-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SZxxTo8RXOdd/Pb58YQ46DE9Mfsnw8Rio2LWV2w8J9fprPf5vCLJmXQ4IL912v1b V7xEumxZ0gE50mr4xjw3pg== 0000950147-02-000682.txt : 20020515 0000950147-02-000682.hdr.sgml : 20020515 20020515151738 ACCESSION NUMBER: 0000950147-02-000682 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SWIFT TRANSPORTATION CO INC CENTRAL INDEX KEY: 0000863557 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 860666860 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18605 FILM NUMBER: 02651580 BUSINESS ADDRESS: STREET 1: 2200 SOUTH 75TH AVENUE CITY: PHOENIX STATE: AZ ZIP: 85043 BUSINESS PHONE: 6022699700 MAIL ADDRESS: STREET 1: 2200 SOUTH 75TH AVENUE CITY: PHOENIX STATE: AZ ZIP: 85043 10-Q 1 e-8483.txt QUARTERLY REPORT FOR QTR. ENDED 03/31/2002 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 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 Incorporation or Organization) Identification 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 (May 13, 2002) Common stock, $.001 par value: 86,398,336 shares PART I FINANCIAL INFORMATION PAGE NUMBER ------ Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2002 (unaudited) and December 31, 2001 3-4 Condensed Consolidated Statements of Earnings (unaudited) for the Three Month Periods Ended March 31, 2002 and 2001 5 Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Month Periods Ended March 31, 2002 and 2001 6-7 Notes to Condensed Consolidated Financial Statements 8-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 PART II OTHER INFORMATION Items 1, 2, 3, 4 and 5. Not applicable Item 6. Exhibits and Reports on Form 8-K 14 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) MARCH 31, DECEMBER 31, 2002 2001 ---------- ---------- (UNAUDITED) ASSETS Current assets: Cash $ 5,261 $ 14,151 Accounts receivable, net 276,735 248,725 Equipment sales receivable 14,552 2,107 Inventories and supplies 12,364 11,682 Prepaid taxes, licenses and insurance 31,494 26,881 Deferred income taxes 13,932 13,932 ---------- ---------- Total current assets 354,338 317,478 ---------- ---------- Property and equipment, at cost: Revenue and service equipment 1,388,682 1,401,646 Land 42,808 42,852 Facilities and improvements 207,197 197,681 Furniture and office equipment 66,958 66,319 ---------- ---------- Total property and equipment 1,705,645 1,708,498 Less accumulated depreciation and amortization 506,557 501,853 ---------- ---------- Net property and equipment 1,199,088 1,206,645 ---------- ---------- Investment in Transplace 6,324 7,517 Notes receivable from Trans-Mex 5,695 3,475 Other assets 15,654 12,081 Goodwill 8,900 8,900 ---------- ---------- $1,589,999 $1,556,096 ========== ========== See accompanying notes to condensed consolidated financial statements. CONTINUED 3 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) MARCH 31, DECEMBER 31, 2002 2001 ---------- ---------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 54,343 $ 57,229 Accrued liabilities 68,947 58,925 Current portion of claims accruals 45,370 48,416 Current portion of long-term debt 3,468 3,546 Current portion of obligations under capital leases 69,837 57,661 Borrowings under line of credit 136,500 Securitization of accounts receivable 118,000 116,000 ---------- ---------- Total current liabilities 496,465 341,777 ---------- ---------- Borrowings under line of credit 117,000 Long-term debt, less current portion 9,730 16,340 Obligations under capital leases 65,616 90,146 Claims accruals, less current portion 63,775 55,975 Deferred income taxes 201,520 195,605 Fair value of interest rate swaps 2,693 4,050 Stockholders' equity: Preferred stock, par value $.001 per share Authorized 1,000,000 shares; none issued Common stock, par value $.001 per share Authorized 150,000,000 shares; 89,539,567 and 89,049,519 shares issued at March 31, 2002 and December 31, 2001, respectively 89 89 Additional paid-in capital 254,744 249,410 Retained earnings 533,302 523,892 ---------- ---------- 788,135 773,391 Less: Treasury stock, at cost (3,157,850 shares) 37,935 37,935 Other equity items 253 ---------- ---------- Total stockholders' equity 750,200 735,203 ---------- ---------- Commitments and contingencies $1,589,999 $1,556,096 ========== ========== See accompanying notes to condensed consolidated financial statements. 4 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA) THREE MONTHS ENDED MARCH 31, ---------------------------- 2002 2001 --------- --------- Operating revenue $ 475,780 $ 509,594 Operating expenses: Salaries, wages and employee benefits 180,905 192,724 Operating supplies and expenses 41,652 44,384 Fuel 54,316 71,030 Purchased transportation 83,738 91,782 Rental expense 22,194 23,862 Insurance and claims 19,380 17,193 Depreciation and amortization 36,717 35,006 Communication and utilities 7,171 6,890 Operating taxes and licenses 11,955 13,046 --------- --------- Total operating expenses 458,028 495,917 --------- --------- Operating income 17,752 13,677 Other (income) expenses: Interest expense 2,307 12,996 Interest income (287) (290) Other 407 509 --------- --------- Other (income) expenses, net 2,427 13,215 --------- --------- Earnings before income taxes 15,325 462 Income taxes 5,915 203 --------- --------- Net earnings $ 9,410 $ 259 ========= ========= Basic earnings per share $ .11 $ .00 ========= ========= Diluted earnings per share $ .11 $ .00 ========= ========= See accompanying notes to condensed consolidated financial statements. 