loss) before income taxes | (62,526 | ) | (43,259 | ) | (108,995 | ) | (135,187 | ) | (330,504 | ) | (34,999 | ) | 221,274 | 164,350 | ||||||||||||||||||||
Income tax (benefit) expense | (9,525 | ) | 301 | 326,650 | 11,368 | (234,316 | ) | (4,577 | ) | 80,219 | 63,223 | |||||||||||||||||||||||
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Successor | Predecessor | |||||||||||||||||||||||||||||||||
Three | January 1, | |||||||||||||||||||||||||||||||||
Months | 2007 | |||||||||||||||||||||||||||||||||
Ended | Year Ended | Year Ended | through | |||||||||||||||||||||||||||||||
March 31, | December 31, | December 31, | May 10, | Year Ended December 31, | ||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | 2010 | 2009 | 2009 | 2008 | 2007(1) | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (53,001 | ) | $ | (43,560 | ) | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | $ | (30,422 | ) | $ | 141,055 | $ | 101,127 | ||||||||||||
Basic income (loss) per common share | $ | (0.71 | ) | $ | (0.58 | ) | $ | (5.80 | ) | $ | (1.95 | ) | $ | (1.94 | ) | $ | (0.40 | ) | $ | 1.89 | $ | 1.39 | ||||||||||||
Diluted income (loss) per common share | $ | (0.71 | ) | $ | (0.58 | ) | $ | (5.80 | ) | $ | (1.95 | ) | $ | (1.94 | ) | $ | (0.40 | ) | $ | 1.86 | $ | 1.37 | ||||||||||||
Weighted average shares used in computing basic income (loss) per common share (in thousands) | 75,146 | 75,146 | 75,146 | 75,146 | 49,521 | 75,159 | 74,584 | 72,540 | ||||||||||||||||||||||||||
Weighted average shares used in computing diluted income (loss) per common share (in thousands) | 75,146 | 75,146 | 75,146 | 75,146 | 49,521 | 75,159 | 75,841 | 73,823 | ||||||||||||||||||||||||||
Pro forma C corporation data (unaudited):(6) | ||||||||||||||||||||||||||||||||||
Historical loss before income taxes | N/A | $ | (43,259 | ) | $ | (108,995 | ) | $ | (135,187 | ) | $ | (330,504 | ) | N/A | N/A | N/A | ||||||||||||||||||
Pro forma provision (benefit) for income taxes | N/A | 2,259 | 5,693 | (26,573 | ) | (19,166 | ) | N/A | N/A | N/A | ||||||||||||||||||||||||
Pro forma net loss | N/A | $ | (45,518 | ) | $ | (114,688 | ) | $ | (108,614 | ) | $ | (311,338 | ) | N/A | N/A | N/A | ||||||||||||||||||
Pro forma loss per share: | ||||||||||||||||||||||||||||||||||
Basic | N/A | $ | (0.61 | ) | $ | (1.53 | ) | $ | (1.45 | ) | $ | (6.29 | ) | N/A | N/A | N/A | ||||||||||||||||||
Diluted | N/A | $ | (0.61 | ) | $ | (1.53 | ) | $ | (1.45 | ) | $ | (6.29 | ) | N/A | N/A | N/A | ||||||||||||||||||
Consolidated balance sheet data (at end of period): | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents (excl. restricted cash) | 87,327 | 56,806 | 115,862 | 57,916 | 78,826 | 81,134 | 47,858 | 13,098 | ||||||||||||||||||||||||||
Net property and equipment | 1,327,210 | 1,516,994 | 1,364,545 | 1,583,296 | 1,588,102 | 1,478,808 | 1,513,592 | 1,630,469 | ||||||||||||||||||||||||||
Total assets | 2,638,739 | 2,594,965 | 2,513,874 | 2,648,507 | 2,928,632 | 2,124,293 | 2,110,648 | 2,218,530 | ||||||||||||||||||||||||||
Debt: | ||||||||||||||||||||||||||||||||||
Securitization of accounts receivable(4) | 150,000 | — | — | — | 200,000 | 160,000 | 180,000 | 245,000 | ||||||||||||||||||||||||||
Long-term debt and obligations under capital leases (incl. current)(4) | 2,382,181 | 2,515,335 | 2,466,934 | 2,494,455 | 2,427,253 | 200,000 | 200,000 | 365,786 | ||||||||||||||||||||||||||
Stockholders’ equity (deficit) | (818,354 | ) | (498,831 | ) | (865,781 | ) | (444,193 | ) | (297,547 | ) | 1,007,904 | 1,014,223 | 870,044 | |||||||||||||||||||||
Consolidated statement of cash flows data: | ||||||||||||||||||||||||||||||||||
Net cash flows from operating activities | 15,107 | 7,376 | 115,335 | 119,740 | 128,646 | 85,149 | 365,430 | 362,548 | ||||||||||||||||||||||||||
Net cash flows used in investing activities | (35,131 | ) | (6,661 | ) | (1,127 | ) | (118,517 | ) | (1,612,314 | ) | (43,854 | ) | (114,203 | ) | (380,007 | ) | ||||||||||||||||||
Net cash flows from (used in) financing activities, net of the effect of exchange rate changes | (8,511 | ) | (1,825 | ) | (56,262 | ) | (22,133 | ) | 1,562,494 | (8,019 | ) | (216,467 | ) | 2,312 | ||||||||||||||||||||
Other financial data: | ||||||||||||||||||||||||||||||||||
Adjusted EBITDA (unaudited)(7) | 90,335 | 79,035 | 405,860 | 409,598 | 291,597 | 109,687 | 498,601 | 407,820 | ||||||||||||||||||||||||||
Adjusted Operating Ratio (unaudited)(8) | 94.4% | 97.7% | 93.9% | 94.5% | 94.4% | 97.4% | 90.4% | 92.6% | ||||||||||||||||||||||||||
Total cash capital expenditures | 17,155 | 12,551 | 71,265 | 327,725 | 215,159 | 80,517 | 219,666 | 544,650 | ||||||||||||||||||||||||||
Net cash capital expenditures | 12,471 | 10,170 | 1,492 | 136,574 | 175,351 | 52,676 | 139,216 | 386,780 | ||||||||||||||||||||||||||
Operating statistics (unaudited): | ||||||||||||||||||||||||||||||||||
Weekly trucking revenue per tractor | $ | 2,711 | $ | 2,541 | $ | 2,660 | $ | 2,916 | $ | 2,903 | $ | 2,790 | $ | 3,011 | $ | 3,004 | ||||||||||||||||||
Deadhead miles % | 12.2% | 13.6% | 13.2% | 13.6% | 13.0% | 13.2% | 12.2% | 12.1% | ||||||||||||||||||||||||||
Average tractors available | 14,443 | 15,589 | 14,869 | 16,024 | 17,192 | 16,816 | 16,466 | 17,383 | ||||||||||||||||||||||||||
Average loaded length of haul (miles) | 438 | 451 | 442 | 469 | 483 | 492 | 522 | 534 | ||||||||||||||||||||||||||
Total tractors (end of period): | ||||||||||||||||||||||||||||||||||
Company-operated | 12,489 | 13,695 | 12,440 | 13,786 | 16,017 | 14,847 | 14,977 | 14,465 | ||||||||||||||||||||||||||
Owner-operator | 3,731 | 3,575 | 3,585 | 3,560 | 3,221 | 2,961 | 2,950 | 3,466 | ||||||||||||||||||||||||||
Trailers (end of period) | 49,436 | 49,284 | 49,215 | 49,695 | 49,879 | 48,959 | 50,013 | 51,997 |
(1) | Our audited results of operations include the full year presentation of Swift Corporation as of and for the year ended December 31, 2007. Swift Corporation was formed in 2006 for the purpose of acquiring Swift Transportation, but that acquisition was not completed until May 10, 2007 as part of the 2007 Transactions, and, as such, Swift Corporation had nominal activity from January 1, 2007 through May 10, 2007. The results of Swift Transportation from January 1, 2007 to May 10, 2007 and IEL from January 1, 2007 to |
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April 7, 2007 are not reflected in the audited results of Swift Corporation for the year ended December 31, 2007. These financial results include the impact of the 2007 Transactions. | ||
(2) | During the three months ended March 31, 2010, we recorded $7.4 million of incremental depreciation expense related to our revised estimates regarding salvage value and useful lives for approximately 7,000 dry van trailers that we decided to scrap during the quarter. During the three months ended March 31, 2010 and 2009, we incurred non-cash amortization expense of $5.2 million and $5.7 million, respectively, relating to a step up in basis of certain intangible assets recognized in connection with the 2007 Transactions. For the years ended December 31, 2009, 2008, and 2007, we incurred amortization expense of $22.0 million, $24.2 million, and $16.8 million, respectively, relating to a step up in basis of certain intangible assets recognized in connection with the 2007 Transactions. | |
(3) | During the three months ended March 31, 2010, revenue equipment with a carrying amount of $3.6 million was written down to its fair value of $2.3 million, resulting in an impairment charge of $1.3 million, which was included in impairments in the consolidated statement of operations for the three months ended March 31, 2010. During the three months ended March 31, 2009, non-operating real estate properties held and used with a carrying amount of $2.1 million were written down to their fair value of $1.6 million, resulting in an impairment charge of $0.5 million. For the year ended December 31, 2008, we incurred $24.5 million in pre-tax impairment charges comprised of a $17.0 million impairment of goodwill relating to our Mexico freight transportation reporting unit, and impairment charges totaling $7.5 million on tractors, trailers, and several non-operating real estate properties and other assets. For the year ended December 31, 2007, we recorded a goodwill impairment of $238.0 million pre-tax related to our U.S. freight transportation reporting unit and trailer impairment of $18.3 million pre-tax. The results for the year ended December 31, 2006 included pre-tax charges of $9.2 million related to the impairment of certain trailers, Mexico real property and equipment, and $18.4 million for the write-off of a note receivable and other outstanding amounts related to our sale of our auto haul business in April 2005. For the year ended December 31, 2005, we incurred a pre-tax impairment charge of $6.4 million related to certain trailers. | |
(4) | Effective January 1, 2010, we adopted ASU No. 2009-16 “Accounting For Transfers of Financial Assets,” or ASUNo. 2009-16, under which we were required to account for our accounts receivable securitization agreement, or our 2008 RSA, as a secured borrowing on our balance sheet as opposed to a sale, with our 2008 RSA program fees characterized as interest expense. From March 27, 2008 through December 31, 2009, our 2008 RSA has been accounted for as a true sale in accordance with generally accepted accounting principles, or GAAP. Therefore, as of December 31, 2009 and 2008, such accounts receivable and associated obligation are not reflected in our consolidated balance sheets. For periods prior to March 27, 2008, and again beginning January 1, 2010, accounts receivable and associated obligation are recorded on our balance sheet. Long-term debt excludes securitization amounts outstanding for each period. For the three months ended March 31, 2010, total program fees recorded as interest expense were $1.1 million. | |
Prior to the change in GAAP, program fees were recorded under “Other income and expenses” under “Other.” For the three months ended March 31, 2009, total program fees included in “Other” were $1.1 million. For the years ended December 31, 2009 and 2008, program fees from our 2008 RSA totaling $5.0 million and $7.3 million, respectively, were recorded in “Other.” | ||
(5) | Derivative interest expense for the three months ended March 31, 2010 and 2009 is related to our interest rate swaps with notional amounts of $1.14 billion and $1.20 billion, respectively. Derivative interest expense increased during the three months ended March 31, 2010 over the same period in 2009 as a result of the decrease in three month London Interbank Offered Rate, or LIBOR, the underlying index for the swaps. Additionally, we de-designated the remaining swaps and discontinued hedge accounting effective October 1, 2009 as a result of the second amendment to our existing senior secured credit facility, after which the entiremark-to-market adjustment was recorded in our statement of operations as opposed to being recorded in equity as a component of other comprehensive income under the prior cash flow hedge accounting treatment. Derivative interest expense for the years ended December 31, 2009, 2008, and 2007 is related to our interest rate swaps with notional amounts of $1.14 billion, $1.22 billion, and $1.34 billion, respectively. | |
(6) | From May 11, 2007 until October 10, 2009, we had elected to be taxed under the Internal Revenue Code of 1986, as amended from time to time, or the Internal Revenue Code, as a subchapter S corporation. A subchapter S corporation passes through essentially all taxable earnings and losses to its stockholders and does not pay federal income taxes at the corporate level. Historical income taxes during this time consist mainly of state income taxes in certain states that do not recognize subchapter S corporations, and an income tax provision or benefit was recorded for certain of our subsidiaries, including our Mexican subsidiaries and our sole domestic captive insurance company at the time, which were not eligible to be treated as qualified subchapter S corporations. In October 2009, we elected to be taxed as a subchapter C corporation. For comparative purposes, we have included a pro forma (provision) benefit for income taxes assuming we had been taxed as a subchapter C corporation in all periods when our subchapter S corporation election was in effect. The pro forma effective tax rate for 2009 of 5.2% differs from the expected federal tax benefit of 35% primarily as a result of income recognized for tax purposes on the partial cancellation of the stockholder loan, which reduced the tax benefit rate by 32.6%. In 2008, the pro forma effective tax rate was reduced by 8.8% for stockholder distributions and 4.4% for non-deductible goodwill impairment charges, which resulted in a 19.7% effective tax rate. In 2007, the pro forma effective tax rate of 5.8% resulted primarily from a non-deductible goodwill impairment charge, which reduced the rate by 25.1%. | |
(7) | We use the term “Adjusted EBITDA” throughout this prospectus. Adjusted EBITDA, as we define this term, is not presented in accordance with GAAP. We use Adjusted EBITDA as a supplement to our GAAP results in evaluating certain aspects of our business, as described below. | |
We define Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest and derivative interest expense, including other fees and charges associated with indebtedness, net of interest income, (iii) income taxes, (iv) non-cash impairments, (v) non-cash equity compensation expense, (vi) other unusual non-cash items, and (vii) excludable transaction costs. | ||
Our board of directors and executive management team focus on Adjusted EBITDA as a key measure of our performance, for business planning, and for incentive compensation purposes. Adjusted EBITDA assists us in comparing our performance over various reporting |
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periods on a consistent basis because it removes from our operating results the impact of items that, in our opinion, do not reflect our core operating performance. Our method of computing Adjusted EBITDA is consistent with that used in our debt covenants and also is routinely reviewed by management for that purpose. For a reconciliation of our Adjusted EBITDA to our net income (loss), the most directly related GAAP measure, please see the table below. | ||
Our Chief Executive Officer, who is our chief operating decision-maker, and our compensation committee, traditionally have used Adjusted EBITDA thresholds in setting performance goals for our employees, including senior management. Such performance goals serve to incentivize management to improve profitability and thereby increase long-term stockholder value. For more information on the use of Adjusted EBITDA by our board of directors’ compensation committee, see “Executive Compensation — Compensation Discussion and Analysis.” | ||
As a result, the annual bonuses for certain members of our management typically are based at least in part on Adjusted EBITDA. At the same time, some or all of these executives have responsibility for monitoring our financial results generally, including the items included as adjustments in calculating Adjusted EBITDA (subject ultimately to review by our board of directors in the context of the board’s review of our quarterly financial statements). While many of the adjustments (for example, transaction costs and our existing senior secured credit facility fees) involve mathematical application of items reflected in our financial statements, others (such as determining whether a non-cash item is unusual) involve a degree of judgment and discretion. While we believe that all of these adjustments are appropriate, and although the quarterly calculations are subject to review by our board of directors in the context of the board’s review of our quarterly financial statements and certification by our Chief Financial Officer in a compliance certificate provided to the lenders under our existing senior secured credit facility, this discretion may be viewed as an additional limitation on the use of Adjusted EBITDA as an analytical tool. | ||
We believe our presentation of Adjusted EBITDA is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance. | ||
Adjusted EBITDA is not a substitute for net income (loss), income (loss) from continuing operations, cash flows from operating activities, operating margin, or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that, in our opinion, do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. | ||
Because of these limitations, Adjusted EBITDA should not be considered a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business. Our management compensates for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA supplementally. |
Successor | Predecessor | ||||||||||||||||||||||||||||||||
Three | January 1, | ||||||||||||||||||||||||||||||||
Months | Year | 2007 | |||||||||||||||||||||||||||||||
Ended | Ended | through | Year Ended | ||||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | December 31, | May 10, | December 31, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
Net income (loss) | $ | (53,001 | ) | $ | (43,560 | ) | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | $ | (30,422 | ) | $ | 141,055 | $ | 101,127 | |||||||||||
Adjusted for: | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 65,497 | 66,956 | 253,531 | 275,832 | 187,043 | 82,949 | 222,376 | 199,777 | |||||||||||||||||||||||||
Interest expense | 62,596 | 47,702 | 200,512 | 222,177 | 171,115 | 9,454 | 26,870 | 29,946 | |||||||||||||||||||||||||
Derivative interest expense (income) | 23,714 | 7,549 | 55,634 | 18,699 | 13,233 | (177 | ) | (1,134 | ) | (3,314 | ) | ||||||||||||||||||||||
Interest income | (220 | ) | (428 | ) | (1,814 | ) | (3,506 | ) | (6,602 | ) | (1,364 | ) | (2,007 | ) | (1,713 | ) | |||||||||||||||||
Income tax expense (benefit) | (9,525 | ) | 301 | 326,650 | 11,368 | (234,316 | ) | (4,577 | ) | 80,219 | 63,223 | ||||||||||||||||||||||
EBITDA | $ | 89,061 | $ | 78,520 | $ | 398,868 | $ | 378,015 | $ | 34,285 | $ | 55,863 | $ | 467,379 | $ | 389,046 | |||||||||||||||||
Non-cash impairments(a) | 1,274 | 515 | 515 | 24,529 | 256,305 | — | 27,595 | 6,377 | |||||||||||||||||||||||||
Non-cash equity comp | — | — | — | — | — | 12,501 | 3,627 | 12,397 | |||||||||||||||||||||||||
Other unusual non-cash items(b) | — | — | — | — | — | 2,418 | — | — | |||||||||||||||||||||||||
Excludable transaction costs(c) | — | — | 6,477 | 7,054 | 1,007 | 38,905 | — | — | |||||||||||||||||||||||||
Adjusted EBITDA | $ | 90,335 | $ | 79,035 | $ | 405,860 | $ | 409,598 | $ | 291,597 | $ | 109,687 | $ | 498,601 | $ | 407,820 | |||||||||||||||||
(a) | Non-cash impairments include the items discussed in note (3) above. | |
(b) | For the period January 1, 2007 through May 10, 2007, we incurred a $2.4 million pre-tax impairment of a note receivable recorded in non-operating other (income) expense. |
• | for the year ended December 31, 2009, we incurred $4.2 million of pre-tax transaction costs in the third and fourth quarters of 2009 related to an amendment to our existing senior secured credit facility and the concurrent senior secured notes amendments, and $2.3 million of pre-tax transaction costs during the third quarter of 2009 related to our cancelled bond offering; |
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• | for the year ended December 31, 2008, we incurred $7.1 million of pre-tax expense associated with the closing of our 2008 RSA on July 30, 2008, and financial advisory fees associated with an amendment to our existing senior secured credit facility; | |
• | for the year ended December 31, 2007, we incurred $1.0 million in pre-tax transaction costs related to our going private transaction; and | |
• | for the period January 1, 2007 to May 10, 2007, our predecessor incurred $16.4 million related tochange-in-control payments made to former executive officers and $22.5 million for financial investment advisory, legal, and accounting fees, all of which resulted from the 2007 Transactions. |
(8) | We use the term “Adjusted Operating Ratio” throughout this prospectus. Adjusted Operating Ratio, as we define this term, is not presented in accordance with GAAP. We use Adjusted Operating Ratio as a supplement to our GAAP results in evaluating certain aspects of our business, as described below. | |
We define Adjusted Operating Ratio as (a) total operating expenses, less (i) fuel surcharges, (ii) non-cash impairment charges, (iii) other unusual items, and (iv) excludable transaction costs, as a percentage of (b) total revenue excluding fuel surcharge revenue. | ||
Our board of directors and executive management team also focus on Adjusted Operating Ratio as a key indicator of our performance from period to period. We believe fuel surcharge is sometimes volatile and eliminating the impact of this source of revenue (by netting fuel surcharge revenue against fuel expense) affords a more consistent basis for comparing our results of operations. We also believe excluding impairments and other unusual items enhances the comparability of our performance from period to period. For a reconciliation of our Adjusted Operating Ratio to our operating ratio, please see the table below. | ||
We believe our presentation of Adjusted Operating Ratio is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance. | ||
Adjusted Operating Ratio is not a substitute for operating margin or any other measure derived solely from GAAP measures. There are limitations to using non-GAAP measures such as Adjusted Operating Ratio. Although we believe that Adjusted Operating Ratio can make an evaluation of our operating performance more consistent because it removes items that, in our opinion, do not reflect our core operations, other companies in our industry may define Adjusted Operating Ratio differently than we do. As a result, it may be difficult to use Adjusted Operating Ratio or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. | ||
A reconciliation of our Adjusted Operating Ratio for each of the periods indicated is as follows: |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Three Months | Year | January 1, 2007 | ||||||||||||||||||||||||||||||||
Ended | Ended | through | Year Ended | |||||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | December 31, | May 10, | December 31, | ||||||||||||||||||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||
Total GAAP operating revenue | $ | 654,830 | $ | 614,756 | $ | 2,571,353 | $ | 3,399,810 | $ | 2,180,293 | $ | 1,074,723 | $ | 3,172,790 | $ | 3,197,455 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||
Fuel surcharge revenue | (88,816 | ) | (52,986 | ) | (275,373 | ) | (719,617 | ) | (344,946 | ) | (147,507 | ) | (462,529 | ) | (391,942 | ) | ||||||||||||||||||
Operating revenue, net of fuel surcharge revenue | 566,014 | 561,770 | 2,295,980 | 2,680,193 | 1,835,347 | 927,216 | 2,710,261 | 2,805,513 | ||||||||||||||||||||||||||
Total GAAP operating expense | 631,637 | 602,517 | 2,439,352 | 3,284,874 | 2,334,984 | 1,100,380 | 2,929,059 | 3,009,395 | ||||||||||||||||||||||||||
Adjusted for: | ||||||||||||||||||||||||||||||||||
Fuel surcharge revenue | (88,816 | ) | (52,986 | ) | (275,373 | ) | (719,617 | ) | (344,946 | ) | (147,507 | ) | (462,529 | ) | (391,942 | ) | ||||||||||||||||||
Excludable transaction costs(a) | — | — | (6,477 | ) | (7,054 | ) | (1,007 | ) | (38,905 | ) | — | — | ||||||||||||||||||||||
Non-cash impairments(b) | (1,274 | ) | (515 | ) | (515 | ) | (24,529 | ) | (256,305 | ) | — | (27,595 | ) | (6,377 | ) | |||||||||||||||||||
Other unusual items(c) | (7,382 | ) | — | — | — | — | — | 9,952 | — | |||||||||||||||||||||||||
Acceleration of noncash stock options(d) | — | — | — | — | — | (11,125 | ) | — | (12,397 | ) | ||||||||||||||||||||||||
Adjusted operating expense | $ | 534,165 | $ | 549,016 | $ | 2,156,987 | $ | 2,533,674 | $ | 1,732,726 | $ | 902,843 | $ | 2,448,887 | $ | 2,598,679 | ||||||||||||||||||
Adjusted Operating Ratio(e) | 94.4% | 97.7% | 93.9% | 94.5% | 94.4% | 97.4% | 90.4% | 92.6% | ||||||||||||||||||||||||||
Actual operating ratio | 96.5% | 98.0% | 94.9% | 96.6% | 107.1% | 102.4% | 92.3% | 94.1% |
(a) | Excludable transaction costs include the following: |
• | for the year ended December 31, 2009, we incurred $4.2 million of pre-tax transaction costs in the third and fourth quarters of 2009 related to an amendment to our existing senior secured credit facility and the concurrent senior secured notes amendments, and $2.3 million of pre-tax transaction costs during the third quarter of 2009 related to our cancelled bond offering; | |
• | for the year ended December 31, 2008, we incurred $7.1 million of pre-tax expense associated with the closing of our 2008 RSA on July 30, 2008, and financial advisory fees associated with an amendment to our existing senior secured credit facility; | |
• | for the year ended December 31, 2007, we incurred $1.0 million in pre-tax transaction costs related to our going private transaction; and | |
• | for the period January 1, 2007 to May 10, 2007, our predecessor incurred $16.4 million related tochange-in-control payments made to former executive officers and $22.5 million for financial investment advisory, legal, and accounting fees, all of which resulted from the 2007 Transactions. |
(b) | Non-cash impairments include items discussed in note (3) above. |
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(c) | Other unusual items included the following: |
• | for the year ended December 31, 2006, we recognized a $4.8 million and $5.2 million pre-tax benefit for the change in our discretionary match to our 401(k) profit sharing plan and a gain from the settlement of litigation, respectively; and | |
• | in the first quarter of 2010, we incurred $7.4 million of incremental depreciation expense during the 2010 quarter reflecting management’s revised estimates regarding salvage value and useful lives for approximately 7,000 dry van trailers, which management decided to scrap. |
(d) | Acceleration of non-cash stock options includes the following: |
• | for the period January 1, 2007 to May 10, 2007, we incurred $11.1 million related to the acceleration of stock incentive awards as a result of the 2007 Transactions; and | |
