-----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, AxjTFycaZf9jy7z1KDWk9tpXzXTZRyKu0WYaVqDDJGGO9CV9oeTKNoVgna3CVi7T t0mVBxUO1JU5dgzwSuBB5Q== 0000950147-02-001453.txt : 20021114 0000950147-02-001453.hdr.sgml : 20021114 20021113205604 ACCESSION NUMBER: 0000950147-02-001453 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 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: 02821705 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-9216.txt QUARTERLY REPORT FOR QTR ENDED 09/30/2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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 (November 12, 2002) Common stock, $.001 par value: 83,639,051 shares PART I PAGE FINANCIAL INFORMATION NUMBER ------ Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2002 (unaudited) and December 31, 2001 3-4 Condensed Consolidated Statements of Earnings (unaudited) for the Three and Nine Month Periods Ended September 30, 2002 and 2001 5 Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Month Periods Ended September 30, 2002 and 2001 6-7 Notes to Condensed Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-16 Item 3. Quantitative and Qualitative Disclosures about Market Risk 17 Item 4. Controls and Procedures 17 PART II OTHER INFORMATION Items 1, 2, 3, 4 and 5. Not applicable Item 6. Exhibits and Reports on Form 8-K 18 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------- ----------- (UNAUDITED) ASSETS Current assets: Cash $ 20,790 $ 14,151 Accounts receivable, net 272,753 248,725 Equipment sales receivable 14,788 2,107 Account receivable, related party 5,261 Inventories and supplies 14,049 11,682 Prepaid taxes, licenses and insurance 10,908 26,881 Deferred income taxes 17,932 13,932 ----------- ----------- Total current assets 356,481 317,478 ----------- ----------- Property and equipment, at cost: Revenue and service equipment 1,449,583 1,401,646 Land 42,758 42,852 Facilities and improvements 222,124 197,681 Furniture and office equipment 69,185 66,319 ----------- ----------- Total property and equipment 1,783,650 1,708,498 Less accumulated depreciation and amortization 532,393 501,853 ----------- ----------- Net property and equipment 1,251,257 1,206,645 ----------- ----------- Investment in Transplace 5,467 7,517 Notes receivable from Trans-Mex 6,082 3,475 Deferred legal fees 19,011 Other assets 14,367 12,081 Goodwill 8,900 8,900 ----------- ----------- $ 1,661,565 $ 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)
SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------- ------------ (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 66,938 $ 57,229 Accrued liabilities 66,863 58,925 Current portion of claims accruals 66,072 48,416 Current portion of long-term debt 3,420 3,546 Current portion of obligations under capital leases 69,047 57,661 Borrowings under line of credit 113,000 Securitization of accounts receivable 171,000 116,000 ----------- ----------- Total current liabilities 556,340 341,777 ----------- ----------- Borrowings under line of credit 117,000 Long-term debt, less current portion 9,502 16,340 Obligations under capital leases 44,421 90,146 Claims accruals, less current portion 64,563 55,975 Deferred income taxes 224,345 195,605 Fair value of interest rate swaps 9,952 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 200,000,000 shares; 89,868,777 and 89,049,519 shares issued at September 30, 2002 and December 31, 2001, respectively 90 89 Additional paid-in capital 259,900 249,410 Retained earnings 567,324 523,892 ----------- ----------- 827,314 773,391 Less: Treasury stock, at cost (5,277,252 and 3,157,850 shares, at September 30, 2002 and December 31, 2001, respectively) 74,872 37,935 Other equity items 253 ----------- ----------- Total stockholders' equity 752,442 735,203 ----------- ----------- Commitments and contingencies $ 1,661,565 $ 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 NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Operating revenue $ 536,955 $ 536,379 $ 1,541,330 $ 1,581,528 Operating expenses: Salaries, wages and employee benefits 201,911 193,990 574,385 584,786 Operating supplies and expenses 49,678 49,450 141,377 137,116 Fuel 67,576 70,188 184,885 214,386 Purchased transportation 91,457 92,141 264,532 276,462 Rental expense 20,329 24,850 63,679 74,029 Insurance and claims 17,280 24,161 56,374 66,075 Depreciation and amortization 35,985 36,123 110,885 105,430 Communication and utilities 6,938 7,360 20,675 21,348 Operating taxes and licenses 12,200 12,913 37,419 38,893 ------------ ------------ ------------ ------------ Total operating expenses 503,354 511,176 1,454,211 1,518,525 ------------ ------------ ------------ ------------ Operating income 33,601 25,203 87,119 63,003 Other (income) expenses: Interest expense 8,894 10,377 17,971 29,464 Interest income (1,064) (388) (1,715) (939) Other (159) 8,983 811 9,568 ------------ ------------ ------------ ------------ Other (income) expenses, net 7,671 18,972 17,067 38,093 ------------ ------------ ------------ ------------ Earnings before income taxes 25,930 6,231 70,052 24,910 Income taxes 9,590 3,444 26,620 10,733 ------------ ------------ ------------ ------------ Net earnings $ 16,340 $ 2,787 $ 43,432 $ 14,177 ============ ============ ============ ============ Basic earnings per share $ .19 $ .03 $ .50 $ .17 ============ ============ ============ ============ Diluted earnings per share $ .19 $ .03 $ .50 $ .17 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. 