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 September 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 (November 5, 1997)
Common stock, $.001 par value: 28,248,236 shares
Exhibit Index at page 17
Total pages 20
<PAGE>
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Condensed consolidated balance sheets
as of September 30, 1997 (unaudited) and
December 31, 1996 3 - 4
Condensed consolidated statements of
earnings (unaudited) for the three and nine month
periods ended September 30, 1997 and 1996 5
Condensed consolidated statements of cash
flows (unaudited) for the nine month
periods ended September 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, 4 and 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K 17
2
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated balance sheets
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
(unaudited)
<S> <C> <C>
Assets
------
Current assets:
Cash $ 10,087 $ 1,210
Accounts receivable, net 94,573 77,918
Equipment sales receivables 5,324 362
Inventories and supplies 3,580 3,997
Prepaid taxes, licenses and insurance 7,121 3,274
Assets held for sale 5,468 5,453
Deferred tax asset 6,190 3,690
-------- --------
Total current assets 132,343 95,904
-------- --------
Property and equipment, at cost:
Revenue and service equipment 349,808 297,744
Land 7,520 7,351
Facilities and improvements 59,010 53,109
Furniture and office equipment 13,419 12,242
-------- --------
Total property and equipment 429,757 370,446
Less accumulated depreciation and amortization 105,202 95,597
-------- --------
Net property and equipment 324,555 274,849
Other assets 1,977 417
Goodwill 8,868 9,435
-------- --------
$467,743 $380,605
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed consolidated balance sheets (continued)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 17,226 $ 16,779
Accrued liabilities 31,145 17,202
Claims accruals 14,550 14,668
Current portion of long-term debt 7,147 10,317
-------- --------
Total current liabilities 70,068 58,966
-------- --------
Borrowings under line of credit 57,500 16,500
Long-term debt, less current portion 18,444 23,784
Claims accruals 19,586 16,689
Deferred income taxes 44,100 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
28,468,436 and 28,134,684 shares at
September 30, 1997 and December 31, 1996 28 28
Additional paid-in capital 112,026 110,291
Retained earnings 149,407 119,763
-------- --------
261,461 230,082
Less treasury stock, at cost (220,700 shares) 3,416 3,416
-------- --------
Net stockholders' equity 258,045 226,666
-------- --------
Commitments and contingencies
$467,743 $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 Nine months
ended September 30, ended September 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenue $ 188,071 $ 146,739 $ 524,999 $ 408,473
Operating expenses:
Salaries, wages and employee
benefits 64,677 49,539 183,718 145,071
Operating supplies and expenses 17,652 13,575 46,807 37,830
Fuel and fuel taxes 22,118 18,846 67,584 55,176
Purchased transportation 25,638 18,968 69,224 50,538
Rental expense 11,809 7,295 35,198 21,788
Insurance and claims 4,721 5,416 15,863 14,886
Depreciation and amortization 9,858 8,680 27,748 25,539
Communication and utilities 2,848 2,100 7,915 6,052
Operating taxes and licenses 5,921 4,592 18,036 14,188
--------- --------- --------- ---------
Total operating expenses 165,242 129,011 472,093 371,068
--------- --------- --------- ---------
Operating income 22,829 17,728 52,906 37,405
--------- --------- --------- ---------
Other (income) expenses:
Interest expense 1,330 1,830 3,470 5,269
Interest income (52) (9) (138) (48)
Other (101) (119) (271) (400)
--------- --------- --------- ---------
Other (income) expenses, net 1,177 1,702 3,061 4,821
--------- --------- --------- ---------
Earnings before income taxes 21,652 16,026 49,845 32,584
Income taxes 8,770 6,575 20,200 13,790
--------- --------- --------- ---------
Net earnings $ 12,882 $ 9,451 $ 29,645 $ 18,794
========= ========= ========= =========
Net earnings per common and
equivalent share $ .45 $ .37 $ 1.03 $ .74
========= ========= ========= =========
Shares used in per share
calculations 28,843 25,556 28,773 25,488
========= ========= ========= =========
</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>
Nine months
ended September 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 29,645 $ 18,794
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 27,815 25,539
Deferred income taxes 3,600 (1,260)
Provision for losses on accounts receivable 180 180
Amortization of deferred compensation 90 18
Change in assets and liabilities:
Increase in accounts receivable (16,835) (16,862)
(Increase) decrease in inventories and supplies 417 (1,871)
Increase in prepaid expenses (3,667) (1,777)
Increase in other assets (689) (424)
Increase in accounts payable, accrued liabilities
and claims accruals 17,169 30,147
-------- --------
Net cash provided by operating activities 57,725 52,484
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 17,727 22,994
Capital expenditures (97,351) (93,979)
Cash expended for purchase of DTI assets (1997)
and Navajo Shippers (1996) (3,749) (5,148)
Payments received on contracts receivable 390 106
-------- --------
Net cash used in investing activities (82,983) (76,027)
-------- --------
</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>
Nine months
ended September 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Repayments of long-term debt $(23,510) $(18,902)
Proceeds from issuance of long-term debt 15,026
Increase in borrowings under
line of credit 56,000 28,250
Proceeds from issuance of common stock
under stock option and stock purchase plans 1,645 1,158
-------- --------
Net cash provided by
financing activities 34,135 25,532
-------- --------
Net increase in cash 8,877 1,989
Cash at beginning of period 1,210 2,627
-------- --------
Cash at end of period $ 10,087 $ 4,616
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 3,391 $ 5,085
Income taxes $ 13,079 $ 5,150
Supplemental schedule of noncash investing and financing activities:
Equipment sales receivables $ 5,324 $ 7,608
Issuance of 90,000 shares of common stock in
connection with the purchase of Navajo Shippers $ 1,918
</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 5,790 tractors as of September 30, 1997 compared to 4,674
tractors as of September 30, 1996. This net fleet growth was accomplished
through a combination of internal growth and the acquisition in April 1997 of
565 tractors from various lessors of DTI. The owner operator portion of the
Company's fleet increased to 848 as of September 30, 1997 from 659 as of
September 30, 1996.
