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, 1998
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, 1998)
Common stock, $.001 par value: 42,835,711 shares
Exhibit Index at page 16
Total pages 20
<PAGE>
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Condensed consolidated balance sheets
as of June 30, 1998 (unaudited) and
December 31, 1997 3 - 4
Condensed consolidated statements of
earnings (unaudited) for the three and six month
periods ended June 30, 1998 and 1997 5
Condensed consolidated statements of cash
flows (unaudited) for the six month
periods ended June 30, 1998 and 1997 6 - 7
Notes to condensed consolidated financial
statements 8
Item 2. Management's discussion and analysis of
financial condition and results of
operations 9 - 15
PART II
OTHER INFORMATION
Items 1, 2,
3 and 5. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
2
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
1998 1997
----------- ------------
(unaudited)
Assets
------
Current assets:
Cash $ 9,009 $ 5,726
Accounts receivable, net 108,279 92,587
Equipment sales receivables 3,628 3,284
Inventories and supplies 2,637 4,509
Prepaid taxes, licenses and insurance 9,819 5,090
Assets held for sale 5,468 5,468
Deferred income taxes 6,175 5,280
-------- --------
Total current assets 145,015 121,944
Property and equipment, at cost:
Revenue and service equipment 413,712 366,223
Land 8,756 7,520
Facilities and improvements 72,350 62,760
Furniture and office equipment 15,245 13,949
-------- --------
Total property and equipment 510,063 450,452
Less accumulated depreciation and amortization 122,213 111,917
-------- --------
Net property and equipment 387,850 338,535
Other assets 2,246 1,976
Goodwill 8,300 8,679
-------- --------
$543,411 $471,134
======== ========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets (continued)
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- -----------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 23,797 $ 14,469
Accrued liabilities 29,227 20,177
Current portion of claims accruals 19,691 16,281
Current portion of long-term debt 4,485 6,849
-------- --------
Total current liabilities 77,200 57,776
-------- --------
Borrowings under line of credit 78,500 56,500
Long-term debt, less current portion 15,215 16,920
Claims accruals, less current portion 24,875 21,343
Deferred income taxes 48,034 44,420
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
43,153,661 and 42,793,557 shares at
June 30, 1998 and December 31, 1997, respectively 43 43
Additional paid-in capital 118,105 116,141
Retained earnings 184,855 161,407
-------- --------
303,003 277,591
Less treasury stock, at cost (331,050 shares) 3,416 3,416
-------- --------
Net stockholders' equity 299,587 274,175
-------- --------
Commitments and contingencies
-------- --------
$543,411 $471,134
======== ========
</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 share data)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1998 1997 1998 1997
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Operating revenue $ 215,832 $ 180,855 $ 407,440 $ 336,929
Operating expenses:
Salaries, wages and employee
benefits 76,411 63,760 145,599 119,042
Operating supplies and expenses 20,886 14,861 38,408 29,140
Fuel 23,264 23,098 45,867 45,466
Purchased transportation 34,473 23,239 63,869 43,585
Rental expense 9,143 11,839 19,176 23,389
Insurance and claims 6,666 6,079 12,553 11,143
Depreciation and amortization 10,867 9,383 21,944 17,889
Communication and utilities 2,668 2,674 5,386 5,067
Operating taxes and licenses 6,368 6,943 12,616 12,115
--------- --------- --------- ---------
Total operating expenses 190,746 161,876 365,418 306,836
--------- --------- --------- ---------
Operating income 25,086 18,979 42,022 30,093
--------- --------- --------- ---------
Other (income) expenses:
Interest expense 1,675 1,326 3,013 2,139
Interest income (66) (20) (122) (85)
Other (114) (63) (277) (170)
--------- --------- --------- ---------
Other (income) expenses, net 1,495 1,243 2,614 1,884
--------- --------- --------- ---------
Earnings before income taxes 23,591 17,736 39,408 28,209
Income taxes 9,555 7,180 15,960 11,430
--------- --------- --------- ---------
Net earnings $ 14,036 $ 10,556 $ 23,448 $ 16,779
========= ========= ========= =========
Basic earnings per share $ .33 $ .25 $ .55 $ .40
========= ========= ========= =========
Diluted earnings per share $ .32 $ .24 $ .54 $ .39
========= ========= ========= =========
</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,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 23,448 $ 16,779
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 19,514 17,960
Deferred income taxes 2,719 2,028
Provision for losses on accounts receivable 430 164
Amortization of deferred compensation 104 55
Change in assets and liabilities:
Increase in accounts receivable (16,122) (15,065)
Decrease in inventories and supplies 1,872 679
Increase in prepaid expenses (4,729) (6,741)
Increase in other assets (334) (700)
Increase in accounts payable, accrued liabilities
and claims accruals 25,320 18,345
--------- ---------
Net cash provided by operating activities 52,222 33,504
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment 34,044 10,391