• | for the year ended December 31, 2005, we incurred a $12.4 million pre-tax expense to accelerate the vesting period of 7.3 million stock options. |
(e) | We have not included adjustments to Adjusted Operating Ratio to reflect the following non-cash amortization expense we recognized for certain identified intangible assets during the following periods: |
• | during the three months ended March 31, 2010 and 2009, we incurred amortization expense of $5.2 million and $5.7 million, respectively, relating to certain intangible assets identified in the 2007 Transactions; and | |
• | for the years ended December 31, 2009, 2008, and 2007, we incurred amortization expense of $22.0 million, $24.2 million, and $16.8 million, respectively, relating to certain intangible assets identified in the 2007 Transactions. |
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• | recessionary economic cycles; | |
• | changes in customers’ inventory levels and in the availability of funding for their working capital; | |
• | excess tractor capacity in comparison with shipping demand; and | |
• | downturns in customers’ business cycles. |
• | we may experience low overall freight levels, which may impair our asset utilization; | |
• | certain of our customers may face credit issues and cash flow problems, as discussed below; | |
• | freight patterns may change as supply chains are redesigned, resulting in an imbalance between our capacity and our customers’ freight demand; | |
• | customers may bid out freight or select competitors that offer lower rates from among existing choices in an attempt to lower their costs and we might be forced to lower our rates or lose freight; and | |
• | we may be forced to incur more deadhead miles to obtain loads. |
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• | many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth in the economy, which may limit our ability to maintain or increase freight rates or to maintain or expand our business or may require us to reduce our freight rates; | |
• | some of our customers also operate their own private trucking fleets and they may decide to transport more of their own freight; | |
• | some shippers have reduced or may reduce the number of carriers they use by selecting core carriers as approved service providers and in some instances we may not be selected; | |
• | many customers periodically solicit bids from multiple carriers for their shipping needs and this process may depress freight rates or result in a loss of business to competitors; | |
• | the continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources and other competitive advantages, and we may have difficulty competing with them; | |
• | advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments; | |
• | higher fuel prices and, in turn, higher fuel surcharges to our customers may cause some of our customers to consider freight transportation alternatives, including rail transportation; | |
• | competition from freight logistics and brokerage companies may negatively impact our customer relationships and freight rates; and | |
• | economies of scale that may be passed on to smaller carriers by procurement aggregation providers may improve such carriers’ ability to compete with us. |
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• | some of the acquired businesses may not achieve anticipated revenue, earnings, or cash flows; | |
• | we may assume liabilities that were not disclosed to us or otherwise exceed our estimates; | |
• | we may be unable to integrate acquired businesses successfully and realize anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; | |
• | acquisitions could disrupt our ongoing business, distract our management, and divert our resources; | |
• | we may experience difficulties operating in markets in which we have had no or only limited direct experience; | |
• | there is a potential for loss of customers, employees, and drivers of any acquired company; |
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• | we may incur additional indebtedness; and | |
• | if we issue additional shares of stock in connection with any acquisitions, your ownership would be diluted. |
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• | shares will be eligible for sale on the date of this prospectus; and | |
• | shares will be eligible for sale upon the expiration of thelock-up agreements described below. |
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• | increasing our vulnerability to adverse economic, industry, or competitive developments; | |
• | requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, and future business opportunities; | |
• | exposing us to the risk of increased interest rates because certain of our borrowings, including borrowings under our new senior secured credit facility, are at variable rates of interest; | |
• | making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing such indebtedness, including our new senior secured credit facility and the indentures governing our senior secured notes; | |
• | restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; | |
• | limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and | |
• | limiting our flexibility in planning for, or reacting to, changes in our business, market conditions, or in the economy, and placing us at a competitive disadvantage compared with our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting. |
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• | incur additional indebtedness or issue certain preferred shares; | |
• | pay dividends on, repurchase, or make distributions in respect of our capital stock or make other restricted payments; | |
• | make certain investments; | |
• | sell certain assets; | |
• | create liens; | |
• | enter into sale and leaseback transactions; | |
• | make capital expenditures; | |
• | prepay or defease specified debt; | |
• | consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets; and |
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• | enter into certain transactions with our affiliates. |
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• | any future recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries in which we have a significant concentration of customers; | |
• | increasing competition from trucking, rail, intermodal, and brokerage competitors; | |
• | a significant reduction in, or termination of, our trucking services by a key customer; | |
• | our ability to sustain cost savings realized as part of our recent cost reduction initiatives; | |
• | our ability to achieve our strategy of growing our revenue; | |
• | volatility in the price or availability of fuel; | |
• | increases in new equipment prices or replacement costs; | |
• | the regulatory environment in which we operate, including existing regulations and changes in existing regulations, or violations by us of existing or future regulations; | |
• | the costs of environmental complianceand/or the imposition of liabilities under environmental laws and regulations; | |
• | difficulties in driver recruitment and retention; | |
• | increases in driver compensation to the extent not offset by increases in freight rates; | |
• | potential volatility or decrease in the amount of earnings as a result of our claims exposure through our wholly-owned captive insurance companies; | |
• | uncertainties associated with our operations in Mexico; | |
• | our ability to attract and maintain relationships with owner-operators; | |
• | our ability to retain or replace key personnel; | |
• | conflicts of interest or potential litigation that may arise from other businesses owned by Mr. Moyes; | |
• | potential failure in computer or communications systems; |
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• | our labor relations; | |
• | our ability to execute or integrate any future acquisitions successfully; | |
• | seasonal factors such as harsh weather conditions that increase operating costs; and | |
• | our ability to service our outstanding indebtedness, including compliance with our indebtedness covenants, and the impact such indebtedness may have on the way we operate our business. |
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• | an actual basis, without giving effect to the consummation of the merger and recapitalization as described under “Reorganization”; and | |
• | an as adjusted basis to reflect: |
• | the consummation of the merger and recapitalization; | |
• | the sale by us of shares of Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; | |
• | the application of net proceeds from this offering as described under “Use of Proceeds,” as if the offering and the application of net proceeds of this offering had occurred on March 31, 2010; | |
• | the cancellation of the stockholder loan; and | |
• | the refinancing of our existing senior secured credit facility. |
As of March 31, 2010 | ||||||||
Actual | As Adjusted(1) | |||||||
(In thousands, except share and per share data) | ||||||||
Cash and cash equivalents(2) | $ | 87,327 | $ | |||||
Total long-term debt and obligations under capital leases: | ||||||||
Existing senior secured credit facility(3) | $ | 1,507,100 | $ | |||||
New senior secured credit facility | — | |||||||
Obligation relating to securitization of accounts receivable | 150,000 | |||||||
Senior secured floating rate notes | 203,600 | |||||||
Senior secured fixed rate notes | 505,648 | |||||||
Other existing long-term debt and obligations under capital leases | 165,833 | |||||||
Total debt | 2,532,181 | |||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized, none issued or outstanding, actual; and shares authorized, no shares issued or outstanding, as adjusted | — | |||||||
Pre-reorganization common stock, $0.001 par value; 200,000,000 shares authorized, 75,145,892 shares issued and outstanding, actual; and none issued and outstanding, as adjusted | 75 | |||||||
Class A common stock, $0.001 par value; shares authorized, shares issued and outstanding, as adjusted | — | |||||||
Class B common stock, $0.001 par value; shares authorized, 75,145,892 shares issued and outstanding, as adjusted | — |
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As of March 31, 2010 | ||||||||
Actual | As Adjusted(1) | |||||||
(In thousands, except share and per share data) | ||||||||
Additional paid-in capital | 279,136 | |||||||
Accumulated deficit | (812,937 | ) | ||||||
Stockholder loans receivable | (241,678 | ) | ||||||
Accumulated other comprehensive loss | (43,052 | ) | ||||||
Noncontrolling interest | 102 | |||||||
Total stockholders’ deficit | (818,354 | ) | ||||||
Total capitalization | $ | 1,713,827 | $ | |||||
(1) | Each $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the amount of cash and cash equivalents, additional paid-in capital, total stockholders’ deficit, and total capitalization by approximately $ million, assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses that we must pay. | |
(2) | Excludes restricted cash of $48.9 million. | |
(3) | Our existing senior secured credit facility also includes a $300.0 million revolving line of credit due May 2012 and a $150.0 million synthetic letter of credit facility due May 2014. As of March 31, 2010, we had outstanding letters of credit under the revolving line of credit primarily for workers’ compensation and self-insurance liability purposes totaling $64.4 million, and $235.6 million available for borrowings under the revolving line of credit. As of March 31, 2010, the synthetic letter of credit facility was fully utilized. |
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Assumed initial public offering price per share | $ | |||||||
Net tangible book value per share as of March 31, 2010 | $ | (19.37 | ) | |||||
Increase per share attributable to this offering | ||||||||
As adjusted net tangible book value per share after this offering | ||||||||
Net tangible book value dilution per share to new investors in this offering | $ | |||||||
Average | ||||||||||||||||||||
Shares Purchased | Total Consideration | Price Per | ||||||||||||||||||
Number | Percent | Amount | Percent | Share | ||||||||||||||||
Existing stockholders | % | $ | % | $ | ||||||||||||||||
New investors | ||||||||||||||||||||
Total | 100 | % | $ | 100 | % | |||||||||||||||
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Successor | Predecessor | |||||||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||
Three Months Ended | Year Ended | Year Ended | Through | Year Ended | ||||||||||||||||||||||||||||
(Dollars in thousands, | March 31, | December 31, | December 31, | May 10, | December 31, | |||||||||||||||||||||||||||
except per share data) | 2010 | 2009 | 2009 | 2008 | 2007(1) | 2007 | 2006 | 2005 | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Consolidated statement of operations data: | ||||||||||||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||||||||
Trucking revenue | $ | 503,507 | $ | 509,320 | $ | 2,062,296 | $ | 2,443,271 | $ | 1,674,835 | $ | 876,042 | $ | 2,585,590 | $ | 2,722,648 | ||||||||||||||||
Fuel surcharge revenue | 88,816 | 52,986 | 275,373 | 719,617 | 344,946 | 147,507 | 462,529 | 391,942 | ||||||||||||||||||||||||
Other revenue | 62,507 | 52,450 | 233,684 | 236,922 | 160,512 | 51,174 | 124,671 | 82,865 | ||||||||||||||||||||||||
Total operating revenue | 654,830 | 614,756 | 2,571,353 | 3,399,810 | 2,180,293 | 1,074,723 | 3,172,790 | 3,197,455 |
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Successor | Predecessor | |||||||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||
Three Months Ended | Year Ended | Year Ended | Through | Year Ended | ||||||||||||||||||||||||||||
(Dollars in thousands, | March 31, | December 31, | December 31, | May 10, | December 31, | |||||||||||||||||||||||||||
except per share data) | 2010 | 2009 | 2009 | 2008 | 2007(1) | 2007 | 2006 | 2005 | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Salaries, wages, and employee benefits | 177,803 | 189,377 | 728,784 | 892,691 | 611,811 | 364,690 | 899,286 | 1,008,833 | ||||||||||||||||||||||||
Operating supplies and expenses | 47,830 | 56,723 | 209,945 | 271,951 | 187,873 | 119,833 | 268,658 | 286,261 | ||||||||||||||||||||||||
Fuel expense | 106,082 | 85,868 | 385,513 | 768,693 | 474,825 | 223,579 | 632,824 | 610,919 | ||||||||||||||||||||||||
Purchased transportation | 175,702 | 135,753 | 620,312 | 741,240 | 435,421 | 196,258 | 586,252 | 583,380 | ||||||||||||||||||||||||
Rental expense | 18,903 | 20,391 | 79,833 | 76,900 | 51,703 | 20,089 | 50,937 | 57,669 | ||||||||||||||||||||||||
Insurance and claims | 20,207 | 25,481 | 81,332 | 141,949 | 69,699 | 58,358 | 153,728 | 156,525 | ||||||||||||||||||||||||
Depreciation and amortization(2) | 65,497 | 66,956 | 253,531 | 275,832 | 187,043 | 82,949 | 222,376 | 199,777 | ||||||||||||||||||||||||
Impairments(3) | 1,274 | 515 | 515 | 24,529 | 256,305 | — | 27,595 | 6,377 | ||||||||||||||||||||||||
(Gain) loss on disposal of property and equipment | (1,448 | ) | (19 | ) | (2,244 | ) | (6,466 | ) | (397 | ) | 130 | (186 | ) | (942 | ) | |||||||||||||||||
Communication and utilities | 6,422 | 7,091 | 24,595 | 29,644 | 18,625 | 10,473 | 28,579 | 30,920 | ||||||||||||||||||||||||
Operating taxes and licenses | 13,365 | 14,381 | 57,236 | 67,911 | 42,076 | 24,021 | 59,010 | 69,676 | ||||||||||||||||||||||||
Total operating expenses | 631,637 | 602,517 | 2,439,352 | 3,284,874 | 2,334,984 | 1,100,380 | 2,929,059 | 3,009,395 | ||||||||||||||||||||||||
Operating income (loss) | 23,193 | 12,239 | 132,001 | 114,936 | (154,691 | ) | (25,657 | ) | 243,731 | 188,060 | ||||||||||||||||||||||
Other (income) expenses: | ||||||||||||||||||||||||||||||||
Interest expense(4) | 62,596 | 47,702 | 200,512 | 222,177 | 171,115 | 9,454 | 26,870 | 29,946 | ||||||||||||||||||||||||
Derivative interest expense (income)(5) | 23,714 | 7,549 | 55,634 | 18,699 | 13,233 | (177 | ) | (1,134 | ) | (3,314 | ) | |||||||||||||||||||||
Interest income | (220 | ) | (428 | ) | (1,814 | ) | (3,506 | ) | (6,602 | ) | (1,364 | ) | (2,007 | ) | (1,713 | ) | ||||||||||||||||
Other(4) | (371 | ) | 675 | (13,336 | ) | 12,753 | (1,933 | ) | �� | 1,429 | (1,272 | ) | (1,209 | ) | ||||||||||||||||||
Total other (income) expenses | 85,719 | 55,498 | 240,996 | 250,123 | 175,813 | 9,342 | 22,457 | 23,710 | ||||||||||||||||||||||||
Income (loss) before income taxes | (62,526 | ) | (43,259 | ) | (108,995 | ) | (135,187 | ) | (330,504 | ) | (34,999 | ) | 221,274 | 164,350 | ||||||||||||||||||
Income tax (benefit) expense | (9,525 | ) | 301 | 326,650 | 11,368 | (234,316 | ) | (4,577 | ) | 80,219 | 63,223 | |||||||||||||||||||||
Net income (loss) | $ | (53,001 | ) | $ | (43,560 | ) | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | $ | (30,422 | ) | $ | 141,055 | $ | 101,127 | ||||||||||
Basic income (loss) per common share | $ | (0.71 | ) | $ | (0.58 | ) | $ | (5.80 | ) | $ | (1.95 | ) | $ | (1.94 | ) | $ | (0.40 | ) | $ | 1.89 | $ | 1.39 | ||||||||||
Diluted income (loss) per common share | $ | (0.71 | ) | $ | (0.58 | ) | $ | (5.80 | ) | $ | (1.95 | ) | $ | (1.94 | ) | $ | (0.40 | ) | $ | 1.86 | $ | 1.37 | ||||||||||
Weighted average shares used in computing basic income (loss) per common share (in thousands) | 75,146 | 75,146 | 75,146 | 75,146 | 49,521 | 75,159 | 74,584 | 72,540 | ||||||||||||||||||||||||
Weighted average shares used in computing diluted income (loss) per common share (in thousands) | 75,146 | 75,146 | 75,146 | 75,146 | 49,521 | 75,159 | 75,841 | 73,823 | ||||||||||||||||||||||||
Pro forma C corporation data (unaudited):(6) | ||||||||||||||||||||||||||||||||
Historical loss before income taxes | N/A | $ | (43,259 | ) | $ | (108,995 | ) | $ | (135,187 | ) | $ | (330,504 | ) | N/A | N/A | N/A | ||||||||||||||||
Pro forma provision (benefit) for income taxes | N/A | 2,259 | 5,693 | (26,573 | ) | (19,166 | ) | N/A | N/A | N/A | ||||||||||||||||||||||
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Successor | Predecessor | |||||||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||
Three Months Ended | Year Ended | Year Ended | Through | Year Ended | ||||||||||||||||||||||||||||
(Dollars in thousands, | March 31, | December 31, | December 31, | May 10, | December 31, | |||||||||||||||||||||||||||
except per share data) | 2010 | 2009 | 2009 | 2008 | 2007(1) | 2007 | 2006 | 2005 | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Pro forma net loss | N/A | $ | (45,518 | ) | $ | (114,688 | ) | $ | (108,614 | ) | $ | (311,338 | ) | N/A | N/A | N/A | ||||||||||||||||
Pro forma loss per share: | ||||||||||||||||||||||||||||||||
Basic | N/A | $ | (0.61 | ) | $ | (1.53 | ) | $ | (1.45 | ) | $ | (6.29 | ) | N/A | N/A | N/A | ||||||||||||||||
Diluted | N/A | $ | (0.61 | ) | $ | (1.53 | ) | $ | (1.45 | ) | $ | (6.29 | ) | N/A | N/A | N/A | ||||||||||||||||
Consolidated balance sheet data (at end of period): | ||||||||||||||||||||||||||||||||
Cash and cash equivalents (excl. restricted cash) | 87,327 | 56,806 | 115,862 | 57,916 | 78,826 | 81,134 | 47,858 | 13,098 | ||||||||||||||||||||||||
Net property and equipment | 1,327,210 | 1,516,994 | 1,364,545 | 1,583,296 | 1,588,102 | 1,478,808 | 1,513,592 | 1,630,469 | ||||||||||||||||||||||||
Total assets | 2,638,739 | 2,594,965 | 2,513,874 | 2,648,507 | 2,928,632 | 2,124,293 | 2,110,648 | 2,218,530 | ||||||||||||||||||||||||
Debt: | ||||||||||||||||||||||||||||||||
Securitization of accounts receivable(4) | 150,000 | — | — | — | 200,000 | 160,000 | 180,000 | 245,000 | ||||||||||||||||||||||||
Long-term debt and obligations under capital leases (incl. current)(4) | 2,382,181 | 2,515,335 | 2,466,934 | 2,494,455 | 2,427,253 | 200,000 | 200,000 | 365,786 | ||||||||||||||||||||||||
Stockholders’ equity (deficit) | (818,354 | ) | (498,831 | ) | (865,781 | ) | (444,193 | ) | (297,547 | ) | 1,007,904 | 1,014,223 | 870,044 | |||||||||||||||||||
Consolidated statement of cash flows data: | ||||||||||||||||||||||||||||||||
Net cash flows from operating activities | 15,107 | 7,376 | 115,335 | 119,740 | 128,646 | 85,149 | 365,430 | 362,548 | ||||||||||||||||||||||||
Net cash flows used in investing activities | (35,131 | ) | (6,661 | ) | (1,127 | ) | (118,517 | ) | (1,612,314 | ) | (43,854 | ) | (114,203 | ) | (380,007 | ) | ||||||||||||||||
Net cash flows from (used in) financing activities, net of the effect of exchange rate changes | (8,511 | ) | (1,825 | ) | (56,262 | ) | (22,133 | ) | 1,562,494 | (8,019 | ) | (216,467 | ) | 2,312 |
(1) | Our audited results of operations include the full year presentation of Swift Corporation as of and for the year ended December 31, 2007. Swift Corporation was formed in 2006 for the purpose of acquiring Swift Transportation, but that acquisition was not completed until May 10, 2007 as part of the 2007 Transactions, and, as such, Swift Corporation had nominal activity from January 1, 2007 through May 10, 2007. The results of Swift Transportation from January 1, 2007 to May 10, 2007 and IEL from January 1, 2007 to April 7, 2007 are not reflected in the audited results of Swift Corporation for the year ended December 31, 2007. These financial results include the impact of the 2007 Transactions. | |
(2) | During the three months ended March 31, 2010, we recorded $7.4 million of incremental depreciation expense related to our revised estimates regarding salvage value and useful lives for approximately 7,000 dry van trailers that we decided to scrap during the quarter. During the three months ended March 31, 2010 and 2009, we incurred non-cash amortization expense of $5.2 million and $5.7 million, respectively, relating to a step up in basis of certain intangible assets recognized in connection with the 2007 Transactions. For the years ended December 31, 2009, 2008, and 2007, we incurred amortization expense of $22.0 million, $24.2 million, and $16.8 million, respectively, relating to a step up in basis of certain intangible assets recognized in connection with the 2007 Transactions. | |
(3) | During the three months ended March 31, 2010, revenue equipment with a carrying amount of $3.6 million was written down to its fair value of $2.3 million, resulting in an impairment charge of $1.3 million, which was included in impairments in the consolidated statement of operations for the three months ended March 31, 2010. During the three months ended March 31, 2009, non-operating real estate properties held and used with a carrying amount of $2.1 million were written down to their fair value of $1.6 million, resulting in an impairment charge of $0.5 million. For the year ended December 31, 2008, we incurred $24.5 million in pre-tax impairment charges comprised of a $17.0 million impairment of goodwill relating to our Mexico freight transportation reporting unit, and impairment charges totaling $7.5 million on tractors, trailers, and several non-operating real estate properties and other assets. For the year ended December 31, 2007, we recorded a goodwill impairment of $238.0 million pre-tax related to our U.S. freight transportation reporting unit and trailer impairment of $18.3 million pre-tax. The results for the year ended December 31, 2006 included pre-tax charges of $9.2 million related to the impairment of certain trailers, Mexico real property and equipment, and $18.4 million for the write-off of a note receivable and other outstanding amounts related to our sale of our auto haul business in April 2005. For the year ended December 31, 2005, we incurred a pre-tax impairment charge of $6.4 million related to certain trailers. |
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(4) | Effective January 1, 2010, we adopted ASUNo. 2009-16 under which we were required to account for our 2008 RSA as a secured borrowing on our balance sheet as opposed to a sale, with our 2008 RSA program fees characterized as interest expense. From March 27, 2008 through December 31, 2009, our 2008 RSA has been accounted for as a true sale in accordance with GAAP. Therefore, as of December 31, 2009 and 2008, such accounts receivable and associated obligation are not reflected in our consolidated balance sheets. For periods prior to March 27, 2008, and again beginning January 1, 2010, accounts receivable and associated obligation are recorded on our balance sheet. Long-term debt excludes securitization amounts outstanding for each period. For the three months ended March 31, 2010, total program fees recorded as interest expense were $1.1 million. | |
Prior to the change in GAAP, program fees were recorded under “Other income and expenses” under “Other.” For the three months ended March 31, 2009, total program fees included in “Other” were $1.1 million. For the years ended December 31, 2009 and 2008, program fees from our 2008 RSA totaling $5.0 million and $7.3 million, respectively, were recorded in “Other.” | ||
(5) | Derivative interest expense for the three months ended March 31, 2010 and 2009 is related to our interest rate swaps with notional amounts of $1.14 billion and $1.20 billion, respectively. Derivative interest expense increased during the three months ended March 31, 2010 over the same period in 2009 as a result of the decrease in three month LIBOR, the underlying index for the swaps. Additionally, we de-designated the remaining swaps and discontinued hedge accounting effective October 1, 2009 as a result of the second amendment to our existing senior secured credit facility, after which the entiremark-to-market adjustment was recorded in our statement of operations as opposed to being recorded in equity as a component of other comprehensive income under the prior cash flow hedge accounting treatment. Derivative interest expense for the years ended December 31, 2009, 2008, and 2007 is related to our interest rate swaps with notional amounts of $1.14 billion, $1.22 billion, and $1.34 billion, respectively. | |