10
<PAGE>
Results of Operations
Three Months Ended September 30, 1997 compared to Three Months ended September
- --------------------------------------------------------------------------------
30, 1996
- --------
Operating revenue increased $41.3 million or 28.2% to $188.1 million for the
three months ended September 30, 1997 from $146.7 million for the corresponding
period of 1996. The increase in operating revenue is primarily the result of the
expansion of the Company's fleet, including the DTI revenue equipment beginning
in April 1997.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) was 87.9% for the third quarter of 1997 and 1996. The
Company's operating revenue for the three months ended September 30, 1997
improved as a result of improved shipper demand. The Company's empty mile factor
for linehaul operations was 13.1% and 13.7% and average loaded linehaul revenue
per mile was $1.30 and $1.29 in the third 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 34.4% of operating revenue for
the three months ended September 30, 1997 compared with 33.8% in 1996. The
increase is due primarily to driver pay including retention bonuses offset in
part by expansion of the Company's owner operator fleet (see discussion of
purchased transportation below).
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 11.8 % for the third quarter of
1997 versus 12.8% 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 13.6% for the
three months ended September 30, 1997 compared to 12.9% in 1996. The increase is
due to the growth of the owner operator fleet to 848 as of September 30, 1997
from 659 as of September 30, 1996.
Rental expense as a percentage of operating revenue was 6.3% for the third
quarter of 1997 versus 5.0% in 1996. This increase is partially due to an
increase in trailers under lease. At September 30, 1997 and 1996, leased
tractors represented 63% and 65%, respectively, of the total fleet of Company
tractors. When it is economically advantageous to do so, the Company will
purchase then sell
11
<PAGE>
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 third quarter of 1997 and $1.3
million in 1996 from the sale of leased tractors. Exclusive of gains, which
reduced rental expense, the percentage in the third quarter of 1997 and 1996 to
operating revenue was 6.3% and 5.9%, respectively.
Depreciation and amortization expense as a percentage of operating revenue was
5.2% in the third quarter of 1997 versus 5.9% 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 September 30, 1997,
net gains from the sale of revenue equipment reduced depreciation and
amortization expense by approximately $1.1 million compared to approximately
$770,000 in the third quarter of 1996. Exclusive of gains, which reduced
depreciation and amortization expense, the percentage in the third quarter of
1997 and 1996 to operating revenue was 5.8% and 6.4%, respectively. The decrease
in 1997 is primarily due to expansion of the owner operator fleet.
The Company continues to replace a significant portion 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 September 30, 1997, the Company has replaced approximately 50% 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 2.5% and 3.7% of operating revenue in
the third 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 third quarter of 1997 from $1.8
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>
Nine Months Ended September 30, 1997 compared to Nine Months ended September 30,
- --------------------------------------------------------------------------------
1996
- ----
Operating revenue increased $116.5 million or 28.5% to $525.0 million for the
nine months ended September 30, 1997 from $408.5 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 nine months of 1997 was 89.9% compared to 90.8%
in the comparable period of 1996. The Company's operating revenue and operating
ratio for the nine months ended September 30, 1997 improved as a result of
improved shipper demand. The Company's empty mile factor for linehaul operations
was 13.9% for both periods and average loaded linehaul revenue per mile was
$1.30 and $1.28 in the first nine 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 35.0% of operating revenue for
the nine months ended September 30, 1997 compared with 35.5% 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 12.9% for the first nine months of
1997 versus 13.5% in 1996. Although the Company experienced an increase in fuel
costs during the first nine 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.
Purchased transportation as a percentage of operating revenue was 13.2% for the
nine months ended September 30, 1997 compared to 12.4% in 1996. The increase is
due to the growth of the owner operator fleet to 848 as of September 30, 1997
from 659 as of September 30, 1996.