Capital expenditures (105,622) (80,737)
Cash expended for purchase of DTI assets (3,749)
Payments received on equipment sales receivables 3,284 402
--------- ---------
Net cash used in investing activities (68,294) (73,693)
--------- ---------
</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,
1998 1997
---- ----
<S> <C> <C>
Cash flows from financing activities:
Repayments of long-term debt $ (4,505) $ (6,734)
Increase in borrowings under line of credit 22,000 45,000
Payment of stock split fractional shares (21)
Proceeds from issuance of common stock
under stock option and stock purchase plans 1,881 1,567
-------- --------
Net cash provided by financing activities 19,355 39,833
-------- --------
Net increase (decrease) in cash 3,283 (356)
Cash at beginning of period 5,726 1,210
-------- --------
Cash at end of period $ 9,009 $ 854
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,752 $ 1,838
Income taxes $ 6,421 $ 9,243
Supplemental schedule of noncash investing and financing activities:
Equipment sales receivables $ 3,628 $ 4,866
Direct financing for purchase of equipment $ 436
</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, 1997. 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. Stock Split
On February 20, 1998, the Company's Board of Directors approved a
3-for-2 stock split effected in the form of a stock dividend and
payable on March 12, 1998 to the stockholders of record at the
close of business on March 2, 1998. All share amounts, share
prices and earnings per share have been retroactively adjusted to
reflect this 3-for-2 stock split.
Note 4. Line of Credit
In August 1998, the Company modified its unsecured line of credit
agreement to increase the maximum available borrowings from $110
million to $170 million and extend the maturity to January 16,
2003.
8
<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.
Year 2000 Issue
The Company is in the process of performing a comprehensive review of its Year
2000 issues and has completed its intial review of internal systems (information
technology ("IT") and non-IT). The majority of the Company's application
software programs are purchased from and maintained by vendors. Therefore, the
Company is working with these software vendors to verify these applications
become Year 2000 compliant. The Company estimates the status of progress of
these internal systems as follows:
Vendor Modifications Testing Commenced
Being Performed
IT Systems 70% 15%
Non-IT Systems 50% 5%
The Company presently believes that with modifications and updates to existing
software, the cost of which is not expected to be material, the Year 2000
problem will not pose significant operational problems for the Company's
internal systems.
9
<PAGE>
As part of the Company's comprehensive review, it is continuing to verify the
Year 2000 readiness of third parties (vendors and customers) with whom the
company has material relationships. At present, the Company is not able to
determine the effect on the Company's results of operations, liquidity, and
financial condition in the event the Company's material vendors and customers
are not Year 2000 compliant. The Company will continue to monitor the progress
of its material vendors and customers and formulate a contingency plan at that
point in time when the Company does not believe a material vendor or customer
will be compliant.
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 an increase of 774 tractors to 6,398 tractors as of June
30, 1998 up from 5,624 tractors as of June 30, 1997. The owner operator portion
of the Company's fleet increased to 1,113 as of June 30, 1998 from 798 as of
June 30, 1997.
Results of Operations
Three Months Ended June 30, 1998 compared to Three Months ended June 30, 1997
- -----------------------------------------------------------------------------
Operating revenue increased $34.9 million or 19.3% to $215.8 million for the
three months ended June 30, 1998 from $180.9 million for the corresponding
period of 1997. The increase in operating revenue is primarily the result of the
expansion of the Company's fleet as a result of strong shipper demand. The
Company's freight rates increased by approximately 1.9% in the second quarter of
1998 compared to the second quarter of 1997.
The Company's operating ratio (operating expenses expressed as a percentage of
operating revenue) for the second quarter of 1998 was 88.4% compared to 89.5% in
the comparable period of 1997. The Company's operating ratio for the three
months ended June 30, 1998 improved as a result of the aforementioned increase
in operating revenue combined with decreases in certain components of operating
expenses as a percentage of operating revenue as discussed below. The Company's
empty mile factor for linehaul operations was 13.5% and 14.4% and average loaded
linehaul revenue per mile was $1.32 and $1.31 in the second quarter of 1998 and
1997, respectively.
Salaries, wages and employee benefits represented 35.4% of operating revenue for
the three months ended June 30, 1998 compared with 35.3% in 1997. The increase
is primarily due to an increase in the accrual for the Company's profit sharing
contribution and normal wage increases and associated benefits and taxes.