5 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2002 2001 -------- -------- Cash flows from operating activities: Net earnings $ 9,410 $ 259 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 36,646 35,159 Deferred income taxes 5,915 851 Provision for losses on accounts receivable 2,629 300 Amortization of deferred compensation 209 141 Fair market value of interest rate swaps (1,357) 3,040 Increase (decrease) in cash resulting from changes in: Accounts receivable (30,019) (5,165) Inventories and supplies (682) (21) Prepaid expenses (4,613) 160 Other assets 7,891 3,665 Accounts payable, accrued liabilities and claims accruals 9,605 5,458 -------- -------- Net cash provided by operating activities 35,634 43,847 -------- -------- Cash flows from investing activities: Proceeds from sale of property and equipment 22,074 12,778 Capital expenditures (65,683) (40,392) Repayment of note receivable 1,000 3,200 Notes receivable (11,604) Payments received on equipment sale receivables 2,107 5,799 -------- -------- Net cash used in investing activities (52,106) (18,615) -------- --------
See accompanying notes to condensed consolidated financial statements. CONTINUED 6 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2002 2001 -------- -------- Cash flows from financing activities: Repayments of long-term debt (19,043) (9,463) Borrowings under line of credit 75,500 Repayments of borrowings under line of credit (56,000) (18,545) Change in borrowings under accounts receivable securitization 2,000 (12,000) Proceeds from issuance of common stock under stock option and stock purchase plans 5,125 1,473 -------- -------- Net cash provided by (used in) financing activities 7,582 (38,535) -------- -------- Net decrease in cash (8,890) (13,303) Cash at beginning of period 14,151 19,638 -------- -------- Cash at end of period $ 5,261 $ 6,335 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 3,919 $ 5,358 Income taxes $ 3,099 Supplemental schedule of noncash investing and financing activities: Equipment sales receivables $ 14,552 $ 2,749 Note receivable from property sale $ 1,715 Direct financing for purchase of equipment $ 2,421
See accompanying notes to condensed consolidated financial statements. 7 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. These consolidated financial statements include the accounts of M.S. Carriers, Inc. ("M.S. Carriers"), which merged with a subsidiary of the Company on June 29, 2001 (the "Merger"). Upon completion of the Merger, M.S. Carriers became a wholly owned subsidiary of the Company. The Merger was accounted for as a pooling of interests. Accordingly, the historical financial statements presented herein have been restated to include the financial position, results of operations, and cash flows of M.S. Carriers. 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, 2001. 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. Receivable - Trans-Mex The Company has advanced $5.7 million to Trans-mex, Inc. S.A. de C. V., a Mexican corporation of which the Company owns 49%. These loans, which are secured by equipment, bear interest at prime plus 2% with monthly payments of interest plus amortization of the principal over five years. 8 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 4. Earnings Per Share The computation of basic and diluted earnings per share is as follows:
THREE MONTHS ENDED MARCH 31, ---------------------------- 2002 2001 ------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net earnings $ 9,410 $ 259 ======= ======= Weighted average shares: Common shares outstanding for basic earnings per share 86,108 82,335 Equivalent shares issuable upon exercise of stock options 1,860 2,217 ------- ------- Diluted shares 87,968 84,552 ======= ======= Basic earnings per share $ .11 $ .00 ======= ======= Diluted earnings per share $ .11 $ .00 ======= =======
Note 5. Accounting Standards Adopted by the Company The Company adopted Statement of Financial Standards No. 142 "Goodwill and Other Intangible Assets" on January 1, 2002. This standard eliminates amortization of goodwill and replaces it with a test for impairment. The Company has $8.9 million of goodwill. The Company amortized $359,000 of goodwill for the three months ended March 31, 2001. 9 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES ITEM 2. 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 cause actual results or events to differ materially from those expressed in forward-looking statements. Additional factors that could contribute to or cause such differences 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. POOLING OF INTERESTS On June 29, 2001, the Company acquired M.S. Carriers, Inc. ("M.S. Carriers") through the merger of a wholly owned subsidiary of the Company with and into M.S. Carriers (the "Merger"). Upon completion of the Merger, M.S. Carriers became a wholly owned subsidiary of the Company. The Merger has been accounted for as a pooling of interests. Accordingly, all historical financial data discussed below has been restated to include the financial position, results of operations, and cash flows of M.S. Carriers. OVERVIEW See Note 5 to the financial statements for discussion of accounting standards adopted by the Company. 