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 June 30, 1997
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (August 7, 1997)
Common stock, $.001 par value: 28,246,236 shares
Exhibit Index at page 17
Total pages 21
<PAGE>
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Condensed consolidated balance sheets
as of June 30, 1997 (unaudited) and
December 31, 1996 3 - 4
Condensed consolidated statements of
earnings (unaudited) for the three and six month
periods ended June 30, 1997 and 1996 5
Condensed consolidated statements of cash
flows (unaudited) for the six month
periods ended June 30, 1997 and 1996 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 - 16
PART II
OTHER INFORMATION
Items 1, 2,
3 and 5. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
2
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated balance sheets
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Assets
-------
Current assets:
Cash $ 854 $ 1,210
Accounts receivable, net 92,819 77,918
Equipment sales receivables 4,854 362
Inventories and supplies 3,318 3,997
Prepaid taxes, licenses and insurance 10,195 3,274
Assets held for sale 5,458 5,453
Deferred tax asset 5,099 3,690
-------- --------
Total current assets 122,597 95,904
-------- --------
Property and equipment, at cost:
Revenue and service equipment 347,952 297,744
Land 7,351 7,351
Facilities and improvements 57,133 53,109
Furniture and office equipment 13,534 12,242
-------- --------
Total property and equipment 425,970 370,446
Less accumulated depreciation and amortization 100,602 95,597
-------- --------
Net property and equipment 325,368 274,849
Other assets 2,032 417
Goodwill 9,057 9,435
-------- --------
$459,054 $380,605
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated balance sheets (continued)
(dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 20,686 $ 16,779
Accrued liabilities 27,660 17,202
Claims accruals 15,606 14,668
Current portion of long-term debt 7,143 10,317
-------- --------
Total current liabilities 71,095 58,966
-------- --------
Borrowings under line of credit 61,500 16,500
Long-term debt, less current portion 20,224 23,784
Claims accruals 19,731 16,689
Deferred income taxes 41,437 38,000
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
28,460,936 and 28,134,684 shares at
June 30, 1997 and December 31, 1996, respectively 28 28
Additional paid-in capital 111,913 110,291
Retained earnings 136,542 119,763
-------- --------
248,483 230,082
Less treasury stock, at cost (220,700 shares) 3,416 3,416
-------- --------
Net stockholders' equity 245,067 226,666
-------- --------
Commitments and contingencies
-------- --------
$459,054 $380,605
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated statements of earnings
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenue $ 180,855 $ 137,210 $ 336,929 $ 261,734
Operating expenses:
Salaries, wages and employee
benefits 63,760 49,037 119,042 95,532
Operating supplies and expenses 14,861 12,035 29,140 24,255
Fuel and fuel taxes 23,098 18,607 45,466 36,330
Purchased transportation 23,239 16,713 43,585 31,570
Rental expense 11,839 6,427 23,389 14,493
Insurance and claims 6,079 4,945 11,143 9,470
Depreciation and amortization 9,383 8,608 17,889 16,859
Communication and utilities 2,674 1,973 5,067 3,952
Operating taxes and licenses 6,943 4,904 12,115 9,596
--------- --------- --------- ---------
Total operating expenses 161,876 123,249 306,836 242,057
--------- --------- --------- ---------
Operating income 18,979 13,961 30,093 19,677
--------- --------- --------- ---------
Other (income) expenses:
Interest expense 1,326 1,953 2,139 3,439
Interest income (20) (6) (85) (39)
Other (63) (83) (170) (281)
--------- --------- --------- ---------
Other (income) expenses, net 1,243 1,864 1,884 3,119
--------- --------- --------- ---------
Earnings before income taxes 17,736 12,097 28,209 16,558
Income taxes 7,180 5,325 11,430 7,215
--------- --------- --------- ---------
Net earnings $ 10,556 $ 6,772 $ 16,779 $ 9,343
========= ========= ========= =========
Net earnings per common and
equivalent share $ .37 $ .27 $ .58 $ .37
========= ========= ========= =========
Shares used in per share
calculations 28,817 25,495 28,736 25,452
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated statements of cash flows
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months
ended June 30,
1997 1996
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 16,779 $ 9,343
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 17,960 16,859
Deferred income taxes 2,028 1,665
Provision for losses on accounts receivable 164 120
Amortization of deferred compensation 55 37
Change in assets and liabilities:
Increase in accounts receivable (15,065) (9,680)
(Increase) decrease in inventories and supplies 679 (1,108)
Increase in prepaid expenses (6,741) (4,594)
Increase in other assets (700) (9)
Increase in accounts payable, accrued liabilities
and claims accruals 18,345 20,670
-------- --------
Net cash provided by operating activities 33,504 33,303
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 10,391 10,419
Capital expenditures (80,737) (61,680)
Cash expended for purchase of DTI assets (3,749)
