Delaware | 001-35007 | 20-5589597 | |||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||
2200 South 75th Avenue, Phoenix, Arizona | 85043 | ||||
(Address of principal executive offices) | (Zip Code) | ||||
(602) 269-9700 | |||||
(Registrant's telephone number, including area code) | |||||
N/A | |||||
(Former name or former address, if changed since last report) | |||||
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||||
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit | Description | |
Exhibit 99 | Letter to stockholders dated April 24, 2017 issued by Swift Transportation Company |
Swift Transportation Company | |||||
(Registrant) | |||||
Date: | April 24, 2017 | /s/ Virginia Henkels | |||
Virginia Henkels | |||||
Executive Vice President and Chief Financial Officer |
Exhibit 99 |
P.O. Box 29243 - Phoenix, Arizona 85038-9243 | ||
2200 S. 75th Avenue - Phoenix, Arizona 85043 | ||
(602) 269-9700 | ||
Quarter Ended March 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Unaudited | |||||||||||
(Dollars in millions, except per share data) | |||||||||||
Operating Revenue | $ | 963.8 | $ | 967.8 | $ | 1,015.1 | |||||
Revenue xFSR (1)(2) | $ | 871.1 | $ | 906.9 | $ | 894.9 | |||||
Operating Ratio | 98.4 | % | 94.6 | % | 92.6 | % | |||||
Adjusted Operating Ratio (2) | 97.8 | % | 93.8 | % | 91.2 | % | |||||
Diluted EPS | $ | 0.04 | $ | 0.23 | $ | 0.26 | |||||
Adjusted EPS (2) | $ | 0.07 | $ | 0.25 | $ | 0.29 | |||||
(1) Revenue xFSR is operating revenue, excluding fuel surcharge revenue | |||||||||||
(2) See GAAP to non-GAAP reconciliation in the schedules following this letter |
• | Diluted EPS was $0.04 and Adjusted EPS was $0.07 |
• | Settlement of certain litigation negatively impacted Diluted EPS and Adjusted EPS by $0.06 and Operating Ratio and Adjusted Operating Ratio by 120 and 140 basis points, respectively |
• | Consolidated Average Operational Truck Count declined by 225 trucks from the fourth quarter of 2016, and 812 trucks year over year in the first quarter, in a continued effort to drive improvements in asset utilization |
• | Favorable discrete tax items resulted in an effective tax rate of 31.3% |
• | Net Debt and Net Leverage Ratio were $942.9 million and 1.89, respectively, as of March 31, 2017 |
1 |
• | On April 10, 2017, Swift and Knight Transportation (KNX) announced the Board approval of a merger in an all-stock transaction to create Knight-Swift Transportation Holdings Inc. This transaction is expected to close in the third quarter of 2017, and will result in the industry's largest full truckload company. |
• | As announced on our mid-first quarter conference call, we reorganized our reportable segments to reflect management's revised reporting structure. Our dedicated grocery line of business, which previously reported within our Dedicated segment, is now reported within our Refrigerated segment, resulting in all of our temperature-controlled lines of business reporting under the Refrigerated segment. |
• | Truckload Revenue xFSR for the first quarter of 2017 was $429.6 million, compared to $455.8 million in the first quarter of 2016 |
• | Revenue xFSR per loaded mile declined 2.6% year over year |
• | Total loaded miles decreased 3.2% year over year, primarily due to a 6.0% reduction in Average Operational Truck Count and one less calendar day in the first quarter of 2017 compared to the first quarter of 2016, partially offset by a 4.0% increase in loaded miles per tractor per week |
• | Deadhead Percentage improved 90 basis points year over year, and 80 basis points sequentially |
• | Operating Ratio and Adjusted Operating Ratio for the first quarter of 2017 were 96.7% and 96.3%, respectively |
• | Dedicated Revenue xFSR grew 2.3% year over year to $136.8 million |
• | Weekly Revenue xFSR per Tractor improved 3.7% year over year, due to improvements in both asset utilization and pricing |
• | Dedicated sales pipeline is strengthening, resulting in an increase in the number of pending bids for new business opportunities |
• | Operating Ratio and Adjusted Operating Ratio for the first quarter of 2017 were 92.3% and 91.5%, respectively. Increases in insurance and claims expense, depreciation expense, and equipment maintenance expense partially driven by weather related issues negatively affected Operating Ratio and Adjusted Operating Ratio. |
• | Refrigerated Revenue xFSR for the first quarter of 2017 was $161.8 million, compared to $163.0 million in the first quarter of 2016 |
• | Weekly Revenue xFSR per Tractor increased 3.2% year over year, due to increases in both asset utilization and Revenue xFSR per loaded mile |
• | Safety and operational initiatives remain a key focus as insurance and claims, workers' compensation expense and Deadhead Percentage, improved year over year |
• | Operating Ratio and Adjusted Operating Ratio for the first quarter of 2017 were 103.6% and 103.9%, respectively, which were negatively impacted by 660 and 720 basis points, respectively, due to the increase in legal reserves for certain litigation noted above |
• | Intermodal Revenue xFSR for the first quarter of 2017 was $76.1 million, compared to $75.9 million in the first quarter of 2016 |
• | Revenue xFSR per load increased 1.1% year over year, despite continued pressure in the intermodal pricing market |