(6) | From May 11, 2007 until October 10, 2009, we had elected to be taxed under the Internal Revenue Code as a subchapter S corporation. A subchapter S corporation passes through essentially all taxable earnings and losses to its stockholders and does not pay federal income taxes at the corporate level. Historical income taxes during this time consist mainly of state income taxes in certain states that do not recognize subchapter S corporations, and an income tax provision or benefit was recorded for certain of our subsidiaries, including our Mexican subsidiaries and our sole domestic captive insurance company at the time, which were not eligible to be treated as qualified subchapter S corporations. In October 2009, we elected to be taxed as a subchapter C corporation. For comparative purposes, we have included a pro forma (provision) benefit for income taxes assuming we had been taxed as a subchapter C corporation in all periods when our subchapter S corporation election was in effect. The pro forma effective tax rate for 2009 of 5.2% differs from the expected federal tax benefit of 35% primarily as a result of income recognized for tax purposes on the partial cancellation of the stockholder loan, which reduced the tax benefit rate by 32.6%. In 2008, the pro forma effective tax rate was reduced by 8.8% for stockholder distributions and 4.4% for non-deductible goodwill impairment charges, which resulted in a 19.7% effective tax rate. In 2007, the pro forma effective tax rate of 5.8% resulted primarily from a non-deductible goodwill impairment charge, which reduced the rate by 25.1%. |
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and Results of Operations
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Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(Unaudited) | (Unaudited) | (Audited) | (Audited) | Pro Forma | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Total operating revenue | $ | 654,830 | $ | 614,756 | $ | 2,571,353 | $ | 3,399,810 | $ | 3,264,748 | ||||||||||
Net loss | $ | (53,001) | $ | (43,560) | $ | (435,645) | $ | (146,555) | $ | (219,815) | ||||||||||
Revenue (excl. fuel surcharge) | $ | 566,014 | $ | 561,770 | $ | 2,295,980 | $ | 2,680,193 | $ | 2,772,295 | ||||||||||
Adjusted EBITDA | $ | 90,335 | $ | 79,035 | $ | 405,860 | $ | 409,598 | $ | 404,084 | ||||||||||
Adjusted Operating Ratio | 94.4% | 97.7% | 93.9% | 94.5% | 95.7% |
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25 Mile Increase in | 1% Reduction in | |||||||||||
Miles Per Tractor | One Cent Increase | Deadhead Miles | ||||||||||
Per Week | in Rate Per Mile | Percentage | ||||||||||
(Dollars in thousands) | ||||||||||||
Operating Revenue | $ | 35,613 | $ | 12,883 | $ | — | ||||||
Operating Income | $ | 9,269 | $ | 12,883 | $ | 20,332 |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
Weekly trucking revenue per tractor | $ | 2,711 | $ | 2,541 | $ | 2,660 | $ | 2,916 | $ | 2,867 | ||||||||||
Deadhead miles percentage | 12.2% | 13.6% | 13.2% | 13.6% | 13.0% | |||||||||||||||
Average tractors available | 14,443 | 15,589 | 14,869 | 16,024 | 17,066 | |||||||||||||||
Adjusted Operating Ratio | 94.4% | 97.7% | 93.9% | 94.5% | 95.7% |
Pro Forma | ||||||||
Actual | (Unaudited) | |||||||
(Dollars in thousands) | ||||||||
Operating revenue | $ | 2,180,293 | $ | 3,264,748 | ||||
Operating loss | $ | (154,691 | ) | $ | (188,707 | ) | ||
Interest expense | $ | 171,115 | $ | 265,745 | ||||
Loss before income taxes | $ | (330,504 | ) | $ | (458,708 | ) |
• | $1.1 billion increase in operating revenue and recording the associated expenses to reflect the results of Swift Transportation and IEL for periods prior to their contribution; | |
• | $94.6 million increase in interest expense to reflect interest that would have been due on our acquisition financing during the period between January 1, 2007 and May 10, 2007; and |
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• | $10.5 million increase in depreciation and amortization expense as if the 2007 Transactions occurred on January 1, 2007. |
• | $16.4 million in estimated non-cash equity compensation expense relating to the approximately 20% of our approximately 7.8 million outstanding stock options that will vest and be exercisable upon completion of this offering. Thereafter, quarterly non-cash equity compensation expense for existing grants is estimated to be approximately $1.8 million per quarter through 2012; and | |
• | $ million estimated reduction in annual interest expense assuming the debt and capital lease balances at March 31, 2010, and the application of the estimated net proceeds of this offering as set forth in “Use of Proceeds.” |
• | $1.3 million of pre-tax impairment charge for trailers reclassified to assets held for sale; | |
• | $7.4 million of incremental pre-tax depreciation expense reflecting management’s decision in the first quarter to scrap approximately 7,000 dry van trailers over the course of the next several years and the corresponding revision to estimates regarding salvage and useful lives of such trailers; and | |
• | $9.5 million of income tax benefit as a result of recognition of subchapter C corporation tax benefits after our becoming a subchapter C corporation in the fourth quarter of 2009. |
• | $0.5 million pre-tax impairment of three non-operating real estate properties in the first quarter of 2009; | |
• | $4.2 million of pre-tax transaction costs incurred in the third and fourth quarters of 2009 related to an amendment to our existing senior secured credit facility and the concurrent senior secured notes amendments; | |
• | $2.3 million of pre-tax transaction costs incurred during the third quarter related to our cancelled bond offering; | |
• | $12.5 million pre-tax benefit in other income for net proceeds received during the third quarter pursuant to a litigation settlement entered into by us on September 25, 2009; | |
• | $4.0 million pre-tax benefit in other income from the sale of our investment in Transplace in the fourth quarter of 2009, representing the recovery of a note receivable that had been previously written off; |
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• | $324.8 million of non-cash income tax expense primarily in recognition of net deferred tax liabilities in the fourth quarter of 2009 reflecting our subchapter S revocation; and | |
• | $29.2 million in additional interest expense and derivative interest expense related to higher interest rates and loss of hedge accounting for our interest rate swaps as a result of an amendment to our existing senior secured credit facility in the fourth quarter of 2009. |
• | $17.0 million of pre-tax charges associated with impairment of goodwill relating to our Mexico freight transportation reporting unit; | |
• | $7.5 million of pre-tax impairment charges for certain real property, tractors, trailers, and a note receivable; and | |
• | $6.7 million in pre-tax expense associated with the closing of our 2008 RSA on July 30, 2008 and $0.3 million in financial advisory fees associated with an amendment to our existing senior secured credit facility. |
• | $23.5 million in pretax transaction costs related to our going private transaction; | |
• | $28.9 million in pretax change in control and stock incentive compensation, primarily relating to the going private transaction; | |
• | $238.0 million in pretax goodwill impairment relating to our U.S. reporting unit; | |
• | $2.4 million in pretax impairment of a note receivable, recorded, in non-operating other (income) expense; | |
• | $18.3 million in pretax impairment of revenue equipment; and | |
• | $230.2 million in income tax benefit associated with our election to become a subchapter S corporation. |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Trucking revenue | $ | 503,507 | $ | 509,320 | $ | 2,062,296 | $ | 2,443,271 | $ | 2,550,877 | ||||||||||
Fuel surcharge revenue | 88,816 | 52,986 | 275,373 | 719,617 | 492,453 | |||||||||||||||
Other revenue | 62,507 | 52,450 | 233,684 | 236,922 | 221,418 | |||||||||||||||
Operating revenue | $ | 654,830 | $ | 614,756 | $ | 2,571,353 | $ | 3,399,810 | $ | 3,264,748 | ||||||||||
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March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Salaries, wages, and employee benefits | $ | 177,803 | $ | 189,377 | $ | 728,784 | $ | 892,691 | $ | 977,829 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 31.4% | 33.7% | 31.7% | 33.3% | 35.3% | |||||||||||||||
% of operating revenue | 27.2% | 30.8% | 28.3% | 26.3% | 30.0% |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Operating supplies and expenses | $ | 47,830 | $ | 56,723 | $ | 209,945 | $ | 271,951 | $ | 307,901 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 8.5% | 10.1% | 9.1% | 10.1% | 11.1% | |||||||||||||||
% of operating revenue | 7.3% | 9.2% | 8.2% | 8.0% | 9.4% |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Fuel expense | $ | 106,082 | $ | 85,868 | $ | 385,513 | $ | 768,693 | $ | 699,302 | ||||||||||
% of operating revenue | 16.2% | 14.0% | 15.0% | 22.6% | 21.4% |
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March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Total fuel surcharge revenue | $ | 88,816 | $ | 52,986 | $ | 275,373 | $ | 719,617 | $ | 492,453 | ||||||||||
Less: fuel surcharge revenue reimbursed to owner-operators and other third parties | 32,866 | 16,279 | 92,341 | 216,185 | 126,415 | |||||||||||||||
Company fuel surcharge revenue | $ | 55,950 | $ | 36,707 | $ | 183,032 | $ | 503,432 | $ | 366,038 | ||||||||||
Total fuel expense | $ | 106,082 | $ | 85,868 | $ | 385,513 | $ | 768,693 | $ | 699,302 | ||||||||||
Less: company fuel surcharge revenue | 55,950 | 36,707 | 183,032 | 503,432 | 366,038 | |||||||||||||||
Net fuel expense | $ | 50,132 | $ | 49,161 | $ | 202,481 | $ | 265,261 | $ | 333,264 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 8.9% | 8.8% | 8.8% | 9.9% | 12.0% |
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March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Purchased transportation expense | $ | 175,702 | $ | 135,753 | $ | 620,312 | $ | 741,240 | $ | 629,586 | ||||||||||
% of operating revenue | 26.8% | 22.1% | 24.1% | 21.8% | 19.3% |
Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Purchased transportation | $ | 175,702 | $ | 135,753 | $ | 620,312 | $ | 741,240 | $ | 629,586 | ||||||||||
Less: Fuel surcharge revenue reimbursed to owner-operators and other third parties | 32,866 | 16,279 | 92,341 | 216,185 | 126,415 | |||||||||||||||
Purchased transportation, net of fuel surcharge reimbursement | $ | 142,836 | $ | 119,474 | $ | 527,971 | $ | 525,055 | $ | 503,171 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 25.2% | 21.3% | 23.0% | 19.6% | 18.2% |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Insurance and claims | $ | 20,207 | $ | 25,481 | $ | 81,332 | $ | 141,949 | $ | 128,138 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 3.6% | 4.5% | 3.5% | 5.3% | 4.6% | |||||||||||||||
% of operating revenue | 3.1% | 4.1% | 3.2% | 4.2% | 3.9% |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Rental expense | $ | 18,903 | $ | 20,391 | $ | 79,833 | $ | 76,900 | $ | 78,256 | ||||||||||
Depreciation and amortization expense | 65,497 | 66,956 | 253,531 | 275,832 | 281,181 | |||||||||||||||
Rental expense, depreciation, and amortization expense | 84,400 | 87,347 | 333,364 | 352,732 | 359,437 | |||||||||||||||
% of revenue, excluding fuel surcharge revenue | 14.9% | 15.5% | 14.5% | 13.2% | 13.0% | |||||||||||||||
% of operating revenue | 12.9% | 14.2% | 13.0% | 10.4% | 11.0% |
As of March 31, | As of December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
Tractors: | ||||||||||||||||||||
Company | ||||||||||||||||||||
Owned | 7,657 | 9,280 | 7,881 | 9,811 | 13,017 | |||||||||||||||
Leased — capital leases | 2,680 | 2,352 | 2,485 | 1,977 | 764 | |||||||||||||||
Leased — operating leases | 2,152 | 2,063 | 2,074 | 1,998 | 2,236 | |||||||||||||||
Total company tractors | 12,489 | 13,695 | 12,440 | 13,786 | 16,017 | |||||||||||||||
Owner-operator | ||||||||||||||||||||
Financed through the Company | 2,761 | 2,451 | 2,687 | 2,417 | 2,218 | |||||||||||||||
Other | 970 | 1,124 | 898 | 1,143 | 1,003 | |||||||||||||||
Total owner-operator tractors | 3,731 | 3,575 | 3,585 | 3,560 | 3,221 | |||||||||||||||
Total tractors | 16,220 | 17,270 | 16,025 | 17,346 | 19,238 | |||||||||||||||
Trailers | 49,436 | 49,284 | 49,215 | 49,695 | 49,879 | |||||||||||||||
Containers | 4,262 | 5,755 | 4,262 | 5,726 | 5,776 | |||||||||||||||
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Impairment expense | $ | 1,274 | $ | 515 | $ | 515 | $ | 24,529 | $ | 256,305 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 0.2% | 0.1% | 0.0% | 0.9% | 9.2% | |||||||||||||||
% of operating revenue | 0.2% | 0.1% | 0.0% | 0.7% | 7.9% |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Operating taxes and licenses expense | $ | 13,365 | $ | 14,381 | $ | 57,236 | $ | 67,911 | $ | 66,108 | ||||||||||
% of revenue, excluding fuel surcharge revenue | 2.4% | 2.6% | 2.5% | 2.5% | 2.4% | |||||||||||||||
% of operating revenue | 2.0% | 2.3% | 2.2% | 2.0% | 2.0% |
Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Interest expense | $ | 62,596 | $ | 47,702 | $ | 200,512 | $ | 222,177 | $ | 265,745 |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Derivative interest expense | $ | 23,714 | $ | 7,549 | $ | 55,634 | $ | 18,699 | $ | 13,056 |
Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Other (income) expense | $ | (371 | ) | $ | 675 | $ | (13,336 | ) | $ | 12,753 | $ | (473 | ) |
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Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Actual | Actual | Pro Forma | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Income tax expense (benefit) | $ | (9,525 | ) | $ | 301 | $ | 326,650 | $ | 11,368 | $ | (238,893 | ) |
As of March 31, 2010 | ||||
(Dollars in thousands) | ||||
Cash and cash equivalents, excluding restricted cash | $ | 87,327 | ||
Availability under revolving line of credit due 2012 | 235,600 | |||
Total | $ | 322,927 | ||
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Three Months Ended | ||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
(Unaudited) | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net cash provided by operating activities | $ | 15,107 | $ | 7,376 | $ | 115,335 | $ | 119,740 | ||||||||
Net cash used in investing activities | $ | (35,131 | ) | $ | (6,661 | ) | $ | (1,127 | ) | $ | (118,517 | ) | ||||
Net cash used in financing activities and effect of exchange rate changes | $ | (8,511 | ) | $ | (1,825 | ) | $ | (56,262 | ) | $ | (22,133 | ) |
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Three Months Ended | Years Ended | |||||||||||||||
March 31, | December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenue equipment: | ||||||||||||||||
Tractors | $ | 14,018 | $ | 10,105 | $ | 56,200 | $ | 221,731 | ||||||||
Trailers | 446 | 1,360 | 8,393 | 93,006 | ||||||||||||
Facilities | 2,394 | 1,012 | 6,152 | 12,121 | ||||||||||||
Other | 297 | 74 | 520 | 867 | ||||||||||||
Total cash capital expenditures | 17,155 | 12,551 | 71,265 | 327,725 | ||||||||||||
Less: Proceeds from sales of equipment | 4,684 | 2,381 | 69,773 | 191,151 | ||||||||||||
Net cash capital expenditures | $ | 12,471 | $ | 10,170 | $ | 1,492 | $ | 136,574 | ||||||||
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• | existing senior secured credit facility consisting of a term loan due May 2014, a revolving line of credit due May 2012 (none drawn), and a synthetic letter of credit facility due May 2014; | |
• | senior secured floating rate notes due May 2015; | |
• | senior secured fixed rate notes due May 2017; | |
• | 2008 RSA due July 2013; and | |
• | other secured indebtedness and capital lease agreements. |
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March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
First lien term loan due May 2014 | $ | 1,507,100 | $ | 1,511,400 | ||||
Senior secured floating rate notes due May 15, 2015 | 203,600 | 203,600 | ||||||
Senior secured fixed rate notes due May 15, 2017 | 505,648 | 595,000 | ||||||
2008 RSA | 150,000 | — | ||||||
Other secured debt and capital leases | 165,833 | 156,934 | ||||||
Total long-term debt and capital leases | $ | 2,532,181 | $ | 2,466,934 | ||||
Less: current portion | 56,369 | 46,754 | ||||||
Long-term debt and capital leases, less current portion | $ | 2,475,812 | $ | 2,420,180 | ||||
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Payments due by period(5) | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
1 Year | 1-3 Years | 3-5 Years | 5 Years | Total | ||||||||||||||||
Long-term debt obligations | $ | 19,054 | $ | 36,079 | $ | 1,460,316 | $ | 798,600 | $ | 2,314,049 | ||||||||||
Capital lease obligations(1) | 27,700 | 91,136 | 34,049 | — | 152,885 | |||||||||||||||
Operating lease obligations(2) | 64,724 | 61,263 | 6,426 | 1,154 | 133,567 | |||||||||||||||
Purchase obligations(3) | 149,140 | — | — | — | 149,140 | |||||||||||||||
Other long-term liabilities: | ||||||||||||||||||||
Interest rate swaps(4) | 48,819 | 38,793 | — | — | 87,612 | |||||||||||||||
Total contractual obligations | $ | 309,437 | $ | 227,271 | $ | 1,500,791 | $ | 799,754 | $ | 2,837,253 | ||||||||||
(1) | Represents principal payments owed at December 31, 2009. The borrowing consists of capital leases with finance companies, with fixed borrowing amounts and fixed interest rates, as set forth on each applicable lease schedule. Accordingly, interest on each lease varies between schedules. | |
(2) | Represents future monthly rental payment obligations under operating leases for tractors, trailers, chassis, and facilities. Substantially all lease agreements for revenue equipment have fixed payment terms based on the passage of time. The tractor lease agreements generally stipulate maximum miles and provide for mileage penalties for excess miles. These leases generally run for a period of three to five years for tractors and five to seven years for trailers. We also have guarantee obligations of residual values under certain operating leases, which obligations are not included in the amounts presented. Upon termination of these leases, we would be responsible for the excess of the guarantee amount above the fair market value of the equipment, if any. As of December 31, 2009, the maximum potential amount of future payments we could be required to make under these guarantees is $18.7 million. | |
(3) | Represents purchase obligations for revenue equipment, fuel, and facilities. The portion associated with revenue equipment purchase obligations consists of $146.1 million. We generally have the option to cancel tractor purchase orders with 90 days’ notice. As of December 31, 2009, approximately one-third of this amount had become non-cancelable. | |
(4) | Represents interest rate swap payments that are undiscounted and projected based on LIBOR forward rates as of December 31, 2009. | |
(5) | Deferred taxes and long-term portion of claims accruals are excluded from other long-term liabilities in the table above. |
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![(BAR CHART)](https://capedge.com/proxy/S-1/0000950123-10-066959/c58386c5838603.gif)
(1) | Truck tonnage was comprised of 48.8% truckload, 1.4%less-than-truckload, and 49.8% private fleet in 2009 and projected to be comprised of 49.8% truckload, 1.5%less-than-truckload, and 48.7% private fleet in 2021. |
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![]() | ![]() | |
Source: ATA | Source: ACT Research |
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• | general truckload service; | |
• | dedicated truckload service; | |
• | cross-border Mexico truckload service; | |
• | rail intermodal service; and | |
• | non-asset based freight brokerage and logistics management service. |
• | North American market leader with broad terminal network and a modern fleet. The size and scope of our operations afford us significant advantages in a fragmented truckload industry. We operate North America’s largest truckload fleet, have 35 major terminals and multiple other locations strategically positioned throughout the United States and Mexico, and offer customers “one-stop-shopping” for a broad spectrum of their truckload transportation needs. Our fleet size offers wide geographic coverage while maintaining the efficiencies associated with significant traffic density within our operating regions. Our terminals are strategically located near key population centers, driver recruiting areas, and cross-border hubs, often in close proximity to our customers. This broad network offers benefits such as in-house maintenance, more frequent equipment inspections, localized driver recruiting, rapid customer response, and personalized marketing efforts. Our size allows us to achieve substantial economies of scale in purchasing items such as tractors, trailers, containers, fuel, and tires where pricing is volume-sensitive. We believe our scale also offers additional benefits in brand awareness and access to capital. Additionally, our modern company tractor fleet, with an average age of 2.55 years for our approximately 9,000 linehaul sleeper units, lowers maintenance and repair expense, aids in driver recruitment, and increases asset utilization as compared with an older fleet. | |
• | High quality customer service and extensive suite of services. Our intense focus on customer satisfaction contributed to 20 “carrier of the year” or similar awards in 2009 and has helped us establish a strong platform for cross-selling our other services. Our strong and diversified customer base, ranging from Fortune 500 companies to local shippers, has a wide variety of shipping needs, including general and specialized truckload, imports and exports, regional distribution, high-service dedicated operations, rail intermodal service, and surge capacity through fleet flexibility and brokerage and logistics operations. We believe customers continue to seek fewer transportation providers that offer a broader range of services to streamline their transportation management functions. For example, ten of our top fifteen customers used at least four of our services in the three months ended March 31, 2010. Our top fifteen customers by revenue in 2009 included Coors, Costco, Dollar Tree,Georgia-Pacific, Home Depot, Kimberly-Clark, Lowes, Menlo Logistics, Procter & Gamble, Quaker Oats, Ryder Logistics, Sears, Target, and Wal-Mart. We believe the breadth of our services helps diversify our customer base and provides us with a competitive advantage, especially for customers with multiple needs and international shipments. |
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• | Strong and growing owner-operator business. We supplement our company tractors with tractors provided by owner-operators, who operate their own tractors and are responsible for most ownership and operating expenses. We believe that owner-operators provide significant advantages that primarily arise from the entrepreneurial motivation of business ownership. Our owner-operators tend to be more experienced, have lower turnover, have fewer accidents per million miles, and produce higher weekly trucking revenue per tractor than our average company drivers. In 2009, our owner-operator tractors drove on average 34% more miles per week than our company tractors. | |
• | Leader in driver and owner-operator development. Driver recruiting and retention historically have been significant challenges for truckload carriers. To address these challenges, we employ nationwide recruiting efforts through our terminal network, operate five driver training schools, maintain an active and successful owner-operator development program, provide drivers modern tractors, and employ numerous driver satisfaction policies. We believe our extensive recruiting and training efforts will become increasingly advantageous to us in periods of economic growth when employment alternatives are more plentiful and also when new regulatory requirements begin to affect the size or effective capacity of the industry-wide driver pool. | |
• | Experienced management aligned with corporate success. Our management team has a proven track record of growth and cost control. The improvements we have made to our operations since going private have positioned us to benefit from the expected improvement in the freight environment. Management focuses on disciplined execution and financial performance by measuring our progress through a combination of Adjusted EBITDA growth, revenue growth, Adjusted Operating Ratio, and return on capital. We align management’s priorities with our own through equity option awards and an annual senior management incentive program linked to Adjusted EBITDA. |
• | Profitable revenue growth. To increase freight volumes and yield, we intend to further penetrate our existing customer base, cross-sell our services, and pursue new customer opportunities. Our superior customer service and extensive suite of truckload services continue to contribute to recent new business wins from customers such as Costco, Procter & Gamble, Caterpillar, and Home Depot. In addition, we are further enhancing our sophisticated freight selection management tools to allocate our equipment to more profitable loads and complementary lanes. As freight volumes increase, we intend to prioritize the following areas for growth: |
— | Rail intermodal and port operations. Our growing rail intermodal presence allows us to better serve customers in longer haul lanes and reduce our investment in fixed assets. Since its inception in 2005, we have grown our rail intermodal business by adding approximately 4,300 containers, and we have ordered an additional 1,000 containers for delivery between August 2010 and June 2011. We have intermodal agreements with all major U.S. railroads and recently negotiated more favorable terms with our largest intermodal provider, which has helped increase our volumes through more competitive pricing. We also expanded our presence in the short-haul drayage business at the ports of Los Angeles and Long Beach in 2008 and are evaluating additional port opportunities. | |
— | Dedicated services and private fleet outsourcing. The size and scale of our fleet and terminal network allow us to provide the equipment availability and high service levels required for dedicated contracts. Dedicated contracts often are used for high-service and high-priority freight, sometimes to replace private fleets previously operated by customers. Dedicated operations generally produce higher margins and lower driver turnover than our general truckload operations. We believe these opportunities will increase in times of scarce capacity in the truckload industry. |
