SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-18605
SWIFT TRANSPORTATION CO., INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0666860
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2200 South 75th Avenue
Phoenix, AZ 85043
(602) 269-9700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date (May 8, 2000)
Common stock, $.001 par value: 63,058,926 shares
EXHIBIT INDEX AT PAGE 15
TOTAL PAGES 63
PART I
FINANCIAL INFORMATION
Page
Number
------
Item 1. Financial statements
Condensed consolidated balance sheets
as of March 31, 2000 (unaudited) and
December 31, 1999 3-4
Condensed consolidated statements of
earnings (unaudited) for the three month
periods ended March 31, 2000 and 1999 5
Condensed consolidated statements of cash
flows (unaudited) for the three month
periods ended March 31, 2000 and 1999 6-7
Notes to condensed consolidated financial statements 8-9
Item 2. Management's discussion and analysis of financial
condition and results of operations 10-14
Item 3. Quantitative and qualitative disclosures about market risk. 14
PART II
OTHER INFORMATION
Items 1, 2, 3, 4 and 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K 15
2
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
March 31, December 31,
2000 1999
-------- --------
(unaudited)
ASSETS
Current assets:
Cash $ 4,542 $ 9,969
Accounts receivable, net 165,464 153,418
Equipment sales receivable 8,581 5,966
Inventories and supplies 7,428 7,410
Prepaid taxes, licenses and insurance 17,067 17,010
Assets held for sale 3,606 5,468
Deferred income taxes 4,231 4,200
-------- --------
Total current assets 210,919 203,441
-------- --------
Property and equipment, at cost:
Revenue and service equipment 634,408 608,470
Land 12,532 12,879
Facilities and improvements 119,201 112,659
Furniture and office equipment 21,623 20,260
-------- --------
Total property and equipment 787,764 754,268
Less accumulated depreciation
and amortization 171,799 172,936
-------- --------
Net property and equipment 615,965 581,332
-------- --------
Other assets 2,158 2,731
Goodwill 6,884 7,070
-------- --------
$835,926 $794,574
======== ========
See accompanying notes to condensed consolidated financial statements.
Continued
3
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
March 31, December 31,
2000 1999
-------- --------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,355 $ 53,917
Accrued liabilities 43,326 34,493
Current portion of claims accruals 26,044 26,530
Current portion of long-term debt 491 473
Securitization of accounts receivable 79,000
-------- --------
Total current liabilities 190,216 115,413
-------- --------
Borrowings under line of credit 115,500 152,500
Long-term debt, less current portion 15,511 15,653
Claims accruals, less current portion 21,327 21,122
Deferred income taxes 101,287 95,687
Stockholders' equity:
Preferred stock, par value $.001 per share
Authorized 1,000,000 shares; none issued
Common stock, par value $.001 per share
Authorized 150,000,000 shares; issued
65,908,895 and 65,818,166 shares at
March 31, 2000 and December 31, 1999,
respectively 66 66
Additional paid-in capital 132,040 131,571
Retained earnings 294,404 283,749
-------- --------
426,510 415,386
Less treasury stock, at cost (2,877,850
and 1,862,550 shares at March 31,
2000 and December 31, 1999, respectively) 34,425 21,187
-------- --------
Total stockholders' equity 392,085 394,199
-------- --------
Commitments and contingencies
-------- --------
$835,926 $794,574
======== ========
See accompanying notes to condensed consolidated financial statements.
4
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(unaudited)
(In thousands, except share data)
Three months ended
March 31,
-------------------------
2000 1999
--------- ---------
Operating revenue $ 291,522 $ 234,944
Operating expenses:
Salaries, wages and employee benefits 103,606 89,047
Operating supplies and expenses 23,754 21,008
Fuel 39,786 24,134
Purchased transportation 55,209 36,566
Rental expense 14,158 11,133
Insurance and claims 8,918 6,870
Depreciation and amortization 13,644 14,025
Communication and utilities 3,854 3,289
Operating taxes and licenses 8,482 7,040
--------- ---------
Total operating expenses 271,411 213,112
--------- ---------
Operating income 20,111 21,832
Other (income) expenses:
Interest expense 3,164 2,068
Interest income (164) (130)
Other (244) (149)
--------- ---------
Other (income) expenses, net 2,756 1,789
--------- ---------
Earnings before income taxes 17,355 20,043
Income taxes 6,700 7,940
--------- ---------
Net earnings $ 10,655 $ 12,103
========= =========
Basic earnings per share $ .17 $ .19
========= =========
Diluted earnings per share $ .17 $ .19
========= =========
See accompanying notes to condensed consolidated financial statements.