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. The Company expanded its fleet with an increase of 95 tractors to 15,486 tractors as of March 31, 2002 up from 15,391 tractors as of March 31, 2001. The owner operator portion of the Company's fleet decreased to 3,204 as of March 31, 2002 from 3,463 as of March 31, 2001. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001 Operating revenue decreased $33.8 million or 6.6% to $475.8 million for the three months ended March 31, 2002 from $509.6 million for the corresponding period of 2001. The first quarter of 2002 includes $2.7 million of fuel surcharge revenue versus $18.5 million in 2001. Excluding this fuel surcharge revenue, the decrease in revenues would have been 3.7%. The decrease in operating revenue, net of the impact of surcharge revenue, primarily resulted from the reduced number of trucks operated by the Company during the first quarter of 2002 as compared to the same period in 2001. The Company began the 10 first quarter of 2002 with approximately 650 trucks without drivers. The number of unmanned trucks has since been reduced to approximately 300. In addition, the Company operated during the first quarter of 2002 with more than 300 fewer owner operators than the first quarter of 2001. The Company's operating ratio (operating expenses expressed as a percentage of operating revenue) for the first quarter of 2002 was 96.3% compared to 97.3% in the comparable period of 2001. The Company's operating ratio for the three months ended March 31, 2002 decreased as a result of 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 14.95% and 15.72% and average loaded linehaul revenue per mile (excluding fuel surcharge) was $1.4171 and $1.4178 in the first quarter of 2002 and 2001, respectively. Salaries, wages and employee benefits represented 38.0% of operating revenue for the three months ended March 31, 2002 compared with 37.8% in 2001. Although the majority of our salaries, wages and employee benefits are variable, the fixed portion will cause an increase in this percentage when operating revenue decreases. 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 needed in order to attract and retain drivers, the Company's results of operations would be negatively affected to the extent that corresponding freight rate increases were not obtained. Fuel as a percentage of operating revenue was 11.4% for the first quarter of 2002 versus 13.9% in 2001. The decrease is primarily due to actual fuel cost per gallon decreasing by approximately 28 cents per gallon (21%) in the first quarter of 2002 versus the first quarter of 2001. Increases in fuel costs, to the extent not offset by rate increases or fuel surcharges, would 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. Purchased transportation as a percentage of operating revenue was 17.6% for the three months ended March 31, 2002 compared to 18.0% in 2001. The decrease is primarily due to a reduction in the owner operator portion of the fleet. Rental expense as a percentage of operating revenue was 4.7% for the first quarter of 2002 and 2001. At March 31, 2002 and 2001, leased tractors represented 44% and 48%, respectively, of the 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 gains of $403,000 in the first quarter of 2002 and $19,000 during the first quarter of 2001 from the sale of leased tractors. Depreciation and amortization expense as a percentage of operating revenue was 7.7% in the first quarter of 2002 versus 6.9% in the first quarter of 2001. The Company includes gains and losses from the sale of owned revenue equipment in depreciation and amortization expense. During the three month period ended March 31, 2002, net gains from the sale of revenue equipment reduced depreciation and amortization expense by approximately $1.4 million compared to approximately $1.1 million in the first quarter of 2001. Exclusive of gains, which reduced this expense, depreciation and amortization expense, as a percentage of operating revenue was 8.0% and 7.1% in the first quarter of 2002 and 2001, respectively. This increase is primarily due to a greater percentage of the Company tractors in 2002 being owned versus leased. 11 Insurance and claims expense represented 4.1% and 3.4% of operating revenue in the first quarter of 2002 and 2001, respectively. Included in the first quarter of 2002 are $4.0 million of increased insurance premiums over the same quarter of the prior year, approximately .8% of operating revenue. The Company expects this percentage will range between 4% and 5% this year. 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. Insurance and claims expense will vary as a percentage of operating revenue from period to period based on the frequency and severity of claims incurred in a given period as well as changes in claims development trends. Interest expense decreased to $2.3 million in 2002 from $13.0 million in 2001. This decrease was due to lower interest rates, a shift in borrowings from more costly M.S. Carriers debt to less costly Swift debt, and decreased borrowings under long term debt and capital lease obligations. In addition, the first quarter of 2002 includes the benefit of a $1.3 million reduction in market value of interest rate derivative agreements of M.S. Carriers while the first quarter of 2001 includes a $3.0 million expense for the increase in the market value of the interest rate derivative agreements. 