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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, 2001
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 identification
incorporation or organization) 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
--- ---
At May 4, 2001, the number of shares outstanding of the Registrant's common
stock, par value $0.001, was 63,360,246.
EXHIBIT INDEX AT PAGE 14
TOTAL PAGES 17
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PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 2001 (unaudited) and
December 31, 2000 3-4
Condensed Consolidated Statements of
Earnings (unaudited) for the Three Month
Periods Ended March 31, 2001 and 2000 5
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Three Month Periods Ended
March 31, 2001 and 2000 6-7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II
OTHER INFORMATION
Items 1, 2,
3, 4 and 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K 14
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PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
March 31, December 31,
2001 2000
------------ ------------
(unaudited)
Assets
Current assets:
Cash $ 6,048 $ 19,196
Accounts receivable, net 181,739 174,524
Equipment sales receivable 2,749 5,799
Inventories and supplies 8,987 8,966
Prepaid taxes, licenses and insurance 27,031 27,191
Assets held for sale 3,169
Note receivable 3,200
------------ -----------
Total current assets 226,554 242,045
----------- -----------
Property and equipment, at cost:
Revenue and service equipment 729,228 716,305
Land 22,589 22,589
Facilities and improvements 137,918 128,654
Furniture and office equipment 24,034 23,545
----------- -----------
Total property and equipment 913,769 891,093
Less accumulated depreciation and amortization 202,436 188,111
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Net property and equipment 711,333 702,982
----------- -----------
Other assets 8,281 8,860
Goodwill 6,137 6,324
----------- -----------
$ 952,305 $ 960,211
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
March 31, December 31,
2001 2000
--------------------- ----------------------
(unaudited)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 43,669 $ 53,659
Accrued liabilities 41,432 31,688
Current portion of claims accruals 24,428 23,104
Current portion of long-term debt 3,383 386
Securitization of accounts receivable 105,000 117,000
Current portion of deferred income taxes 7,458 7,200
----------- -----------
Total current liabilities 225,370 233,037
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Borrowings under line of credit 154,000 154,000
Long-term debt, less current portion 12,115 15,240
Claims accruals, less current portion 22,225 21,040
Deferred income taxes 100,399 100,170
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
66,426,689 and 66,389,281 shares at
March 31, 2001 and December 31, 2000. 66 66
Additional paid-in capital 138,559 138,243
Retained earnings 337,506 336,350
----------- -----------
476,131 474,659
Less treasury stock, at cost (3,157,850 shares) 37,935 37,935
----------- -----------
Total stockholders' equity 438,196 436,724
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Commitments and contingencies
----------- -----------
$ 952,305 $ 960,211
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See accompanying notes to condensed consolidated financial statements.
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SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(unaudited)
(In thousands, except share data)
Three months ended
March 31,
2001 2000
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Operating revenue $ 327,411 $ 291,522
Operating expenses:
Salaries, wages and employee benefits 126,542 103,606
Operating supplies and expenses 28,715 23,754
Fuel 46,541 39,786
Purchased transportation 57,431 55,209
Rental expense 20,178 14,158
Insurance and claims 8,898 8,918
Depreciation and amortization 18,606 13,644
Communication and utilities 4,393 3,854
Operating taxes and licenses 9,156 8,482
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Total operating expenses 320,460 271,411
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Operating income 6,951 20,111
Other (income) expenses:
Interest expense 5,040 3,164
Interest income (290) (164)
Other 315 (244)
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Other (income) expenses, net 5,065 2,756
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Earnings before income taxes 1,886 17,355
Income taxes 730 6,700
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Net earnings $ 1,156 $ 10,655
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Basic earnings per share $ .02 $ .17
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Diluted earnings per share $ .02 $ .17
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See accompanying notes to condensed consolidated financial statements.