5
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
Three months ended
March 31,
----------------------
2000 1999
--------- ---------
Cash flows from operating activities:
Net earnings $ 10,655 $ 12,103
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 12,872 13,581
Deferred income taxes 5,569 2,911
Provision for losses on accounts receivable 200 300
Amortization of deferred compensation 81 68
Increase (decrease) in cash resulting from
changes in:
Accounts receivable (12,018) (5,249)
Inventories and supplies (18) 1,458
Prepaid expenses (57) (1,493)
Other assets 489 (35)
Accounts payable, accrued liabilities
and claims accruals (3,810) 14,809
-------- --------
Net cash provided by operating activities 13,963 38,453
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 23,674 6,669
Capital expenditures (78,028) (42,726)
Payments received on equipment sale receivables 5,966 5,262
-------- --------
Net cash used in investing activities (48,388) (30,795)
-------- --------
See accompanying notes to condensed consolidated financial statements.
Continued
6
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
Three months ended
March 31,
-------------------------
2000 1999
--------- ---------
Cash flows from financing activities:
Repayments of long-term debt (124) (331)
Increase in borrowings under accounts
receivable securitization 79,000
Decrease in borrowings under line of credit (37,000) (9,500)
Proceeds from issuance of common stock
under stock option plan 360 174
Purchases of treasury stock (13,238)
-------- -------
Net cash provided by (used in) financing
activities 28,998 (9,657)
-------- -------
Net decrease in cash (5,427) (1,999)
Cash at beginning of period 9,969 6,530
-------- -------
Cash at end of period $ 4,542 $ 4,531
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 3,198 $ 2,068
Income taxes $ $ 147
Supplemental schedule of noncash investing
and financing activities:
Equipment sales receivables $ 8,781 $ 1,537
Direct financing for purchase of equipment $ $ 973
See accompanying notes to condensed consolidated financial statements.
7
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements include the accounts of
Swift Transportation Co., Inc., a Nevada holding company, and its
wholly-owned subsidiaries (the "Company"). All significant intercompany
balances and transactions have been eliminated.
The financial statements have been prepared in accordance with generally
accepted accounting principles, pursuant to rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
accompanying condensed consolidated financial statements include all
adjustments that are necessary for a fair presentation of the results for
the interim periods presented. Certain information and footnote
disclosures have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements and notes
thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. Results of operations in
interim periods are not necessarily indicative of results to be expected
for a full year.
Note 2. Contingencies
The Company is involved in certain claims and pending litigation arising
from the normal course of business. Based on the knowledge of the facts
and, in certain cases, opinions of outside counsel, management believes
the resolution of claims and pending litigation will not have a material
adverse effect on the financial condition of the Company.
Note 3. Assets Held for Sale
In February 2000, the Company sold a portion of the assets held for sale
which relate to the Company's former corporate headquarters. There was no
gain or loss on the sale of these assets.
Note 4. Accounts Receivable Securitization
The Company received $79,000,000 of proceeds under this program. As
discussed in the Annual Report, these proceeds are reflected as a current
liability on the consolidated financial statements because the committed
term, subject to annual renewals, is 364 days.
8
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 5. Investment in Trans-Place.com
In April 2000, the Company and five other large transportation companies
("Members") entered into an (1) Operating Agreement and (2) Initial
Subscription Agreement of Transplace.com, LLC ("Transplace.com"), an
Internet-based global transportation logistics company. These agreements
finalize the terms of the agreement in principal, signed in March 2000, to
form Transplace.com.
Under the terms of these agreements, the Company will contribute, on or
before June 30, 2000, all of the intangible assets of its Transportation
Logistics Business. In addition, the Company and five other members will
each contribute $5,000,000 on an as needed basis. The Company's initial
interest in Transplace.com will be 16%.
9
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements. The words
"believe," "expect," "anticipate," and "project," and similar expressions
identify forward-looking statements, which speak only as of the date the
statement was made. Such forward-looking statements are within the meaning of
that term in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements may
include, but are not limited to, projections of revenues, income, or loss,
capital expenditures, plans for future operations, financing needs or plans, the
impact of inflation and plans relating to the foregoing.
Statements in Exhibit 99 to this Quarterly Report on Form 10-Q and in the
Company's Annual Report on Form 10-K, including Notes to the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," describe factors, among others, that could
contribute to or cause such differences. Additional factors that could cause
actual results to differ materially from those expressed in such forward-looking
statements are set forth in "Business" and "Market for the Registrant's Common
Stock and Related Stockholder Matters" in the Company's Annual Report on Form
10-K.