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, proceeds from the accounts receivable securitization, 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 $35.6 million in the first three months of 2002 compared to $43.8 million in 2001. The decrease is primarily attributable to a larger increase in accounts receivable offset by an increase in net earnings, an increase in deferred taxes, a positive change in the fair market value of the interest rate swaps, and an increase in accounts payable, accrued liabilities and claims accruals. Net cash used in investing activities increased to $52.1 million in the first three months of 2002 from $18.6 million in 2001. The increase is primarily due to increased capital expenditures and an increase in notes receivable offset by increased proceeds from the sale of property and equipment. As of March 31, 2002, the Company had commitments outstanding to acquire replacement and additional revenue equipment for approximately $390 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 three months of 2002, the Company incurred approximately $10.5 million of non-revenue equipment capital expenditures. These expenditures were primarily for facilities and equipment. The Company anticipates that it will expend approximately $46 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. 12 The funding for capital expenditures has been and is anticipated to continue to be from a combination of cash provided by operating activities, amounts available under the Company's line of credit, accounts receivable securitization 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 $7.6 million in the first three months of 2002 compared to $38.5 million used in financing activities in 2001. This increase is primarily due to increased borrowings under the line of credit and increased proceeds under the accounts receivable securitization, offset by increased repayments of long-term debt. Management believes it will be able to finance its needs for working capital, facilities improvements and expansion, as well as anticipated fleet growth, with cash flows from future operations, borrowings available under the line of credit, accounts receivable securitization 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. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has interest rate exposure arising from the Company's line of credit, approximately $79 million of capital lease obligations and accounts receivable securitization, all of which have variable interest rates. These variable interest rates are impacted by changes in short-term interest rates. The Company manages interest rate exposure through its mix of variable rate debt, fixed rate lease financing and $70 million notional amount of interest rate swaps. The fair value of the Company's long-term debt approximates carrying values. Assuming the current level of borrowings, a hypothetical one-percentage point increase in interest rates would increase the Company's interest expense by $2.6 million. 13 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 3.1 - Amended and Restated Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement No. 333-85940 on Form S-8) Exhibit 3.2 - Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 of the Registrant's Registration Statement No. 33-66034 on Form S-3) Exhibit 10.18 - Swift Transportation Corporation Deferred Compensation Plan 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 March 31, 2002. SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SWIFT TRANSPORTATION CO., INC. Date: May 14, 2002 /s/ William F. Riley III ---------------------------------------- (Signature) William F. Riley III Senior Executive Vice President and Chief Financial Officer 14 EX-10.18 3 ex10-18.txt SWIFT DEFERRED COMPENSATION PLAN Exhibit 10.18 SWIFT TRANSPORTATION CORPORATION DEFERRED COMPENSATION PLAN WHEREAS, M.S. Carriers, Inc. ("Subsidiary"), a subsidiary of Swift Transportation Corporation, previously adopted the M.S. Carriers Deferred Compensation Plan (the "Plan"), which Plan was previously restated effective August 1, 1999; and WHEREAS, Subsidiary became a wholly owned subsidiary of Swift Transportation Corporation, a Nevada Corporation ("Employer") as of June 29, 2001; and WHEREAS, effective January 1, 2002, the Employer adopted the First Amendment to the restated Plan; and WHEREAS, the Employer now intends to amend and completely restate the Plan again, effective February 1, 2002, and to provide for the continuation of the Plan on the terms and provisions hereinafter set forth for all of its employees, and intends, at the same time, to restate the accompanying trust agreement (the "Trust"); WITNESSETH: In consideration of the above recitals, and in order to enhance the retirement security of certain of its highly compensated employees, the Employer hereby adopts and amends the Plan in its entirety as follows: INTRODUCTION AND PURPOSE OF THE PLAN The Plan is intended to be a nonqualified, unfunded (except for the accompanying Trust) plan of deferred compensation for tax purposes and for purposes of Title I of the Employer Retirement Income Security Act of 1974, as amended ("ERISA"), and is intended to benefit only a select group of management or highly compensated employees of the Employer. The purpose of the Plan is to enable employees who become eligible for coverage under the Plan to enhance their retirement security by permitting them to enter into agreements with the Employer to defer the receipt of compensation. The Employer will pay benefits under the Plan only in accordance with the terms and conditions set forth in the Plan. I. DEFINITIONS 1.01 "ACCOUNT" means the account established by the Employer under the Plan for each Participant. 