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, 1996
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)
1455 Hulda Way
Sparks, NV 89431
(702) 359-9031
(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 10, 1996)
Common stock, $.001 par value: 24,656,834 shares
<PAGE>
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Condensed consolidated balance sheets
March 31, 1996, (unaudited) and
December 31, 1995 1 - 2
Condensed consolidated statements of
earnings (unaudited) for the three month
periods ended March 31, 1996 and 1995 3
Condensed consolidated statements of cash
flows (unaudited) for the three month
periods ended March 31, 1996 and 1995 4 - 5
Notes to condensed consolidated financial
statements 6
Item 2. Management's discussion and analysis of
financial condition and results of
operations 7 - 11
PART II
OTHER INFORMATION
Page
Number
Item 1. Legal proceedings 12
Items 2.,
3., 4.
and 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated balance sheets
(dollars in thousands)
March 31, December 31,
1996 1995
----------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,266 $ 2,627
Accounts receivable, net 63,497 56,493
Inventories and supplies 3,582 3,223
Prepaid taxes, licenses and
insurance 12,341 4,964
Current deferred tax asset 360 1,250
-------- --------
Total current assets 81,046 68,557
-------- --------
Property and equipment, at cost:
Revenue and service equipment 281,316 259,362
Land 10,226 10,226
Facilities and improvements 42,757 35,936
Furniture and office equipment 10,657 10,295
-------- --------
Total property and equipment 344,956 315,819
Less accumulated depreciation and amortization 89,226 82,946
-------- --------
Net property and equipment 255,730 232,873
Contracts receivable, less current portion 245 349
Other assets 520 590
Goodwill 8,770 8,939
-------- --------
$346,311 $311,308
======== ========
See accompanying notes to condensed consolidated financial statements
Page 1
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated balance sheets (continued)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
(unaudited)
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Accounts payable $ 17,750 $ 13,089
Accrued liabilities 20,223 15,508
Claims accruals 12,123 10,457
Current portion of long-term debt 24,135 22,768
-------- --------
Total current liabilities 74,231 61,822
-------- --------
Borrowings under revolving line of credit 20,250 11,750
Long-term debt, less current portion 65,418 57,204
Claims accruals 16,008 13,647
Deferred income taxes 32,970 32,050
Stockholders' equity:
Preferred stock, par value $.001 per share
Authorized 1,000,000 shares; none issued -- --
Common stock, par value $.001 per share
Authorized 75,000,000 shares; issued
24,878,534 and 24,877,534 shares at
March 31, 1996 and December 31, 1995, respectively 25 25
Additional paid-in capital 45,913 45,885
Retained earnings 94,912 92,341
-------- --------
140,850 138,251
Less 220,700 of treasury stock, at cost 3,416 3,416
-------- --------
Net stockholders' equity 137,434 134,835
-------- --------
Contingencies
-------- --------
$346,311 $311,308
======== ========
</TABLE>
Page 2
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated statements of earnings
(unaudited)
(in thousands, except per share amounts)
Three months ended March 31,
1996 1995
------------ ------------
Operating revenue $ 124,524 $ 106,715
Operating expenses:
Salaries, wages and employee benefits 46,495 39,678
Operating supplies and expenses 12,220 10,175
Fuel 17,723 15,236
Purchased transportation 14,857 7,515
Rental expense 8,066 6,747
Insurance and claims 4,525 3,911
Depreciation and amortization 8,251 8,062
Communications and utilities 1,979 1,905
Operating taxes and licenses 4,692 4,950
--------- ---------
Total operating expenses 118,808 98,179
--------- ---------
Operating income 5,716 8,536
--------- ---------
Other (income) expenses:
Interest expense 1,486 1,761
Interest income (33) (10)
Other (198) (121)
--------- ---------
Other (income) expenses, net 1,255 1,630
--------- ---------
Earnings before income taxes 4,461 6,906
Income taxes 1,890 2,920
--------- ---------
Net earnings $ 2,571 $ 3,986
========= =========
Net earnings per common and equivalent share $ .10 $ .16
========= =========
Shares used in per share calculations 25,409 25,375
========= =========
See accompanying notes to condensed consolidated financial statements.