• | Container-on-Flat-Car (COFC) load counts strengthened throughout the first quarter, resulting in year over year growth in COFC volumes |
• | Operating Ratio and Adjusted Operating Ratio for the first quarter of 2017 were both 100.1%, a year over year improvement of over 300 basis points |
2 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Unaudited | |||||||||||
Operating Revenue (1) | $ | 481.5 | $ | 492.5 | $ | 538.3 | |||||
Revenue xFSR (1)(2)(3) | $ | 429.6 | $ | 455.8 | $ | 468.8 | |||||
Operating Ratio | 96.7 | % | 92.6 | % | 89.4 | % | |||||
Adjusted Operating Ratio (3) | 96.3 | % | 92.0 | % | 87.9 | % | |||||
Weekly Revenue xFSR per Tractor | $ | 3,339 | $ | 3,292 | $ | 3,461 | |||||
Total Loaded Miles (4) | 238,218 | 246,137 | 254,926 | ||||||||
Average Operational Truck Count | 10,006 | 10,650 | 10,535 | ||||||||
Deadhead Percentage | 11.6 | % | 12.5 | % | 11.8 | % | |||||
(1) In millions | |||||||||||
(2) Revenue xFSR is operating revenue, excluding fuel surcharge revenue | |||||||||||
(3) See GAAP to non-GAAP reconciliation in the schedules following this letter | |||||||||||
(4) Total Loaded Miles presented in thousands |
3 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 (recast) (4) | 2015 (recast) (4) | |||||||||
Unaudited | |||||||||||
Operating Revenue (1) | $ | 150.8 | $ | 142.9 | $ | 135.9 | |||||
Revenue xFSR (1)(2)(3) | $ | 136.8 | $ | 133.7 | $ | 118.7 | |||||
Operating Ratio | 92.3 | % | 86.9 | % | 91.9 | % | |||||
Adjusted Operating Ratio (3) | 91.5 | % | 86.0 | % | 90.7 | % | |||||
Weekly Revenue xFSR per Tractor | $ | 3,461 | $ | 3,339 | $ | 3,107 | |||||
Average Operational Truck Count | 3,074 | 3,079 | 2,969 | ||||||||
(1) In millions | |||||||||||
(2) Revenue xFSR is operating revenue, excluding fuel surcharge revenue | |||||||||||
(3) See GAAP to non-GAAP reconciliation in the schedules following this letter | |||||||||||
(4) During the first quarter, the Company reorganized its reportable segments to reflect management's revised reporting structure of its Dedicated and Refrigerated reportable segments. In association with the reorganization, the operations of our dedicated grocery line of business, which was previously reported within the Company's Dedicated segment, is now reported within the Company's Refrigerated segment. This reorganization results in all of our temperature-controlled lines of business reporting under the Refrigerated segment. |
4 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 (recast) (4) | 2015 (recast) (4) | |||||||||
Unaudited | |||||||||||
Operating Revenue (1) | $ | 177.5 | $ | 169.7 | $ | 177.4 | |||||
Revenue xFSR (1)(2)(3) | $ | 161.8 | $ | 163.0 | $ | 158.6 | |||||
Operating Ratio | 103.6 | % | 97.2 | % | 95.5 | % | |||||
Adjusted Operating Ratio (3) | 103.9 | % | 97.1 | % | 94.9 | % | |||||
Weekly Revenue xFSR per Tractor | $ | 3,690 | $ | 3,574 | $ | 3,384 | |||||
Average Operational Truck Count | 3,411 | 3,509 | 3,644 | ||||||||
Deadhead Percentage | 7.4 | % | 7.8 | % | 7.9 | % | |||||
(1) In millions | |||||||||||
(2) Revenue xFSR is operating revenue, excluding fuel surcharge revenue | |||||||||||
(3) See GAAP to non-GAAP reconciliation in the schedules following this letter; includes $11.65 million increase in legal reserves in 2017 | |||||||||||
(4) During the first quarter, the Company reorganized its reportable segments to reflect management's revised reporting structure of its Dedicated and Refrigerated reportable segments. In association with the reorganization, the operations of our dedicated grocery line of business, which was previously reported within the Company's Dedicated segment, is now reported within the Company's Refrigerated segment. This reorganization results in all of our temperature-controlled lines of business reporting under the Refrigerated segment. |
5 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Unaudited | |||||||||||
Operating Revenue (1) | $ | 86.2 | $ | 82.5 | $ | 90.4 | |||||
Revenue xFSR (1)(2)(3) | $ | 76.1 | $ | 75.9 | $ | 77.3 | |||||
Operating Ratio | 100.1 | % | 103.5 | % | 101.4 | % | |||||
Adjusted Operating Ratio (3) | 100.1 | % | 103.8 | % | 101.6 | % | |||||
Load Counts | 40,666 | 40,997 | 41,940 | ||||||||
Average Container Counts | 9,130 | 9,150 | 9,150 | ||||||||
(1) In millions | |||||||||||
(2) Revenue xFSR is operating revenue, excluding fuel surcharge revenue | |||||||||||
(3) See GAAP to non-GAAP reconciliation in the schedules following this letter |
6 |
YOY | QOQ | |||||||||||||||||||
Q1'17 | Q1'16 | Variance (1) | (Dollars in millions) | Q1'17 | Q4'16 | Variance (1) | ||||||||||||||
Unaudited | Unaudited | |||||||||||||||||||
$ | 963.8 | $ | 967.8 | -0.4 | % | Operating Revenue | $ | 963.8 | $ | 1,038.6 | -7.2 | % | ||||||||
$ | (92.7 | ) | $ | (60.9 | ) | 52.3 | % | Less: Fuel Surcharge Revenue | $ | (92.7 | ) | $ | (87.8 | ) | 5.6 | % | ||||
$ | 871.1 | $ | 906.9 | -3.9 | % | Revenue xFSR | $ | 871.1 | $ | 950.8 | -8.4 | % | ||||||||
$ | 283.3 | $ | 288.6 | 1.8 | % | Salaries, Wages, & Benefits | $ | 283.3 | $ | 279.8 | -1.3 | % | ||||||||
32.5 | % | 31.8 | % | -70 bps | % of Revenue xFSR | 32.5 | % | 29.4 | % | -310 bps | ||||||||||
$ | 104.1 | $ | 90.2 | -15.4 | % | Operating Supplies & Expenses | $ | 104.1 | $ | 98.8 | -5.4 | % | ||||||||
12.0 | % | 9.9 | % | -210 bps | % of Revenue xFSR | 12.0 | % | 10.4 | % | -160 bps | ||||||||||