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— | Cross-border Mexico-U.S. freight. The combination of our U.S., cross-border, customs brokerage, and Mexican operations enables us to provide efficientdoor-to-door service between the United States and Mexico. We believe our sophisticated load security measures, as well as our DHS status as a C-TPAT carrier, allow us to offer more efficient service than most competitors and afford us substantial advantages with major international shippers. | |
— | Freight brokerage and third-party logistics. We believe we have a substantial opportunity to continue to increase our non-asset based freight brokerage and third-party logistics services. We believe many customers increasingly seek transportation companies that offer both asset-based and non-asset based services to gain additional certainty that safe, secure, and timely truckload service will be available on demand and to reward asset-based carriers for investing in fleet assets. We intend to continue growing our transportation management and freight brokerage capability to build market share with customers, earn marginal revenue on more loads, and preserve our assets for the most attractive lanes and loads. |
• | Increase asset productivity and return on capital. We believe we have a substantial opportunity to improve the productivity and yield of our existing assets through the following measures: |
— | increasing the percentage of our fleet provided by owner-operators, who generally produce higher weekly trucking revenue per tractor than our company drivers; | |
— | increasing company tractor utilization through measures such as equipment pools, relays, and team drivers; | |
— | capitalizing on a stronger freight market to increase average trucking revenue per mile by using sophisticated freight selection and network management tools to upgrade our freight mix and reduce deadhead miles; | |
— | maintaining discipline regarding the timing and extent of company tractor fleet growth based on availability of high-quality freight; and | |
— | rationalizing unproductive assets as necessary, thereby improving our return on capital. |
• | Continue to focus on efficiency and cost control. We intend to continue to implement the Lean Six Sigma, accountability, and discipline measures that helped us improve our Adjusted Operating Ratio in 2009 and in the first quarter of 2010. We presently have ongoing efforts in the following areas that we expect will yield benefits in future periods: |
— | managing the flow of our tractor capacity through our network to balance freight flows and reduce deadhead miles; | |
— | improving processes and resource allocation throughout our customer-facing functions to increase operational efficiencies while endeavoring to improve customer service; | |
— | streamlining driver recruiting and training procedures to reduce attrition costs; and | |
— | reducing waste in shop methods and procedures and in other administrative processes. |
• | Pursue selected acquisitions. In addition to expanding our company tractor fleet through organic growth, and to take advantage of opportunities to add complementary operations, we expect to pursue selected acquisitions. We operate in a highly fragmented and consolidating industry where we believe the size and scope of our operations afford us significant competitive advantages. Acquisitions can provide us an opportunity to expand our fleet with customer revenue and drivers already in place. In our history, we have completed twelve acquisitions, most of which were immediately integrated into our existing business. Given our size in relation to most competitors, we expect most future acquisitions |
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to be integrated quickly. As with our prior acquisitions, our goal is for any future acquisitions to be accretive to our earnings within two full calendar quarters. |
• | we are an efficient and nimble world class service organization that is focused on the customer; | |
• | we are aligned and working together at all levels to achieve our common goals; | |
• | our team enjoys our work and co-workers and this enthusiasm resonates both internally and externally; | |
• | we are on the leading edge of service, always innovating to add value to our customers; | |
• | our information and resources can be easily adapted to analyze and monitor what is most important in a changing environment; | |
• | our financial health is strong, generating excess cash flows and growing profitability year-after-year with a culture that is cost-and environmentally-conscious; and | |
• | we train, build, and develop our employees through perpetual learning opportunities to enhance their skill sets, allowing us to maximize potential of our talented people. |
• | Improving financial performance. To improve our financial performance, we have developed and deployed several strategies, including profitable, revenue growth, improved asset utilization and return on capital, and cost reductions. We measure our performance on these strategies by Adjusted EBITDA, Adjusted Operating Ratio, revenue growth, and return on capital. Our annual incentive plans are based on achieving an Adjusted EBITDA target. In this regard, we have identified numerous specific activities as outlined in “Our Growth Strategy” section above. We also engage all of our sales personnel in specific planning ofmonth-by-month volume and rate goals for each of their major customers and identify specific, controllable operating metrics for each of our terminal managers. | |
• | Customer satisfaction. In our pursuit to be best in class, we surveyed our customers and identified areas where we can accelerate the capture of new freight opportunities, improve our customers’ experience, and profit from enhancing the value our customers receive. Based on the survey, focus areas of improvement include meeting customer commitments for on-timepick-up and delivery, improving billing accuracy, defining and documenting expectations of new customers, and enhancing responsiveness of our personnel. | |
• | Employee development. We realize we are only as good as our people. We believe, by unleashing the talent of our people, we can meet and exceed our organizational goals while enabling our employees to increase their own potential. To facilitate personal and professional growth, we have implemented leadership training and other tools to enhance feedback, continual learning, and sharing of best practices. |
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• | General truckload service. Our general truckload service consists of one-way movements over irregular routes throughout the United States and in Canada through dry van, temperature controlled, flatbed, or specialized trailers, as well as drayage operations, using both company tractors and owner-operator tractors. Our regional terminal network and operating systems enable us to enhance driver recruitment and retention by maintaining open communication lines with our drivers and by planning loads and routes that will regularly return drivers to their homes. Our operating systems provide access to current information regarding driver and equipment status and location, special load and equipment instructions, routing, and dispatching. These systems enable our operations to match available equipment and drivers to available loads and plan future loads based on the intended destinations. Our operating systems also facilitate the scheduling of regular equipment maintenance and fueling at our terminals or other locations, as appropriate, which also enhance productivity and asset utilization while reducing empty miles and repair costs. | |
• | Dedicated truckload service. Through our dedicated truckload service, we devote exclusive use of equipment and offer tailored solutions under long-term contracts, generally with higher operating margins and lower driver turnover. Dedicated truckload service allows us to provide tailored solutions to meet specific customer needs. Our dedicated operations use our terminal network, operating systems, and for-hire freight volumes to source backhaul opportunities to improve asset utilization and reduce deadhead miles. In our dedicated operations, we typically provide transportation professionalson-site at each customer’s facilities and have a centralized team of transportation engineers to design transportation solutions to support private fleet conversions and/or augment customers’ transportation requirements. | |
• | Cross-border Mexico/U.S. truckload service. Our growing cross-border, Mexico truckload business includes service through Trans-Mex, our wholly-owned subsidiary, which is one of the largest trucking companies in Mexico. Our Mexican operations primarily haul through commercial border crossings from Laredo, Texas westward to California. Through Trans-Mex, we can move freight efficiently across theU.S.-Mexico border, and our integrated systems allow customers to track their goods from origin to destination. Our revenue from Mexican operations was approximately $18 million in the three months ended March 31, 2010 and approximately $61 million in 2009, in each case prior to intercompany eliminations. As of March 31, 2010 and December 31, 2009, respectively, the total U.S. dollar book value of our Mexico operations long-lived assets was $47.0 million and $46.9 million. | |
• | Rail intermodal service. Our rail intermodal business involves arranging for rail service for primary freight movement and related drayage service and requires lower tractor investment than general truckload service, making it one of our less asset-intensive businesses. In 2008, we expanded our presence in the short-haul, intermodal drayage business at the ports of Los Angeles, California, and Long Beach, California. With the help of our tracking and operating systems, modern equipment, employee training systems, and existing drayage capabilities, we have achieved strong growth in our drayage business at these ports. We offer “Trailer-on-Flat-Car” through our approximately 49,400 trailers and “Container-on-Flat-Car” through a 4,300 dedicated 53-foot container fleet. We expect to expand our container fleet by 600 units in the third quarter of 2010, with an additional 400 units to be added thereafter. We offer these products to and from 82 active rail ramps located across the United States and Canada. We operate our own drayage fleet and have contracts with over 350 drayage operators across North America. In 2010, we expect to complete more than 100,000 intermodal loads, and our intermodal revenue has grown over 22% per year over the past five years. | |
• | Non-asset based freight brokerage and logistics management services. Through our freight brokerage and logistics management services, we offer our transportation management expertise and/or arrange for other trucking companies to haul freight that does not fit our network, earning us a revenue share with |
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little investment. Our freight brokerage and logistics management services enable us to offer capacity to meet seasonal demands and surges. |
• | Other revenue generating services. In addition to the services referenced above, our services include providing tractor leasing arrangements through IEL to owner-operators, underwriting insurance through our wholly-owned captive insurance companies, and providing repair services through our maintenance and repair shops to owner-operators and other third parties. |
• | Velocity —how quickly freight moves through our network; | |
• | Price —how the load is rated on a revenue per mile basis; | |
• | Lane flow — how the lane fits in our network with backhauls or continuous moves; and | |
• | Seasonality — how consistent the freight demand is throughout the year. |
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Model Year | Tractors(1) | Trailers | ||||||
2011 | 184 | 360 | ||||||
2010 | 623 | 110 | ||||||
2009 | 3,818 | 4,290 | ||||||
2008 | 3,386 | 1,814 | ||||||
2007 | 2,182 | 40 | ||||||
2006 | 502 | 5,454 | ||||||
2005 | 855 | 1,582 | ||||||
2004 | 281 | 1,093 | ||||||
2003 | 179 | 2,954 | ||||||
2002 and prior | 479 | 31,739 | ||||||
Total | 12,489 | 49,436 | ||||||
(1) | Excludes 3,731 owner-operator tractors. |
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• | automobile liability, general liability, and excess liability — $150.0 million of coverage per occurrence, subject to a $10.0 million per-occurrence, self-insured retention; | |
• | cargo damage and loss — $2.0 million limit per truck or trailer with a $10.0 million limit per occurrence; provided that there is a $250,000 limit for tobacco loads and a $250,000 self-insured retention for all perils; | |
• | property and catastrophic physical damage — $150.0 million limit for property and $100.0 million limit for vehicle damage, excluding over the road exposures, subject to a $1.0 million self-insured retention; | |
• | workers’ compensation/employers liability — statutory coverage limits; employers liability of $1.0 million bodily injury by accident and disease, subject to a $5.0 million self-insured retention for each accident or disease; | |
• | employment practices liability — primary policy with a $10.0 million limit subject to a $2.5 million self-insured retention; we also have an excess liability policy that provides coverage for the next $7.5 million of liability for a total coverage limit of $17.5 million; and | |
• | health care — we self-insure for the first $400,000 of each employee health care claim and maintain commercial insurance for the balance. |
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Owned | ||||
Location | or Leased | Description of Activities at Location | ||
Western region | ||||
Arizona — Phoenix | Owned | Customer Service, Marketing, Administration, Fuel, Repair, Driver Training School | ||
California — Fontana | Owned | Customer Service, Marketing, Fuel, Repair | ||
California — Lathrop | Owned | Customer Service, Marketing, Fuel, Repair | ||
California — Mira Loma | Owned | Fuel, Repair | ||
California — Otay Mesa | Owned | Customer Service | ||
California — Wilmington | Owned | Customer Service, Fuel, Repair | ||
California — Willows | Owned | Customer Service, Fuel, Repair | ||
Colorado — Denver | Owned | Customer Service, Marketing, Fuel, Repair | ||
Idaho — Lewiston | Owned/Leased | Customer Service, Marketing, Fuel, Repair, Driver Training School | ||
Nevada — Sparks | Owned | Customer Service, Fuel, Repair | ||
New Mexico — Albuquerque | Owned | Customer Service, Fuel, Repair | ||
Oklahoma — Oklahoma City | Owned | Customer Service, Marketing, Fuel, Repair | ||
Oregon — Troutdale | Owned | Customer Service, Marketing, Fuel, Repair | ||
Texas — El Paso | Owned | Customer Service, Marketing, Fuel, Repair | ||
Texas — Houston | Leased | Customer Service, Repair, Fuel | ||
Texas — Lancaster | Owned | Customer Service, Marketing, Fuel, Repair | ||
Texas — Laredo | Owned | Customer Service, Marketing, Fuel, Repair | ||
Texas — San Antonio | Leased | Driver Training School, Fuel | ||
Utah — Salt Lake City | Owned | Customer Service, Marketing, Fuel, Repair | ||
Washington — Sumner | Owned | Customer Service, Marketing, Fuel, Repair | ||
Eastern region | ||||
Florida — Ocala | Owned | Customer Service, Marketing, Fuel, Repair | ||
Georgia — Decatur | Owned | Customer Service, Marketing, Fuel, Repair | ||
Illinois — Manteno | Owned | Customer Service, Fuel, Repair | ||
Indiana — Gary | Owned | Customer Service, Fuel, Repair | ||
Kansas — Edwardsville | Owned | Customer Service, Marketing, Fuel, Repair | ||
Michigan — New Boston | Owned | Customer Service, Marketing, Fuel, Repair | ||
Minnesota — Inver Grove Heights | Owned | Customer Service, Marketing, Fuel, Repair | ||
New Jersey — Avenel | Owned | Customer Service, Repair | ||
New York — Syracuse | Owned | Customer Service, Marketing, Fuel, Repair | ||
Ohio — Columbus | Owned | Customer Service, Marketing, Fuel, Repair | ||
Pennsylvania — Jonestown | Owned | Customer Service, Fuel, Repair | ||
South Carolina — Greer | Owned | Customer Service, Marketing, Fuel, Repair | ||
Tennessee — Memphis | Owned | Customer Service, Marketing, Fuel, Repair | ||
Tennessee — Millington | Leased | Driver Training School | ||
Virginia — Richmond | Owned/Leased | Customer Service, Marketing, Fuel, Repair, Driver Training School | ||
Wisconsin — Town of Menasha | Owned | Customer Service, Marketing, Fuel, Repair | ||
Mexico | ||||
Tamaulipas — Nuevo Laredo | Owned | Customer Service, Marketing, Fuel, Repair | ||
Sonora — Nogales | Leased | Customer Service, Repair | ||
Nuevo Leon — Monterrey | Owned | Customer Service, Administration |
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Name | Age | Position | ||||
Jerry Moyes | 66 | Chief Executive Officer and Director | ||||
Richard H. Dozer | 53 | Director | ||||
David Vander Ploeg | 51 | Director | ||||
Richard Stocking | 40 | President | ||||
Virginia Henkels | 41 | Executive Vice President, Chief Financial Officer, and Treasurer | ||||
James Fry | 48 | Executive Vice President, General Counsel, and Corporate Secretary | ||||
Mark Young | 52 | Executive Vice President — Swift Transportation Co. of Arizona, LLC | ||||
Kenneth C. Runnels | 45 | Executive Vice President, Eastern Region — Swift Transportation Co. of Arizona, LLC | ||||
Rodney Sartor | 55 | Executive Vice President, Western Region — Swift Transportation Co. of Arizona, LLC | ||||
Chad Killebrew | 35 | Executive Vice President, Business Transformation — Swift Transportation Co. of Arizona, LLC |
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• | presiding at all executive sessions of the independent directors; | |
• | presiding at all meetings of our board of directors and the stockholders (in the case of the lead independent director, where the Chairman is not present); | |
• | in the case of the lead independent director or the Chairman who is an independent director, coordinating the activities of the independent directors; | |
• | preparing board meeting agendas in consultation with the CEO and lead independent director or Chairman, as the case may be, and coordinating board meeting schedules; | |
• | authorizing the retention of outside advisors and consultants who report directly to the board; | |
• | requesting the inclusion of certain materials for board meetings; | |
• | consulting with respect to, and where practicable receiving in advance, information sent to the Board; | |
• | collaborating with the CEO and lead independent director or Chairman, as the case may be, in determining the need for special meetings; | |
• | in the case of the lead independent director, acting as liaison for stockholders between the independent directors and the Chairman, as appropriate; | |
• | communicating to the CEO, together with the chairman of the compensation committee, the results of the board’s evaluation of the CEO’s performance; | |
• | responding directly to stockholder and other stakeholder questions and comments that are directed to the Chairman of the board, or to the lead independent director or the independent directors as a group, as the case may be; and | |
• | performing such other duties as our board of directors may delegate from time to time. |
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• | reviews the audit plans and findings of our independent registered public accounting firm and our internal audit and risk review staff, as well as the results of regulatory examinations, and tracks management’s corrective action plans where necessary; | |
• | reviews our financial statements, including any significant financial itemsand/or changes in accounting policies, with our senior management and independent registered public accounting firm; | |
• | reviews our financial risk and control procedures, compliance programs, and significant tax, legal, and regulatory matters; and | |
• | has the sole discretion to appoint annually our independent registered public accounting firm, evaluate its independence and performance, and set clear hiring policies for employees or former employees of the independent registered public accounting firm. |
• | annually reviews corporate goals and objectives relevant to the compensation of our named executive officers and evaluates performance in light of those goals and objectives; | |
• | approves base salary and other compensation of our named executive officers; | |
• | oversees and periodically reviews the operation of all of Swift’s stock-based employee (including management and director) compensation plans; | |
• | reviews and adopts all employee (including management and director) compensation plans, programs and arrangements, including stock option grants and other perquisites and fringe benefit arrangements; |
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• | periodically reviews the outside directors’ compensation arrangements to ensure their competitiveness and compliance with applicable laws; and | |
• | approves corporate goals and objectives and determines whether such goals are met. |
• | is responsible for identifying, screening, and recommending candidates to the board for board membership; | |
• | advises the board with respect to the corporate governance principles applicable to us; and | |
• | oversees the evaluation of the board and management. |
• | directors are responsible for attending board meetings and meetings of committees on which they serve and to review in advance of meetings material distributed for such meetings; | |
• | the board’s principal responsibility is to oversee and direct our management in building long-term value for our stockholders and to assure the vitality of Swift for our customers, clients, employees, and the communities in which we operate; | |
• | at least two-thirds of the board shall be independent directors, and other than our Chief Executive Officer and up to one additional non-independent director, all of the members of our board of directors shall be independent directors; | |
• | our nominating and corporate governance committee is responsible for nominating members for election to our board of directors and will consider candidates submitted by stockholders; | |
• | our board of directors believes that it is important for each director to have a financial stake in us to help align the director’s interests with those of our stockholders; | |
• | although we do not impose a limit to the number of other public company boards on which a director serves, our board of directors expects that each member be fully committed to devoting adequate time to his or her duties to us; | |
• | the independent directors meet in executive session on a regular basis, but not less than quarterly; | |
• | each of our audit committee, compensation committee, and nominating and corporate governance committee must consist solely of independent directors; | |
• | new directors participate in an orientation program and all directors are encouraged to attend, at our expense, continuing educational programs to further their understanding of our business and enhance their performance on our board; and |
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• | our board of directors and its committees will sponsor annual self-evaluations to determine whether members of the board are functioning effectively. |
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Fees Earned | ||||||||
or Paid | ||||||||
Name | in Cash | Total | ||||||
Jerry Moyes(1) | $ | — | $ | — | ||||
Earl Scudder(2) | $ | 30,500 | $ | 30,500 | ||||
Jeff A. Shumway(3) | $ | 36,000 | $ | 36,000 | ||||
Richard H. Dozer | $ | 53,000 | $ | 53,000 | ||||
John Breslow(4) | $ | 10,000 | $ | 10,000 | ||||
David Vander Ploeg | $ | 23,000 | $ | 23,000 |
(1) | Jerry Moyes also serves as our Chief Executive Officer and previously served as our President during 2009. Employees of Swift who serve as directors receive no additional compensation, although we may reimburse them for travel and other expenses. See below for disclosure of Mr. Moyes’ compensation as Chief Executive Officer and President for 2009. | |
(2) | Earl Scudder resigned from our board of directors and all committees effective July 21, 2010. | |
(3) | Jeff A. Shumway resigned from our board of directors and all committees effective July 21, 2010. | |
(4) | John Breslow resigned from our board of directors and all committees effective May 5, 2009. |
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• | administering all of Swift’s stock-based and other incentive compensation plans; | |
• | annually reviewing corporate goals and objectives relevant to the compensation of our named executive officers and evaluating performance in light of those goals and objectives; | |
• | approving base salary and other compensation of our named executive officers; | |
• | overseeing and periodically reviewing the operation of all of Swift’s stock-based employee (including management and director) compensation plans; | |
• | reviewing and adopting all employee (including management and director) compensation plans, programs, and arrangements, including stock option grants and other perquisites, and fringe benefit arrangements; | |
• | periodically reviewing the outside directors’ compensation arrangements to ensure their competitiveness and compliance with applicable laws; and | |
• | approving corporate goals and objectives and determining whether such goals have been met. |
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• | Business performance accountability. Compensation should be tied to our performance in key areas so that executives are held accountable through their compensation for our performance. | |
• | Individual performance accountability. Compensation should be tied to an individual’s performance so that individual contributions to our performance are rewarded. | |
• | Alignment with stockholder interests. Compensation should be tied to our performance through stock incentives so that executives’ interests are aligned with those of our stockholders. | |
• | Retention. Compensation should be designed to promote the retention of key employees. | |
• | Competitiveness. Compensation should be designed to attract, retain, and reward key leaders critical to our success by providing competitive total compensation. |