Page 3
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated statements of cash flows
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
---------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,571 $ 3,986
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation and amortization 8,251 8,062
Deferred income taxes 1,810 1,090
Provision for losses on accounts receivable 60 60
Amortization of deferred compensation 14 11
Change in assets and liabilities:
(Increase) decrease in accounts receivable (4,501) 2,094
(Increase) decrease in inventories and supplies (359) 240
Increase in prepaid expenses and other current assets (7,377) (3,597)
Decrease in other assets 70 54
Increase in accounts payable, accrued liabilities
and claims accruals 13,403 2,929
-------- --------
Net cash provided by operating activities 13,942 14,929
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 1,744 10,022
Capital expenditures (35,246) (24,159)
Payments received on contracts receivable 104 57
-------- --------
Net cash used in investing activities (33,398) (14,080)
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 4
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated statements of cash flows (continued)
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
----------- ------------
<S> <C> <C>
Cash flows from financing activities:
Repayments of long-term debt $ (5,445) $ (5,592)
Increase in borrowings under revolving
line of credit 8,500 2,750
Increase in long-term debt 15,026 --
Proceeds from issuance of common stock 14 45
Purchase of treasury stock -- (1,207)
-------- --------
Net cash provided by (used in)
financing activities 18,095 (4,004)
-------- --------
Net decrease in cash (1,361) (3,155)
Cash at beginning of period 2,627 4,033
-------- --------
Cash at end of period $ 1,266 $ 878
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,407 $ 1,734
Income taxes $ 5 $ 2,362
======== ========
Supplemental schedule of noncash investing and financing activities:
Equipment sales contracts receivable $ 3,159 $ 2,146
Direct financing for purchase of equipment $ -- $ 20,225
Treasury stock purchase transaction settled in April 1995 $ -- $ 386
======== ========
</TABLE>
Page 5
<PAGE>
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 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. It is suggested that these condensed consolidated
financial statements and notes thereto 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, 1995. 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.
Page 6
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
- --------
The trend in the truckload segment of the motor carrier industry over the past
several years has been towards shippers' use of a relatively small number of
financially stable "core carriers". This trend has resulted in consolidation of
the truckload industry. However, the truckload industry remains highly
fragmented. Management believes that this industry trend towards core carriers
will continue and will result in continued industry consolidation. In response
to this trend, the Company has expanded its fleet to 4,077 tractors as of March
31, 1996 from 3,696 tractors as of March 31, 1995. This net fleet growth was
accomplished through internal growth including expansion of the Company's owner
operator fleet from 311 as of March 31, 1995 to 574 as of March 31, 1996.
Results of Operations
- ---------------------
Operating revenue increased $17.8 million to $124.5 million or 16.7% for the
three months ended March 31, 1996 from $106.7 million for the corresponding
period of 1995. The increase in operating revenue is primarily the result of the
expansion of the Company's fleet.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) for the first quarter of 1996 was 95.4% compared to 92.0% in
the comparable period in 1995. The Company's operating revenue and operating
ratio in 1996 was impacted by overall soft shipper demand, harsh winter
conditions and an increase in fuel costs. The soft shipper demand resulted in
lower equipment utilization and a slightly lower revenue per mile. The Company's
empty mile factor was 13.8% and 14.1% and average linehaul revenue per mile was
$1.27 and $1.28 for the first quarter of 1995 and 1994, respectively. The
Company believes that the soft shipper demand will continue to impact the
Company's results of operations through the second quarter of 1996. The Company
will continue to acquire revenue equipment as replacement equipment under its
three year replacement program. Significant differences in the components of
operating expenses as a percentage of operating revenue are explained below.
Salaries, wages and employee benefits represented 37.3% of operating revenue for
the three months ended March 31, 1996 compared with 37.1% for the first quarter
of 1995. From time to time 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 freight rate increases were not obtained.
Page 7
<PAGE>
Fuel and fuel taxes were 14.2% of operating revenue in the first quarter of 1996
versus 14.3% for the first quarter of 1995. Fuel expense as a percent of revenue
adjusted for owner operator revenue for which the owners bear the fuel expense
was approximately 16.0% and 15.4% for the first quarters of 1996 and 1995,
respectively. In the latter part of the first quarter of 1996, fuel costs
increased and overall prices at March 31, 1996 were approximately 8 cents per
gallon higher than at March 31, 1995. Also, fuel consumption in 1996 was higher
than in 1995 due to increased idle time as a result of the harsh winter
conditions in 1996.