5 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 2002 2001 ---------- ---------- Cash flows from operating activities: Net earnings $ 43,432 $ 14,177 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 104,732 106,027 Deferred income taxes 24,740 407 Provision for losses on accounts receivable 4,729 1,125 Amortization of deferred compensation 803 516 Fair market value of interest rate swaps 5,902 3,652 EASO impairment adjustment 10,447 Impairment of property 3,100 Amortization of deferred legal fees 2,119 Increase (decrease) in cash resulting from changes in: Accounts receivable (17,979) (36,407) Inventories and supplies (2,367) (2,393) Prepaid expenses 15,973 13,720 Other assets (15,085) (2,039) Accounts payable, accrued liabilities and claims accruals 42,837 38,915 ---------- ---------- Net cash provided by operating activities 212,936 148,147 ---------- ---------- Cash flows from investing activities: Proceeds from sale of property and equipment 73,520 41,050 Capital expenditures (254,644) (156,281) Repayment of note receivable 1,000 3,200 Notes receivable (10,727) 851 Payments received on equipment sale receivables 2,107 5,799 ---------- ---------- Net cash used in investing activities (188,744) (105,381) ---------- ----------
See accompanying notes to condensed consolidated financial statements. CONTINUED 6 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 2002 2001 ---------- ---------- Cash flows from financing activities: Repayments of long-term debt (41,304) (81,432) Borrowings under line of credit 163,500 125,000 Repayment of borrowings under line of credit (167,500) (131,000) Change in borrowings under accounts receivable securitization 55,000 (1,000) Purchases of treasury stock (36,937) Proceeds from public offering 20,064 Proceeds from issuance of common stock under stock option and stock purchase plans 9,688 17,858 ---------- ---------- Net cash used in financing activities (17,553) (50,510) ---------- ---------- Net increase (decrease) in cash 6,639 (7,744) Cash at beginning of period 14,151 19,638 ---------- ---------- Cash at end of period $ 20,790 $ 11,894 ========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 10,589 $ 26,137 Income taxes $ 2,318 Supplemental schedule of noncash investing and financing activities: Equipment sales receivables $ 27,796 $ 1,959 Note receivable from property sale $ 1,715
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. 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 $6.1 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 NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2002 2001 2002 2001 -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net earnings ................................................ $ 16,340 $ 2,787 $ 43,432 $ 14,177 ======== ======== ======== ======== Weighted average shares: Common shares outstanding for basic earnings per share ...... 85,796 84,799 86,107 83,249 Equivalent shares issuable upon exercise of stock options ... 1,227 1,944 1,528 1,990 -------- -------- -------- -------- Diluted shares .............................................. 87,023 86,743 87,635 85,239 ======== ======== ======== ======== Basic earnings per share .................................... $ .19 $ .03 $ .50 $ .17 ======== ======== ======== ======== Diluted earnings per share .................................. $ .19 $ .03 $ .50 $ .17 ======== ======== ======== ========
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 and $1,077,000 of goodwill for the three and nine months ended September 30, 2001, respectively. Basic earnings per share would have been $.04 and $.18 per share for the three months and nine months ended September 30, 2001 and diluted earnings per share would have been $.04 and $.18 per share for the three months and nine months ended September 30, 2001 without goodwill amortization. Note 6. Settlement of Litigation In June 2002, the Company entered into a settlement agreement with an insurance company. Pursuant to this settlement, the insurance company agreed to provide certain insurance coverage, at no cost to the Company, through December 2004 in exchange for the Company releasing all claims that were the subject of the litigation. The Company will recognize this settlement amount as a reduction of insurance expense as the insurance coverage is provided during the period from July 1, 2002 through December 