1.02 "ACCRUED BENEFIT" means the total dollar amount credited to a Participant's Account. 1.03 "BENEFICIARY" means the person or persons entitled to receive Plan benefits in the event of a Participant's death. 1.04 "CODE" means the Internal Revenue Code of 1986, as amended. 1.05 "COMPENSATION" means the compensation of a Participant paid by the Employer during the Taxable Year which is reported as wages on the Participant's Form W-2, including regular salary, commissions, bonuses, overtime or other premium pay, but excluding reimbursements or other expense allowances, fringe benefits (whether cash or non-cash), non-cash compensation, stock options (whether qualified or nonqualified), deferred compensation and any compensation received by an Employee prior to becoming a Participant in the Plan. Notwithstanding the foregoing, Compensation shall also include all amounts excludable from a Participant's gross income under Code Sections 125, 402(e)(3), 402(h) and 408(p) contributed by the Employer, at the Participant's election to the Swift Transportation Co., Inc. Retirement Plan or any cafeteria plan maintained by the Employer or any affiliate of the Employer. 1.06 "DISABILITY" means Total and Permanent Disability as defined in the Swift Transportation Co., Inc. Retirement Plan. 1.07 "EFFECTIVE DATE" of the Plan is July 1, 1997. The Effective Date of this Restatement is February 1, 2002. 1.8 "ELECTIVE DEFERRAL" means Compensation elected by a Participant to be deferred into the Participant's Account under the Plan. 1.9 "EMPLOYEE" means an Employee of the Employer. 1.10 "EMPLOYER" means Swift Transportation Corporation, a Nevada corporation. 1.11 "EMPLOYER CONTRIBUTION" means amounts contributed by the Employer or credited by the Employer to an Account under the Plan. 1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.13 "KEY EMPLOYEE" means any Employee who is employed by the Employer in a management or sales position and who meets the definition of "highly-compensated employee" under Section 414(q) of the Code, as that Section may be amended from time to time. 1.14 "PARTICIPANT" means a Key Employee who meets the eligibility requirements of Section 2.01. 1.15 "PLAN" means the Swift Transportation Corporation Deferred Compensation Plan. 1.16 "SUBSIDIARY" means M.S. Carriers, Inc., a wholly owned subsidiary of Employer and the original sponsor of the Plan. 1.17 "TAXABLE YEAR" means the 12 consecutive month period ending each December 31. 1.18 "TRUST" means the Swift Transportation Corporation Deferred Compensation Trust, as amended from time to time. 1.19 "TRUSTEE" means the person persons or entity designated under the Trust as the trustee, and any duly appointed successor or successors thereto. 1.20 "VALUATION DATE" means the last day of each Taxable Year and such other dates as the Employer may determine. 2 II. PARTICIPATION 2.01 ELIGIBILITY. Each Employee who was eligible to participate in this Plan immediately prior to the Effective Date of this Restatement shall remain eligible to participate, provided he or she continues to remain in the employ of the Employer and continues to meet the definition of Key Employee under the Plan. Each other Employee who meets the definition of Key Employee shall be eligible to participate in the Plan as of the later of (i) the effective date of this Restatement (February 1, 2001, but in no event shall Compensation prior to March 1, 2002 be taken into account); or (ii) each January 1 following the Key Employee's date of hire or date of promotion to a position meeting the definition of Key Employee, provided that he or she remains in the employ of the Employer on such date of eligibility. Each Employee who meets the eligibility requirements may enroll and begin participation in the Plan by completing a Compensation Deferral Agreement setting forth that Employee's Elective Deferral and submitting it to the Employer. 2.02 ELECTIVE DEFERRALS. With respect to the 2002 Plan Year, any eligible Key Employee who was not a prior Participant in the Plan shall, prior to March 1, 2002, and for all other Participants and all other Taxable Years any eligible Key Employee shall, prior to each January 1, enter into an Elective Deferral Agreement with the Employer on forms provided by the Employer for this purpose, specifying (in whole percentages only) the percentage of such Employee's Compensation (up to a maximum of 50% of Compensation) that the Employee wishes to defer for such Taxable Year. For Plan Years beginning after December 31, 2002, each eligible Employee may specify what percentage of that Employee's Compensation (excluding bonuses) which the Employee wishes to defer and shall also separately elect which percentage, if any, of that Employee's bonus for the Taxable Year that the Employee wishes to defer (but not in excess of 50%), provided that an Employee may further elect to establish a maximum dollar amount of the bonus which is to be deferred, irrespective of the percentage of bonus chosen (provided that in no event may the maximum percentage of the bonus deferred exceed 50% of such Employee's bonus). A Participant's Elective Deferral Election remains in effect for the duration of the Taxable Year for which the Participant makes the election and is irrevocable for such Taxable Year. For all succeeding Taxable Years, the Participant must enter into a new Elective Deferral Agreement. 