Fuel costs have continued to increase and on April 11, 1996 the Company
implemented a fuel surcharge program to pass on to its customers the incremental
fuel cost increases. There can be no assurance, however, that the fuel surcharge
program will successfully pass on to its customers the increase in fuel prices.
Increases in fuel costs (including fuel taxes), 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.
Therefore, the Company does not use derivative-type hedging products.
Purchased transportation as a percentage of operating revenue was 11.9% for the
first quarter of 1996 versus 7.0% during the first quarter of 1995. The increase
is due to the growth of the Owner operator fleet to 574 at March 31, 1996 from
311 as of March 31, 1995.
Rental expense represented 6.5% and 6.3% of operating revenue for the quarters
ended March 31, 1996 and 1995, respectively. Leased tractors at March 31, 1996
and 1995 represented approximately 45% of the total Company fleet (exclusive of
owner operators). The Company's decision to buy or lease new and replacement
revenue equipment is based upon the overall economic impact of the alternative
financing methods, including market prices available and income tax
considerations. 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 the activities are recorded as a
reduction of rent expense. During the first quarter of 1996 such gains were
$167,000.
Depreciation and amortization expense decreased as a percentage of operating
revenue to 6.6% in the first quarter of 1996 from 7.6% in the corresponding
period of 1995. The decrease in depreciation and amortization as a percent of
operating revenue is due to the expansion of the owner operator fleet. The
Company includes gains and losses from the sale of revenue equipment in
depreciation and amortization expense. During the three month period ended March
31, 1996 net gains from the sale of revenue equipment totalled $262,000 as
compared to $499,000 in the corresponding period of 1995.
Page 8
<PAGE>
The Company has decided to replace substantially all of its fleet of double van
trailers with 13'-6" high 53 foot trailers to be used in the Eastern United
States and 14 foot high 53 foot trailers to be used in the Western United
States. Management believes that this conversion to a standardized fleet of 53
foot trailers will provide cost reductions such as lower licensing costs,
simplified driver training and increased equipment utilization. The conversion
to a standarized fleet of 53 foot trailers will result in the sale of
substantially all of the Company's fleet of double van trailers. While the
Company believes that the market value of its double van trailer fleet is
currently greater than the book value, there can be no assurance the market
value of such equipment will not decline or that the sale of such equipment will
result in gains. The sale of the Company's double van trailer fleet may result
in significant fluctuations in the amount of gains or losses recorded in any
given quarter. The amount of such gains or losses recorded in a particular
quarter will be dependent upon the quantity of trailers sold and the prevailing
market prices for used trailering equipment.
Insurance and claims expense represented 3.6% and 3.7% of operating revenue in
the first quarter of 1996 and 1995, 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 the 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.
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 result of operations
unless freight rates could be increased correspondingly. However, the effect of
inflation has been minimal over the past three years.
Liquidity and Capital Resources
- -------------------------------
The growth in the Company's business has required 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 revolving line of credit, the use of
operating leases to finance the acquisition of revenue equipment and from public
offerings of common stock.
Net cash provided by operating activities was $13.9 million in the first quarter
of 1996 compared to $14.9 million in the first quarter of 1995. The decrease is
due primarily to increases in accounts receivable and prepaid expenses offset by
increases in accounts payable, accrued liabilities and claims accruals.
Page 9
<PAGE>
Accounts receivable increased to $63.5 million at March 31, 1996 from $56.5
million at December 31, 1995. The increase is primarily due to a $3.5 million
increase in revenues from fourth quarter 1995 to first quarter 1996 and to
increases in receivables from equipment manufacturers of $2.6 million.
Prepaid expenses increased by $7.4 million from December 31, 1995 to March 31,
1996. The increase is due primarily to significant annual license fees which are
prepaid in the first quarter of each year and amortized through the balance of
the calendar year.
Cash used in investing activities increased to $33.4 million in the first
quarter of 1996 from $14.1 million in the corresponding quarter of 1995. This
increase was the result of increased capital expenditures, net of proceeds from
the sale of property and equipment.