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SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
Three Months
Ended March 31,
2001 2000
---------------- ------------------
Cash flows from operating activities:
Net earnings $ 1,156 $ 10,655
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 18,758 12,872
Deferred income taxes 487 5,569
Provision for losses on accounts receivable 300 200
Amortization of deferred compensation 141 81
Increase (decrease) in cash resulting from
changes in:
Accounts receivable (5,926) (12,018)
Inventories and supplies (21) (18)
Prepaid expenses 160 (57)
Other assets 677 489
Accounts payable, accrued liabilities
and claims accruals 2,664 (3,810)
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Net cash provided by operating activities 18,396 13,963
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 10,121 23,674
Capital expenditures (38,707) (78,028)
Repayment of note receivable 3,200
Payments received on equipment sales receivables 5,799 5,966
----------- -----------
Net cash used in investing activities (19,587) (48,388)
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See accompanying notes to condensed consolidated financial statements.
Continued
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SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
Three Months
Ended March 31,
2001 2000
---------------- ------------
Cash flows from financing activities:
Repayments of long-term debt (128) (124)
Change in borrowings under line of credit (37,000)
Change in borrowings under accounts receivable
securitization (12,000) 79,000
Purchases of treasury stock (13,238)
Proceeds from issuance of common stock
under stock option and stock purchase plans 171 360
------------ ------------
Net cash provided (used) by financing
activities (11,957) 28,998
------------ ------------
Net decrease in cash (13,148) (5,427)
Cash at beginning of period 19,196 9,969
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Cash at end of period $ 6,048 $ 4,542
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 4,891 $ 3,198
Income taxes
Supplemental schedule of noncash investing and
financing activities:
Equipment sales receivables $ 2,749 $ 8,781
Note receivable from property sale $ 1,715
See accompanying notes to condensed consolidated financial statements.
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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 financial statements
include all normal recurring adjustments, which 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, 2000. 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 January 2001, the Company sold the remainder of the assets
held for sale. The Company received $1,000,000 and a non
interest-bearing note for $1,900,000. Under the terms of the
note, a $1,000,000 payment is due January 2002 and the balance
is due January 2003.
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SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Item 2. 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 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 for the year ended December 31, 2000,
including Notes to the Consolidated Financial Statements, "Business," "Market
for the Registrant's Common Stock and Related Stockholder Matters" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," describe factors, among others, that could cause actual results to
differ materially from those expressed in such forward-looking statements.
OVERVIEW
Although the trend in the truckload segment of the motor carrier industry over
the past several years has been towards consolidation, the truckload segment
remains highly fragmented. Management believes the industry trend towards
financially stable "core carriers" will continue and result in further industry
consolidation. In response to this trend, the Company continues to expand its
fleet with an increase of 1,453 tractors to 10,384 tractors as of March 31, 2001
up from 8,931 tractors as of March 31, 2000. The owner operator portion of the
Company's fleet increased to 2,160 as of March 31, 2001 from 1,908 as of March
31, 2000.
Swift has entered into an agreement to acquire M.S. Carriers. This acquisition,
if consummated, would have a significant impact on Swift's financial condition
and results of operations. In particular, Swift's equity capitalization,
revenues and other indicia of financial performance will change significantly
due to the issuance of Swift common stock, the inclusion of M.S. Carriers
operating results and the anticipated integration and other costs associated
with the merger, among other factors. Accordingly, the results discussed below
are not necessarily indicative of the results
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to be expected in any future periods in the event that the M.S. Carriers
transaction is consummated.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Operating revenue increased $35.9 million or 12.3% to $327.4 million for the
three months ended March 31, 2001 from $291.5 million for the corresponding
period of 2000. The increase in operating revenue is primarily the result of the
expansion of the Company's fleet, rate increases of approximately 3% and a fuel
surcharge revenue increase of approximately $5 million.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) for the first quarter of 2001 was 97.9% compared to 93.1% in
the comparable period of 2000. The Company's operating ratio for the three
months ended March 31, 2001 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
16.02% and 14.15% and average loaded linehaul revenue per mile was $1.39 and
$1.35 (excluding fuel surcharge) in the first quarter of 2001 and 2000,
respectively.
Salaries, wages and employee benefits represented 38.6% of operating revenue for
the three months ended March 31, 2001 compared with 35.5% in 2000. The increase
is primarily due to a greater number of empty miles, an overall driver wage
scale increase that went into effect in April 2000 and normal wage increases.
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 needed in order to attract and retain drivers, the Company's
results of operations would be negatively impacted to the extent that
corresponding freight rate increases were not obtained.