$ | 50.2 | $ | 47.7 | -5.2 | % | Insurance & Claims | $ | 50.2 | $ | 51.8 | 3.2 | % | ||||||||
5.8 | % | 5.3 | % | -50 bps | % of Revenue xFSR | 5.8 | % | 5.5 | % | -30 bps | ||||||||||
$ | 8.5 | $ | 6.9 | -23.2 | % | Communication & Utilities | $ | 8.5 | $ | 7.7 | -9.8 | % | ||||||||
1.0 | % | 0.8 | % | -20 bps | % of Revenue xFSR | 1.0 | % | 0.8 | % | -20 bps | ||||||||||
$ | 18.2 | $ | 18.5 | 1.8 | % | Operating Taxes & Licenses | $ | 18.2 | $ | 19.0 | 4.2 | % | ||||||||
2.1 | % | 2.0 | % | -10 bps | % of Revenue xFSR | 2.1 | % | 2.0 | % | -10 bps | ||||||||||
(1) Positive numbers represent favorable variances. Negative numbers represent unfavorable variances. Variances are calculated based on the precision of the consolidated income statement, presented in thousands, included in the schedules following this letter. |
7 |
Q1'17 | Q1'16 | (Dollars in millions) | Q1'17 | Q4'16 | ||||||||||
Unaudited | Unaudited | |||||||||||||
$ | 95.0 | $ | 75.0 | Fuel Expense | $ | 95.0 | $ | 92.5 | ||||||
9.9 | % | 7.7 | % | % of Operating Revenue | 9.9 | % | 8.9 | % |
Q1'17 | Q1'16 | (Dollars in millions) | Q1'17 | Q4'16 | ||||||||||
Unaudited | Unaudited | |||||||||||||
$ | 265.5 | $ | 267.3 | Purchased Transportation | $ | 265.5 | $ | 285.8 | ||||||
27.5 | % | 27.6 | % | % of Operating Revenue | 27.5 | % | 27.5 | % |
Q1'17 | Q1'16 | (Dollars in millions) | Q1'17 | Q4'16 | ||||||||||
Unaudited | Unaudited | |||||||||||||
$ | 55.7 | $ | 56.3 | Rental Expense | $ | 55.7 | $ | 55.9 | ||||||
6.4 | % | 6.2 | % | % of Revenue xFSR | 6.4 | % | 5.9 | % | ||||||
$ | 67.8 | $ | 67.0 | Depreciation & Amortization of Property and Equipment | $ | 67.8 | $ | 68.3 | ||||||
7.8 | % | 7.4 | % | % of Revenue xFSR | 7.8 | % | 7.2 | % | ||||||
$ | 123.5 | $ | 123.3 | Combined Rental Expense and Depreciation | $ | 123.5 | $ | 124.2 | ||||||
14.2 | % | 13.6 | % | % of Revenue xFSR | 14.2 | % | 13.1 | % |
8 |
December 31, 2016 | Q1 2017 Changes | March 31, 2017 | |||||||||
Unaudited | |||||||||||
(In millions) | |||||||||||
Unrestricted Cash | $ | 89.4 | $ | (27.6 | ) | $ | 61.8 | ||||
A/R Securitization ($400 million) (1) | 280.0 | 25.0 | 305.0 | ||||||||
Revolver ($600 million) | 130.0 | (120.0 | ) | 10.0 | |||||||
Term Loan A (1) | 494.3 | (22.5 | ) | 471.8 | |||||||
Capital Leases & Other Debt | 242.8 | (24.9 | ) | 217.9 | |||||||
Total Debt | $ | 1,147.1 | $ | (142.4 | ) | $ | 1,004.7 | ||||
Net Debt | $ | 1,057.7 | $ | (114.8 | ) | $ | 942.9 | ||||
(1) Amounts presented represent face value |
9 |
10 |
11 |
Ginnie Henkels | Taylor Varley | |
Executive Vice President & | Director of Finance & | |
Chief Financial Officer | Investor Relations | |
(602) 269-9700 | (602) 477-7052 |
• | trends and expectations relating to our operations, expenses, other revenue, pricing, utilization, profitability, net debt, and related metrics; |
• | our estimated capital expenditures, gains on dispositions, EPS, and Adjusted EPS for 2017; |
• | our expected 2017 effective tax rate before discrete items; |
• | our beliefs regarding industry trends, including a difficult operating environment in Q2 2017, that capacity contracture is inevitable in the next 12 months, and that we are positioning ourselves to rebound when market dynamics improve; |
• | that we can make further improvements in Dedicated and Intermodal segment results; and |
• | our expectations regarding the timing and impact of our merger with Knight Transportation. |
• | economic conditions, including future recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries in which we have a significant concentration of customers; |
• | increasing competition from trucking, rail, intermodal, and brokerage competitors; |
• | our ability to execute or integrate any future acquisitions successfully; |
• | increases in driver compensation to the extent not offset by increases in freight rates and difficulties in driver recruitment and retention; |
• | additional risks arising from our contractual arrangements with owner-operators that do not exist with Company drivers; |
• | our ability to retain or replace key personnel; |
• | our dependence on third parties for intermodal and brokerage business; |
• | potential failure in computer or communications systems; |
• | seasonal factors such as severe weather conditions that increase operating costs; |
• | the regulatory environment in which we operate, including existing regulations and changes in existing regulations, or violations by us of existing or future regulations; |
12 |
• | the possible re-classification of owner-operators as employees; |
• | changes in rules or legislation by the National Labor Relations Board, Congress or states, and/or union organizing efforts; |
• | our Compliance Safety Accountability safety rating; |
• | government regulations with respect to our captive insurance companies; |
• | uncertainties and risks associated with our operations in Mexico; |
• | a significant reduction in, or termination of, our trucking services by a key customer; |
• | our significant ongoing capital requirements; |
• | volatility in the price or availability of fuel, as well as our ability to recover fuel prices through our fuel surcharge program; |
• | fluctuations in new and used equipment prices or replacement costs, and the potential failure of manufacturers to meet their sale and trade-back obligations; |