Revenue and service equipment increased to $281.3 million at March 31, 1996 from
$259.4 million at December 31, 1995 primarily due to the expansion of the
Company's fleet of owned tractors from 1,839 at December 31, 1995 to 1,918 at
March 31, 1996 and the purchase of approximately 790 trailers in the first
quarter of 1996. As described above, the Company is replacing its double-van
trailer configurations with 53 foot vans.
As of March 31, 1996, the Company had commitments outstanding to acquire
replacement and additional revenue equipment for approximately $130 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 quarter of 1996, the Company incurred approximately $7.5
million of non-revenue equipment capital expenditures. These expenditures were
primarily for the completion of the construction of the Company's terminal
facility in Edwardsville, Kansas and for continued construction of the Company's
new headquarters facility in Phoenix, Arizona.
The Company anticipates that it will expend approximately $25.0 million during
1996 to complete construction of the Company's new headquarters facility in
Phoenix, Arizona, the Edwardsville terminal facility, the various terminal
facility upgrades, and certain capital requirements relating to a new trailer
configuration designed for railroad intermodal services. 1996 expenditures could
exceed this estimate if construction plans change for the new headquarters
facilities or if additional facilities are required to support the Company's
continued growth.
The funding for these capital expenditures will be from a combination of cash
provided by operating activities, long-term debt including $15 million borrowed
to finance the new Phoenix headquarters facility, amounts available under the
Company's $36 million revolving line of credit and lease financing.
Page 10
<PAGE>
Net cash provided by financing activities amounted to $18.1 million in the first
quarter of 1996 compared to net cash used in financing activities of $4.0
million in the first quarter of 1995. The increase in cash provided by financing
activities is due to increases in borrowings under revolving line of credit and
long-term debt.
The Company believes that it will be able to finance its needs for working
capital and facilities improvements and expansion as well as anticipated fleet
growth through cash flows from future operations, borrowings available under its
revolving line of credit and through long-term debt and operating lease
financing believed to be available to finance revenue equipment acquisitions.
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.
Seasonality
In the transportation industry, results of operations generally show a seasonal
pattern as customers reduce shipments during and after the winter holiday
season. The Company's operating expenses also tend to be higher in the winter
months primarily due to increased operating costs in colder weather and higher
fuel consumption due to increased idle time.
Page 11
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
No reportable events or material changes occurred
during the quarter for which this report is filed.
Items 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 (see attached)
(b) No reports on Form 8-K have been filed
during the quarter for which this report is
filed.
Page 12
<PAGE>
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, 1996
/s/ William F. Riley III
------------------------
(Signature)
William F. Riley III
Chief Financial Officer
Page 13
EXHIBIT 11
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Schedule of Computation of Net Earnings Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
---------- ------------
<S> <C> <C>
Net earnings $ 2,571 $ 3,986
======= =======
Weighted average shares:
Common shares outstanding 24,658 24,462
Common equivalent shares issuable upon
exercise of employee stock options (1) 751 913
------- -------
Total weighted average shares - primary 25,409 25,375
Incremental common equivalent shares (calculated
using the higher of the end of period or average
fair market value (2) -- --
------- -------
Total weighted average shares - fully diluted 25,409 25,375
======= =======
Primary net earnings per common and equivalent share $ .10 $ .16
======= =======
Fully diluted net earnings per common and equivalent share $ .10 $ .16
======= =======
</TABLE>
Notes:
(1) Amount calculated using the treasury stock method and average fair
market values.
(2) The calculation is submitted in accordance with Regulation S-K Item
601(b) (11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS AS OF MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH STATEMENTS
</LEGEND>
<CIK> 0000863557
<NAME> SWIFT TRANSPORTAION CO., INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,266
<SECURITIES> 0
<RECEIVABLES> 63,497
<ALLOWANCES> 0
<INVENTORY> 3,582
<CURRENT-ASSETS> 81,046
<PP&E> 344,956
<DEPRECIATION> 89,226
<TOTAL-ASSETS> 346,311
<CURRENT-LIABILITIES> 74,231
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 137,409
<TOTAL-LIABILITY-AND-EQUITY> 346,311
<SALES> 124,524
<TOTAL-REVENUES> 124,524
<CGS> 0
<TOTAL-COSTS> 118,808
<OTHER-EXPENSES> (231)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,486
<INCOME-PRETAX> 4,461
<INCOME-TAX> 1,890
<INCOME-CONTINUING> 2,571
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,571
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