Fuel as a percentage of operating revenue was 14.2% for the first quarter of
2001 versus 13.6% in 2000. The increase is primarily due to actual fuel cost per
gallon increasing by approximately 5 cents per gallon (3.9%) in the first
quarter of 2001 versus the first quarter of 2000.
Increases in fuel costs, to the extent not offset by rate increases or fuel
surcharges, would have an adverse effect on the operations and profitability of
the Company. Management believes 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.
Purchased transportation as a percentage of operating revenue was 17.5% for the
three months ended March 31, 2001 compared to 18.9% in 2000. The decrease is
primarily due to the transfer of our logistics business to Transplace.com and a
lower growth rate of the owner operator fleet as a percentage of total fleet
growth.
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Rental expense as a percentage of operating revenue was 6.2% for the first
quarter of 2001 versus 4.9% in 2000. At March 31, 2001 and 2000, leased tractors
represented 60% and 50%, 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 gains of $19,000 in the first quarter of 2001
and $657,000 during the first quarter of 2000 from the sale of leased tractors.
Exclusive of gains, which reduced this expense, rental expense as a percentage
of operating revenue was 6.2% and 5.1% in the third quarter of 2001 and 2000,
respectively.
Depreciation and amortization expense as a percentage of operating revenue was
5.7% in the first quarter of 2001 versus 4.7% in 2000. 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, 2001, net
gains from the sale of revenue equipment reduced depreciation and amortization
expense by approximately $941,000 compared to approximately $3.9 million in the
first quarter of 2000. Exclusive of gains, which reduced this expense,
depreciation and amortization expense as a percentage of operating revenue was
6.0% in the first quarter of both 2001 and 2000.
Insurance and claims expense represented 2.7% and 3.1% of operating revenue in
the first quarter of 2001 and 2000, 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 which 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. Insurance and claims
expense will vary as a percentage of operating revenue from period to period
based on the frequency and severity of claims incurred in a given period as well
as changes in claims development trends.
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
from the accounts receivable securitization, the use of operating leases to
finance the acquisition of revenue equipment and from periodic public offerings
of common stock.
Net cash provided by operating activities was $18.4 million in the first three
months of 2001 compared to $14.0 million in 2000. The increase is primarily
attributable to an increase in depreciation and amortization, a smaller increase
in accounts receivable and a larger increase in
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accounts payable, accrued liabilities and claims accruals offset by a decrease
in net earnings and deferred income taxes.
Net cash used in investing activities decreased to $19.6 million in the first
three months of 2001 from $48.4 million in 2000. The decrease is primarily due
to lower capital expenditures in 2001 and repayment by Transplace.com of a $3.2
million loan offset by decreased proceeds from the sale of property and
equipment.
As of March 31, 2001, the Company had commitments outstanding to acquire
replacement and additional revenue equipment for approximately $176 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 2001, the Company incurred approximately $10
million of non-revenue equipment capital expenditures. These expenditures were
primarily for facilities and equipment.
The Company anticipates that it will expend approximately $45 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 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 used by financing activities amounted to $12.0 million in the first
three months of 2001 compared to $29.0 million provided by financing activities
in 2000. This decrease is primarily due to reduced proceeds from the accounts
receivable securitization offset by reduced treasury stock purchases.
Management believes 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 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.
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INFLATION
Inflation can be expected to have an impact on the Company's operating costs. A
prolonged period of inflation could cause interest rates, fuel, wages and other
costs to increase which would adversely affect the Company's results of
operations unless freight rates could be increased correspondingly. However, the
effect of inflation on the Company 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes to the disclosure made in the Annual Report on
Form 10-K for the year ended December 31, 2000 regarding this matter.
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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 11 - Schedule of Computation of Net Earnings Per
Share
Exhibit 99 - Private Securities Litigation Reform Act of
1995 Safe Harbor Compliance Statement for
Forward-Looking Statements
(b) Current Reports on Form 8-K were filed on March 14, 2001
and March 23, 2001.
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 8, 2000 /s/ William F. Riley III
------------------------------------------
(Signature)
William F. Riley III
Senior Executive Vice President and
Chief Financial Officer
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