• | the impact that our leverage may have on the way we operate our business and our ability to service our debt, including compliance with our debt covenants; |
• | restrictions contained in our debt agreements; |
• | adverse impacts of insuring risk through our captive insurance companies, including our need to provide restricted cash and similar collateral for anticipated losses; |
• | potential volatility or decrease in the amount of earnings as a result of our claims exposure through our captive insurance companies and third-party insurance; |
• | the potential impact of the significant number of shares of our common stock that is eligible for future sale; |
• | goodwill impairment; |
• | that we currently do not pay dividends; |
• | the significant amount of our stock owned by controlling shareholder and board member Jerry Moyes and the related control over the company; |
• | related-party transactions between the Company and Jerry Moyes; and |
• | conflicts of interest or potential litigation that may arise from other businesses owned by Jerry Moyes, including pledges of Swift stock and guarantees by Jerry Moyes related to other businesses. |
13 |
Quarter Ended March 31, | |||||||
2017 | 2016 | ||||||
(In thousands, except per share data) | |||||||
Operating revenue: | |||||||
Revenue, excluding fuel surcharge revenue | $ | 871,090 | $ | 906,913 | |||
Fuel surcharge revenue | 92,741 | 60,910 | |||||
Operating revenue | 963,831 | 967,823 | |||||
Operating expenses: | |||||||
Salaries, wages, and employee benefits | 283,338 | 288,633 | |||||
Operating supplies and expenses | 104,119 | 90,215 | |||||
Fuel | 94,961 | 74,987 | |||||
Purchased transportation | 265,511 | 267,309 | |||||
Rental expense | 55,694 | 56,252 | |||||
Insurance and claims | 50,176 | 47,710 | |||||
Depreciation and amortization of property and equipment | 67,769 | 66,951 | |||||
Amortization of intangibles | 4,204 | 4,204 | |||||
Gain on disposal of property and equipment | (4,195 | ) | (6,326 | ) | |||
Communication and utilities | 8,503 | 6,900 | |||||
Operating taxes and licenses | 18,166 | 18,505 | |||||
Total operating expenses | 948,246 | 915,340 | |||||
Operating income | 15,585 | 52,483 | |||||
Other expenses (income): | |||||||
Interest expense | 7,521 | 8,594 | |||||
Interest income | (488 | ) | (751 | ) | |||
Merger transaction costs | 2,157 | — | |||||
Other income, net | (1,183 | ) | (776 | ) | |||
Total other expenses (income), net | 8,007 | 7,067 | |||||
Income before income taxes | 7,578 | 45,416 | |||||
Income tax expense | 2,371 | 13,511 | |||||
Net income | $ | 5,207 | $ | 31,905 | |||
Basic earnings per share | $ | 0.04 | $ | 0.23 | |||
Diluted earnings per share | $ | 0.04 | $ | 0.23 | |||
Shares used in per share calculations: | |||||||
Basic | 133,147 | 136,519 | |||||
Diluted | 134,089 | 137,655 |
14 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Diluted earnings per share | $ | 0.04 | $ | 0.23 | $ | 0.26 | |||||
Adjusted for: | |||||||||||
Income tax expense | 0.02 | 0.10 | 0.16 | ||||||||
Income before income taxes | 0.06 | 0.33 | 0.43 | ||||||||
Non-cash impairments of non-operating assets (2) | — | — | 0.01 | ||||||||
Amortization of certain intangibles (3) | 0.03 | 0.03 | 0.03 | ||||||||
Excludable transaction costs – merger (4) | 0.02 | — | — | ||||||||
Adjusted income before income taxes | 0.10 | 0.36 | 0.46 | ||||||||
Provision for income tax expense at effective rate | (0.03 | ) | (0.11 | ) | (0.18 | ) | |||||
Adjusted EPS | $ | 0.07 | $ | 0.25 | $ | 0.29 |
(1) | Our definition of the non-GAAP measure, Adjusted EPS, starts with (a) income (loss) before income taxes, the most comparable GAAP measure. We add the following items back to (a) to arrive at (b) adjusted income (loss) before income taxes: |
(i) | amortization of the intangibles from our 2007 going-private transaction, |
(ii) | non-cash impairments, |
(iii) | other special non-cash items, |
(iv) | excludable transaction costs, |
(v) | mark-to-market adjustments on our interest rate swaps, recognized in the income statement, |
(vi) | amortization of previous losses recorded in accumulated other comprehensive income (loss) ("AOCI") related to the interest rate swaps we terminated upon our IPO and refinancing transactions in December 2010, and |
(vii) | severance expense, including cash and equity award impact, related to the departure of certain executive leadership. |
(2) | During the three months ended March 31, 2015, Swift Transportation Company ("the Company") recorded an impairment loss related to an uncollectible note receivable. In September 2013, the Company agreed to advance up to $2.3 million, pursuant to an unsecured promissory note, to an independent fleet contractor that transported freight on Swift's behalf. In March 2015, management became aware that the independent contractor violated various covenants outlined in the unsecured promissory note, which created an event of default that made the principal and accrued interest immediately due and payable. As a result of this event of default, as well as an overall decline in the independent contractor's financial condition, management re-evaluated the fair value of the unsecured promissory note. At March 31, 2015, management determined that the remaining balance due from the independent contractor to the Company was not collectible, which resulted in a $1.5 million pre-tax impairment that was recorded in "Non-cash impairments of non-operating assets" in the Company's consolidated income statements. |