31, 2004. In addition, the Company deferred the $21.1 million of legal expenses, which were earned pursuant to a contingent fee arrangement based upon the Company's estimated valuation of the insurance provided of between $65 million and $74 million. These legal expenses are being amortized on a 9 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) straight-line basis over the thirty-month period beginning July 1, 2002. In the event that the Company does not receive the future insurance coverage due to the liquidation, rehabilitation, bankruptcy or other similar insolvency of the insurers, the Company will receive a reimbursement of its legal expenses on a declining basis ranging from $15.8 million through December 15, 2002 to $3.9 million through July 1, 2004. Note 7. Fixed Asset Impairment The Company has recorded a $3.1 million expense in 2002 for the estimated excess of carrying value over the fair value of an office building in Memphis, Tennessee, which formerly was the corporate office of M.S. Carriers. Although the Company is currently utilizing some of the building, a sale of this property is anticipated in the near term. This expense, which was included in depreciation expense, was based upon a fair value determined by the Company using sale and asking prices of comparable properties and an independent appraisal. Note 8. Stock Repurchase Program In July 2002, the Company announced that its Board of Directors authorized the Company to repurchase up to 3,000,000 shares of its common stock. The stock may be purchased on the open market or in privately negotiated transactions at any time until December 31, 2002, unless the period is extended by the Board. Any purchases would be at management's discretion based upon prevailing prices, liquidity and other factors. During the nine months ended September 30, 2002, the Company repurchased 2,119,402 shares of its common stock for a total cost of $36.9 million. In October 2002, the Company completed the authorized repurchase of the 3,000,000 shares and announced that the Board of Directors authorized the Company to repurchase up to an additional 3,000,000 shares of its common stock. The first 1,000,000 shares of stock may be purchased in the open market or in privately negotiated transactions at price levels set by the Board of Directors. The Board of Directors expects to establish criteria for the repurchase of the remaining 2,000,000 shares of stock in the near future. 10 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, operating expenses (including insurance and claims expense), income or loss, capital expenditures, plans for future operations, financing needs or plans, the impact of inflation, future repurchases of common stock and plans relating to the foregoing. Statements in Exhibit 99.1 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. 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 423 tractors to 16,151 tractors as of September 30, 2002 up from 15,728 tractors as of September 30, 2001. The owner operator portion of the Company's fleet decreased to 3,223 as of September 30, 2002 from 3,290 as of September 30, 2001. APPLICATION OF CRITICAL ACCOUNTING POLICIES The Company is self-insured for some portion of its liability, property damage and cargo damage risk. This self-insurance results from the Company buying insurance coverage with deductible amounts. Each reporting period the Company accrues the 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 upon 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. Management has discussed the development and selection of this accounting estimate with the audit committee of the Board of Directors and the audit committee has reviewed the company's disclosure relating to it in this Quarterly Report on Form 10-Q. 11 RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2001 Operating revenue increased $0.6 million to $537.0 million for the three months ended September 30, 2002 from $536.4 million for the corresponding period of 2001. The third quarter of 2002 included $10.5 million of fuel surcharge revenue versus $15.4 million in 2001. Excluding this fuel surcharge revenue, operating revenue increased $5.5 million. The Company's operating ratio (operating expenses expressed as a percentage of operating revenue) for the third quarter of 2002 was 93.7% compared to 95.3% in the comparable period of 2001. The Company's operating ratio for the three months ended September 30, 2002 improved 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 13.68% and 14.58%, in the third quarter of 2002 and 2001, respectively. Average loaded linehaul revenue per mile (excluding fuel surcharge) for the three months ended September 30, 2002 was $1.4095, compared to $1.4038, for the same period in 2001. Salaries, wages and employee benefits represented 37.6% of operating revenue for the three months ended September 30, 2002, compared with 36.2% for the same period in 2001. This increase was due to an increase in workers' compensation cost offset by a reduction in certain administrative positions, and an increase in the portion of Company drivers on the Swift pay scale versus the higher M.S. Carriers pay scale. 