• | establishing our overall performance goals; | |
• | setting target incentives for each individual; and | |
• | measuring our actual financial performance against the predetermined goals to determine incentive payouts. |
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Level of Attainment: | Threshold | Target | Stretch | Maximum | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Adjusted EBITDA | $ | 485,000 | $ | 495,000 | $ | 550,000 | $ | 600,000 | ||||||||
Bonus Payout % | 50% | 100% | 150% | 200% |
Level of Attainment: | Threshold | Target | Stretch | Maximum | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Adjusted EBITDA | $ | 440,000 | $ | 450,000 | $ | 475,000 | $ | 500,000 | ||||||||
Bonus Payout % | 50% | 100% | 150% | 200% |
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�� | Non-Equity | |||||||||||||||||||||||||||
Option | Incentive Plan | All Other | ||||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus(1) | Awards(2) | Compensation(3) | Compensation(4) | Total | |||||||||||||||||||||
Jerry Moyes, | 2009 | $ | 490,385 | $ | — | $ | — | $ | — | $ | 10,256 | $ | 500,641 | |||||||||||||||
Chief Executive | 2008 | $ | 500,000 | $ | 87,500 | $ | — | $ | — | $ | 10,256 | $ | 597,756 | |||||||||||||||
Officer | 2007 | $ | 311,538 | $ | — | $ | — | $ | 178,250 | $ | 6,644 | $ | 496,432 | |||||||||||||||
Virginia Henkels | 2009 | $ | 269,711 | $ | — | $ | — | $ | — | $ | 10,256 | $ | 279,967 | |||||||||||||||
Executive Vice President and Chief Financial Officer(5) | 2008 | $ | 235,385 | $ | 34,375 | $ | 776,250 | $ | — | $ | 14,751 | $ | 1,060,761 | |||||||||||||||
Richard Stocking, | 2009 | $ | 386,707 | $ | — | $ | 169,500 | $ | — | $ | 11,447 | $ | 567,654 | |||||||||||||||
President and Chief | 2008 | $ | 231,985 | $ | 27,248 | $ | — | $ | — | $ | 13,252 | $ | 272,485 | |||||||||||||||
Operating Officer | 2007 | $ | 142,435 | $ | — | $ | 492,000 | $ | 110,413 | $ | 8,709 | $ | 753,557 | |||||||||||||||
Rodney Sartor, | 2009 | $ | 213,792 | $ | — | $ | — | $ | — | $ | 10,256 | $ | 224,048 | |||||||||||||||
Executive Vice President | 2008 | $ | 217,984 | $ | 27,248 | $ | — | $ | — | $ | 10,676 | $ | 255,908 | |||||||||||||||
2007 | $ | 134,144 | $ | — | $ | 492,000 | $ | 110,413 | $ | 5,957 | $ | 742,514 | ||||||||||||||||
Kenneth Runnels, | 2009 | $ | 213,808 | $ | — | $ | — | $ | — | $ | 10,909 | $ | 224,717 | |||||||||||||||
Executive Vice President(5) | 2008 | $ | 218,000 | $ | 27,250 | $ | 931,500 | $ | — | $ | 55,311 | $ | 1,232,061 |
(1) | Amounts in this column represent discretionary cash bonuses paid in fiscal 2008 to the respective named executive officers as described in Note 3 below. | |
(2) | This column represents the grant date fair value of stock options under Topic 718 granted to each of the named executive officers in 2009, 2008, and 2007. For additional information on the valuation assumptions with respect to the 2009, 2008, and 2007 grants, refer to Note 19 of Swift Corporation’s audited consolidated financial statements. See “—Grants of Plan-Based Awards in 2009” in this prospectus for information on options granted in 2009. | |
(3) | This column represents the cash incentive compensation amounts approved by the compensation committee and Chief Executive Officer paid to the named executive officers. The amounts for a given year represent the amount of incentive compensation earned with respect to such year. The bonuses were calculated based on our actual financial performance for 2009 and 2008 and pro forma financial performance for 2007, as compared with established targets. The performance targets to qualify for a 2009 bonus were not met and, accordingly, no awards were paid in 2009. For the 2008 cash bonuses, the Chief Executive Officer determined in December 2008 that, even though we would not achieve the 2008 performance targets in order to qualify for payout under the 2008 bonus plan, Swift would make a discretionary payout in amounts generally equal to 25% of what each employee’s target bonus was under the 2008 bonus plan. These cash bonuses were paid to the named executive officers at the end of 2008 and are reflected in the “Bonus” column rather than the “Non-Equity Incentive Plan Compensation” column. For the 2007 cash bonuses, the Chief Executive Officer determined in December 2007 that the annual performance targets |
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would be met and, consistent with our past practice of paying bonuses before Christmas, determined to make partial payments of the annual bonuses to the named executive officers and other of our employees. The final payment of bonuses was made in February 2008 after the Chief Executive Officer determined the unpaid amount owing to each employee upon Swift’s final determination of financial performance for 2007. | ||
(4) | This column represents all other compensation paid to the named executive officers for employer 401(k) matches, executive disability insurance, car allowance, and other benefits, none of which individually exceeded $10,000. | |
(5) | Ms. Henkels first became an executive officer on May 1, 2008, and Mr. Runnels was hired as an executive officer on November 28, 2007. |
All Other | ||||||||||||||||||||||||||||
Option | Exercise | |||||||||||||||||||||||||||
Awards: | or Base | |||||||||||||||||||||||||||
Number of | Price of | Grant Date | ||||||||||||||||||||||||||
Board | Estimated Possible Payouts Under | Securities | Option | Fair Value of | ||||||||||||||||||||||||
Grant | Approval | Non-Equity Incentive Plan Awards(1) | Underlying | Awards | Option | |||||||||||||||||||||||
Name | Date | Date | Threshold | Target | Maximum | Options (#)(2) | ($/SH)(3) | Awards | ||||||||||||||||||||
Jerry Moyes | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Virginia Henkels | — | — | $ | 68,750 | $ | 137,500 | $ | 275,000 | — | — | — | |||||||||||||||||
Richard Stocking | 12/31/2009 | 11/24/2009 | — | — | — | 50,000 | $ | 6.89 | $ | 169,500 | ||||||||||||||||||
— | — | $ | 100,000 | $ | 200,000 | $ | 400,000 | — | — | — | ||||||||||||||||||
Rodney Sartor | — | — | $ | 54,496 | $ | 108,992 | $ | 217,984 | — | — | — | |||||||||||||||||
Kenneth Runnels | — | — | $ | 54,500 | $ | 109,000 | $ | 218,000 | — | — | — |
(1) | These columns represent the potential value of 2009 annual cash incentive payouts for each named executive officer, for which target amounts were approved by the compensation committee in March 2009. As discussed in Note 3 to the “Summary Compensation Table,” the 2009 performance targets to qualify for a payout under the 2009 plan were not met and, accordingly, no awards were paid under this plan. Mr. Moyes is not eligible for the annual cash incentive. | |
(2) | This column shows the number of stock options granted in 2009 to the named executive officers. The options granted to Mr. Stocking are Tier I options and will vest (i) upon the occurrence of the earlier of a sale or a change in control of Swift or, if earlier (ii) a five-year vesting period at a rate of 331/3% beginning with the third anniversary date of the grant. To the extent vested, these options will become exercisable simultaneously with the closing of the earlier of (i) an initial public offering of Swift stock, (ii) a sale, or (iii) change in control of Swift. | |
(3) | This column shows the exercise price for the stock options granted, as determined by our board of directors, which equaled the fair value of the common stock on the date of grant. |
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Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | Option | |||||||||||||
Options (#) | Options (#) | Exercise | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | Price | Date | ||||||||||||
Jerry Moyes | — | — | $ | — | — | |||||||||||
Virginia Henkels | — | 25,000 | (1) | $ | 12.50 | 10/16/2017 | ||||||||||
— | 125,000 | (1) | $ | 13.43 | 8/27/2018 | |||||||||||
Richard Stocking | — | 150,000 | (2) | $ | 12.50 | 10/16/2017 | ||||||||||
— | 50,000 | (2) | $ | 6.89 | 12/31/2019 | |||||||||||
Rodney Sartor | — | 150,000 | (2) | $ | 12.50 | 10/16/2017 | ||||||||||
Kenneth Runnels | — | 150,000 | (2) | $ | 13.43 | 8/27/2018 |
(1) | The stock options are Tier II options and will vest upon (A) the later of (i) the occurrence of an initial public offering of Swift or (ii) a five-year vesting period at a rate of 331/3% beginning with the third anniversary date of the grant, or (B) immediately upon a change in control. The grant dates for Ms. Henkels’ awards of 25,000 stock options and 125,000 stock options were October 16, 2007 and August 27, 2008, respectively. To the extent vested, the options will become exercisable simultaneously with the closing of the earlier of (i) an initial public offering, (ii) a sale, or (iii) a change in control of Swift. | |
(2) | The stock options are Tier I options and will vest upon the occurrence of the earliest of (i) a sale or a change in control of Swift or (ii) a five-year vesting period at a rate of 331/3% beginning with the third anniversary date of the grant. The grant dates for Mr. Stocking’s awards of 150,000 stock options and 50,000 stock options were October 16, 2007 and December 31, 2009, respectively. The grant date for Mr. Sartor’s award of 150,000 stock options was October 16, 2007. The grant date for Mr. Runnels’s award of 150,000 stock options was August 27, 2008. To the extent vested, the options will become exercisable simultaneously with the closing of the earlier of (i) an initial public offering, (ii) a sale, or (iii) a change in control of Swift. |
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• | Operating revenue (including without limitation revenue per mile or revenue per tractor) or net operating revenue | |
• | Fuel surcharges | |
• | Accounts receivable collection or days sales outstanding | |
• | Cost reductions and savings or limits on cost increases | |
• | Safety and claims (including without limitation accidents per million miles and number of significant accidents) | |
• | Operating income | |
• | Operating ratio or Adjusted Operating Ratio | |
• | EBITDA or Adjusted EBITDA, as applicable | |
• | Income before taxes | |
• | Net income or adjusted net income | |
• | Earnings per share or adjusted earnings per share | |
• | Stock price | |
• | Working capital measures | |
• | Return on assets or return on revenues | |
• | Debt-to-equity ordebt-to-capitalization (with or without lease adjustment) |
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• | Productivity and efficiency measures (including without limitation driver turnover,trailer-to-tractor ratio, andtractor-to-non-driver ratio) | |
• | Cash position or cash flow measures (including without limitation free cash flow) | |
• | Return on stockholders’ equity or return on invested capital | |
• | Market share | |
• | Economic value added | |
• | Completion of acquisitions (either with or without specified size) | |
• | Personal goals or objectives, as established by the compensation committee as it deems appropriate, including, without limitation, implementation of our policies, negotiation of significant corporate transactions, development of long-term business goals or strategic plans for us, and exercise of specific areas of managerial responsibility |
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• | all of our executive officers and directors as a group; | |
• | each of our named executive officers; | |
• | each of our directors; and | |
• | each beneficial owner of more than 5% of any class of our outstanding shares. |
Shares Beneficially Owned | Shares Beneficially Owned | |||||||||||||||||||||||||||
Before the Offering | After the Offering | |||||||||||||||||||||||||||
Percent | Percent | Percent | Percent | |||||||||||||||||||||||||
of Total | of Total | Class of | of Total | of Total | ||||||||||||||||||||||||
Common | Voting | Common | Common | Voting | ||||||||||||||||||||||||
Name and Address of Beneficial Owner(1)(2) | Number | Stock | Power | Stock | Number | Stock(3) | Power(4) | |||||||||||||||||||||
Named Executive Officers and Directors: | ||||||||||||||||||||||||||||
Jerry Moyes(5) | 54,995,230 | 73.2 | % | 73.2 | % | B | % | % | ||||||||||||||||||||
Virginia Henkels(6) | 25,000 | * | * | A | % | % | ||||||||||||||||||||||
Richard Stocking(7) | 150,000 | * | * | A | % | % | ||||||||||||||||||||||
Rodney Sartor(8) | 150,000 | * | * | A | % | % | ||||||||||||||||||||||
Kenneth Runnels | — | — | — | A | % | % | ||||||||||||||||||||||
Richard H. Dozer | — | — | — | A | % | % | ||||||||||||||||||||||
David Vander Ploeg | — | — | — | A | % | % | ||||||||||||||||||||||
All executive officers and directors as a group (10 persons) | 55,320,230 | 73.2 | % | 73.2 | % | — | % | % | ||||||||||||||||||||
Other 5% Stockholders: | ||||||||||||||||||||||||||||
Various Moyes Children’s Trusts(9) | 20,150,662 | 26.8 | % | 26.8 | % | B | % | % |
* | Represents less than 1% of the outstanding shares of our common stock. | |
(1) | Except as otherwise indicated, addresses arec/o Swift, 2200 South 75th Avenue, Phoenix, Arizona 85043. | |
(2) | Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of July 21, 2010 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. | |
(3) | Percent of total common stock represents the percentage of total shares of outstanding Class A common stock and Class B common stock. | |
(4) | Percent of total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as a single class. Each holder of Class A common stock is generally entitled to one vote per share of Class A common stock and each holder of Class B common stock is |
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generally entitled to two votes per share of Class B common stock on all matters submitted to our stockholders for a vote. See “Description of Capital Stock — Common Stock.” | ||
(5) | Consists of shares owned by Mr. Moyes, Mr. Moyes and Vickie Moyes, jointly, and the Jerry and Vickie Moyes Family Trust dated December 11, 1987, including 44,346,230 shares over which Mr. Moyes has sole voting and dispositive power and 10,649,000 shares over which Mr. Moyes has shared voting and dispositive power. Excludes 20,150,662 shares owned by the various Moyes children’s trusts. | |
(6) | Consists of options to purchase 25,000 shares of our Class A common stock exercisable upon the completion of this offering. | |
(7) | Consists of options to purchase 150,000 shares of our Class A common stock exercisable upon the completion of this offering. | |
(8) | Consists of options to purchase 150,000 shares of our Class A common stock exercisable upon the completion of this offering. | |
(9) | Consists of (x) 3,387,843 shares owned by the Todd Moyes Trust, 3,387,843 shares owned by the Hollie Moyes Trust, 3,387,843 shares owned by the Chris Moyes Trust, 3,287,045 shares owned by the Lyndee Moyes Nester Trust, and 3,312,245 shares owned by the Marti Lyn Moyes Trust, for each of which Michael J. Moyes is the trustee and for which he has sole voting and dispositive power and (y) 3,387,843 shares owned by the Michael J. Moyes Trust. Lyndee Moyes Nester is the trustee of the Michael J. Moyes Trust and has sole voting and dispositive power with respect to shares held by the trust. |
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• | shares are designated as Class A common stock; | |
• | shares are designated as Class B common stock; and | |
• | shares are designated as preferred stock. |
• | any merger or consolidation in which holders of shares of Class A common stock receive consideration that is not identical to consideration received by holders of Class B common stock (provided that if such consideration includes shares of stock, then no separate class vote will be required if the shares to be received by holders of our Class B common stock have two times the voting power of the shares of our Class A common stock but are otherwise identical in their rights and preferences); | |
• | any amendment of our amended and restated certificate of incorporation or amended and restated bylaws that alters relative rights of our common stockholders; and | |
• | any increase in the authorized number of shares of our Class B common stock or the issuance of shares of our Class B common stock, other than such increase or issuance required of effect a stock split, stock dividend, or recapitalization pro rata with any increase or issuance of shares of our Class A common stock. |
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• | before such date, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested holder; | |
• | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or | |
• | on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of the holders of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder. |
• | any merger or consolidation involving the corporation and the interested stockholder; | |
• | any sale, transfer, pledge, or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; | |
• | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; | |
• | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or | |
• | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits by or through the corporation. |
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• | shares will be eligible for sale on the date of this prospectus; and | |
• | shares will be eligible for sale upon the expiration of thelock-up agreements described below. |
• | 1% of the number of shares of Class A common stock then outstanding, which will equal approximately shares immediately after this offering; or | |
• | the average weekly trading volume of the Class A common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
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toNon-U.S. Holders
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• | the gain is effectively connected with a trade or business carried on by thenon-U.S. Holder within the United States (and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment or fixed base of suchnon-U.S. Holder); | |
• | thenon-U.S. Holder is an individual and is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are satisfied; or | |
• | we are or have been a U.S. real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding such disposition or suchnon-U.S. Holder’s holding period of our Class A common stock. |
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Number of | ||||
Name | Shares | |||
Morgan Stanley & Co. Incorporated | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Wells Fargo Securities, LLC | ||||
Total | ||||
Without | With Full | |||||||
Over-Allotment | Over-Allotment | |||||||
Exercise | Exercise | |||||||
Per Share | $ | $ | ||||||
Total | $ | $ |
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• | the information set forth in this prospectus and otherwise available to the representatives; | |
• | our prospects and the history and prospects for the industry in which we compete; | |
• | an assessment of our management; | |
• | our prospects for future earnings; | |
• | the general condition of the securities markets at the time of this offering; | |
• | the recent market prices of, and demand for, publicly traded Class A common stock of generally comparable companies; and | |
• | other factors deemed relevant by the underwriters and us. |
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• | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
• | to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; |
• | to fewer than 100 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive) subject to obtaining the prior consent of the book-running managers for any such offer; or |
• | in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
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• | made by investment firms, banks, or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 385 of 1 September 1993, as amended, or Decree No. 385, Decree No. 58, CONSOB Regulation No. 11522, and any other applicable laws and regulations; | |
• | in compliance with Article 129 of Decree No. 385 and the implementing instructions of the Bank of Italy, pursuant to which the issue, trading, or placement of securities in Italy is subject to a prior notification to the Bank of Italy, unless an exemption, depending, inter alia, on the aggregate amount and the characteristics of the securities issued or offered in the Republic of Italy, applies; and | |
• | in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or the Bank of Italy. |
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Page | ||
Number | ||
Unaudited Financial Statements of Swift Corporation (successor) | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-7 | ||
Audited Financial Statements of Swift Corporation (successor) | ||
F-21 | ||
F-22 | ||
F-23 | ||
F-24 | ||
F-25 | ||
F-26 | ||
F-28 | ||
Audited Financial Statements of Swift Transportation Co., Inc. (predecessor) | ||
F-62 | ||
F-63 | ||
F-64 | ||
F-65 | ||
F-66 | ||
F-67 | ||
F-68 | ||
Audited Financial Statements of Swift Holdings Corp. (registrant) | ||
F-85 | ||
F-86 | ||
F-87 |
F-1
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Consolidated balance sheets
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands, except share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 87,327 | $ | 115,862 | ||||
Restricted cash | 48,871 | 24,869 | ||||||
Accounts receivable, net | 269,392 | 21,914 | ||||||
Retained interest in accounts receivable | — | 79,907 | ||||||
Income tax refund receivable | 1,843 | 1,436 | ||||||
Equipment sales receivable | 2,498 | 208 | ||||||
Inventories and supplies | 9,414 | 10,193 | ||||||
Assets held for sale | 7,929 | 3,571 | ||||||
Prepaid taxes, licenses, insurance and other | 46,349 | 42,365 | ||||||
Deferred income taxes | 48,820 | 49,023 | ||||||
Other current assets | 4,606 | 4,523 | ||||||
Total current assets | 527,049 | 353,871 | ||||||
Property and equipment, at cost: | ||||||||
Revenue and service equipment | 1,494,107 | 1,488,953 | ||||||
Land | 142,126 | 142,126 | ||||||
Facilities and improvements | 224,541 | 222,751 | ||||||
Furniture and office equipment | 33,092 | 32,726 | ||||||
Total property and equipment | 1,893,866 | 1,886,556 | ||||||
Less: accumulated depreciation and amortization | 566,656 | 522,011 | ||||||
Net property and equipment | 1,327,210 | 1,364,545 | ||||||
Insurance claims receivable | 40,775 | 45,775 | ||||||
Other assets | 106,712 | 107,211 | ||||||
Intangible assets, net | 383,737 | 389,216 | ||||||
Goodwill | 253,256 | 253,256 | ||||||
Total assets | $ | 2,638,739 | $ | 2,513,874 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 85,359 | $ | 70,934 | ||||
Accrued liabilities | 135,216 | 110,662 | ||||||
Current portion of claims accruals | 101,380 | 92,280 | ||||||
Current portion of long-term debt and obligations under capital leases | 56,369 | 46,754 | ||||||
Fair value of guarantees | 2,886 | 2,519 | ||||||
Current portion of fair value of interest rate swaps | 44,714 | 47,244 | ||||||
Total current liabilities | 425,924 | 370,393 | ||||||
Long-term debt and obligations under capital leases | 2,325,812 | 2,420,180 | ||||||
Claims accruals, less current portion | 151,269 | 166,718 | ||||||
Fair value of interest rate swaps, less current portion | 34,689 | 33,035 | ||||||
Deferred income taxes | 360,333 | 383,795 | ||||||
Securitization of accounts receivable | 150,000 | — | ||||||
Other liabilities | 9,066 | 5,534 | ||||||
Total liabilities | 3,457,093 | 3,379,655 | ||||||
Commitments and contingencies (note 12) | ||||||||
Stockholders’ deficit: | ||||||||
Preferred stock, par value $.001 per share Authorized 1,000,000 shares; none issued | — | — | ||||||
Common stock, par value $.001 per share Authorized 200,000,000 shares; 75,145,892 shares issued at March 31, 2010 and December 31, 2009 | 75 | 75 | ||||||
Additional paid-in capital | 279,136 | 419,105 | ||||||
Accumulated deficit | (812,937 | ) | (759,936 | ) | ||||
Stockholder loans receivable | (241,678 | ) | (471,113 | ) | ||||
Accumulated other comprehensive loss | (43,052 | ) | (54,014 | ) | ||||
Noncontrolling interest | 102 | 102 | ||||||
Total stockholders’ deficit | (818,354 | ) | (865,781 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 2,638,739 | $ | 2,513,874 | ||||
F-2
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Consolidated statements of operations
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands, except per share data) | ||||||||
Operating revenue | $ | 654,830 | $ | 614,756 | ||||
Operating expenses: | ||||||||
Salaries, wages and employee benefits | 177,803 | 189,377 | ||||||
Operating supplies and expenses | 47,830 | 56,723 | ||||||
Fuel | 106,082 | 85,868 | ||||||
Purchased transportation | 175,702 | 135,753 | ||||||
Rental expense | 18,903 | 20,391 | ||||||
Insurance and claims | 20,207 | 25,481 | ||||||
Depreciation, amortization and impairments | 66,771 | 67,471 | ||||||
Gain on disposal of property and equipment | (1,448 | ) | (19 | ) | ||||
Communication and utilities | 6,422 | 7,091 | ||||||
Operating taxes and licenses | 13,365 | 14,381 | ||||||
Total operating expenses | 631,637 | 602,517 | ||||||
Operating income | 23,193 | 12,239 | ||||||
Other (income) expenses: | ||||||||
Interest expense | 62,596 | 47,702 | ||||||
Derivative interest expense | 23,714 | 7,549 | ||||||
Interest income | (220 | ) | (428 | ) | ||||
Other | (371 | ) | 675 | |||||
Total other (income) expenses, net | 85,719 | 55,498 | ||||||
Loss before income taxes | (62,526 | ) | (43,259 | ) | ||||
Income tax (benefit) expense | (9,525 | ) | 301 | |||||
Net loss | $ | (53,001 | ) | $ | (43,560 | ) | ||
Basic and diluted loss per share | $ | (0.71 | ) | $ | (0.58 | ) | ||
Pro forma C corporation data: | ||||||||
Historical loss before income taxes | N/A | $ | (43,259 | ) | ||||
Pro forma provision for income taxes | N/A | 2,259 | ||||||
Pro forma net loss | N/A | $ | (45,518 | ) | ||||
Pro forma basic and diluted loss per share | N/A | $ | (0.61 | ) | ||||
F-3
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Consolidated statements of comprehensive loss
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net loss | $ | (53,001 | ) | $ | (43,560 | ) | ||
Other comprehensive income (loss): | ||||||||
Change in unrealized losses on cash flow hedges | 10,962 | (11,180 | ) | |||||
Comprehensive loss | $ | (42,039 | ) | $ | (54,740 | ) | ||
F-4