(3) | Amortization of certain intangibles reflects the non-cash amortization expense relating to certain intangible assets identified in the 2007 going-private transaction through which Swift Corporation acquired Swift Transportation Co. |
(4) | On April 10, 2017, Swift Transportation Company ("Swift") and Knight Transportation, Inc. ("Knight") announced the Board approval of a merger of Knight and Swift in an all-stock transaction. The combined company will be named Knight-Swift Transportation Holdings Inc. ("Knight-Swift"). Swift incurred certain transactional expenses associated with the planned merger, which are added back for Adjusted EPS purposes. |
15 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(Dollars in thousands) | |||||||||||
Operating revenue | $ | 963,831 | $ | 967,823 | $ | 1,015,144 | |||||
Less: Fuel surcharge revenue | (92,741 | ) | (60,910 | ) | (120,280 | ) | |||||
Revenue, excluding fuel surcharge revenue | $ | 871,090 | $ | 906,913 | $ | 894,864 | |||||
Operating expense | $ | 948,246 | $ | 915,340 | $ | 940,144 | |||||
Adjusted for: | |||||||||||
Fuel surcharge revenue | (92,741 | ) | (60,910 | ) | (120,280 | ) | |||||
Amortization of certain intangibles (2) | (3,912 | ) | (3,912 | ) | (3,912 | ) | |||||
Adjusted operating expense | $ | 851,593 | $ | 850,518 | $ | 815,952 | |||||
Operating Ratio | 98.4 | % | 94.6 | % | 92.6 | % | |||||
Adjusted Operating Ratio | 97.8 | % | 93.8 | % | 91.2 | % |
(1) | Our definition of the non-GAAP measure, Adjusted Operating Ratio, starts with (a) operating expense and (b) operating revenue, which are GAAP financial measures. We subtract the following items from (a) to arrive at (c) adjusted operating expense: |
(i) | fuel surcharge revenue, |
(ii) | amortization of the intangibles from our 2007 going-private transaction, |
(iii) | non-cash operating impairment charges, |
(iv) | other special non-cash items, |
(v) | excludable transaction costs, and |
(vi) | severance expense, including cash and equity award impact, related to the departure of certain executive leadership. |
(2) | Includes the items discussed in note (3) to the Non-GAAP Reconciliation: Adjusted EPS. |
16 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Net income | $ | 5,207 | $ | 31,905 | $ | 37,840 | |||||
Adjusted for: | |||||||||||
Depreciation and amortization of property and equipment | 67,769 | 66,951 | 56,927 | ||||||||
Amortization of intangibles | 4,204 | 4,204 | 4,204 | ||||||||
Interest expense | 7,521 | 8,594 | 10,388 | ||||||||
Derivative interest expense | — | — | 2,793 | ||||||||
Interest income | (488 | ) | (751 | ) | (587 | ) | |||||
Income tax expense | 2,371 | 13,511 | 23,691 | ||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) | 86,584 | 124,414 | 135,256 | ||||||||
Non-cash equity compensation (2) | 2,673 | 1,417 | 1,483 | ||||||||
Excludable transaction costs – merger (3) | 2,157 | — | — | ||||||||
Non-cash impairments of non-operating assets (4) | — | — | 1,480 | ||||||||
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) | $ | 91,414 | $ | 125,831 | $ | 138,219 |
(1) | Our definition of the non-GAAP measure, Adjusted EBITDA, starts with (a) net income (loss), the most comparable GAAP measure. We add the following items back to (a) to arrive at Adjusted EBITDA: |
(i) | depreciation and amortization, |
(ii) | interest and derivative interest expense, including fees and charges associated with indebtedness, net of interest income, |
(iii) | income taxes, |
(iv) | non-cash equity compensation expense, |
(v) | non-cash impairments, |
(vi) | other special non-cash items, and |
(vii) | excludable transaction costs. |
(2) | Represents recurring non-cash equity compensation expense, on a pre-tax basis. In accordance with the terms of our senior credit agreement, this expense is added back in the calculation of Adjusted EBITDA for covenant compliance purposes. |
(3) | Includes the item discussed in note (4) to the Non-GAAP Reconciliation: Adjusted EPS. |
(4) | Includes the item discussed in note (2) to the Non-GAAP Reconciliation: Adjusted EPS. |
17 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 (recast) (3) | 2015 (recast) (3) | |||||||||
(Dollars in thousands) | |||||||||||
Operating revenue: | |||||||||||
Truckload | $ | 481,546 | $ | 492,522 | $ | 538,341 | |||||
Dedicated | 150,836 | 142,911 | 135,929 | ||||||||
Refrigerated | 177,491 | 169,688 | 177,414 | ||||||||
Intermodal | 86,233 | 82,548 | 90,354 | ||||||||
Subtotal | 896,106 | 887,669 | 942,038 | ||||||||
Non-reportable segments (1) | 82,714 | 99,248 | 91,622 | ||||||||
Intersegment eliminations | (14,989 | ) | (19,094 | ) | (18,516 | ) | |||||
Consolidated operating revenue | $ | 963,831 | $ | 967,823 | $ | 1,015,144 | |||||
Operating income (loss): | |||||||||||
Truckload | $ | 15,917 | $ | 36,287 | $ | 56,854 | |||||
Dedicated | 11,613 | 18,741 | 11,073 | ||||||||
Refrigerated | (6,335 | ) | 4,785 | 8,071 | |||||||
Intermodal | (109 | ) | (2,908 | ) | (1,243 | ) | |||||
Subtotal | 21,086 | 56,905 | 74,755 | ||||||||
Non-reportable segments (1) | (5,501 | ) | (4,422 | ) | 245 | ||||||
Consolidated operating income | $ | 15,585 | $ | 52,483 | $ | 75,000 | |||||
Operating ratio: | |||||||||||
Truckload | 96.7 | % | 92.6 | % | 89.4 | % | |||||