Rental expense as a percentage of operating revenue was 6.7% for the first nine
months of 1997 versus 5.3% in 1996. This increase is partially due to an
increase in trailers under lease. At September 30, 1997 and 1996, leased
tractors represented 63% and 65%, 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 nine
months of 1997 and $3.2 million in 1996 from the sale of leased tractors.
Exclusive of gains, which reduced rental expense, the percentage in the first
nine months of 1997 and 1996 to operating revenue was 6.7% and 6.1%,
respectively.
Depreciation and amortization expense as a percentage of operating revenue was
5.3% in the first nine months 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 nine month period ended September 30, 1997, net
gains from the sale of revenue equipment reduced depreciation and amortization
expense by approximately $2.9 million compared to approximately $1.5 million
13
<PAGE>
in the first nine months of 1996. Exclusive of gains, which reduced depreciation
and amortization expense, the percentage in the first nine months of 1997 and
1996 to operating revenue was 5.8% and 6.6 %, respectively. The decrease in 1997
is due to expansion of the owner operator fleet.
Insurance and claims expense represented 3.0% and 3.6% of operating revenue in
the first nine 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 $3.5 million in the first nine months of 1997 from
$5.3 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 $57.7 million in the first nine
months of 1997 compared to $52.5 million in 1996. The increase is primarily
attributable to an increase in net earnings offset by an increase in prepaid
expenses and a smaller increase in accounts payable, accrued liabilities and
claims accruals.
Prepaid expenses increased by $3.8 million from December 31, 1996 to September
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 $83.0 million in the first
nine months of 1997 from $76.0 million in 1996. The increase is due primarily to
greater capital expenditures primarily for revenue equipment including $33
million for the purchase of certain assets from DTI and its lessors and reduced
proceeds from sale of property and equipment offset in part by capital
expenditures in 1996 to complete construction of the Company's new corporate
facilities.
As of September 30, 1997, the Company had commitments outstanding to acquire
replacement and additional revenue equipment for approximately $167 million. The
Company has the option to cancel such commitments upon 60 days notice. The
Company believes it has the ability to obtain
14
<PAGE>
debt and lease financing and generate sufficient cash flows from operating
activities to support these acquisitions of revenue equipment.
During the first nine months of 1997, the Company incurred approximately $7.3
million of non-revenue equipment capital expenditures. These expenditures were
primarily for facilities and equipment.
The Company anticipates that it will expend approximately $5 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 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 $34.1 million in the first
nine months of 1997 compared to $25.5 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, 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 27 - Financial Data Schedule
Exhibit 99 - Private Securities Litigation
Reform Act of 1995 Safe Harbor Compliance
Statement for Forward-Looking Statements
(b) No reports on Form 8-K have been filed
during the quarter for which this report is
filed.
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: November 5, 1997 /s/ William F. Riley III
-------------------------------------------
(Signature)
William F. Riley III
Chief Financial Officer
17
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 Nine months
ended September 30, ended September 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings $12,882 $ 9,451 $29,645 $18,794
======= ======= ======= =======
Weighted average shares:
Common shares outstanding 28,245 24,863 28,131 24,778
Common equivalent shares issuable
upon exercise of employee stock
options (1) 598 693 642 710
------- ------- ------- -------
Total weighted average shares
- primary 28,843 25,556 28,773 25,488
Incremental common equivalent
shares (calculated using the higher
of the end of period or average
fair market value)(2) 23 23 30 46
------- ------- ------- -------
Total weighted average shares -
fully diluted 28,866 25,579 28,803 25,534
======= ======= ======= =======
Net earnings per common
and equivalent share $ .45 $ .37 $ 1.03 $ .74
======= ======= ======= =======
Net earnings per common share -
assuming full dilution $ .45 $ .37 $ 1.03 $ .74
======= ======= ======= =======
</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%.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF September 30,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS
</LEGEND>
<CIK> 863557
<NAME> SWIFT TRANSPORTATION CO., INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 10,087
<SECURITIES> 0
<RECEIVABLES> 99,897
<ALLOWANCES> 0
<INVENTORY> 3,580
<CURRENT-ASSETS> 132,343
<PP&E> 429,757
<DEPRECIATION> 105,202
<TOTAL-ASSETS> 467,743
<CURRENT-LIABILITIES> 70,068
<BONDS> 0
0
0
<COMMON> 28
<OTHER-SE> 258,017
<TOTAL-LIABILITY-AND-EQUITY> 467,743
<SALES> 524,999
<TOTAL-REVENUES> 524,999
<CGS> 0
<TOTAL-COSTS> 472,093
<OTHER-EXPENSES> (409)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,470
<INCOME-PRETAX> 49,845
<INCOME-TAX> 20,200
<INCOME-CONTINUING> 29,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,645
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</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 ability of the Company to continue to identify
acquisition candidates that will result in successful combinations; (x) an
unanticipated increase in the number of claims for which the Company is self
insured; and (xi) 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.
20