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Consolidated statement of stockholders’ deficit
Accumulated | ||||||||||||||||||||||||||||||||
Common Stock | Additional | Stockholder | Other | Total | ||||||||||||||||||||||||||||
Par | Paid-In | Accumulated | Loans | Comprehensive | Noncontrolling | Stockholders’ | ||||||||||||||||||||||||||
Shares | Value | Capital | Deficit | Receivable | Loss | Interest | Deficit | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||||||||||
Balances, December 31, 2009 | 75,145,892 | $ | 75 | $ | 419,105 | $ | (759,936 | ) | $ | (471,113 | ) | $ | (54,014 | ) | $ | 102 | $ | (865,781 | ) | |||||||||||||
Interest accrued on stockholder loan | 1,650 | (1,650 | ) | — | ||||||||||||||||||||||||||||
Interest accrued and proceeds from repayment of related party note receivable | 29 | 85 | 114 | |||||||||||||||||||||||||||||
Change in unrealized losses on cash flow hedges | 10,962 | 10,962 | ||||||||||||||||||||||||||||||
Reduction of stockholder loan (see Note 11) | (231,000 | ) | 231,000 | — | ||||||||||||||||||||||||||||
Cancellation of fixed rate notes (see Note 6) | 89,352 | 89,352 | ||||||||||||||||||||||||||||||
Net loss | (53,001 | ) | (53,001 | ) | ||||||||||||||||||||||||||||
Balances, March 31, 2010 | 75,145,892 | $ | 75 | $ | 279,136 | $ | (812,937 | ) | $ | (241,678 | ) | $ | (43,052 | ) | $ | 102 | $ | (818,354 | ) | |||||||||||||
F-5
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Consolidated statements of cash flows
Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (53,001 | ) | $ | (43,560 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 68,754 | 68,965 | ||||||
(Gain) loss on disposal of property and equipment less write-off of totaled tractors | (1,261 | ) | 447 | |||||
Impairment of property and equipment | 1,274 | 515 | ||||||
Gain on securitization | — | (562 | ) | |||||
Deferred income taxes | (23,259 | ) | (168 | ) | ||||
Provision for losses on accounts receivable | (1,171 | ) | 435 | |||||
Income effect ofmark-to-market adjustment of interest rate swaps | 11,127 | (2,062 | ) | |||||
Increase (decrease) in cash resulting from changes in: | ||||||||
Accounts receivable | (18,400 | ) | 3,847 | |||||
Inventories and supplies | 778 | 920 | ||||||
Prepaid expenses and other current assets | (4,391 | ) | (7,286 | ) | ||||
Other assets | 2,699 | (13,050 | ) | |||||
Accounts payable, accrued and other liabilities | 31,958 | (1,065 | ) | |||||
Net cash provided by operating activities | 15,107 | 7,376 | ||||||
Cash flows from investing activities: | ||||||||
Increase in restricted cash | (24,002 | ) | (3,249 | ) | ||||
Proceeds from sale of property and equipment | 4,684 | 2,381 | ||||||
Capital expenditures | (17,155 | ) | (12,551 | ) | ||||
Payments received on notes receivable | 1,345 | 1,188 | ||||||
Expenditures on assets held for sale | (574 | ) | (1,509 | ) | ||||
Payments received on assets held for sale | 363 | 2,149 | ||||||
Payments received on equipment sale receivables | 208 | 4,930 | ||||||
Net cash used in investing activities | (35,131 | ) | (6,661 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of long-term debt and capital leases | (10,625 | ) | (4,846 | ) | ||||
Repayment of short-term notes payable | — | (1,978 | ) | |||||
Proceeds from long-term debt and capital leases | — | 4,897 | ||||||
Borrowings under accounts receivable securitization | 40,000 | — | ||||||
Repayment of accounts receivable securitization | (38,000 | ) | — | |||||
Distributions to stockholders | — | (6,204 | ) | |||||
Interest payments received on stockholder loan receivable | — | 6,204 | ||||||
Payments received on stockholder loan from affiliate | 114 | 102 | ||||||
Net cash used in financing activities | (8,511 | ) | (1,825 | ) | ||||
Net decrease in cash and cash equivalents | (28,535 | ) | (1,110 | ) | ||||
Cash and cash equivalents at beginning of period | 115,862 | 57,916 | ||||||
Cash and cash equivalents at end of period | $ | 87,327 | $ | 56,806 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 58,748 | $ | 38,679 | ||||
Income taxes | $ | 13,214 | $ | 1,059 | ||||
Supplemental schedule of: | ||||||||
Non-cash investing activities: | ||||||||
Equipment sales receivables | $ | 2,498 | $ | 2,649 | ||||
Equipment purchase accrual | $ | 17,120 | $ | 1,257 | ||||
Notes receivable from sale of assets | $ | 1,792 | $ | 1,129 | ||||
Non-cash financing activities: | ||||||||
Re-recognition of securitized accounts receivable | $ | 148,000 | $ | — | ||||
Capital lease additions | $ | 15,236 | $ | 20,980 | ||||
Insurance premium notes payable | $ | — | $ | 6,205 | ||||
Cancellation of senior notes | $ | 89,352 | $ | — | ||||
Reduction in stockholder loan | $ | 231,000 | $ | — | ||||
Paid-in-kind interest on stockholder loan | $ | 1,650 | $ | — | ||||
F-6
Table of Contents
Note 3. | Income taxes |
F-7
Table of Contents
Note 4. | Intangible assets |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Customer Relationship: | ||||||||
Gross carrying value | $ | 275,324 | $ | 275,324 | ||||
Accumulated amortization | (72,749 | ) | (67,553 | ) | ||||
Owner-Operator Relationship: | ||||||||
Gross carrying value | 3,396 | 3,396 | ||||||
Accumulated amortization | (3,271 | ) | (2,988 | ) | ||||
Trade Name: | ||||||||
Gross carrying value | 181,037 | 181,037 | ||||||
Intangible assets, net | $ | 383,737 | $ | 389,216 | ||||
F-8
Table of Contents
Note 5. | Assets held for sale |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Land and facilities | $ | 2,737 | $ | 2,737 | ||||
Revenue equipment | 5,192 | 834 | ||||||
Assets held for sale | $ | 7,929 | $ | 3,571 | ||||
Note 6. | Debt and financing transactions |
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
First lien term loan due May 2014 | $ | 1,507,100 | $ | 1,511,400 | ||||
Second-priority senior secured floating rate notes due May 15, 2015 | 203,600 | 203,600 | ||||||
12.50% second-priority senior secured fixed rate notes due May 15, 2017 | 505,648 | 595,000 | ||||||
Note payable, with principal and interest payable in five annual payments of $514 plus interest at a fixed rate of 7.00% through August 2013 secured by real property | 1,542 | 2,056 | ||||||
Notes payable, with principal and interest payable in 24 monthly payments of $130 including interest at a fixed rate of 7.5% through May 2011 | 1,617 | 1,993 | ||||||
Total long-term debt | 2,219,507 | 2,314,049 | ||||||
Less: current portion | 19,074 | 19,054 | ||||||
Long-term debt, less current portion | $ | 2,200,433 | $ | 2,294,995 | ||||
Note 7. | Accounts receivable securitization |
F-12
Table of Contents
Note 8. | Capital leases |
Note 9. | Derivative financial instruments |
F-13
Table of Contents
Fair Value | ||||||||||
March 31, | December 31, | |||||||||
Derivative Liabilities Description | Balance Sheet Location | 2010 | 2009 | |||||||
Interest rate derivative contracts designated as hedging instruments under Topic 815: | Fair value of interest rate swaps | $ | — | $ | — | |||||
Interest rate derivative contracts not designated as hedging instruments under Topic 815: | Fair value of interest rate swaps | $ | 79,403 | $ | 80,279 | |||||
Total derivatives | $ | 79,403 | $ | 80,279 | ||||||
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Amount of loss recognized in OCI on derivative (effective portion) | $ | — | $ | (20,536 | ) | |||
Amount of loss reclassified from accumulated OCI into Income as “Derivative interest expense” (effective portion) | $ | (10,962 | ) | $ | (9,356 | ) | ||
Amount of gain recognized in income on derivative as “Derivative interest expense” (ineffective portion) | $ | — | $ | 1,807 |
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Amount of gain (loss) recognized in income on derivative as “Derivative interest expense” | $ | (12,752 | ) | $ | — |
F-14
Table of Contents
Note 10. | Fair value measurement |
March 31, 2010 | December 31, 2009 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial Assets: | ||||||||||||||||
Retained interest in receivables | $ | N/A | $ | N/A | $ | 79,907 | $ | 79,907 | ||||||||
Financial Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 79,403 | $ | 79,403 | $ | 80,279 | $ | 80,279 | ||||||||
First lien term loan | 1,507,100 | 1,441,164 | 1,511,400 | 1,374,618 | ||||||||||||
Senior fixed rate notes | 505,648 | 475,309 | 595,000 | 500,544 | ||||||||||||
Senior floating rate notes | 203,600 | 184,513 | 203,600 | 152,955 | ||||||||||||
Securitization of accounts receivable | 150,000 | 145,336 | N/A | N/A |
F-15
Table of Contents
• | Level 1 — Valuation techniques in which all significant inputs are quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. | |
• | Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measuredand/or quoted prices from markets that are not active for assets or liabilities that are identical or similar to the assets or liabilities being measured. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques. | |
• | Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
F-16
Table of Contents
• | Interest rate swaps. The Company’s interest rate swaps are not actively traded but are valued using valuation models and credit valuation adjustments, both of which use significant inputs that are observable in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies these valuation techniques as Level 2 in the hierarchy. |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Total Fair Value | Quoted Prices in | Significant | ||||||||||||||
and Carrying | Active Markets | Significant Other | Unobservable | |||||||||||||
Value on Balance | for Identical Assets | Observable Inputs | Inputs | |||||||||||||
Description | Sheet | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
As of March 31, 2010: | ||||||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 79,403 | $ | — | $ | 79,403 | $ | — | ||||||||
As of December 31, 2009: | ||||||||||||||||
Assets: | ||||||||||||||||
Retained interest in receivables | $ | 79,907 | $ | — | $ | — | $ | 79,907 | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 80,279 | $ | — | $ | 80,279 | $ | — |
Fair Value at | Sales, Collections | Transfers in | Fair Value | |||||||||||||||||
Beginning of | and | Total Realized | and/or out of | at End of | ||||||||||||||||
Period | Settlements, Net | Gains (Losses) | Level 3 | Period | ||||||||||||||||
Three Months Ended March 31, 2010 | $ | 79,907 | $ | — | $ | — | $ | (79,907 | )(1) | $ | — | |||||||||
Three Months Ended March 31, 2009 | $ | 80,401 | $ | 11,910 | $ | 562 | $ | — | $ | 92,873 |
(1) | Upon adoption of ASU No.2009-16 on January 1, 2010 as discussed in Note 7, the Company’s retained interest in receivables was de-recognized upon recording the previously transferred receivables and recognizing the securitization proceeds as a secured borrowing on the Company’s balance sheet. Thus the removal of the retained interest balance is reflected here as a transfer out of Level 3. |
F-17
Table of Contents
Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||
Quoted Prices | Significant | |||||||||||||||||||
in Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||||||
Fair Value at | Identical Assets | Inputs | Inputs | Total Gains | ||||||||||||||||
Description | End of Period | (Level 1) | (Level 2) | (Level 3) | (Losses) | |||||||||||||||
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Long-lived assets held for sale | $ | 2,277 | $ | — | $ | — | $ | 2,277 | $ | (1,274 | ) | |||||||||
Total | $ | 2,277 | $ | — | $ | — | $ | 2,277 | $ | (1,274 | ) | |||||||||
Three Months Ended March 31, 2009 | ||||||||||||||||||||
Long-lived assets held and used | $ | 1,600 | $ | — | $ | — | $ | 1,600 | $ | (475 | ) | |||||||||
Long-lived assets held for sale | 100 | — | — | 100 | (40 | ) | ||||||||||||||
Total | $ | 1,700 | $ | — | $ | — | $ | 1,700 | $ | (515 | ) | |||||||||
Note 11. | Stockholder loans receivable |
F-18
Table of Contents
Note 12. | Contingencies |
Note 13. | Stock-based compensation |
Note 14. | Change in estimate |
F-19
Table of Contents
Note 15. | Loss per share |
Three Months ending March 31, | ||||||||
2010 | 2009 | |||||||
(In thousands, except | ||||||||
per share amounts) | ||||||||
Net loss | $ | (53,001 | ) | $ | (43,560 | ) | ||
Weighted average shares: | ||||||||
Common shares outstanding for basic and diluted loss per share | 75,146 | 75,146 | ||||||
Basic and diluted loss per share | $ | (0.71 | ) | $ | (0.58 | ) | ||
F-20
Table of Contents
March 25, 2010, except for note 28
which is as of July 21, 2010
F-21
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(In thousands, except share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 115,862 | $ | 57,916 | ||||
Restricted cash | 24,869 | 18,439 | ||||||
Accounts receivable, net | 21,914 | 32,991 | ||||||
Retained interest in accounts receivable | 79,907 | 80,401 | ||||||
Income tax refund receivable | 1,436 | 2,036 | ||||||
Equipment sales receivable | 208 | 4,951 | ||||||
Inventories and supplies | 10,193 | 10,167 | ||||||
Assets held for sale | 3,571 | 3,920 | ||||||
Prepaid taxes, licenses, insurance and other | 42,365 | 40,988 | ||||||
Deferred income taxes | 49,023 | 24 | ||||||
Other current assets | 4,523 | 4,224 | ||||||
Total current assets | 353,871 | 256,057 | ||||||
Property and equipment, at cost: | ||||||||
Revenue and service equipment | 1,488,953 | 1,536,325 | ||||||
Land | 142,126 | 144,753 | ||||||
Facilities and improvements | 222,751 | 222,023 | ||||||
Furniture and office equipment | 32,726 | 28,678 | ||||||
Total property and equipment | 1,886,556 | 1,931,779 | ||||||
Less: accumulated depreciation and amortization | 522,011 | 348,483 | ||||||
Net property and equipment | 1,364,545 | 1,583,296 | ||||||
Insurance claims receivable | 45,775 | 42,925 | ||||||
Other assets | 107,211 | 100,565 | ||||||
Intangible assets, net | 389,216 | 412,408 | ||||||
Goodwill | 253,256 | 253,256 | ||||||
Total assets | $ | 2,513,874 | $ | 2,648,507 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 70,934 | $ | 118,850 | ||||
Accrued liabilities | 110,662 | 94,250 | ||||||
Current portion of claims accruals | 92,280 | 155,769 | ||||||
Current portion of long-term debt and obligations under capital leases | 46,754 | 28,105 | ||||||
Fair value of guarantees | 2,519 | 2,572 | ||||||
Current portion of fair value of interest rate swaps | 47,244 | 27,064 | ||||||
Total current liabilities | 370,393 | 426,610 | ||||||
Long-term debt and obligations under capital leases | 2,420,180 | 2,466,350 | ||||||
Claims accruals, less current portion | 166,718 | 157,296 | ||||||
Fair value of interest rate swaps, less current portion | 33,035 | 17,323 | ||||||
Deferred income taxes | 383,795 | 24,567 | ||||||
Other liabilities | 5,534 | 554 | ||||||
Total liabilities | 3,379,655 | 3,092,700 | ||||||
Commitments and contingencies (notes 15 and 16) | ||||||||
Stockholders’ deficit: | ||||||||
Preferred stock, par value $.001 per share Authorized 1,000,000 shares; none issued | — | — | ||||||
Common stock, par value $.001 per share Authorized 200,000,000 shares; 75,145,892 shares issued at December 31, 2009 and December 31, 2008 | 75 | 75 | ||||||
Additional paid-in capital | 419,105 | 456,807 | ||||||
Accumulated deficit | (759,936 | ) | (307,908 | ) | ||||
Stockholder loans receivable | (471,113 | ) | (562,054 | ) | ||||
Accumulated other comprehensive loss | (54,014 | ) | (31,215 | ) | ||||
Noncontrolling interest | 102 | 102 | ||||||
Total stockholders’ deficit | (865,781 | ) | (444,193 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 2,513,874 | $ | 2,648,507 | ||||
F-22
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Operating revenue | $ | 2,571,353 | $ | 3,399,810 | $ | 2,180,293 | ||||||
Operating expenses: | ||||||||||||
Salaries, wages and employee benefits | 728,784 | 892,691 | 611,811 | |||||||||
Operating supplies and expenses | 209,945 | 271,951 | 187,873 | |||||||||
Fuel | 385,513 | 768,693 | 474,825 | |||||||||
Purchased transportation | 620,312 | 741,240 | 435,421 | |||||||||
Rental expense | 79,833 | 76,900 | 51,703 | |||||||||
Insurance and claims | 81,332 | 141,949 | 69,699 | |||||||||
Depreciation and amortization | 253,531 | 275,832 | 187,043 | |||||||||
Impairments | 515 | 24,529 | 256,305 | |||||||||
Gain on disposal of property and equipment | (2,244 | ) | (6,466 | ) | (397 | ) | ||||||
Communication and utilities | 24,595 | 29,644 | 18,625 | |||||||||
Operating taxes and licenses | 57,236 | 67,911 | 42,076 | |||||||||
Total operating expenses | 2,439,352 | 3,284,874 | 2,334,984 | |||||||||
Operating income (loss) | 132,001 | 114,936 | (154,691 | ) | ||||||||
Other (income) expenses: | ||||||||||||
Interest expense | 200,512 | 222,177 | 171,115 | |||||||||
Derivative interest expense | 55,634 | 18,699 | 13,233 | |||||||||
Interest income | (1,814 | ) | (3,506 | ) | (6,602 | ) | ||||||
Other | (13,336 | ) | 12,753 | (1,933 | ) | |||||||
Total other (income) expenses, net | 240,996 | 250,123 | 175,813 | |||||||||
Loss before income taxes | (108,995 | ) | (135,187 | ) | (330,504 | ) | ||||||
Income tax expense (benefit) | 326,650 | 11,368 | (234,316 | ) | ||||||||
Net loss | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | |||
Basic and diluted loss per share | $ | (5.80 | ) | $ | (1.95 | ) | $ | (1.94 | ) | |||
Pro forma C corporation data: | ||||||||||||
Historical loss before income taxes | $ | (108,995 | ) | $ | (135,187 | ) | $ | (330,504 | ) | |||
Pro forma provision (benefit) for income taxes (unaudited) | 5,693 | (26,573 | ) | (19,166 | ) | |||||||
Pro forma net loss (unaudited) | $ | (114,688 | ) | $ | (108,614 | ) | $ | (311,338 | ) | |||
Pro forma basic and diluted loss per share (unaudited) | $ | (1.53 | ) | $ | (1.45 | ) | $ | (6.29 | ) | |||
F-23
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Net loss | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | |||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustment | — | 149 | (68 | ) | ||||||||
Change in fair value of interest rate swaps | (22,799 | ) | (744 | ) | (30,552 | ) | ||||||
Comprehensive loss | $ | (458,444 | ) | $ | (147,150 | ) | $ | (126,808 | ) | |||
F-24
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||
Common Stock | Additional | Stockholder | Other | Total | ||||||||||||||||||||||||||||
Par | Paid-in | Accumulated | Loans | Comprehensive | Noncontrolling | Stockholders’ | ||||||||||||||||||||||||||
Shares | Value | Capital | Deficit | Receivable | Loss | Interest | Deficit | |||||||||||||||||||||||||
(in thousands, except share data) | ||||||||||||||||||||||||||||||||
Balances, December 31, 2006 | 1,000 | $ | — | $ | 328 | $ | — | $ | — | $ | — | $ | — | $ | 328 | |||||||||||||||||
Acquisition transaction costs paid in cash by stockholders | 1,903 | 1,903 | ||||||||||||||||||||||||||||||
Contribution of 100% of Interstate Equipment Leasing | 10,649,000 | 11 | 5,275 | (2,393 | ) | 2,893 | ||||||||||||||||||||||||||
Distribution of non-revenue equipment to stockholders | (1,594 | ) | (1,594 | ) | ||||||||||||||||||||||||||||
Contribution of 38.259% of Swift Transportation Co. | 64,495,892 | 64 | 385,550 | 385,614 | ||||||||||||||||||||||||||||
Issuance of stockholder loan | (560,000 | ) | (560,000 | ) | ||||||||||||||||||||||||||||
Interest accrued on stockholder loan and dividends distributed | 29,740 | (29,740 | ) | — | ||||||||||||||||||||||||||||
Proceeds from repayment of related party note receivable | 50 | 50 | ||||||||||||||||||||||||||||||
Foreign currency translation | (68 | ) | (68 | ) | ||||||||||||||||||||||||||||
Change in fair value of interest rate swaps | (30,552 | ) | (30,552 | ) | ||||||||||||||||||||||||||||
Other | 67 | 67 | ||||||||||||||||||||||||||||||
Net loss | (96,188 | ) | (96,188 | ) | ||||||||||||||||||||||||||||
Balances, December 31, 2007 | 75,145,892 | 75 | 422,863 | (127,522 | ) | (562,343 | ) | (30,620 | ) | — | (297,547 | ) | ||||||||||||||||||||
Interest accrued on stockholder loan and dividends distributed | 33,831 | (33,831 | ) | — | ||||||||||||||||||||||||||||
Interest accrued and proceeds from repayment of related party note receivable | 153 | 289 | 442 | |||||||||||||||||||||||||||||
Foreign currency translation | 149 | 149 | ||||||||||||||||||||||||||||||
Change in fair value of interest rate swaps | (744 | ) | (744 | ) | ||||||||||||||||||||||||||||
Entry into joint venture | 102 | 102 | ||||||||||||||||||||||||||||||
Other | (40 | ) | �� | (40 | ) | |||||||||||||||||||||||||||
Net loss | (146,555 | ) | (146,555 | ) | ||||||||||||||||||||||||||||
Balances, December 31, 2008 | 75,145,892 | 75 | 456,807 | (307,908 | ) | (562,054 | ) | (31,215 | ) | 102 | (444,193 | ) | ||||||||||||||||||||
Interest accrued on stockholder loan and dividends distributed | 19,768 | (16,383 | ) | (3,385 | ) | — | ||||||||||||||||||||||||||
Interest accrued and proceeds from repayment of related party note receivable | 130 | 326 | 456 | |||||||||||||||||||||||||||||
Change in fair value of interest rate swaps | (22,799 | ) | (22,799 | ) | ||||||||||||||||||||||||||||
Reduction of stockholder loan (see Note 17) | (94,000 | ) | 94,000 | — | ||||||||||||||||||||||||||||
Cancellation of floating rate notes (see Note 12) | 36,400 | 36,400 | ||||||||||||||||||||||||||||||
Net loss | (435,645 | ) | (435,645 | ) | ||||||||||||||||||||||||||||
Balances, December 31, 2009 | $ | 75,145,892 | $ | 75 | $ | 419,105 | $ | (759,936 | ) | $ | (471,113 | ) | $ | (54,014 | ) | $ | 102 | $ | (865,781 | ) | ||||||||||||
F-25
Table of Contents
Consolidated statements of cash flows
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 263,611 | 281,591 | 190,975 | |||||||||
Gain on disposal of property and equipment less write-off of totaled tractors | (728 | ) | (2,956 | ) | (1,754 | ) | ||||||
Impairment of goodwill, property and equipment and note receivable and write-off of investment | 515 | 24,776 | 256,305 | |||||||||
(Gain) loss on securitization | (507 | ) | 1,137 | — | ||||||||
Deferred income taxes | 310,269 | 2,919 | (233,559 | ) | ||||||||
Provision for losses on accounts receivable | 4,477 | 1,065 | (1,350 | ) | ||||||||
Income effect ofmark-to-market adjustment of interest rate swaps | 7,933 | (5,487 | ) | 14,509 | ||||||||
Increase (decrease) in cash resulting from changes in: | ||||||||||||
Accounts receivable | 6,599 | (6,401 | ) | (24,277 | ) | |||||||
Inventories and supplies | (26 | ) | 1,370 | (2,360 | ) | |||||||
Prepaid expenses and other current assets | 5,429 | 22,920 | (2,176 | ) | ||||||||
Other assets | 1,400 | (20,540 | ) | (35,883 | ) | |||||||
Accounts payable, accrued and other liabilities | (47,992 | ) | (34,099 | ) | 64,404 | |||||||
Net cash provided by operating activities | 115,335 | 119,740 | 128,646 | |||||||||
Cash flows from investing activities: | ||||||||||||
Acquisition of 61.741% of Swift Transportation Co., net of cash acquired (see Note 3) | — | — | (1,470,389 | ) | ||||||||
(Increase) decrease in restricted cash | (6,430 | ) | 3,588 | (22,028 | ) | |||||||
Proceeds from sale of property and equipment | 69,773 | 191,151 | 39,808 | |||||||||
Capital expenditures | (71,265 | ) | (327,725 | ) | (215,159 | ) | ||||||
Payments received on notes receivable | 6,462 | 5,648 | 15,034 | |||||||||
Cash and cash equivalents received from contribution of 38.3% of Swift Transportation Co. (see Note 2) | — | — | 31,312 | |||||||||
Cash and cash equivalents received from contribution of Interstate Equipment Leasing, Inc. (see Note 2) | — | — | 2,539 | |||||||||
Expenditures on assets held for sale | (9,060 | ) | (10,089 | ) | (3,481 | ) | ||||||
Payments received on assets held for sale | 4,442 | 16,391 | 7,657 | |||||||||
Payments received on equipment sale receivables | 4,951 | 2,519 | 2,393 | |||||||||
Net cash used in investing activities | (1,127 | ) | (118,517 | ) | (1,612,314 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Repayment of long-term debt and capital leases | (30,820 | ) | (16,625 | ) | (202,366 | ) | ||||||
Repayment of short-term notes payable | (6,204 | ) | — | — | ||||||||
Proceeds from issuance of senior notes | — | — | 835,000 | |||||||||
Issuance of stockholder loan receivable, net of repayments | — | — | (559,950 | ) | ||||||||
Payments received on stockholder loan from affiliate | 456 | 442 | — | |||||||||
Proceeds from long-term debt | — | 2,570 | 1,720,000 | |||||||||
Payment of deferred loan costs | (19,694 | ) | (8,669 | ) | (57,010 | ) | ||||||
Repayment of existing debt of Swift Transportation Co. and Interstate Equipment Leasing, Inc. | — | — | (376,200 | ) | ||||||||
Borrowings of other long-term debt | — | — | 1,185 | |||||||||
Proceeds from accounts receivable securitization | — | — | 200,000 | |||||||||
Stockholder contributions | — | — | 1,903 | |||||||||
Distributions to stockholders | (16,383 | ) | (33,831 | ) | (29,740 | ) |
F-26
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Interest payments received on stockholder loan receivable | 16,383 | 33,831 | 29,740 | |||||||||
Net cash (used in) provided by financing activities | (56,262 | ) | (22,282 | ) | 1,562,562 | |||||||
Effect of exchange rate changes on cash and cash equivalents | — | 149 | (68 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 57,946 | (20,910 | ) | 78,826 | ||||||||
Cash and cash equivalents at beginning of period | 57,916 | 78,826 | — | |||||||||
Cash and cash equivalents at end of period | $ | 115,862 | $ | 57,916 | $ | 78,826 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid (refunded) during the period for: | ||||||||||||
Interest | $ | 216,248 | $ | 248,179 | $ | 131,560 | ||||||
Income taxes | $ | 6,001 | $ | (11,593 | ) | $ | 4,406 | |||||
Supplemental schedule of: | ||||||||||||
Non-cash investing activities: | ||||||||||||
Non-cash contribution of 38.3% of Swift Transportation Co. (see Note 2) | $ | — | $ | — | $ | 354,302 | ||||||
Non-cash contribution of Interstate Equipment Leasing, Inc. (see Note 2) | $ | — | $ | — | $ | 2,005 | ||||||
Equipment sales receivables | $ | 208 | $ | 2,515 | $ | 4,955 | ||||||
Equipment purchase accrual | $ | 7,963 | $ | 37,844 | $ | 1,894 | ||||||
Notes receivable from sale of assets | $ | 6,230 | $ | 8,396 | $ | 4,214 | ||||||
Non-cash financing activities: | ||||||||||||
Payment on note payable with non-cash assets | $ | — | $ | — | $ | 5,077 | ||||||
Distribution of Interstate Equipment Leasing non-revenue equipment to stockholders | $ | — | $ | — | $ | 1,594 | ||||||