Dedicated | 92.3 | % | 86.9 | % | 91.9 | % | |||||
Refrigerated | 103.6 | % | 97.2 | % | 95.5 | % | |||||
Intermodal | 100.1 | % | 103.5 | % | 101.4 | % | |||||
Adjusted Operating Ratio (2): | |||||||||||
Truckload | 96.3 | % | 92.0 | % | 87.9 | % | |||||
Dedicated | 91.5 | % | 86.0 | % | 90.7 | % | |||||
Refrigerated | 103.9 | % | 97.1 | % | 94.9 | % | |||||
Intermodal | 100.1 | % | 103.8 | % | 101.6 | % |
(1) | The non-reportable segments include the Company's logistics and freight brokerage services, as well as support services that its subsidiaries provide to customers and owner-operators, including repair and maintenance shop services, equipment leasing, and insurance. Intangible asset amortization related to the 2007 going-private transaction, certain legal settlements and reserves, and certain other corporate expenses are also included in the non-reportable segments. |
(2) | For more details, refer to the Non-GAAP Reconciliation: Adjusted Operating Ratio by Segment. |
(3) | During the quarter ended March 31, 2017, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its Dedicated and Refrigerated (formerly “Swift Refrigerated”) reportable segments. In association with the reorganization, the operations of the Company's dedicated grocery line of business, which were previously reported within the Company’s Dedicated segment, are now reported within the Company's Refrigerated segment. This resulted in all temperature-controlled lines of business reporting under the Refrigerated segment. Prior periods have been retrospectively adjusted to align with the current period presentation. |
18 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 (recast) (2) | 2015 (recast) (2) | |||||||||
Truckload: | |||||||||||
Weekly Revenue xFSR per tractor | $ | 3,339 | $ | 3,292 | $ | 3,461 | |||||
Total loaded miles (1) | 238,218 | 246,137 | 254,926 | ||||||||
Average operational truck count: | |||||||||||
Company | 7,173 | 7,673 | 7,334 | ||||||||
Owner-operator | 2,833 | 2,977 | 3,201 | ||||||||
Total | 10,006 | 10,650 | 10,535 | ||||||||
Deadhead miles percentage | 11.6 | % | 12.5 | % | 11.8 | % | |||||
Dedicated: | |||||||||||
Weekly Revenue xFSR per tractor | $ | 3,461 | $ | 3,339 | $ | 3,107 | |||||
Average operational truck count: | |||||||||||
Company | 2,651 | 2,711 | 2,575 | ||||||||
Owner-operator | 423 | 368 | 394 | ||||||||
Total | 3,074 | 3,079 | 2,969 | ||||||||
Refrigerated: | |||||||||||
Weekly Revenue xFSR per tractor | $ | 3,690 | $ | 3,574 | $ | 3,384 | |||||
Total loaded miles (1) | 88,235 | 89,134 | 86,481 | ||||||||
Average operational truck count: | |||||||||||
Company | 2,388 | 2,457 | 2,570 | ||||||||
Owner-operator | 1,023 | 1,052 | 1,074 | ||||||||
Total | 3,411 | 3,509 | 3,644 | ||||||||
Deadhead miles percentage | 7.4 | % | 7.8 | % | 7.9 | % | |||||
Intermodal: | |||||||||||
Average operational truck count: | |||||||||||
Company | 413 | 474 | 481 | ||||||||
Owner-operator | 85 | 96 | 87 | ||||||||
Total | 498 | 570 | 568 | ||||||||
Load Count | 40,666 | 40,997 | 41,940 | ||||||||
Average Container Count | 9,130 | 9,150 | 9,150 |
(1) | Total loaded miles presented in thousands. |
(2) | During the quarter ended March 31, 2017, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its Dedicated and Refrigerated (formerly “Swift Refrigerated”) reportable segments. In association with the reorganization, the operations of the Company's dedicated grocery line of business, which were previously reported within the Company’s Dedicated segment, are now reported within the Company's Refrigerated segment. This resulted in all temperature-controlled lines of business reporting under the Refrigerated segment. Prior periods have been retrospectively adjusted to align with the current period presentation. |
19 |
Quarter Ended March 31, | |||||||||||
2017 | 2016 (recast) (1) | 2015 (recast) (1) | |||||||||
(Dollars in thousands) | |||||||||||
Truckload: | |||||||||||
Operating revenue | $ | 481,546 | $ | 492,522 | $ | 538,341 | |||||
Less: Fuel surcharge revenue | (51,941 | ) | (36,705 | ) | (69,561 | ) | |||||
Revenue xFSR | $ | 429,605 | $ | 455,817 | $ | 468,780 | |||||
Operating expense | $ | 465,629 | $ | 456,235 | $ | 481,487 | |||||
Adjusted for: Fuel surcharge revenue | (51,941 | ) | (36,705 | ) | (69,561 | ) | |||||
Adjusted operating expense | $ | 413,688 | $ | 419,530 | $ | 411,926 | |||||
Operating Ratio | 96.7 | % | 92.6 | % | 89.4 | % | |||||
Adjusted Operating Ratio | 96.3 | % | 92.0 | % | 87.9 | % | |||||
Dedicated: | |||||||||||
Operating revenue | $ | 150,836 | $ | 142,911 | $ | 135,929 | |||||
Less: Fuel surcharge revenue | (14,011 | ) | (9,222 | ) | (17,276 | ) | |||||
Revenue xFSR | $ | 136,825 | $ | 133,689 | $ | 118,653 | |||||
Operating expense | $ | 139,223 | $ | 124,170 | $ | 124,856 | |||||
Adjusted for: Fuel surcharge revenue | (14,011 | ) | (9,222 | ) | (17,276 | ) | |||||
Adjusted operating expense | $ | 125,212 | $ | 114,948 | $ | 107,580 | |||||
Operating Ratio | 92.3 | % | 86.9 | % | 91.9 | % | |||||
Adjusted Operating Ratio | 91.5 | % | 86.0 | % | 90.7 | % | |||||
Refrigerated: | |||||||||||
Operating revenue | $ | 177,491 | $ | 169,688 | $ | 177,414 | |||||
Less: Fuel surcharge revenue | (15,648 | ) | (6,699 | ) | (18,834 | ) | |||||
Revenue xFSR | $ | 161,843 | $ | 162,989 | $ | 158,580 | |||||