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 impacted to the extent that corresponding freight rate increases were not obtained. Fuel as a percentage of operating revenue was 12.6% for the third quarter of 2002, compared to 13.1% for the corresponding period in 2001. The decrease was primarily due to actual fuel cost per gallon decreasing by approximately four cents per gallon (3.3%) in the third quarter of 2002 versus the third 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 as a means to limit exposure to fuel price volatility. Purchased transportation as a percentage of operating revenue was 17.0% for the three months ended September 30, 2002, compared to 17.2% for the same period in 2001. The decrease was primarily due to a reduction in the owner operator portion of the Company's fleet. Rental expense as a percentage of operating revenue was 3.8% for the third quarter of 2002 versus 4.6% for the corresponding period in 2001. At September 30, 2002 and 2001, leased tractors represented 47% and 50%, respectively, of the total fleet of Company tractors. When it is economically advantageous to do so, the Company will purchase then sell tractors that it currently leases by exercising the purchase option contained in the lease. Gains on these activities are recorded as a reduction of rental expense. The Company recorded gains of $471,000 in the third quarter of 2002 and $15,000 during the third quarter of 2001 from the sale of leased tractors. 12 Depreciation and amortization expense as a percentage of operating revenue was 6.7% in the third quarter of 2002 and 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 September 30, 2002, net gains from the sale of revenue equipment reduced depreciation and amortization expense by approximately $1.9 million compared to approximately $588,000 in the third quarter of 2001. Exclusive of gains, which reduced this expense, depreciation and amortization expense, as a percentage of operating revenue was 7.1% and 6.8% in the third quarter of 2002 and 2001, respectively. The increase in depreciation and amortization expense as a percentage of operating revenue was a result of an increase in the owned portion of the Company's fleet. Insurance and claims expense represented 3.2% and 4.5% of operating revenue in the third quarter of 2002 and 2001, respectively. These expenses represent claims paid by the Company, reserves for claims within the Company's self insured retention limits and the cost of premiums for insurance coverage. As described in Note 6 to the financial statements, the Company estimated the valuation of the insurance coverage provided as a result of the settlement of litigation with an insurance company to be between $65 million and $74 million. This benefit will be reflected as a reduction of insurance and claims expense in the financial statements beginning July 1, 2002 through December 31, 2004. As a result, the insurance and claims expense will reflect no cost for certain insurance coverage which is being provided by the insurance company as part of this settlement. In connection with this settlement, the Company also will amortize $2.1 million of deferred legal fees into operating supplies and expenses in each of the next ten quarters ending December 31, 2004. As a result, the Company expects the insurance and claims percentage will range between 3.5% and 4% of operating revenue through December 31, 2002. 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. Beginning in 2003, the Company's self insured retention for liability coverage will increase from $250,000 to $1,000,000 per occurrence. 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 $8.9 million for the three months ended September 30, 2002, from $10.4 million for the same period in 2001. Interest expense for the third quarter of 2002 and 2001 included a $4.5 million and $3.6 million expense, respectively, for the increase in the market value of the interest rate derivative agreements of M.S. Carriers. Excluding the impact of the interest rate derivative agreements, interest expense would have decreased from $6.8 million to $4.4 million. The third quarter of 2002 benefited from 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. NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2001 Operating revenue decreased $40.2 million or 2.5% to $1.541 billion for the nine months ended September 30, 2002 from $1.582 billion for the corresponding period of 2001. The nine months ended September 30, 2002 included $21.3 million of fuel surcharge revenue versus $50.0 million in 2001. Excluding this fuel surcharge revenue, the decrease in revenues would have been less than 