Payments received on contracts receivable 402 107
-------- --------
Net cash used in investing activities (73,693) (51,154)
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated statements of cash flows (continued)
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months
ended June 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Repayments of long-term debt $ (6,734) $(12,699)
Proceeds from issuance of long-term debt 15,026
Increase in borrowings under
line of credit 45,000 15,500
Proceeds from issuance of common stock
under stock option and stock purchase plans 1,567 977
-------- --------
Net cash provided by
financing activities 39,833 18,804
-------- --------
Net increase (decrease) in cash (356) 953
Cash at beginning of period 1,210 2,627
-------- --------
Cash at end of period $ 854 $ 3,580
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,838 $ 3,070
Income taxes $ 9,243 $ 3,608
Supplemental schedule of noncash investing and
financing activities:
Equipment sales receivables $ 4,866 $ 7,133
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<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. 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, 1996. 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. Line of Credit
On January 17, 1997, the Company entered into an agreement with
four major banks for an unsecured line of credit with maximum
borrowings of $110 million which matures on January 16, 2001 (the
Credit Agreement). Interest on outstanding borrowings is based
upon one of two options which the Company selects at the time of
borrowing: the bank's prime rate or the London Interbank Offered
Rate (LIBOR) plus applicable margins, as defined in the Credit
Agreement. The unused portion of the line of credit is subject to
a commitment fee. The Credit Agreement includes financing for
letters of credit. The Credit Agreement requires the Company to
meet certain covenants with respect to debt to equity and debt
coverage ratios. The Credit agreement also requires the Company to
maintain unencumbered assets of not less than 120% of unsecured
indebtedness (as defined).
8
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Notes to condensed consolidated financial statements
(unaudited)
Note 4. Acquisition
On April 8, 1997, the Company completed its acquisition of certain
assets of Direct Transit, Inc. ("DTI"), a Debtor- In- Possession
in United States Bankruptcy Court. DTI was a dry van carrier based
in North Sioux City, South Dakota and operated predominantly in
the eastern two-thirds of the United States. Swift acquired
inventory, furniture and office equipment, computer equipment and
miscellaneous assets from DTI for $2.7 million. Also, Swift paid
$1 million to the principal shareholder of DTI in exchange for a
covenant not to compete. Separately, Swift acquired 565 tractors
and 1,622 trailers from various lessors. Certain of the revenue
equipment was purchased for $31 million and new lease agreements
were negotiated on $11 million of revenue equipment. The Company
used working capital and borrowings under its existing line of
credit to acquire the assets described above and for payments
under the covenant not to compete.
9
<PAGE>
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 towards 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 fleet with 5,624 tractors as of June 30, 1997 compared to 4,362
tractors as of June 30, 1996. This net fleet growth was accomplished through a
combination of internal growth and acquisitions. In September 1996, the
acquisition of substantially all of the operating assets utilized in the dry
freight van division of Navajo Shippers, Inc., and two of its wholly-owned
subsidiaries, Digby Leasing and Digby-Ringsby Truck Line, Inc. (collectively,
"Navajo Shippers") added 287 tractors including 30 owner operators. In April
1997, 565 tractors were acquired from various lessors of DTI. The owner operator
portion of the Company's fleet increased to 798 as of June 30, 1997 from 612 as
of June 30, 1996.
10
<PAGE>
Results of Operations
Three Months Ended June 30, 1997 compared to Three Months ended June 30, 1996
- -----------------------------------------------------------------------------
Operating revenue increased $43.6 million or 31.8% to $180.9 million for the
three months ended June 30, 1997 from $137.2 million for the corresponding
period of 1996. The increase in operating revenue is primarily the result of the
expansion of the Company's fleet, including the DTI revenue equipment beginning
in April 1997, and rate increases.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) for the second quarter of 1997 was 89.5% compared to 89.9% in
the comparable period of 1996. The Company's operating revenue and operating
ratio for the three months ended June 30, 1997 improved as a result of improved
shipper demand. The Company's empty mile factor for linehaul operations was
14.4% and 14.3% and average loaded linehaul revenue per mile was $1.31 and $1.28
in the second quarter of 1997 and 1996, respectively. Significant differences in
the components of operating expenses as a percentage of operating revenue are
explained below.