Operating expense | $ | 183,826 | $ | 164,903 | $ | 169,343 | |||||
Adjusted for: Fuel surcharge revenue | (15,648 | ) | (6,699 | ) | (18,834 | ) | |||||
Adjusted operating expense | $ | 168,178 | $ | 158,204 | $ | 150,509 | |||||
Operating Ratio | 103.6 | % | 97.2 | % | 95.5 | % | |||||
Adjusted Operating Ratio | 103.9 | % | 97.1 | % | 94.9 | % | |||||
Intermodal: | |||||||||||
Operating revenue | $ | 86,233 | $ | 82,548 | $ | 90,354 | |||||
Less: Fuel surcharge revenue | (10,151 | ) | (6,692 | ) | (13,090 | ) | |||||
Revenue xFSR | $ | 76,082 | $ | 75,856 | $ | 77,264 | |||||
Operating expense | $ | 86,342 | $ | 85,456 | $ | 91,597 | |||||
Adjusted for: Fuel surcharge revenue | (10,151 | ) | (6,692 | ) | (13,090 | ) | |||||
Adjusted operating expense | $ | 76,191 | $ | 78,764 | $ | 78,507 | |||||
Operating Ratio | 100.1 | % | 103.5 | % | 101.4 | % | |||||
Adjusted Operating Ratio | 100.1 | % | 103.8 | % | 101.6 | % | |||||
(1) | During the quarter ended March 31, 2017, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its Dedicated and Refrigerated (formerly “Swift Refrigerated”) reportable segments. In association with the reorganization, the operations of the Company's dedicated grocery line of business, which were previously reported within the Company’s Dedicated segment, are now reported within the Company's Refrigerated segment. This resulted in all temperature-controlled lines of business reporting under the Refrigerated segment. Prior periods have been retrospectively adjusted to align with the current period presentation. |
20 |
March 31, 2017 | December 31, 2016 | March 31, 2016 | ||||||
Tractors | ||||||||
Company: | ||||||||
Owned | 6,604 | 6,735 | 7,122 | |||||
Leased – capital leases | 1,775 | 1,968 | 2,009 | |||||
Leased – operating leases | 5,638 | 5,234 | 5,855 | |||||
Total company tractors | 14,017 | 13,937 | 14,986 | |||||
Owner-operator: | ||||||||
Financed through the Company | 3,134 | 3,272 | 3,598 | |||||
Other | 1,505 | 1,157 | 1,274 | |||||
Total owner-operator tractors | 4,639 | 4,429 | 4,872 | |||||
Total tractors | 18,656 | 18,366 | 19,858 | |||||
Trailers | 63,207 | 64,066 | 63,891 | |||||
Containers | 9,130 | 9,131 | 9,150 |
Quarter Ended March 31, | ||||||||
2017 | 2016 | 2015 | ||||||
Average operational truck count (1) : | ||||||||
Company | 12,681 | 13,364 | 12,988 | |||||
Owner-operator | 4,364 | 4,493 | 4,756 | |||||
Total | 17,045 | 17,857 | 17,744 |
(1) | Includes trucks within our non-reportable segments. |
21 |
March 31, 2017 | December 31, 2016 | ||||||
ASSETS | (In thousands) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 61,770 | $ | 89,391 | |||
Cash and cash equivalents – restricted | 54,945 | 57,046 | |||||
Restricted investments, held to maturity, amortized cost | 22,859 | 22,717 | |||||
Accounts receivable, net | 396,251 | 408,593 | |||||
Equipment sales receivable | 2,243 | — | |||||
Income tax refund receivable | 272 | 206 | |||||
Inventories and supplies | 16,663 | 16,630 | |||||
Assets held for sale | 5,333 | 6,969 | |||||
Prepaid taxes, licenses, insurance, and other | 48,557 | 47,038 | |||||
Current portion of notes receivable | 6,414 | 6,961 | |||||
Total current assets | 615,307 | 655,551 | |||||
Property and equipment, at cost: | |||||||
Revenue and service equipment | 2,229,531 | 2,266,137 | |||||
Land | 132,335 | 132,084 | |||||
Facilities and improvements | 283,949 | 281,390 | |||||
Furniture and office equipment | 109,189 | 113,880 | |||||
Total property and equipment | 2,755,004 | 2,793,491 | |||||
Less: accumulated depreciation and amortization | (1,271,973 | ) | (1,244,890 | ) | |||
Net property and equipment | 1,483,031 | 1,548,601 | |||||
Other assets | 23,511 | 21,953 | |||||
Intangible assets, net | 262,101 | 266,305 | |||||
Goodwill | 253,256 | 253,256 | |||||
Total assets | $ | 2,637,206 | $ | 2,745,666 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 114,147 | $ | 115,063 | |||
Accrued liabilities | 163,033 | 132,712 | |||||
Current portion of claims accruals | 86,191 | 80,866 | |||||
Current portion of long-term debt (1) | 5,946 | 8,459 | |||||
Current portion of capital lease obligations | 60,060 | 72,473 | |||||
Total current liabilities | 429,377 | 409,573 | |||||
Revolving line of credit | 10,000 | 130,000 | |||||
Long-term debt, less current portion (1) | 470,932 | 493,346 | |||||
Capital lease obligations, less current portion | 151,468 | 161,463 | |||||
Claims accruals, less current portion | 174,662 | 165,726 | |||||
Deferred income taxes | 408,795 | 427,722 | |||||
Accounts receivable securitization | 304,374 | 279,285 | |||||
Other liabilities | 5,804 | 6,296 | |||||
Total liabilities | 1,955,412 | 2,073,411 | |||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Class A common stock | 835 | 833 | |||||
Class B common stock | 497 | 497 | |||||
Additional paid-in capital (2)(3) | 688,234 | 701,065 | |||||
Accumulated deficit (2)(3) | (7,874 | ) | (30,242 | ) | |||
Noncontrolling interest | 102 | 102 | |||||
Total stockholders’ equity | 681,794 | 672,255 | |||||
Total liabilities and stockholders’ equity | $ | 2,637,206 | $ | 2,745,666 |
22 |
(1) | As of March 31, 2017, the Company's total long-term debt had a carrying value of $476.9 million, comprised of: |