OVERVIEW
Although the trend in the truckload segment of the motor carrier industry over
the past several years has been toward consolidation, the truckload industry
remains highly fragmented. Management believes the industry trend towards
financially stable "core carriers" will continue and result in continued
industry consolidation. In response to this trend, the Company continues to
expand its total fleet with an increase of 1,658 tractors to 8,931 tractors as
of March 31, 2000, up from 7,273 tractors as of March 31, 1999. The owner
operator portion of the Company's fleet increased to 1,908 as of March 31, 2000,
from 1,324 as of March 31, 1999.
10
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Operating revenue increased $56.6 million, or 24.1%, to $291.5 million for the
three months ended March 31, 2000, from $234.9 million for the corresponding
period of 1999. The increase in operating revenue is primarily the result of the
expansion of the Company's fleet as a result of strong shipper demand.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) for the first quarter of 2000 was 93.1% compared to 90.7% in
the comparable period of 1999. The Company's operating ratio for the three
months ended March 31, 2000, increased as a result of increases in certain
components of operating expenses as a percentage of operating revenue as
discussed below. The Company's empty mile factor for linehaul operations was
14.15% and 14.00% and average loaded linehaul revenue per mile was $ 1.35 and
$1.33 in the first quarter of 2000 and 1999, respectively.
Salaries, wages and employee benefits represented 35.5% of operating revenue for
the three months ended March 31, 2000 compared to 37.9% in 1999. The decrease is
primarily due to a decrease in the accrual for the Company's profit sharing
contribution.
In February 2000, the Company announced an increase in certain driver wage rates
effective April 1, 2000. The Company expects this increase to be substantially
offset by an increase in operating revenue as a result of increases in rates
charged to customers.
From time to time the industry has experienced shortages of qualified drivers.
If such a shortage were to occur over a prolonged period and increases in driver
pay rates were to occur in order to attract and retain drivers, the Company's
results of operations would be negatively impacted to the extent that
corresponding rate increases were not obtained.
Fuel as a percentage of operating revenue was 13.6% for the first quarter of
2000 versus 10.3% in 1999. The increase is primarily due to actual fuel cost per
gallon increasing by approximately 44 cents per gallon in the first quarter of
2000 versus the first quarter of 1999.
Increases in fuel costs, to the extent not offset by rate increases or fuel
surcharges, could have an adverse effect on the operations and profitability of
the Company. Management believes that the most effective protection against fuel
cost increases is to maintain a fuel efficient fleet and to implement fuel
surcharges when such option is necessary and available. The Company currently
does not use derivative-type hedging products but is evaluating the possible use
of these products.
Purchased transportation as a percentage of operating revenue was 18.9% for the
three months ended March 31, 2000, compared to 15.6% in 1999. The increase is
due to the growth of the owner operator fleet to 1,908 as of March 31, 2000,
from 1,324 as of March 31, 1999.
11
Rental expense as a percentage of operating revenue was 4.9% for the first
quarter of 2000 versus 4.7% in 1999. At March 31, 2000 and 1999, leased tractors
represented 50% and 49%, respectively, of the total fleet of Company tractors.
When it is economically advantageous to do so, the Company will purchase then
sell tractors that it currently leases by exercising the purchase option
contained in the lease. Gains on these activities are recorded as a reduction of
rent expense. The Company recorded $657,000 in the first quarter of 2000 and
$633,000 during the first quarter of 1999 in gains from the sale of leased
tractors.
Depreciation and amortization expense as a percentage of operating revenue was
4.7% in the first quarter of 2000 versus 6.0% in 1999. The Company includes
gains and losses from the sale of owned revenue equipment in depreciation and
amortization expense. During the three month period ended March 31, 2000, net
gains from the sale of revenue equipment reduced depreciation and amortization
expense by approximately $3.9 million compared to approximately $661,000 in the
first quarter of 1999. Exclusive of gains, which reduced this expense,
depreciation and amortization expense as a percentage of operating revenue was
6.0% and 6.2% in the first quarter of 2000 and 1999, respectively.
Insurance and claims expense represented 3.1% and 2.9% of operating revenue in
the first quarter of 2000 and 1999, respectively. The Company's insurance
program for liability, physical damage and cargo damage involves self-insurance
with varying risk retention levels. Claims in excess of these risk retention
levels are covered by insurance in amounts that management considers adequate.
The Company accrues the estimated cost of the uninsured portion of pending
claims. These accruals are estimated based on management's evaluation of the
nature and severity of individual claims and an estimate of future claims
development based on historical claims development trends.
Income tax expense was recorded using an effective rate of 38.6% and 39.6% in
the first quarter of 2000 and 1999, respectively. This decrease is due to a
change in the mix of income between states.