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
10
<PAGE>
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 10.8% for the second quarter of
1998 versus 12.8% in 1997. The decrease is partially due to an increase in the
number of owner operators who are responsible for their own fuel. In addition,
actual fuel cost per gallon decreased by approximately 13 cents per gallon in
the second quarter of 1998 versus the second quarter of 1997. This decrease in
cost per gallon resulted in an approximately $1.4 million reduction in fuel
surcharge revenue in the second quarter of 1998 compared to the second quarter
of 1997. This reduction in fuel surcharge revenue reduced the decrease in fuel
as a percentage of operating revenue.
Increases in fuel costs, to the extent not offset by rate increases or fuel
surcharges, could have an adverse effect on the operations and profitability of
the Company. Management believes the most effective protection against fuel cost
increases is to maintain a fuel efficient fleet and to implement fuel surcharges
when such option is necessary and available. The Company currently does not use
derivative-type hedging products but is currently evaluating the possible use of
these products.
Purchased transportation as a percentage of operating revenue was 16.0% for the
three months ended June 30, 1998 compared to 12.8% in 1997. The increase is due
to the growth of the owner operator fleet to 1,113 as of June 30, 1998 from 798
as of June 30, 1997.
Rental expense as a percentage of operating revenue was 4.2% for the second
quarter of 1998 versus 6.5% in 1997. At June 30, 1998 and 1997, leased tractors
represented 57% and 60%, respectively, of the total fleet of Company tractors.
In addition to the reduction in the percentage of tractors which were leased,
rental expense was positively impacted by a reduction in the number of leased
trailers as well as a slight reduction in the average lease rate for tractors in
the second quarter of 1998 versus the second quarter of 1997. 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 $1.5 million in the second quarter of 1998 and no gain
during the second quarter of 1997 from the sale of leased tractors.
Depreciation and amortization expense as a percentage of operating revenue was
5.0% in the second quarter of 1998 versus 5.2% in 1997. 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, 1998, net
gains from the sale of revenue equipment reduced depreciation and amortization
expense by approximately $1.7 million compared to approximately $930,000 in the
second quarter of 1997. Exclusive of gains, which reduced depreciation and
amortization expense, the percentage in the second quarter of 1998 and 1997 to
operating revenue was 5.8% and 5.7%, respectively. The increase in 1998 is due
to an increase in the percentage of owned equipment versus leased equipment
offset by the expansion of the owner operator fleet as discussed above.
Insurance and claims expense represented 3.1% and 3.4% of operating revenue in
the second quarter of 1998 and 1997, 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
11
<PAGE>
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.
Six Months Ended June 30, 1998 compared to Six Months ended June 30, 1997
- -------------------------------------------------------------------------
Operating revenue increased $70.5 million or 20.9 % to $407.4 million for the
six months ended June 30, 1998 from $336.9 million for the corresponding period
of 1997. 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 1998 was 89.7% compared to 91.1%
in the comparable period of 1997. The Company's operating ratio for the six
months ended June 30, 1998 improved as a result of the aforementioned increase
in operating revenue combined with decreases in certain components of operating
expenses as a percentage of operating revenue as discussed below. The Company's
empty mile factor for linehaul operations was 13.8% and 14.3% and average loaded
linehaul revenue per mile was $1.32 and $1.31 in the first six months of 1998
and 1997, respectively.
Salaries, wages and employee benefits represented 35.7% of operating revenue for
the six months ended June 30, 1998 compared with 35.3% in 1997. The increase is
primarily due to an increase in the accrual for the Company's profit sharing
contribution and normal wage increases and associated benefits and taxes.
Fuel as a percentage of operating revenue was 11.3% for the first six months of
1998 versus 13.5% in 1997. The decrease is due to an increase in the number of
owner operators who are responsible for their own fuel and the reduction in fuel
prices as discussed above.
Purchased transportation as a percentage of operating revenue was 15.7% for the
six months ended June 30, 1998 compared to 12.9% in 1997. The increase is due to
the growth of the owner operator fleet to 1,113 as of June 30, 1998 from 798 as
of June 30, 1997.
Rental expense as a percentage of operating revenue was 4.7% for the first six
months of 1998 versus 6.9% in 1997. 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 $2.5 million
in 1998 and no gain during the first six months of 1997 from the sale of leased
tractors. As discussed above, rental expense decreased in the first six months
of 1998 vesus 1997 as a result of a reduction in the percentage of leased
tractors, number of leased trailers and the average lease rate for tractors.