2.03 EMPLOYER CONTRIBUTIONS. Effective for Taxable Years beginning January 1, 2002, the Employer will not make any matching contributions to the Plan. 2.04 ADDITIONAL CONDITIONS. In order to participate in this Plan, a Key Employee must continue to remain in the employ of the Employer and must have, by separate deferral agreement, elected to defer the maximum amount permissible under the Code to the Swift Transportation Co., Inc. Retirement Plan. III. VESTING AND TRUST 3.01 VESTING. A Participant shall at all times be fully vested with respect to his Accrued Benefit under the Plan. 3.02 TRUST. The Employer may, at its sole discretion, contribute all Elective Deferrals to the Trust which shall be administered pursuant to the terms of the Trust. Notwithstanding the foregoing, the obligation of the Employer to pay benefits hereunder is unsecured, and Participants and any of their beneficiaries who are entitled to benefits under this Plan are general unsecured creditors of the Employer. The terms of the Plan constitute a mere promise of the Employer to make benefit payments in the future. The Trust created by the Employer and any assets held by the Trust to assist the Employer 3 in meeting its obligations under the Plan shall conform to the terms of the model trust, as described in Revenue Procedure 92-64. IV. BENEFIT PAYMENTS 4.01 TERMINATION. Except as otherwise permitted under Section 4.03, the Plan will pay to the Participant the vested Accrued Benefit held in the Participant's Account following the earlier of a Participant's termination of employment with the Employer or the attainment of age 65. Termination of employment for these purposes shall include a Participant's severance of employment, death or disability. Payment will commence at the time and in the form and method specified under Section 4.02. In the event of a Participant's death, the Plan will pay to the Participant's Beneficiary the Participant's vested Accrued Benefit or any remaining amount thereof if benefits to the Participant had already commenced. 4.02 PARTICIPANT ELECTION OF TIMING AND METHOD. A Participant's vested Accrued Benefit is payable in the form of cash. A Participant may elect the timing and method of payment as described in this Section 4.02. At the time of the Participant's initial participation in the Plan, the Participant may elect any time for commencement and method of payment permitted on the form designated for that purpose by the Employer. Until the Plan completely distributes a Participant's vested Accrued Benefit, the Plan will continue to credit the Participant's Account with interest, investment earnings or gain, and will charge the Participant's Account for loss, in accordance with Section 5.02. A Participant's election as to timing and method of payment is irrevocable. The Employer reserves the right to make a single lump sum payment of any Participant Account which does not exceed $10,000, including any remaining installment not exceeding such amount. A Participant may elect distribution of benefits in a single lump sum payment of a Participant's Accrued Benefit or annual installments over a period of time not to exceed ten years. The amount of each installment shall be equal to the balance of the Participant's Accrued Benefit immediately prior to the installment divided by the number of installments remaining to be paid. An election as to form of distribution shall become irrevocable upon the occurrence of an event which allows for a distribution of benefits pursuant to this Article IV. A Participant may elect the form of benefit to be received by notifying the Administrator in writing of his or her election. Such election shall be made at the time of the initial election to participate in the Plan and shall apply to all Elective Deferrals under the Plan until changed by the Participant. A Participant shall be permitted to change this election during the last thirty days of each Taxable Year. However, any change in election as to the form of distribution shall not become effective until the expiration of one year after the date the Employee receives the written request, in such form as may be acceptable to the Employer, of the change to the election. If a Participant fails to timely elect a payment method, the Employer will pay the Participant's vested Accrued Benefit in a single lump sum payment within 30 days after termination of employment, or at the option of the Employer, in 10 equal annual installments commencing within 30 days after termination of employment. 4.03 UNFORESEEABLE EMERGENCY. Notwithstanding anything contained in this Article IV to the contrary, in the event of an "unforeseeable emergency" as defined herein, a Participant may obtain a distribution of all or any part of his or her Accrued Benefit. An "unforeseeable emergency" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. The circumstances that will constitute an "unforeseeable emergency" will depend upon the facts of each case, but, in any event, payment may not be made in the event that such hardship is or may be relieved: 4 (i) through reimbursement or compensation by insurance or otherwise; or (ii) by liquidation of the Participant's assets, to the extent that liquidation of such assets would not itself cause severe financial hardship. 