Sale of accounts receivable securitization facility, net of retained interest in receivables | $ | — | $ | 200,000 | $ | — | ||||||
Capital lease additions | $ | 36,819 | $ | 81,256 | $ | 75,078 | ||||||
Insurance premium notes payable | $ | 6,205 | $ | — | $ | — | ||||||
Deferred operating lease payment notes payable | $ | 2,877 | $ | — | $ | — | ||||||
Cancellation of senior notes | $ | 36,400 | $ | — | $ | — | ||||||
Reduction in stockholder loan | $ | 94,000 | $ | — | $ | — | ||||||
Paid-in-kind interest on stockholder loan | $ | 3,385 | $ | — | $ | — | ||||||
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(1) | Summary of significant accounting policies |
F-28
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F-29
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• | Measurement of long-lived assets held for sale upon recognition of an impairment charge during 2008. See Note 5. | |
• | Measurement of the Company’s reporting units (Step 1 of goodwill impairment tests performed under Topic 350) and nonfinancial assets and nonfinancial liabilities measured at fair value to determine the amount of goodwill impairment (Step 2 of goodwill impairment tests performed under Topic 350). See Note 26. |
F-30
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F-31
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(2) | Contribution of Interstate Equipment Leasing, Inc. and Swift Transportation Co. |
F-32
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(3) | Acquisition of Swift Transportation Co. |
(In thousands) | ||||
Cash consideration of $31.55 per share for non-Moyes affiliates Swift Transportation Co. common stock outstanding | $ | 1,465,941 | ||
Cash consideration to holders of stock incentive awards | 39,348 | |||
Transaction and change in control costs | 15,192 | |||
Total purchase price | $ | 1,520,481 | ||
Cash and cash equivalents | $ | 50,093 | ||
Accounts receivable | 179,776 | |||
Property and equipment | 950,927 | |||
Other assets | 107,434 | |||
Intangible assets | 442,263 | |||
Goodwill | 486,758 | |||
Deferred income taxes (current and long-term) | (194,544 | ) | ||
Other liabilities | (502,226 | ) | ||
$ | 1,520,481 | |||
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(4) | Accounts receivable |
2009 | 2008 | |||||||
Trade customers | $ | 9,338 | $ | 17,032 | ||||
Equipment manufacturers | 6,167 | 6,604 | ||||||
Other | 6,958 | 10,011 | ||||||
22,463 | 33,647 | |||||||
Less allowance for doubtful accounts | 549 | 656 | ||||||
Accounts receivable, net | $ | 21,914 | $ | 32,991 | ||||
2009 | 2008 | 2007 | ||||||||||
Beginning balance | $ | 656 | $ | 10,180 | $ | — | ||||||
Contributed at May 9, 2007 | — | — | 5,554 | |||||||||
Acquired at May 10, 2007 | — | — | 8,964 | |||||||||
Provision (Reversal) | 4,477 | 1,065 | (1,350 | ) | ||||||||
Recoveries | 11 | 39 | 202 | |||||||||
Write-offs | (4,464 | ) | (223 | ) | (3,190 | ) | ||||||
Retained interest adjustment | (131 | ) | (10,405 | ) | — | |||||||
Ending balance | $ | 549 | $ | 656 | $ | 10,180 | ||||||
(5) | Assets held for sale |
2009 | 2008 | |||||||
Land and facilities | $ | 2,737 | $ | 448 | ||||
Revenue equipment | 834 | 3,472 | ||||||
Assets held for sale | $ | 3,571 | $ | 3,920 | ||||
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(6) | Equity investment — Transplace |
(7) | Notes receivable |
2009 | 2008 | |||||||
Notes receivable due from owner-operators, with interest rates at 15%, secured by revenue equipment. Terms range from several months to three years. | $ | 5,568 | $ | 5,800 | ||||
Note receivable for the credit of development fees from the City of Lancaster, Texas payable May 2014. | 2,523 | 2,523 | ||||||
Other | 102 | 102 | ||||||
8,193 | 8,425 | |||||||
Less current portion | (4,523 | ) | (4,224 | ) | ||||
Notes receivable, less current portion | $ | 3,670 | $ | 4,201 | ||||
(8) | Accrued liabilities |
2009 | 2008 | |||||||
Employee compensation | $ | 25,262 | $ | 34,000 | ||||
Accrued interest expense | 40,693 | 23,128 | ||||||
Accrued owner-operator expenses | 5,587 | 5,568 | ||||||
Owner-operator lease purchase reserve | 5,817 | 5,851 | ||||||
Fuel, mileage and property taxes | 6,851 | 7,430 | ||||||
Income taxes accrual | 16,742 | 6,119 | ||||||
Other | 9,710 | 12,154 | ||||||
Accrued liabilities | $ | 110,662 | $ | 94,250 | ||||
F-35
Table of Contents
(9) | Claims accruals |
2009 | 2008 | |||||||
Auto and collision liability | $ | 156,651 | $ | 202,934 | ||||
Workers’ compensation liability | 76,522 | 85,026 | ||||||
Owner-operator claims liability | 15,185 | 13,480 | ||||||
Group medical liability | 9,896 | 10,743 | ||||||
Cargo damage liability | 744 | 882 | ||||||
258,998 | 313,065 | |||||||
Less: current portion of claims accrual | 92,280 | 155,769 | ||||||
Claim accruals, less current portion | $ | 166,718 | $ | 157,296 | ||||
(10) | Accounts receivable securitization |
F-36
Table of Contents
(11) | Fair value of operating lease guarantees |
F-37
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(12) | Debt and financing transactions |
F-38
Table of Contents
F-39
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F-40
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F-41
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2009 | 2008 | |||||||
First lien term loan due May 2014 | $ | 1,511,400 | $ | 1,520,000 | ||||
Second-priority senior secured floating rate notes due May 15, 2015 | 203,600 | 240,000 | ||||||
12.50% second-priority senior secured fixed rate notes due May 15, 2017 | 595,000 | 595,000 | ||||||
Note payable, with principal and interest payable in five annual payments of $514 plus interest at a fixed rate of 7.00% through August 2013 secured by real property | 2,056 | 2,570 | ||||||
Note payable, with principal and interest payable in 24 monthly payments of $52 including interest at a fixed rate of 4.64% through August 2009 secured by information technology hardware and software | — | 457 | ||||||
Notes payable, with principal and interest payable in 24 monthly payments of $130 including interest at a fixed rate of 7.5% through May 2011 | 1,993 | — | ||||||
Total long-term debt | 2,314,049 | 2,358,027 | ||||||
Less: current portion | 19,054 | 9,571 | ||||||
Long-term debt, less current portion | $ | 2,294,995 | $ | 2,348,456 | ||||
Years Ending December 31, | ||||
2010 | $ | 19,054 | ||
2011 | 18,359 | |||
2012 | 17,720 | |||
2013 | 417,616 | |||
2014 | 1,042,700 | |||
Thereafter | 798,600 | |||
Long-term debt | $ | 2,314,049 | ||
(13) | Capital leases |
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Years Ending December 31, | ||||
2010 | $ | 38,019 | ||
2011 | 53,180 | |||
2012 | 50,271 | |||
2013 | 27,781 | |||
2014 | 7,260 | |||
Total minimum lease payments | 176,511 | |||
Less: amount representing interest | 23,626 | |||
Present value of minimum lease payments | 152,885 | |||
Less: current portion | 27,700 | |||
Capital lease obligations, long-term | $ | 125,185 | ||
(14) | Derivative financial instruments |
F-43
Table of Contents
Fair Value at | ||||||
Derivative Liabilities Description | Balance Sheet Classification | December 31, 2009 | ||||
Interest rate derivative contracts designated as hedging instruments under Topic 815: | Fair value of interest rate swaps (current and non-current) | $ | — | |||
Interest rate derivative contracts not designated as hedging instruments under Topic 815: | Fair value of interest rate swaps (current and non-current) | $ | 80,279 | |||
Total derivatives | $ | 80,279 | ||||
Year Ended | ||||
December 31, 2009 | ||||
Amount of loss recognized in OCI on derivatives (effective portion) | $ | (70,500 | ) | |
Amount of loss reclassified from accumulated OCI into income as “Derivative interest expense” (effective portion) | $ | (47,701 | ) | |
Amount of gain recognized in income on derivatives as “Derivative interest expense” (ineffective portion) | $ | 3,437 |
Year Ended | ||||
December 31, 2009 | ||||
Amount of loss recognized in income on derivatives as “Derivative interest expense” | $ | (11,370 | ) |
F-44
Table of Contents
(15) | Commitments |
Revenue | ||||||||||||
Equipment | Facilities | Total | ||||||||||
Years Ending December 31, | ||||||||||||
2010 | $ | 63,942 | $ | 782 | $ | 64,724 | ||||||
2011 | 40,007 | 405 | 40,412 | |||||||||
2012 | 20,626 | 225 | 20,851 | |||||||||
2013 | 5,419 | 83 | 5,502 | |||||||||
2014 | 924 | — | 924 | |||||||||
Thereafter | 1,154 | — | 1,154 | |||||||||
Total minimum lease payments | $ | 132,072 | $ | 1,495 | $ | 133,567 | ||||||
Years Ending December 31, | ||||
2010 | $ | 61,995 | ||
2011 | 49,325 | |||
2012 | 32,379 | |||
2013 | 12,289 | |||
2014 | 981 | |||
Total minimum lease payments | $ | 156,969 | ||
F-45
Table of Contents
(16) | Contingencies |
(17) | Stockholder loans receivable |
F-46
Table of Contents
(18) | Stockholder distributions |
(19) | Stock option plan |
F-47
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | Shares | Exercise Price | |||||||||||||||||||
Outstanding at beginning of year | 6,292,500 | $ | 12.64 | 6,740,000 | $ | 12.50 | — | $ | ||||||||||||||||
Granted | 564,500 | 6.89 | 981,000 | 13.43 | 7,359,000 | 12.50 | ||||||||||||||||||
Exercised | — | — | — | |||||||||||||||||||||
Forfeited | (644,000 | ) | 12.55 | (1,428,500 | ) | 12.50 | (619,000 | ) | 12.50 | |||||||||||||||
Outstanding at end of year | 6,213,000 | $ | 12.13 | 6,292,500 | $ | 12.64 | 6,740,000 | $ | 12.50 | |||||||||||||||
2009 | 2008 | 2007 | ||||||||||
Dividend yield | 0% | 0% | 0% | |||||||||
Expected volatility | 45% | 41% | 46% | |||||||||
Risk free interest rate | 3.39% | 3.34% | 4.47% | |||||||||
Expected lives (in years) | 6.5 | 6.5 | 6.5 |
Shares | Contractual Years | Number Vested | ||||||||||
Exercise Price | Outstanding | Remaining | and Exercisable | |||||||||
$12.50 | 4,708,500 | 7.8 | — | |||||||||
$13.43 | 940,000 | 8.7 | — | |||||||||
$6.89 | 564,500 | 10.0 | — |
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Table of Contents
(20) | Income taxes |
2009 | 2008 | 2007 | ||||||||||
Current expense (benefit): | ||||||||||||
Federal | $ | 11,509 | $ | 5,790 | $ | 230 | ||||||
State | 1,170 | 631 | 683 | |||||||||
Foreign | 3,311 | 1,230 | (1,670 | ) | ||||||||
15,990 | 7,651 | (757 | ) | |||||||||
Deferred expense (benefit): | ||||||||||||
Federal | 292,113 | 1,035 | (220,211 | ) | ||||||||
State | 19,137 | 2,904 | (12,195 | ) | ||||||||
Foreign | (590 | ) | (222 | ) | (1,153 | ) | ||||||
$ | 310,660 | $ | 3,717 | $ | (233,559 | ) | ||||||
Income tax expense (benefit) | $ | 326,650 | $ | 11,368 | $ | (234,316 | ) | |||||
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2009 | 2008 | 2007 | ||||||||||
Computed “expected” tax expense (benefit) | $ | (12,846 | ) | $ | — | $ | — | |||||
Increase (decrease) in income taxes resulting from: | ||||||||||||
State income taxes, net of federal income tax benefit | 1,659 | 3,535 | (465 | ) | ||||||||
Conversion to an S Corporation for income tax purposes | — | — | (230,180 | ) | ||||||||
Conversion to a C Corporation for income tax purposes | 324,829 | — | — | |||||||||
Effect of tax rates different than statutory (Domestic) | 2,816 | 4,181 | 2,794 | |||||||||
Effect of tax rates different than statutory (Foreign) | 1,418 | 326 | 289 | |||||||||
Effect of providing additionalBuilt-In-Gains deferred taxes | 684 | 1,411 | — | |||||||||
Effect of providing deferred taxes onmark-to-market adjustment of derivatives recorded in accumulated OCI | 6,294 | — | — | |||||||||
Other | 1,796 | 1,915 | (6,754 | ) | ||||||||
$ | 326,650 | $ | 11,368 | $ | (234,316 | ) | ||||||
2009 | 2008 | |||||||
Deferred tax assets: | ||||||||
Claims accruals | $ | 67,249 | $ | 2,390 | ||||
Allowance for doubtful accounts | 4,559 | 49 | ||||||
Derivative financial instruments | 29,885 | 295 | ||||||
Vacation accrual | 3,546 | 38 | ||||||
Original issue discount | 69,312 | — | ||||||
Equity investments | 554 | 5,543 | ||||||
Net operating loss | 5,777 | 2,134 | ||||||
Other | 5,680 | 983 | ||||||
Total deferred tax assets | 186,562 | 11,432 | ||||||
Valuation allowance | (2,043 | ) | (1,582 | ) | ||||
Total deferred tax assets, net | 184,519 | 9,850 | ||||||
Deferred tax liabilities: | ||||||||
Property and equipment, principally due to differences in depreciation | (343,778 | ) | (30,467 | ) | ||||
Prepaid taxes, licenses and permits deducted for tax purposes | (8,898 | ) | (98 | ) | ||||
Cancellation of debt | (14,212 | ) | — | |||||
Intangible assets | (139,749 | ) | (4,244 | ) | ||||
Debt financing costs | (8,529 | ) | (2 | ) | ||||
Other | (5,301 | ) | (381 | ) | ||||
Total deferred tax liabilities | (520,467 | ) | (35,192 | ) | ||||
Net deferred tax liability | $ | (335,948 | ) | $ | (25,342 | ) | ||
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Table of Contents
2009 | 2008 | |||||||
Current deferred tax asset | $ | 49,023 | $ | 24 | ||||
Current deferred tax liability | (1,176 | ) | (799 | ) | ||||
Noncurrent deferred tax liability | (383,795 | ) | (24,567 | ) | ||||
Net deferred tax liability | $ | (335,948 | ) | $ | (25,342 | ) | ||
2009 | 2008 | |||||||
Unrecognized tax benefits at beginning of year | $ | 3,423 | $ | 4,154 | ||||
Increases for tax positions taken prior to beginning of year | 610 | — | ||||||
Decreases for tax positions taken prior to beginning of year | (257 | ) | — | |||||
Increases for tax positions taken during the year | 154 | — | ||||||
Settlements | (243 | ) | (532 | ) | ||||
Lapse of statute of limitations | (156 | ) | (199 | ) | ||||
Unrecognized tax benefits at end of year | $ | 3,531 | $ | 3,423 | ||||
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(21) | Employee benefit plan |
(22) | Key customer |
(23) | Related party transactions |
For the Year Ended December 31, 2009 | ||||||||||||||||
Central | Central | Other | ||||||||||||||
Freight Lines, | Refrigerated | Affiliated | ||||||||||||||
Inc. | Services, Inc. | Entities | Total | |||||||||||||
Services Provided by Swift: | ||||||||||||||||
Freight Services(1) | $ | 3,943 | $ | 152 | $ | 328 | $ | 4,423 | ||||||||
Facility Leases | $ | 661 | $ | — | $ | 20 | $ | 681 | ||||||||
Other Services(2) | $ | — | $ | — | $ | 7 | $ | 7 | ||||||||
Services Received by Swift: | ||||||||||||||||
Freight Services(3) | $ | 117 | $ | 1,920 | $ | — | $ | 2,037 | ||||||||
Facility Leases | $ | 423 | $ | 41 | $ | 41 | $ | 505 | ||||||||
Other Services(4) | $ | 10 | $ | 22 | $ | 138 | $ | 170 | ||||||||
As of December 31, 2009 | ||||||||||||||||
Receivable | $ | 1,206 | $ | 7 | $ | 12 | $ | 1,225 | ||||||||
Payable | $ | 4 | $ | 14 | $ | — | $ | 18 |
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Table of Contents
For the Year Ended December 31, 2008 | ||||||||||||||||
Central | Central | Other | ||||||||||||||
Freight Lines, | Refrigerated | Affiliated | ||||||||||||||
Inc. | Services, Inc. | Entities | Total | |||||||||||||
Services Provided by Swift: | ||||||||||||||||
Freight Services(1) | $ | 18,766 | $ | 307 | $ | 481 | $ | 19,554 | ||||||||
Facility Leases | $ | 761 | $ | — | $ | 20 | $ | 781 | ||||||||
Other Services(2) | $ | — | $ | — | $ | 16 | $ | 16 | ||||||||
Services Received by Swift: | ||||||||||||||||
Freight Services(3) | $ | 80 | $ | 644 | $ | — | $ | 724 | ||||||||
Facility Leases | $ | 479 | $ | — | $ | — | $ | 479 | ||||||||
Other Services(4) | $ | 22 | $ | 14 | $ | 3 | $ | 39 | ||||||||
As of December 31, 2008 | ||||||||||||||||
Receivable | $ | 834 | $ | 14 | $ | 68 | $ | 916 | ||||||||
Payable | $ | 13 | $ | 27 | $ | 1 | $ | 41 | ||||||||
For the Year Ended December 31, 2007 | ||||||||||||||||
Services Provided by Swift: | ||||||||||||||||
Freight Services(1) | $ | 8,053 | $ | 674 | $ | 78 | $ | 8,805 | ||||||||
Facility Leases | $ | 533 | $ | — | $ | 5 | $ | 538 | ||||||||
Other Services(2) | $ | 34 | $ | 22 | $ | 34 | $ | 90 | ||||||||
Equipment Leases(5) | $ | 218 | $ | 404 | $ | 13 | $ | 635 | ||||||||
Services Received by Swift: | ||||||||||||||||
Freight Services(3) | $ | 4 | $ | 18 | $ | — | $ | 22 | ||||||||
Facility Leases | $ | 247 | $ | — | $ | — | $ | 247 | ||||||||
Other Services(4) | $ | 11 | $ | 7 | $ | 6 | $ | 24 |
(1) | The rates the Company charges for freight services to each of these companies for transportation services are market rates, which are comparable to what it charges third-party customers. These transportation services provided to affiliated entities provide the Company with an additional source of operating revenue at its normal freight rates. | |
(2) | Other services provided by the Company to the identified related parties included accounting related employee services provided by Company personnel. The daily rates the Company charged for employee related services reflect market salaries for employees performing similar work functions. In 2007, services provided to related parties also included repair and other truck stop services and employee services provided by Company personnel, including accounting related services, negotiations for parts procurement, and other services. | |
(3) | Transportation services received from affiliated entities represents brokered freight. The loads are brokered out to the third party provider at rates lower than the rate charged to the customer, therefore allowing the Company to realize a profit. These brokered loads make it possible for the Company to provide freight services to customers even in areas that the Company does not serve, providing the Company with an additional source of income. | |
(4) | Other services received by the Company from the identified related parties included: insurance claim liability; fuel tank usage; employee expense reimbursement, executive air transport; service truck purchase; freight services refund; and miscellaneous repair services. |
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(5) | All of the equipment lease transactions through the Company’s wholly owned subsidiary IEL and the identified affiliated companies were accounted for as a lease similar to the Company’s normal business operations and revenue was recognized on a straight-line basis. Specifically, the Company had the following equipment lease transactions: |
a. | The Company leased 94 tractors financed by Daimler Chrysler to Central Freight Lines, Inc. (“Central Freight”) under a lease agreement dated April 15, 2006. The total amount of the lease was $5,329,987, payable in 50 monthly installments of $108,749. On May 4, 2007, the lease agreement was terminated and the related note payable was transferred to Central Freight to assume the remaining payments owed to Daimler Chrysler. However, according to the transfer contract, the Company remains liable for the note payable should Central Freight default on the agreement. There were no amounts owed to the Company at December 31, 2009 and 2008 related to this lease. | |
b. | The Company had equipment lease agreements with Central Refrigerated Services, Inc. (“Central Refrigerated”) dated May 2002 and with Central Leasing dated February 2004. The leases were terminated on July 11, 2007. Upon termination, several tractors under the agreements were purchased by Central Refrigerated and Central Leasing, while the remaining tractors were returned to the Company. No amounts were due to the Company as of December 31, 2009 and 2008 for the equipment lease or equipment purchase. |
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(24) | Fair value measurements |
2009 | 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial Assets: | ||||||||||||||||
Retained interest in receivables | $ | 79,907 | $ | 79,907 | $ | 80,401 | $ | 80,401 | ||||||||
Financial Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 80,279 | $ | 80,279 | $ | 44,387 | $ | 44,387 | ||||||||
First lien term loan | 1,511,400 | 1,374,618 | 1,520,000 | 534,858 | ||||||||||||
Senior fixed rate notes | 595,000 | 500,544 | 595,000 | 52,063 | ||||||||||||
Senior floating rate notes | 203,600 | 152,955 | 240,000 | 18,600 |
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• | Level 1 — Valuation techniques in which all significant inputs are quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. | |
• | Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measuredand/or quoted prices from markets that are not active for assets or liabilities that are identical or similar to the assets or liabilities being measured. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques. | |
• | Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
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• | Retained interest in receivables. The Company’s retained interest is valued using the Company’s own assumptions as discussed in Note 10, and accordingly, the Company classifies the valuation techniques that use these inputs as Level 3 in the hierarchy. | |
• | Interest rate swaps. The Company’s interest rate swaps are not actively traded but are valued using valuation models and credit valuation adjustments, both of which use significant inputs that are observable in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies these valuation techniques as Level 2 in the hierarchy. |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Total Fair | Markets for | Other | Significant | |||||||||||||
Value and | Identical | Observable | Unobservable | |||||||||||||
Carrying Value | Assets | Inputs | Inputs | |||||||||||||
Description | on Balance Sheet | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
As of December 31, 2009: | ||||||||||||||||
Assets: | ||||||||||||||||
Retained interest in receivables | $ | 79,907 | $ | — | $ | — | $ | 79,907 | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 80,279 | $ | — | $ | 80,279 | $ | — | ||||||||
As of December 31, 2008: | ||||||||||||||||
Assets: | ||||||||||||||||
Retained interest in receivables | $ | 80,401 | $ | — | $ | — | $ | 80,401 | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 44,387 | $ | — | $ | 44,387 | $ | — |
Fair Value at | Sales, Collections | Transfers in | ||||||||||||||||||
Beginning of | and | Total Realized | and/or Out of | Fair Value at | ||||||||||||||||
Period | Settlements, Net | Gains (Losses) | Level 3 | End of Period | ||||||||||||||||
Years Ended: | ||||||||||||||||||||
December 31, 2009 | $ | 80,401 | $ | (1,001 | ) | $ | 507 | $ | — | $ | 79,907 | |||||||||
December 31, 2008 | $ | — | $ | 81,538 | $ | (1,137 | ) | $ | — | $ | 80,401 |
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Fair Value Measurements Using | ||||||||||||||||||||
Quoted Prices in | Significant | |||||||||||||||||||
Year Ended | Active Markets | Significant Other | Unobservable | |||||||||||||||||
December 31, | for Identical | Observable Inputs | Inputs | Total Gains | ||||||||||||||||
Description | 2009 | Assets (Level 1) | (Level 2) | (Level 3) | (Losses) | |||||||||||||||
Long-lived assets held and used | $ | 1,600 | $ | — | $ | — | $ | 1,600 | $ | (475 | ) | |||||||||
Long-lived assets held for sale | 100 | — | — | 100 | (40 | ) | ||||||||||||||
Total | $ | 1,700 | $ | — | $ | — | $ | 1,700 | $ | (515 | ) | |||||||||
(25) | Intangible assets |
2009 | 2008 | |||||||
Customer Relationship: | ||||||||
Gross carrying value | $ | 275,324 | $ | 275,324 | ||||
Accumulated amortization | (67,553 | ) | (45,493 | ) | ||||
Owner-Operator Relationship: | ||||||||
Gross carrying value | 3,396 | 3,396 | ||||||
Accumulated amortization | (2,988 | ) | (1,856 | ) | ||||
Trade Name: | ||||||||
Gross carrying value | 181,037 | 181,037 | ||||||
Intangible assets, net | $ | 389,216 | $ | 412,408 | ||||
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Customer | Owner-Operator | Trade | ||||||||||
Relationship | Relationship | Name | ||||||||||
Beginning balance | $ | — | $ | — | $ | — | ||||||
Contributed on May 9, 2007 | 17,494 | — | — | |||||||||
Acquired on May 10, 2007 | 257,830 | 3,396 | 181,037 | |||||||||
Ending balance | $ | 275,324 | $ | 3,396 | $ | 181,037 | ||||||
(26) | Goodwill |
Balance as of January 1, 2007 | $ | — | ||
Contributed at May 9, 2007 | 21,498 | |||
Acquired at May 10, 2007 | 486,758 | |||
Impairment loss | (238,000 | ) | ||
December 31, 2007 | 270,256 | |||
Impairment loss | (17,000 | ) | ||
December 31, 2008 and 2009 | $ | 253,256 | ||
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(27) | Subsequent events |
(28) | Loss per share |
Year ending December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands, except per share amounts) | ||||||||||||
Net loss | $ | (435,645 | ) | $ | (146,555 | ) | $ | (96,188 | ) | |||
Weighted average shares: | ||||||||||||
Common shares outstanding for basic and diluted loss per share | 75,146 | 75,146 | 49,521 | |||||||||
Basic and diluted loss per share | $ | (5.80 | ) | $ | (1.95 | ) | $ | (1.94 | ) | |||
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(29) | Quarterly results of operations (unaudited) |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Year Ended December 31, 2009 | ||||||||||||||||
Operating revenue | $ | 614,756 | $ | 628,572 | $ | 659,723 | $ | 668,302 | ||||||||
Operating income | $ | 12,239 | $ | 27,109 | $ | 45,759 | $ | 46,894 | ||||||||
Net loss | $ | (43,560 | ) | $ | (30,926 | ) | $ | (4,028 | ) | $ | (357,131 | ) | ||||
Basic and diluted loss per share | $ | (0.58 | ) | $ | (0.41 | ) | $ | (0.05 | ) | $ | (4.75 | ) | ||||
Year Ended December 31, 2008 | ||||||||||||||||
Operating revenue | $ | 816,341 | $ | 913,299 | $ | 900,591 | $ | 769,579 | ||||||||
Operating (loss) income | $ | (15,589 | ) | $ | 35,523 | $ | 58,901 | $ | 36,101 | |||||||
Net loss | $ | (81,444 | ) | $ | (26,576 | ) | $ | (10,865 | ) | $ | (27,670 | ) | ||||
Basic and diluted loss per share | $ | (1.08 | ) | $ | (0.35 | ) | $ | (0.14 | ) | $ | (0.37 | ) |
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March 28, 2008, except as to
note 24 which is as of
July 21, 2010
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May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands, | ||||||||
except share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 81,134 | $ | 47,858 | ||||
Accounts receivable, net | 322,995 | 308,018 | ||||||
Equipment sales receivables | 2,393 | 2,422 | ||||||
Inventories and supplies | 9,178 | 11,621 | ||||||
Prepaid taxes, licenses and insurance | 42,273 | 37,865 | ||||||
Assets held for sale | 22,870 | 35,377 | ||||||
Deferred income taxes | 53,615 | 43,695 | ||||||
Total current assets | 534,458 | 486,856 | ||||||
Property and equipment, at cost: | ||||||||
Revenue and service equipment | 1,860,880 | 1,846,618 | ||||||