LIQUIDITY AND CAPITAL RESOURCES
The continued growth in the Company's business requires significant investment
in new revenue equipment, upgraded and expanded facilities, and enhanced
computer hardware and software. The funding for this expansion has been from
cash provided by operating activities, proceeds from the sale of revenue
equipment, long-term debt, borrowings on the Company's line of credit, proceeds
under the accounts receivable securitization, the use of operating leases to
finance the acquisition of revenue equipment and from periodic public offerings
of common stock.
The Company's current liabilities increased significantly as a result of the
receipt of $79,000,000 of proceeds under the Accounts Receivable Securitization.
This increase was partially offset by a decrease in the line of credit facility
which is classified as a noncurrent liability. As discussed in the financial
12
statement footnotes, the receipts under the Securitization are required to be
shown as a current liability because the committed term, subject to annual
renewals, is 364 days.
Net cash provided by operating activities was $14.0 million in the first three
months of 2000 compared to $38.5 million in 1999. The decrease is primarily
attributable to an increase in accounts receivable along with a decrease in
accounts payable, accrued liabilities and claims accruals.
Net cash used in investing activities increased to $48.4 million in the first
three months of 2000 from $30.8 million in 1999. The increase is due primarily
to greater capital expenditures in 2000 offset by increased proceeds from the
sale of property and equipment.
As of March 31, 2000, the Company had commitments outstanding to acquire
replacement and additional revenue equipment for approximately $237 million. The
Company has the option to cancel such commitments upon 60 days notice. The
Company believes it has the ability to obtain debt and lease financing and
generate sufficient cash flows from operating activities to support these
acquisitions of revenue equipment.
During the first three months of 2000, the Company incurred approximately $10.4
million of non- revenue equipment capital expenditures. These expenditures were
primarily for facilities and equipment.
The Company anticipates that it will expend approximately $40 million during the
remainder of the year for various facilities upgrades and acquisition and
development of terminal facilities. Factors such as costs and opportunities for
future terminal expansions may change the amount of such anticipated
expenditures.
The funding for capital expenditures has been and is anticipated to continue to
be from a combination of cash provided by operating activities, amounts
available under the Company's line of credit, accounts receivable securitization
and debt and lease financing. The availability of capital for revenue equipment
and other capital expenditures will be affected by prevailing market conditions
and the Company's financial condition and results of operations.
Net cash provided by financing activities amounted to $29.0 million in the first
three months of 2000 compared to $9.7 million of cash used in financing
activities in 1999. This increase is primarily due to increased proceeds under
the accounts receivable securitization offset by reduced borrowings under the
line of credit and treasury stock purchases.
Management believes that it will be able to finance its needs for working
capital, facilities improvements and expansion, as well as anticipated fleet
growth, with cash flows from future operations, borrowings available under the
line of credit, accounts receivable securitization and with long-term debt and
operating lease financing believed to be available to finance revenue equipment
purchases. Over the long term, the Company will continue to have significant
capital requirements, which may require the Company to seek additional
borrowings or equity capital. The availability of debt financing or equity
capital will depend upon the Company's financial condition and results of
13
operations as well as prevailing market conditions, the market price of the
Company's common stock and other factors over which the Company has little or no
control.
INFLATION
Inflation can be expected to have an impact on the Company's operating costs. A
prolonged period of inflation would cause interest rates, fuel, wages and other
costs to increase and would adversely affect the Company's results of operations
unless freight rates could be increased correspondingly. However, the effect of
inflation has been minimal over the past three years.
SEASONALITY
In the transportation industry, results of operations generally show a seasonal
pattern as customers reduce shipments after the winter holiday season. The
Company's operating expenses also tend to be higher in the winter months
primarily due to colder weather, which causes higher fuel consumption from
increased idle time.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative Disclosure - There have been no material changes in the Company's
market risk during the three months ended March 31, 2000.
Qualitative Disclosure - This information is set forth on page 17 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999
and is incorporated herein by reference
14
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
PART II OTHER INFORMATION
ITEMS 1, 2, 3, 4 AND 5.
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.18 - Nonqualified Deferred Compensation Agreement*
Exhibit 10.19 - Operating Agreement of Transplace.com, LLC
Exhibit 10.20 - Initial Subscription Agreement of Transplace.com,
LLC
Exhibit 11 - Schedule of Computation of Net Earnings Per Share
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Private Securities Litigation Reform Act of 1995 Safe
Harbor Compliance Statement for Forward-Looking
Statements
(b) No Current Reports on Form 8-K were filed during the three months
ended March 31, 2000.
- ----------
* Indicates a compensation plan
15
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SWIFT TRANSPORTATION CO., INC.
Date: May 10, 2000 /s/ William F. Riley III
----------------------------------------
(Signature)
William F. Riley III
Senior Executive Vice President and
Chief Financial Officer
16