4.04 WITHHOLDING. The Employer will withhold from any payment made under the Plan all applicable taxes, and any and all other amounts required to be withheld under federal, state or local law. 4.05 BENEFICIARY DESIGNATION. A Participant may designate a Beneficiary (including one or more primary and contingent Beneficiaries) to receive payment of any Accrued Benefit remaining in the Participant's Account at death. The Employer will provide each Participant with a form for this purpose and no designation will be effective unless made on that form and delivered to the Employer. A Participant may modify or revoke an existing designation of Beneficiary by executing and delivering a new designation to the Employer. In the absence of a properly designated Beneficiary, the Employer will pay the deceased Participant's Accrued Benefit to the Participant's surviving spouse and if none, to the Participant's estate. If a Beneficiary is a minor or otherwise reasonably determined by the Employer to be legally incompetent, the Employer may pay the Participant's Accrued Benefit to a guardian, trustee or other proper legal representative of the Beneficiary. Payment by the Employer of the deceased Participant's Accrued Benefit to the Beneficiary or proper legal representative of the Beneficiary completely discharges the Employer and Plan of all further obligations under the Plan. V. TRUST ELECTION AND INVESTMENTS 5.01 TRUST ELECTION. The Employer intends this Plan to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of management or highly compensated employees within the meaning of ERISA and the Code and intends this Plan to be exempt from Parts 2, 3 and 4 of Title I of ERISA. No Participant, Beneficiary or successor thereto has any legal or equitable right, interest or claim to any property or assets of the Employer, including assets held in any Account under the Plan. As such, no Participant or Beneficiary is entitled to distribution of any asset held under the Participant's Account except for cash payment of the Participant's Accrued Benefit in accordance with the terms of the Plan. The Employer's obligation to pay Plan benefits is an unsecured promise to pay. The Employer will establish a Trust which shall meet the requirements of the model trust issued by the Internal Revenue Service under Rev. Proc. 92-64, or any successor thereto. All of the investments made by the Employer as selected by a Participant shall be held for the Employer's benefit in providing the Employer's obligations under this Plan, provided, however, any assets held in the Plan or Trust remain subject to claims of the Employer's general creditors and no Participant or Beneficiary has any priority to assets in the Plan or Trust over any general unsecured creditor of the Employer. 5.02 INVESTMENTS. The Trust investment provisions shall apply to all Plan contributions. Each Participant shall direct the investment of his or her Account. Such investment direction shall be limited by those investments or funds selected by the Employer and as provided for under the Trust. 5.03 SEPARATE ACCOUNTS. The Employer shall establish and maintain accounts on behalf of each Participant. Each Participant's Account shall be valued at fair market value as of the last day of the Taxable Year and such other dates as are necessary for proper administration of the Plan, and each Participant shall receive a written accounting of his or her Account Balance at least annually. Each Participant's Account shall reflect his or her aggregate Elective Deferrals and any earnings or losses attributable to such amounts, and shall be reduced by 5 administrative, investment, taxes or other fees necessary for the administration which are not paid by the Employer. 5.04 INVESTMENT ALLOCATIONS. Each Participant shall designate among the available investment options designated by the Employer how his Account should be allocated. Such investment allocation request shall remain in effect for all subsequent Elective Deferrals unless changed by the Participant. A Participant may change his or her investment allocation by submitting a written request to the Employer on such form and at such times as may be required or allowed by the Employer. Such changes shall be effective as soon as administratively feasible after the Employer receives such written request. To the extent an investment option is directed, the Participant's Account shall be deemed invested in that option, and shall be adjusted for gain and loss as if invested in such option. VI. MISCELLANEOUS 6.01 NO ASSIGNMENT. No Participant or Beneficiary has the right to anticipate, alienate, assign, pledge, encumber, sell, transfer, mortgage or otherwise in any manner convey in advance of actual receipt, the Participant's Account. Prior to actual payment, a Participant's Account is not subject to the debts, judgments or other obligations of the Participant or Beneficiary and is not subject to attachment, seizure, garnishment or other process applicable to the Participant or Beneficiary. 