Land | 104,565 | 85,883 | ||||||
Facilities and improvements | 292,363 | 303,282 | ||||||
Furniture and office equipment | 86,640 | 85,544 | ||||||
Total property and equipment | 2,344,448 | 2,321,327 | ||||||
Less accumulated depreciation and amortization | 865,640 | 807,735 | ||||||
Net property and equipment | 1,478,808 | 1,513,592 | ||||||
Notes receivable, less current portion | 263 | 2,752 | ||||||
Other assets | 20,451 | 16,037 | ||||||
Customer relationship intangibles, net | 34,125 | 35,223 | ||||||
Goodwill | 56,188 | 56,188 | ||||||
Total assets | $ | 2,124,293 | $ | 2,110,648 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 87,782 | $ | 100,424 | ||||
Accrued liabilities | 93,640 | 63,360 | ||||||
Current portion of claims accruals | 155,273 | 139,112 | ||||||
Fair value of guarantees | 491 | 674 | ||||||
Securitization of accounts receivable | 160,000 | 180,000 | ||||||
Fair value of interest rate swaps | 608 | — | ||||||
Total current liabilities | 497,794 | 483,570 | ||||||
Senior notes | 200,000 | 200,000 | ||||||
Claims accruals, less current portion | 106,461 | 108,606 | ||||||
Deferred income taxes | 312,134 | 303,464 | ||||||
Fair value of interest rate swaps | — | 785 | ||||||
Total liabilities | 1,116,389 | 1,096,425 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, par value $.001 per share. Authorized 1,000,000 shares; none issued | — | — | ||||||
Common stock, par value $.001 per share. Authorized 200,000,000 shares; issued 101,179,174 and 100,864,952 on May 10, 2007 and December 31, 2006, respectively | 101 | 101 | ||||||
Additional paid-in capital | 509,931 | 482,050 | ||||||
Retained earnings | 962,463 | 992,885 | ||||||
Treasury stock, at cost (25,922,320 and 25,776,359 shares on May 10, 2007 and December 31, 2006, respectively) | (464,508 | ) | (460,271 | ) | ||||
Accumulated other comprehensive loss | (83 | ) | (542 | ) | ||||
Total stockholders’ equity | 1,007,904 | 1,014,223 | ||||||
Total liabilities and stockholders’ equity | $ | 2,124,293 | $ | 2,110,648 | ||||
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(In thousands, | ||||
except per share data) | ||||
Operating revenue | $ | 1,074,723 | ||
Operating expenses: | ||||
Salaries, wages and employee benefits | 364,690 | |||
Operating supplies and expenses | 119,833 | |||
Fuel | 223,579 | |||
Purchased transportation | 196,258 | |||
Rental expense | 20,089 | |||
Insurance and claims | 58,358 | |||
Depreciation, amortization and impairments | 82,949 | |||
Loss on disposal of property and equipment | 130 | |||
Communication and utilities | 10,473 | |||
Operating taxes and licenses | 24,021 | |||
Total operating expenses | 1,100,380 | |||
Operating loss | (25,657 | ) | ||
Other (income) expenses: | ||||
Interest expense | 9,277 | |||
Interest income | (1,364 | ) | ||
Other | 1,429 | |||
Other (income) expenses, net | 9,342 | |||
Loss before income taxes | (34,999 | ) | ||
Income tax benefit | (4,577 | ) | ||
Net loss | $ | (30,422 | ) | |
Basic and diluted loss per share | $ | (0.40 | ) | |
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(In thousands) | ||||
Net loss | $ | (30,422 | ) | |
Other comprehensive income (loss): | ||||
Foreign currency translation | 81 | |||
Reclassification of realized derivative loss on cash flow hedge into net earnings, net of tax effect of $148 | 378 | |||
Comprehensive loss | $ | (29,963 | ) | |
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Accumulated | ||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||
Par | Paid-In | Retained | Treasury | Comprehensive | Stockholders’ | |||||||||||||||||||||||
Shares | Value | Capital | Earnings | Stock | Loss | Equity | ||||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||||||
Balances, December 31, 2006 | 100,864,952 | $ | 101 | $ | 482,050 | $ | 992,885 | $ | (460,271 | ) | $ | (542 | ) | $ | 1,014,223 | |||||||||||||
Issuance of common stock under stock option and employee stock purchase plans | 314,222 | — | 5,895 | — | — | — | 5,895 | |||||||||||||||||||||
Income tax benefit arising from the exercise of stock options | — | — | 9,485 | — | — | — | 9,485 | |||||||||||||||||||||
Amortization of deferred compensation | — | — | 12,501 | — | — | — | 12,501 | |||||||||||||||||||||
Purchase of shares of 145,961 treasury stock | — | — | — | — | (4,237 | ) | — | (4,237 | ) | |||||||||||||||||||
Reclassification of realized derivative loss on cash flow hedge | — | — | — | — | — | 378 | 378 | |||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | 81 | 81 | |||||||||||||||||||||
Net loss | — | — | — | (30,422 | ) | — | — | (30,422 | ) | |||||||||||||||||||
Balances, May 10, 2007 | 101,179,174 | $ | 101 | $ | 509,931 | $ | 962,463 | $ | (464,508 | ) | $ | (83 | ) | $ | 1,007,904 | |||||||||||||
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(In thousands) | ||||
Cash flows from operating activities: | ||||
Net loss | $ | (30,422 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Depreciation, amortization and impairments | 85,087 | |||
Deferred income taxes | (1,250 | ) | ||
Provision for losses on accounts receivable | (1,277 | ) | ||
Equity losses | 71 | |||
Amortization of deferred compensation | 12,501 | |||
Change in market value of interest rate swaps | (177 | ) | ||
Net loss on sale of revenue equipment | 91 | |||
Net gain on sale of nonrevenue equipment | (87 | ) | ||
Impairment of note receivable | 2,418 | |||
Increase (decrease) in cash resulting from changes in: | ||||
Accounts receivable | (14,080 | ) | ||
Inventories and supplies | 2,444 | |||
Prepaid taxes, licenses and insurance | (4,408 | ) | ||
Other assets | (6,365 | ) | ||
Accounts payable, accrued and other liabilities | 40,603 | |||
Net cash provided by operating activities | 85,149 | |||
Cash flows from investing activities: | ||||
Proceeds from sale of property and equipment | 27,841 | |||
Capital expenditures | (80,517 | ) | ||
Proceeds from sale of assets held for sale | 6,400 | |||
Payments received on equipment sales receivables | 2,422 | |||
Net cash used in investing activities | (43,854 | ) | ||
Cash flows from financing activities: | ||||
Income tax benefit from exercise of stock options | 9,485 | |||
Repayment of borrowings under accounts receivable securitization | (20,000 | ) | ||
Proceeds from sale of common stock | 6,274 | |||
Reclassification of realized derivative loss on cash flow hedge | 378 | |||
Purchase of treasury stock | (4,237 | ) | ||
Net cash used in financing activities | (8,100 | ) | ||
Effect of exchange rate changes on cash | 81 | |||
Net increase in cash | 33,276 | |||
Cash and cash equivalents at beginning of year | 47,858 | |||
Cash and cash equivalents at end of year | $ | 81,134 | ||
Supplemental disclosure of cash flow information: | ||||
Cash paid during the year for: | ||||
Interest | $ | 6,719 | ||
Income tax paid (refunded) | (9,978 | ) | ||
Supplemental schedule of noncash investing and financing activities: | ||||
Equipment sales receivables | $ | 2,393 | ||
Equipment purchase accrual | (9,131 | ) | ||
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(1) | Summary of significant accounting policies |
(a) | Description of business |
(b) | Description of merger |
(c) | Principles of consolidation |
(d) | Cash and cash equivalents |
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(e) | Inventories and supplies |
(f) | Property and equipment |
(g) | Goodwill |
(h) | Impairments |
(i) | Revenue recognition |
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(j) | Stock compensation plans |
(k) | Income taxes |
(l) | Use of estimates |
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(m) | Recent accounting pronouncements |
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(2) | Accounts receivable |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Trade customers | $ | 294,853 | $ | 290,985 | ||||
Equipment manufacturers | 6,773 | 7,092 | ||||||
Tax receivable | 31,817 | 21,788 | ||||||
Other | 4,070 | 5,458 | ||||||
337,513 | 325,323 | |||||||
Less allowance for doubtful accounts | 14,518 | 17,305 | ||||||
$ | 322,995 | $ | 308,018 | |||||
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Beginning balance | $ | 17,305 | $ | 14,352 | ||||
Additions (reversals) | (1,277 | ) | 6,808 | |||||
Recoveries | 413 | 412 | ||||||
Write-offs | (1,923 | ) | (4,267 | ) | ||||
Ending balance | $ | 14,518 | $ | 17,305 | ||||
(3) | Assets held for sale |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Land and facilities | $ | 800 | $ | 7,511 | ||||
Revenue equipment | 22,070 | 27,866 | ||||||
Assets held for sale | $ | 22,870 | $ | 35,377 | ||||
(4) | Equity investment — Transplace, Inc. |
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(5) | Notes receivable |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Note receivable of $6,331 from Transplace, net of accumulated equity losses and principal payments, bearing interest of 6% per annum and principal due and payable on January 7, 2009 | $ | 263 | $ | 334 | ||||
Note receivable from Transportes EASO, payable on demand | — | 2,418 | ||||||
263 | 2,752 | |||||||
Less current portion | — | — | ||||||
Notes receivable, less current portion | $ | 263 | $ | 2,752 | ||||
(6) | Accrued liabilities |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Employee compensation | $ | 67,424 | $ | 37,980 | ||||
Fuel, mileage and property taxes | 4,563 | 5,339 | ||||||
Income taxes payable | 3,840 | 2,973 | ||||||
Other | 17,813 | 17,068 | ||||||
$ | 93,640 | $ | 63,360 | |||||
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(7) | Claims accruals |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Auto and collision liability | $ | 160,361 | $ | 160,660 | ||||
Workers’ compensation liability | 77,780 | 69,490 | ||||||
Owner-operator claims liability | 9,129 | 4,014 | ||||||
Group medical liability | 12,255 | 10,962 | ||||||
Cargo damage liability | 2,209 | 2,592 | ||||||
261,734 | 247,718 | |||||||
Less current portion of claims accrual | 155,273 | 139,112 | ||||||
Claim accruals, less current portion | $ | 106,461 | $ | 108,606 | ||||
(8) | Securitization of accounts receivable |
(9) | Fair value of operating lease guarantees |
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Table of Contents
(10) | Borrowings under revolving credit agreement |
(11) | Senior notes |
(12) | Derivative financial instruments |
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Table of Contents
(13) | Commitments |
Revenue | ||||||||||||
Equipment | Facilities | Total | ||||||||||
(In thousands) | ||||||||||||
Years Ending May 10, | ||||||||||||
2008 | $ | 29,965 | $ | 897 | $ | 30,862 | ||||||
2009 | 12,526 | 435 | 12,961 | |||||||||
2010 | 12,034 | 167 | 12,201 | |||||||||
2011 | 6,078 | 51 | 6,129 | |||||||||
2012 | — | 43 | 43 | |||||||||
Total minimum lease payments | $ | 60,603 | $ | 1,593 | $ | 62,196 | ||||||
(14) | Contingencies |
(15) | Stockholders’ equity |
(a) | Treasury stock |
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(b) | Stock option plans |
May 10, 2007 | December 31, 2006 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | |||||||||||||
Outstanding at beginning of period | 3,422,386 | $ | 19.78 | 6,467,398 | $ | 18.05 | ||||||||||
Granted at market value | 374,250 | 30.52 | 575,400 | 23.53 | ||||||||||||
Exercised | (221,860 | ) | 17.50 | (3,425,553 | ) | 17.15 | ||||||||||
Cancelled and settled | (3,520,400 | ) | 21.09 | — | — | |||||||||||
Forfeited | (54,376 | ) | 17.34 | (194,859 | ) | 19.85 | ||||||||||
Outstanding at end of period | — | $ | — | 3,422,386 | $ | 19.78 | ||||||||||
Options exercisable at end of period | — | 2,160,154 | ||||||||||||||
May 10, | ||||
2007 | ||||
Dividend yield | —% | |||
Expected volatility | 41% | |||
Risk free interest rate | 4.86% | |||
Expected lives (in years) | 5.0 |
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(c) | Employee stock purchase plan |
May 10, | ||||
2007 | ||||
Dividend yield | — | % | ||
Expected volatility | 48 | % | ||
Risk free interest rate | 5.11 | % |
(d) | Performance share awards |
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(e) | Stockholders protection rights agreement |
(16) | Income Taxes |
Current expense (benefit): | ||||
Federal | $ | (6,124 | ) | |
State | 708 | |||
Foreign | 33 | |||
(5,383 | ) | |||
Deferred expense (benefit): | ||||
Federal | 1,742 | |||
State | (1,992 | ) | ||
Foreign | 1,056 | |||
806 | ||||
Net income tax benefit | $ | (4,577 | ) | |
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Computed “expected” tax benefit | $ | (12,250 | ) | |
Increase (decrease) in income taxes resulting from: | ||||
State income taxes, net of federal income tax benefit | 183 | |||
Per diem allowances | 627 | |||
Acquisition related expenses | 8,144 | |||
State tax rate change and other adjustments in deferred items | (1,551 | ) | ||
Other, net of tax credits | 270 | |||
Net income tax benefit | $ | (4,577 | ) | |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Deferred tax assets: | ||||||||
Claims accruals | $ | 88,877 | $ | 85,287 | ||||
Allowance for doubtful accounts | 6,747 | 6,425 | ||||||
Accrued liabilities | 1,057 | 1,179 | ||||||
Derivative financial instruments | 229 | 297 | ||||||
Equity investments | 5,664 | 5,464 | ||||||
Amortization of discount on stock options | — | 1,980 | ||||||
Other | 8,531 | 7,821 | ||||||
Total deferred tax assets | 111,105 | 108,453 | ||||||
Valuation allowances | (1,697 | ) | (1,616 | ) | ||||
Total deferred tax assets, net | 109,408 | 106,837 | ||||||
Deferred tax liabilities: | ||||||||
Property and equipment, principally due to differences in depreciation | (341,909 | ) | (336,671 | ) | ||||
Prepaid taxes, licenses and permits deducted for tax purposes | (14,017 | ) | (14,495 | ) | ||||
Contractual commitments deducted for tax purposes | (4,644 | ) | (8,412 | ) | ||||
Other | (7,357 | ) | (7,028 | ) | ||||
Total deferred tax liabilities | (367,927 | ) | (366,606 | ) | ||||
Net deferred tax liability | $ | (258,519 | ) | $ | (259,769 | ) | ||
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May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Current deferred tax asset | $ | 53,615 | $ | 43,695 | ||||
Noncurrent deferred tax liability | (312,134 | ) | (303,464 | ) | ||||
Net deferred tax liability | $ | (258,519 | ) | $ | (259,769 | ) | ||
(17) | Accumulated other comprehensive loss |
(18) | Employee benefit plans |
(19) | Key customer |
(20) | Related party transactions |
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(21) | Fair value of financial instruments |
(a) | Accounts receivable and payable |
(c) | Senior notes |
(22) | Customer relationship intangible asset |
May 10, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Customer relationship intangible asset: | ||||||||
Gross carrying amount | $ | 45,726 | $ | 45,726 | ||||
Accumulated amortization | (11,601 | ) | (10,503 | ) | ||||
$ | 34,125 | $ | 35,223 | |||||
(23) | Subsequent events |
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(24) | Loss per share |
Four months and ten days | ||||
ended May 10, 2007 | ||||
(In thousands, except | ||||
per share data) | ||||
Net loss | $ | (30,422 | ) | |
Weighted average shares: | ||||
Common shares outstanding for basic and diluted loss per share | 75,159 | |||
Basic and diluted loss per share | $ | (0.40 | ) | |
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July 2, 2010 | ||||
ASSETS | ||||
Cash | $ | 100 | ||
Total assets | $ | 100 | ||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
Stockholder’s equity: | ||||
Common stock, par value $.01 per share | ||||
Authorized 1,000 shares; 1,000 shares issued at July 2, 2010 | $ | 10 | ||
Additional paid-in capital | 90 | |||
Total stockholder’s equity | 100 | |||
Total liabilities and stockholder’s equity | $ | 100 | ||
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FOR THE YEAR ENDED DECEMBER 31, 2007
Swift | Interstate | Pro Forma | ||||||||||||||||||
Swift | Transportation | Equipment | Adjustments | |||||||||||||||||
Corporation(1) | Co., Inc.(2) | Leasing(3) | (4) | Pro Forma | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Operating revenue | $ | 2,180,293 | $ | 1,074,723 | $ | 12,394 | $ | (2,662 | )(a)(b) | $ | 3,264,748 | |||||||||
Operating expenses: | ||||||||||||||||||||
Salaries, wages and benefits | 611,811 | 364,690 | 1,328 | — | 977,829 | |||||||||||||||
Operating supplies and expenses | 187,873 | 119,833 | 764 | (569 | )(a) | 307,901 | ||||||||||||||
Fuel | 474,825 | 223,579 | 898 | — | 699,302 | |||||||||||||||
Purchased transportation | 435,421 | 196,258 | — | (2,093 | )(b) | 629,586 | ||||||||||||||
Rental expense | 51,703 | 20,089 | 7,016 | (552 | )(c) | 78,256 | ||||||||||||||
Insurance and claims | 69,699 | 58,358 | 81 | — | 128,138 | |||||||||||||||
Depreciation and amortization | 187,043 | 82,949 | 700 | 819 | (c) | |||||||||||||||
7,969 | (d) | |||||||||||||||||||
1,701 | (e) | 281,181 | ||||||||||||||||||
Impairments | 256,305 | — | — | — | 256,305 | |||||||||||||||
(Gain) loss on equipment disposal | (397 | ) | 130 | — | — | (267 | ) | |||||||||||||
Communication and utilities | 18,625 | 10,473 | 18 | — | 29,116 | |||||||||||||||
Operating taxes and licenses | 42,076 | 24,021 | 11 | — | 66,108 | |||||||||||||||
Total operating expenses | 2,334,984 | 1,100,380 | 10,816 | 7,275 | 3,453,455 | |||||||||||||||
Operating income (loss) | (154,691 | ) | (25,657 | ) | 1,578 | (7,275 | ) | (188,707 | ) | |||||||||||
Interest expense | 171,115 | 9,454 | 348 | 92,268 | (f) | |||||||||||||||
2,185 | (f) | |||||||||||||||||||
(9,625 | )(f) | 265,745 | ||||||||||||||||||
Derivative interest expense (income) | 13,233 | (177 | ) | — | — | 13,056 | ||||||||||||||
Interest income | (6,602 | ) | (1,364 | ) | (361 | ) | — | (8,327 | ) | |||||||||||
Other (income) expenses | (1,933 | ) | 1,429 | 31 | — | (473 | ) | |||||||||||||
Earnings (losses) before income taxes | (330,504 | ) | (34,999 | ) | 1,560 | (92,103 | ) | (458,708 | ) | |||||||||||
Income tax (benefit) expense | (234,316 | ) | (4,577 | ) | — | — | (238,893 | ) | ||||||||||||
Net earnings (loss) | $ | (96,188 | ) | $ | (30,422 | ) | $ | 1,560 | $ | (92,103 | ) | $ | (219,815 | ) | ||||||
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(1) | Reflects the GAAP consolidated statement of operations of Swift Corporation for the twelve months ended December 31, 2007, including Swift Transportation from May 11, 2007 to December 31, 2007 and IEL from April 7, 2007 to December 31, 2007. | |
(2) | Reflects the consolidated GAAP statement of operations (loss) of Swift Transportation from January 1, 2007 to May 10, 2007, prior to its acquisition by Swift Corporation. | |
(3) | Reflects the GAAP statement of operations for IEL from January 1, 2007 to April 6, 2007, prior to the contribution of its shares of capital stock to Swift Corporation. | |
(4) | The pro forma adjustments to the consolidated statement of operations reflect the 2007 Transactions as if they occurred on January 1, 2007, including the following: | |
(a) As of April 6, 2007, IEL operated a fleet of approximately 80 trucks for Swift Transportation Co. The adjustment reflects the elimination of 100% of IEL’s revenue and associated expenses from operating these trucks. | ||
(b) Swift Transportation performs repair and maintenance on IEL-owned equipment and recognizes revenue for the total amount billed to IEL. The adjustment reflects the elimination of 100% of Swift Transportation revenue and associated expenses from these repairs. | ||
(c) The $552 thousand reduction in rental expense and the $819 thousand increase in depreciation expense for certain operating leases in which the lessor did not consent to the transfer of the underlying lease to the surviving entity as if the 2007 Transactions occurred on January 1, 2007. | ||
(d) The additional amortization of intangible assets of $8.0 million based on the allocation of a portion of the purchase price to intangible assets, including customer and owner-operator relationships as if the 2007 Transactions occurred on January 1, 2007. The customer relationship intangible is being amortized over fifteen years using the 150% declining balance method and the owner-operator relationship is being amortized using the straight-line method over three years. | ||
(e) The $1.7 million of additional depreciation expense based on the increase in the estimated fair value of property and equipment associated with the preliminary allocation of the purchase price as if the 2007 Transactions occurred on January 1, 2007. | ||
(f) The additional interest expense of $84.8 million as a result of (i) the $92.3 million increase in annual interest expense associated with the debt issued in connection with the 2007 Transactions, (ii) the $2.2 million increase in the interest expense associated with the amortization of deferred financing costs incurred with the issuance of the indebtedness and (iii) the $9.6 million elimination of annual interest expense associated with the repayment of Swift Transportation and IEL debt existing prior to the 2007 Transactions, along with the write-off of deferred financing costs associated with this debt as if the 2007 Transactions occurred on January 1, 2007. |
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Morgan Stanley | BofA Merrill Lynch | Wells Fargo Securities |
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Item 13. | Other expenses of issuance and distribution. |
Amount Paid or | ||||
to be Paid | ||||
SEC registration fee | $ | 49,910 | ||
FINRA filing fee | 75,500 | |||
Stock exchange listing fees | * | |||
Printing and engraving | * | |||
Legal fees and expenses | * | |||
Accounting fees and expenses | * | |||
Blue sky fees and expenses | * | |||
Transfer agent and registrar fees and expenses | * | |||
Miscellaneous | * | |||
Total | $ | * | ||
* | To be filed by amendment. |
Item 14. | Indemnification of directors and officers. |
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Item 15. | Recent sales of unregistered securities. |
Item 16. | Exhibits and financial statement schedules. |
(a) | Exhibits. |
Exhibit | ||||
Number | Exhibit Title | |||
1 | .1 | Form of Underwriting Agreement* | ||
2 | .1 | Certificate of Merger by and between Swift Corporation and Swift Holdings Corp.* | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Swift Holdings Corp.* | ||
3 | .2 | Amended and Restated Bylaws of Swift Holdings Corp.* | ||
4 | .1 | Specimen Class A Common Stock Certificate of Swift Holdings Corp.* | ||
5 | .1 | Opinion of Skadden, Arps, Slate, Meagher & Flom LLP* | ||
10 | .1 | Form of Swift Holdings Corp. Senior Secured Credit Facility* | ||
10 | .2 | Form of Registration Rights Agreement* | ||
10 | .3 | Purchase and Sale Agreement, dated July 30, 2008, among Swift Receivables Corporation II, Swift Transportation Corporation, Swift Intermodal Ltd., Swift Leasing Co., Inc. and Swift Receivables Corporation II |
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Exhibit | ||||
Number | Exhibit Title | |||
10 | .4 | Receivables Sales Agreement, dated July 30, 2008 and as amended on November 6, 2009, among Swift Receivables Corporation II, Swift Transportation Corporation, Morgan Stanley Senior Funding, Inc., Wells Fargo Foothill, LLC and General Electric Capital Corporation | ||
10 | .5 | 2007 Swift Corporation Omnibus Incentive Plan, effective October 10, 2007 | ||
10 | .6 | Form of Option Award Notice | ||
10 | .7 | Swift Corporation Retirement Plan, effective January 1, 1992 | ||
10 | .8 | Swift Corporation Amended and Restated Deferred Compensation Plan, effective January 1, 2008 | ||
10 | .9 | Swift Corporation 2010 Performance Bonus Plan, effective January 1, 2010 | ||
21 | .1 | Subsidiaries of Swift Corporation | ||
23 | .1 | Consent of KPMG LLP | ||
23 | .2 | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)* | ||
24 | .1 | Powers of Attorney (included on signature page) |
* | To be filed by amendment |
Item 17. | Undertakings. |
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By: | /s/ Jerry Moyes |
Signature and Title | Date | |||
/s/ Jerry Moyes Jerry Moyes Chief Executive Officer and Director (Principal executive officer) | July 21, 2010 | |||
/s/ Virginia Henkels Virginia Henkels Executive Vice President and Chief Financial Officer (Principal financial officer) | July 21, 2010 | |||
/s/ Cary M. Flanagan Cary M. Flanagan Vice President and Corporate Controller (Principal accounting officer) | July 21, 2010 | |||
/s/ Richard H. Dozer Richard H. Dozer Director | July 21, 2010 | |||
/s/ David Vander Ploeg David Vander Ploeg Director | July 21, 2010 |
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Exhibit | ||||
Number | Exhibit Title | |||
1 | .1 | Form of Underwriting Agreement* | ||
2 | .1 | Certificate of Merger by and between Swift Corporation and Swift Holdings Corp.* | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Swift Holdings Corp.* | ||
3 | .2 | Amended and Restated Bylaws of Swift Holdings Corp.* | ||
4 | .1 | Specimen Class A Common Stock Certificate of Swift Holdings Corp.* | ||
5 | .1 | Opinion of Skadden, Arps, Slate, Meagher & Flom LLP* | ||
10 | .1 | Form of Swift Holdings Corp. Senior Secured Credit Facility* | ||
10 | .2 | Form of Registration Rights Agreement* | ||
10 | .3 | Purchase and Sale Agreement, dated July 30, 2008, among Swift Receivables Corporation II, Swift Transportation Corporation, Swift Intermodal Ltd., Swift Leasing Co., Inc. and Swift Receivables Corporation II | ||
10 | .4 | Receivables Sales Agreement, dated July 30, 2008 and as amended on November 6, 2009, among Swift Receivables Corporation II, Swift Transportation Corporation, Morgan Stanley Senior Funding, Inc., Wells Fargo Foothill, LLC and General Electric Capital Corporation | ||
10 | .5 | 2007 Swift Corporation Omnibus Incentive Plan, effective October 10, 2007 | ||
10 | .6 | Form of Option Award Notice | ||
10 | .7 | Swift Corporation Retirement Plan, effective January 1, 1992 | ||
10 | .8 | Swift Corporation Amended and Restated Deferred Compensation Plan, effective January 1, 2008 | ||
10 | .9 | Swift Corporation 2010 Performance Bonus Plan, effective January 1, 2010 | ||
21 | .1 | Subsidiaries of Swift Corporation | ||
23 | .1 | Consent of KPMG LLP | ||
23 | .2 | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)* | ||
24 | .1 | Powers of Attorney (included on signature page) |
* | To be filed by amendment |