Salaries, wages and employee benefits represented 35.3% of operating revenue for
the three months ended June 30, 1997 compared with 35.7% in 1996. The decrease
is due primarily to expansion of the Company's owner operator fleet (see
discussion of purchased transportation below) offset in part by driver retention
bonuses.
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 12.8% for the second quarter of
1997 versus 13.6% in 1996. The decrease is due primarily to an increase in the
number of owner operators who are responsible for their own fuel.
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 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 12.8% for the
three months ended June 30, 1997 compared to 12.2% in 1996. The increase is due
to the growth of the owner operator fleet to 798 as of June 30, 1997 from 612 as
of June 30, 1996.
Rental expense as a percentage of operating revenue was 6.5% for the second
quarter of 1997 versus 4.7% in 1996. At June 30, 1997 and 1996, leased tractors
represented 60% 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
11
<PAGE>
in the lease. Gains on these activities are recorded as a reduction of rent
expense. The Company recorded no gain during the second quarter of 1997 and $1.7
million in 1996 from the sale of leased tractors.
Depreciation and amortization expense as a percentage of operating revenue was
5.2% in the second quarter of 1997 versus 6.3% in 1996. The Company includes
gains and losses from the sale of owned revenue equipment in depreciation and
amortization expense. During the three month period ended June 30, 1997, net
gains from the sale of revenue equipment reduced depreciation and amortization
expense by approximately $930,000 compared to approximately $440,000 in the
second quarter of 1996. Exclusive of gains, which reduced depreciation and
amortization expense, the percentage in the second quarter of 1997 and 1996 to
operating revenue was 5.7% and 6.6%, respectively. The decrease in 1997 is due
to expansion of the owner operator fleet and the increase in the percentage of
leased equipment versus owned equipment as discussed above.
The Company continues 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' high 53 foot trailers to be used in the Western United States. As
of June 30, 1997, the Company has replaced approximately 60% of the double van
trailer fleet. As previously disclosed, management believes that this conversion
to a standardized fleet of 53' trailers will provide cost reductions such as
lower licensing costs, simplified driver training and increased equipment
utilization. The conversion to a standardized fleet of 53' 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 3.4% and 3.6% of operating revenue in
the second quarter of 1997 and 1996, 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.
Interest expense declined to $1.3 million in the second quarter of 1997 from
$2.0 million in 1996. This decline is due to a lower debt level which resulted
from utilizing the proceeds of the December 1996 common stock offering to reduce
outstanding debt and a lower effective borrowing rate.
12
<PAGE>
Six Months Ended June 30, 1997 compared to Six Months ended June 30, 1996
- -------------------------------------------------------------------------
Operating revenue increased $75.2 million or 28.7% to $336.9 million for the six
months ended June 30, 1997 from $261.7 million for the corresponding period of
1996. The increase in operating revenue is primarily the result of the expansion
of the Company's fleet and rate increases.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) for the first six months of 1997 was 91.1% compared to 92.5%
in the comparable period of 1996. The Company's operating revenue and operating
ratio for the six months ended June 30, 1997 improved as a result of improved
shipper demand. The Company's empty mile factor for linehaul operations was
14.3% and 14.1% and average loaded linehaul revenue per mile was $1.31 and $1.28
in the first six months of 1997 and 1996, respectively. Significant differences
in the components of operating expenses as a percentage of operating revenue are
explained below.
Salaries, wages and employee benefits represented 35.3% of operating revenue for
the six months ended June 30, 1997 compared with 36.5% in 1996. The decrease is
due primarily to expansion of the Company's owner operator fleet (see discussion
of purchased transportation below) offset in part by driver retention bonuses.
Fuel as a percentage of operating revenue was 13.5% for the first six months of
1997 versus 13.9% in 1996. Although the Company experienced an increase in fuel
costs during the first six months of 1997, such increase was largely offset by
an increase in the number of owner operators who are responsible for their own
fuel and by fuel surcharges. Actual fuel cost per gallon increased by
approximately one cent per gallon in the first six months of 1997 versus the
first six months of 1996.
Purchased transportation as a percentage of operating revenue was 12.9% for the
six months ended June 30, 1997 compared to 12.1% in 1996. The increase is due to
the growth of the owner operator fleet to 798 as of June 30, 1997 from 612 as of
June 30, 1996.
Rental expense as a percentage of operating revenue was 6.9% for the first six
months of 1997 versus 5.5% in 1996. At June 30, 1997 and 1996, leased tractors
represented 60% 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 no gain during the first six months of 1997
and $1.8 million in 1996 from the sale of leased tractors.