6.02 NOT EMPLOYMENT CONTRACT. This Plan is not a contract for employment between the Employer and any Employee who is or becomes a Participant. This Plan does not entitle any Participant to continued employment with the Employer and benefits under the Plan are limited to cash payment of a Participant's Accrued Benefit in accordance with the terms of the Plan. 6.03 AMENDMENT AND TERMINATION. The Employer reserves the right to amend or to terminate the Plan at any time, including the right to terminate future contributions to the Plan by or for any Participant; provided, any amendment or termination will not reduce the Accrued Benefit held in any Participant Account at the date of the amendment or termination. Unless the Employer otherwise determines, termination of the Plan does not accelerate or in any way affect the timing or method of payment of any Participant's Accrued Benefit under the Plan. 6.04 SEVERABILITY. If any provision of the Plan is determined by a proper authority to be invalid, the remaining portions of the Plan will continue in effect and be interpreted consistent with the elimination of the invalid provision. 6.05 NOTICE AND ELECTIONS. Any notice given or election made under the Plan must be in writing and delivered or mailed by certified mail, to the Employer or to the Participant or Beneficiary as appropriate. The Employer will prescribe the form of any Plan notice or election to be given or made by Participants. Any notice or election will be deemed given as of the date of delivery, or if given by certified mail, as of 3 business days after mailing. 6.06 ADMINISTRATION. The Employer will administer and interpret the Plan, including making determination of the Accrued Benefit due any Participant or Beneficiary under the Plan. As a condition of receiving any Plan benefit to which a Participant or Beneficiary otherwise may be entitled, a Participant or Beneficiary will provide such information and perform such other acts as the Employer reasonably may request. The Employer may retain agents to assist in the administration of the Plan and may delegate to agents such duties as it sees fit. The decision of the Employer or its designee concerning the administration of the Plan is final and binding upon all persons having any interest in the 6 Plan. The Employer will indemnify, defend and hold harmless any Employee designated by the Employer to assist in the administration of the Plan from any and all loss, damage, claims, expense or liability with respect to this Plan except claims arising from the intentional acts or gross negligence of the Employee. 6.07 ACCOUNT STATEMENTS. The Employer from time to time, but at least annually, will provide each Participant with a statement of the Participant's Accrued Benefit as of the most recent Valuation Date. The Employer also will provide Account statements to any Beneficiary of a deceased Participant with the deceased Participant's Accrued Benefit remaining in the Plan. 6.08 COSTS AND EXPENSES. Except for investment charges which will be borne by the Accounts to which they pertain, the Employer may, at its discretion, pay the costs, expenses and fees associated with the operation of the Plan, excluding those incurred by Participants or Beneficiaries. 6.09 NO REPRESENTATION. The Employer does not represent or guarantee that any particular federal or state income or other tax consequence will result from participation in the Plan. A Participant should consult with professional tax advisors to determine the tax consequences of his or her participation. Furthermore, the Employer does not represent or guarantee successful investment of the Elective Deferrals and shall not be required to restore any loss which may result from the investment or lack of investment. 6.10 GOVERNING LAW. This Plan shall be construed in accordance with the applicable federal laws governing nonqualified plans of deferred compensation, and to the extent otherwise applicable, the Plan and the Trust shall be construed, administered and enforced according to the laws of the State of Arizona. IN WITNESS WHEREOF, the Employer has caused this Restated Plan to be signed by its duly authorized officer as of this 1st day of February, 2002. SWIFT TRANSPORTATION CORPORATION By: /s/ William F. Riley III ---------------------------------- William F. Riley III Senior Executive Vice-President and Chief Financial Officer 7 EX-99 4 ex-99.txt SAFE HARBOR COMPLIANCE STATEMENT 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. As to Swift's business and financial performance generally, 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 manufacturing) 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; (x) a significant reduction in or termination of the Company's trucking services by a key customer; (xi) the loss of key executives; (xii) new or more comprehensive regulations with respect to fuel emissions, hours in service, or ergonomics; (xiii) a spill or other accident involving hazardous substances; and (xiv) the depressed market for used equipment, particularly tractors. With respect to Swift's merger with M.S. Carriers, these factors include, but are not limited to, the following: (i) the risk that the revenue and other synergies and cost savings anticipated to result from the merger may not be fully realized or may take longer to realize than expected; (ii) the difficulty the stock market may have in valuing the business model of the combined company; and (iii) disruption from the merger making it more difficult to maintain relationships with customers, employees, or suppliers. 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. -----END PRIVACY-ENHANCED MESSAGE-----