(2) | The line items "Additional paid-in capital" and "Accumulated deficit" include allocation of purchase price related to the Company's repurchase and cancellation of its Class A common stock from shares repurchased in 2015 and 2016. The Company did not repurchase any shares of its Class A common stock during the quarter ended March 31, 2017. |
(3) | During the quarter ended March 31, 2017, the Company adopted the amendments to the Financial Accounting Standards Board's Accounting Standards Codification Topic 718, "Compensation – Stock Compensation," which were previously communicated via Accounting Standards Update 2016-09, "Improvements to Employee Share-based Payment Accounting." The amended guidance requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. Modified retrospective application is required, by means of a cumulative-effect adjustment to equity. Accordingly, upon adoption, the Company reclassified approximately $16.8 million in historical net tax benefit/deficiency amounts previously recorded within "Additional paid-in capital" into "Accumulated deficit." Starting January 1, 2017, tax benefit/deficiency amounts are recorded in net income. |
23 |
Quarter Ended March 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 5,207 | $ | 31,905 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of property, equipment, and intangibles | 71,973 | 71,155 | |||||
Amortization of debt issuance costs, and other | 336 | 351 | |||||
Gain on disposal of property and equipment, less write-off of totaled tractors | (2,969 | ) | (5,763 | ) | |||
Deferred income taxes | (19,196 | ) | (4,473 | ) | |||
Reduction of losses on accounts receivable | (540 | ) | (1,233 | ) | |||
Stock-based compensation expense | 2,673 | 1,417 | |||||
Increase (decrease) in cash resulting from changes in: | |||||||
Accounts receivable | 12,882 | 14,885 | |||||
Inventories and supplies | (33 | ) | (52 | ) | |||
Prepaid expenses and other current assets | (1,585 | ) | 8,226 | ||||
Other assets | (797 | ) | 2,332 | ||||
Accounts payable, and accrued and other liabilities (2) | 50,947 | 13,365 | |||||
Net cash provided by operating activities (3) | 118,898 | 132,115 | |||||
Cash flows from investing activities: | |||||||
Decrease (increase) in cash and cash equivalents – restricted | 2,101 | (2,115 | ) | ||||
Proceeds from maturities of investments | 4,790 | 6,386 | |||||
Purchases of investments | (5,003 | ) | (6,429 | ) | |||
Proceeds from sale of property and equipment | 27,124 | 34,271 | |||||
Capital expenditures | (35,566 | ) | (34,450 | ) | |||
Payments received on notes receivable | 663 | 1,127 | |||||
Expenditures on assets held for sale | (4,355 | ) | (6,960 | ) | |||
Payments received on assets held for sale | 5,092 | 5,620 | |||||
Net cash used in investing activities | (5,154 | ) | (2,550 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of long-term debt and capital leases | (47,427 | ) | (50,535 | ) | |||
Net repayments on revolving line of credit | (120,000 | ) | — | ||||
Borrowings under accounts receivable securitization | 25,000 | — | |||||
Proceeds from common stock issued | 1,888 | 1,411 | |||||
Repurchases of Class A common stock (1) | — | (45,000 | ) | ||||
Share withholding for taxes due on equity awards (2) | (826 | ) | (307 | ) | |||
Net cash used in financing activities (3) | (141,365 | ) | (94,431 | ) | |||
Net (decrease) increase in cash and cash equivalents | (27,621 | ) | 35,134 | ||||
Cash and cash equivalents at beginning of period | 89,391 | 107,590 | |||||
Cash and cash equivalents at end of period | $ | 61,770 | $ | 142,724 |
24 |
Quarter Ended March 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 7,346 | $ | 8,081 | |||
Income taxes | 136 | 944 | |||||
Non-cash investing activities: | |||||||
Equipment purchase accrual | $ | 4,543 | $ | 593 | |||
Notes receivable from sale of assets | 919 | 520 | |||||
Equipment sales receivables | 2,261 | 6,710 |
(1) | During the quarter ended March 31, 2017, the Company did not repurchase any shares of its Class A common stock. |
(2) | During the quarter ended March 31, 2017, the Company adopted the amendments to the Financial Accounting Standards Board's Accounting Standards Codification Topic 718, "Compensation – Stock Compensation," which were previously communicated via Accounting Standards Update 2016-09, "Improvements to Employee Share-based Payment Accounting." The amended guidance requires that cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. Retrospective application is required. |
(3) | During the quarter ended March 31, 2017, the Company adopted the amendments to the Financial Accounting Standards Board's Accounting Standards Codification Topic 718, "Compensation – Stock Compensation," which were previously communicated via Accounting Standards Update 2016-09, "Improvements to Employee Share-based Payment Accounting." The amended guidance requires that excess tax benefits be included in cash flows from operating activities and excluded from cash flows from financing activities in the statement of cash flows. The Company retrospectively adjusted the statement of cash flows for the quarter ended March 31, 2016 to align with the current period presentation by increasing cash flows from operating activities by $0.1 million and correspondingly decreasing cash flows from financing activities by $0.1 million, reflecting the amount of excess tax benefits previously presented for that period. |
25 |
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