Depreciation and amortization expense as a percentage of operating revenue was
5.3% in the first six months of 1997 versus 6.4% in 1996. The Company includes
gains and losses from the sale of owned revenue equipment in depreciation and
amortization expense. During the six month period ended June 30, 1997, net gains
from the sale of revenue equipment reduced depreciation
13
<PAGE>
and amortization expense by approximately $1.8 million compared to approximately
$690,000 in the first six months of 1996. Exclusive of gains, which reduced
depreciation and amortization expense, the percentage in the first six months of
1997 and 1996 to operating revenue was 5.8% and 6.7 %, respectively. The
decrease in 1997 is due to expansion of the owner operator fleet and the
increase in the percentage of leased equipment versus owned equipment as
discussed above.
Insurance and claims expense represented 3.3% and 3.6% of operating revenue in
the first six months of 1997 and 1996, 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.
Interest expense declined to $2.1 million in the first six months of 1997 from
$3.4 million in 1996. This decline is due to a lower debt level which resulted
from utilizing the proceeds of the December 1996 common stock offering to reduce
outstanding debt and a lower effective borrowing rate.
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, 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 $33.5 million in the first six
months of 1997 compared to $33.3 million in 1996. The increase is primarily
attributable to an increase in net earnings offset by an increase in accounts
receivable and prepaid expenses and a smaller increase in accounts payable,
accrued liabilities and claims accruals.
Prepaid expenses increased by $6.9 million from December 31, 1996 to June 30,
1997. The increase is primarily due to significant annual license fees which are
prepaid in the first quarter of each year and amortized over the remainder of
the year.
Net cash used in investing activities increased to $73.7 million in the first
six months of 1997 from $51.2 million in 1996. The increase is due primarily to
greater capital expenditures primarily for revenue equipment including $35
million for the purchase of certain assets from DTI and its lessors offset in
part by capital expenditures in 1996 to complete construction of the Company's
new corporate facilities.
14
<PAGE>
As of June 30, 1997, 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 six months of 1997, the Company incurred approximately $4.8
million of non-revenue equipment capital expenditures. These expenditures were
primarily for facilities and equipment.
The Company anticipates that it will expend approximately $15 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 will be from a combination of
cash provided by operating activities, amounts available under the Company's
line of credit 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 $39.8 million in the first
six months of 1997 compared to $18.8 million in 1996. This increase is primarily
due to borrowings including those to affect the purchase of certain assets from
DTI and its lessors.
On January 17, 1997, the Company entered into an agreement with four major banks
for an unsecured line of credit with maximum borrowings of $110 million which
matures on January 16, 2001 (the Credit Agreement). Interest on outstanding
borrowings is based upon one of two options which the Company selects at the
time of borrowing: the bank's prime rate or the London Interbank Offered Rate
(LIBOR) plus applicable margins, as defined in the Credit Agreement. The unused
portion of the line of credit is subject to a commitment fee. The Credit
Agreement includes financing for letters of credit.
Management believes it will be able to finance its needs for working capital,
facilities improvements and expansion, as well as anticipated fleet growth
through a combination of revenue equipment purchases and strategic acquisitions,
as opportunities become available, with cash flows from future operations,
borrowings available under the line of credit 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.
15
<PAGE>
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.
16
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
PART II OTHER INFORMATION
Items 1, 2, 3 and 5. Not applicable
Item 4: Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held
on May 22, 1997. At the Annual Meeting, the
stockholders elected Earl H. Scudder Jr. and Rodney
K. Sartor to serve as Directors for three-year terms.
Jerry C. Moyes, William F. Riley, Lou A. Edwards and
Alphonse E. Frei continued as Directors after the
meeting. Robert Cunningham did not continue as a
Dirctor because he resigned in May 1997.
Additionally, the stockholders approved an amendment
to the Stock Option Plan to increase the number of
shares authorized for issuance thereunder from
2,300,000 to 2,550,000.
Stockholders representing 25,623,928 shares or 91.6%
were present in person or by proxy at the Annual
Meeting. There were no broker non-votes on these
proposals. A tabulation with respect to each nominee
and the Stock Option amendment is as follows:
<TABLE>
<CAPTION>
Votes
Votes Votes Against or
Cast For Withheld
<S> <C> <C> <C>
Earl H. Scudder, Jr. 25,623,928 25,066,286 557,642
Rodney K. Sartor 25,623,928 25,286,540 337,388
Amendment to Stock
Option Plan 25,623,928 20,535,387 5,088,541
</TABLE>
Item 6. Exhibits and reports on Form 8-K
(a) 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) A Form 8-K was filed on April 23, 1997,
pertaining to the acquisition of certain
assets from Direct Transit, Inc. and certain
of its lessors.