Depreciation and amortization expense as a percentage of operating revenue was
5.4% in the first
12
<PAGE>
six months of 1998 versus 5.3% in 1997. 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, 1998, net gains from the
sale of revenue equipment reduced depreciation and amortization expense by
approximately $2.5 million compared to approximately $1.8 million in the first
six months of 1997. Exclusive of gains, which reduced depreciation and
amortization expense, the percentage in the first six months of 1998 and 1997 to
operating revenue was 6.0% and 5.8 %, respectively. The increase in 1998 is due
to the increase in the percentage of owned equipment versus leased equipment
offset by the expansion of the owner operator fleet as discussed above.
Insurance and claims expense represented 3.1% and 3.3% of operating revenue in
the first six months of 1998 and 1997, 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.
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 $52.2 million in the first six
months of 1998 compared to $33.5 million in 1997. The increase is primarily
attributable to an increase in net earnings and accounts payable, accrued
liabilities and claims accruals.
Prepaid expenses increased by $4.7 million from December 31, 1997 to June 30,
1998. 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 decreased to $68.3 million in the first
six months of 1998 from $73.7 million in 1997. The decrease is due primarily to
increased proceeds from the sale of property and equipment and payments received
on equipment sales receivable in 1998 along with a reduction in cash expended
for Direct Transit, Inc. assets in 1997 offset by greater capital expenditures
in 1998.
As of June 30, 1998, the Company had commitments outstanding to acquire
replacement and
13
<PAGE>
additional revenue equipment for approximately $276 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 1998, the Company incurred approximately $13
million of non-revenue equipment capital expenditures. These expenditures were
primarily for facilities and equipment.
The Company anticipates that it will expend approximately $24 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 $19.4 million in the first
six months of 1998 compared to $39.8 million in 1997. This decrease is primarily
due to reduced borrowings under the line 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.
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.
14
<PAGE>
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.
15
<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 28, 1998. At the Annual Meeting, the
stockholders elected Jerry C. Moyes and Alphonse E.
Frei to serve as Directors for three-year terms.
William F. Riley, Lou A. Edwards, Earl H. Scudder,
Jr. and Rodney K. Sartor continued as Directors after
the meeting. Additionally, the stockholders approved
an amendment to the Stock Option Plan to increase the
number of shares authorized for issuance thereunder
from 3,825,000 to 4,200,000.
Stockholders representing 40,395,130 shares or 94.74%
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>
Jerry C. Moyes 40,395,130 40,289,955 105,175
Alphonse E. Frei 40,395,130 40,314,245 80,885
Amendment to Stock
Option Plan 40,395,130 32,014,379 8,380,751
</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) No Current Reports on Form 8-K were filed
during the three months ended June 30, 1998.
16
<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 7, 1998 /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 Six months
ended June 30, ended June 30,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings $14,036 $10,556 $23,448 $16,779
======= ======= ======= =======
Weighted average shares:
Common shares outstanding 42,723 42,302 42,612 42,111
Common equivalent shares issuable
upon exercise of employee stock
options (1) 815 924 875 993
------- ------- ------- -------
Total weighted average shares
- diluted 43,538 43,226 43,487 43,104
======= ======= ======= =======
Basic earnings per share $ .33 $ .25 $ .55 $ .40
======= ======= ======= =======
Diluted earnings per share $ .32 $ .24 $ .54 $ .39
======= ======= ======= =======
</TABLE>
Note:
(1) Amount calculated using the treasury stock method and fair market values.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS AS OF June 30,1998 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 9,009
<SECURITIES> 0
<RECEIVABLES> 108,279
<ALLOWANCES> 0
<INVENTORY> 2,637
<CURRENT-ASSETS> 145,015
<PP&E> 510,063
<DEPRECIATION> 122,213
<TOTAL-ASSETS> 387,850
<CURRENT-LIABILITIES> 77,200
<BONDS> 0
0
0
<COMMON> 43
<OTHER-SE> 299,544
<TOTAL-LIABILITY-AND-EQUITY> 543,411
<SALES> 407,440
<TOTAL-REVENUES> 407,440
<CGS> 0
<TOTAL-COSTS> 365,418
<OTHER-EXPENSES> (399)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,013
<INCOME-PRETAX> 39,408
<INCOME-TAX> 15,960
<INCOME-CONTINUING> 23,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,448
<EPS-PRIMARY> .55
<EPS-DILUTED> .54
</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) the inability of
the Company to continue to secure acceptable financing arrangements; (viii) the
ability of the Company to continue to identify acquisition candidates that will
result in successful combinations; (ix) an unanticipated increase in the number
of claims for which the Company is self insured; and (x) 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.