17
<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: August 11, 1997 /s/ William F. Riley III
-----------------------------------
(Signature)
William F. Riley III
Chief Financial Officer
18
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 Six months
ended June 30, ended June 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings $10,556 $ 6,772 $16,779 $ 9,343
======= ======= ======= =======
Weighted average shares:
Common shares outstanding 28,201 24,810 28,074 24,734
Common equivalent shares issuable
upon exercise of employee stock
options (1) 616 685 662 718
------- ------- ------- -------
Total weighted average shares
- primary 28,817 25,495 28,736 25,452
Incremental common equivalent
shares (calculated using the higher
of the end of period or average
fair market value (2) 9 10 14
------- ------- ------- -------
Total weighted average shares -
fully diluted 28,817 25,504 28,746 25,466
======= ======= ======= =======
Net earnings per common
and equivalent share $ .37 $ .27 $ .58 $ .37
======= ======= ======= =======
Net earnings per common share -
assuming full dilution $ .37 $ .27 $ .58 $ .37
======= ======= ======= =======
</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%.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS AS OF June 30,1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS
</LEGEND>
<CIK> 0000863557
<NAME> SWIFT TRANSPORTATION CO., INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 854
<SECURITIES> 0
<RECEIVABLES> 97,673
<ALLOWANCES> 0
<INVENTORY> 3,318
<CURRENT-ASSETS> 122,597
<PP&E> 425,970
<DEPRECIATION> 100,602
<TOTAL-ASSETS> 459,054
<CURRENT-LIABILITIES> 71,095
<BONDS> 0
0
0
<COMMON> 28
<OTHER-SE> 245,039
<TOTAL-LIABILITY-AND-EQUITY> 459,054
<SALES> 336,929
<TOTAL-REVENUES> 336,929
<CGS> 0
<TOTAL-COSTS> 306,836
<OTHER-EXPENSES> (255)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,139
<INCOME-PRETAX> 28,209
<INCOME-TAX> 11,430
<INCOME-CONTINUING> 16,779
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,779
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
EXHIBIT 99
Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
In passing the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"), Congress encouraged public companies to make "forward-looking
statements"1 by creating a safe-harbor to protect companies from securities law
liability in connection with forward-looking statements. Swift Transportation
Co., Inc. ("Swift") intends to qualify both its written and oral forward-looking
statements for protection under the PSLRA.
To qualify oral forward-looking statements for protection under the PSLRA,
a readily available written document must identify important factors that could
cause actual results to differ materially from those in the forward-looking
statements. Swift provides the following information in connection with its
continuing effort to qualify forward-looking statements for the safe harbor
protection of the PSLRA.
Important factors currently known to management that could cause actual
results to differ materially from those in forward-looking statements include,
but are not limited to, the following: (i) excess capacity in the trucking
industry; (ii) significant increases or rapid fluctuations in fuel prices,
interest rates, fuel taxes, tolls, license and registration fees and insurance
premiums, to the extent not offset by increases in freight rates or fuel
surcharges; (iii) difficulty in attracting and retaining qualified drivers and
owner operators, especially in light of the current shortage of qualified
drivers and owner operators; (iv) recessionary economic cycles and downturns in
customers' business cycles, particularly in market segments and industries (such
as retail and paper products) in which the Company has a significant
concentration of customers; (v) seasonal factors such as harsh weather
conditions that increase operating costs; (vi) increases in driver compensation
to the extent not offset by increases in freight rates; (vii) gains or losses
resulting from sales of the Company's double van trailer fleet; (viii) the
inability of the Company to continue to secure acceptable financing
arrangements; (ix) the successful assimilation of the assets acquired from
Direct Transit, Inc. and lessors of Direct Transit, Inc. into the Company's
operations; (x) the ability of the Company to continue to identify acquisition
candidates that will result in successful combinations; (xi) an unanticipated
increase in the number of claims for which the Company is self insured; and
(xii) a significant reduction in or termination of the Company's trucking
services by a key customer.
Forward-looking statements express expectations of future events. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to these
inherent uncertainties, the investment community is urged not to place undue
reliance on forward-looking statements. In addition, Swift undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to projections
over time.
- --------
1 "Forward-looking statements" can be identified by use of words
such as "expect," "believe," "estimate," "project," "forecast,"
"anticipate," "plan," and similar expressions.
21