1%. This decrease was primarily due to the tractors without drivers of 650 to start the year dropping to 319 at the end of the third quarter and a slight decrease in loaded rate per mile. 13 The Company's operating ratio (operating expenses expressed as a percentage of operating revenue) for the first nine months of 2002 was 94.3% compared to 96.0% in the comparable period of 2001. The Company's operating ratio for the nine months ended September 30, 2002 improved 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 14.26% and 15.12%, in the first nine months of 2002 and 2001, respectively. Average loaded linehaul revenue per mile (excluding fuel surcharge) for the nine months ended September 30, 2002 was $1.4113, compared to $1.4121 for the same period in 2001. Salaries, wages and employee benefits represented 37.3% of operating revenue for the nine months ended September 30, 2002 compared with 37.0% for the same period in 2001. This increase was due to an increase in workers' compensation cost, offset by a reduction in certain administrative positions, and an increase in the portion of Company drivers on the Swift pay scale versus the higher M.S. Carriers pay scale. Fuel as a percentage of operating revenue was 12.0% for the first nine months of 2002, compared to 13.6% for the corresponding period in 2001. The decrease was primarily due to actual fuel cost per gallon decreasing by approximately 17 cents per gallon (12.7%) for the nine months ended September 30, 2002 versus the nine months ended September 30, 2001. Purchased transportation as a percentage of operating revenue was 17.2% for the nine months ended September 30, 2002 compared to 17.5% in 2001. The decrease was primarily due to a reduction in the owner operator portion of the Company's fleet. Rental expense as a percentage of operating revenue was 4.1% for the first nine months of 2002 versus 4.7% for the same period in 2001. 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 rental expense. The Company recorded gains of $1.4 million and $267,000 in the first nine months of 2002 and 2001, respectively, from the sale of leased tractors. Depreciation and amortization expense as a percentage of operating revenue was 7.2% and 6.7% in the first nine months of 2002 and 2001, respectively. The Company includes gains and losses from the sale of owned revenue equipment in depreciation and amortization expense. During the nine month period ended September 30, 2002, net gains from the sale of revenue equipment reduced depreciation and amortization expense by approximately $5.3 million compared to approximately $2.6 million in the first nine months of 2001. Exclusive of gains, which reduced this expense, depreciation and amortization expense as a percentage of operating revenue was 7.5% and 6.8% in the first nine months of 2002 and 2001, respectively. The increase in depreciation and amortization expense as a percentage of operating revenue was a result of an increase in the owned portion of the Company's fleet as well as a $3.1 million adjustment to reduce the recorded value of the former corporate office building of M.S. Carriers to its estimated fair value. The Company has relocated the majority of employees from this building and expects to begin marketing this office building for sale in the near future. Insurance and claims expense represented 3.7% and 4.2% of operating revenue in the first nine months of 2002 and 2001, respectively. These expenses represent claims paid by the Company, reserves for claims within the Company's self insured retention limits and the cost of premiums for insurance coverage. Included in the second quarter of 2001 is an adjustment of approximately $7 million to the M.S. Carriers insurance and claims reserves. Interest expense decreased to $18.0 million in first nine months of 2002 from $29.5 million in the same period in 2001. Interest expense for the first nine months of 2002 and 2001 included a $5.9 million and $5.6 million expense, 14 respectively, for the increase in the market value of the interest rate derivative agreements of M.S. Carriers. Excluding the impact of the interest rate derivative agreements, interest expense would have decreased from $23.9 million to $12.1 million. The first nine months of 2002 benefited from 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. 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 $212.9 million in the first nine months of 2002 compared to $148.1 million in 2001. The increase is primarily attributable to an increase in net earnings, deferred income taxes, and a smaller increase in accounts receivable, offset by an increase in deferred legal fees. In addition, the third quarter of 2001 was negatively impacted by the $10.5 million adjustment to recognize the impairment of the EASO investment. Net cash used in investing activities increased to $188.7 million in the first nine months of 2002 from $105.4 million in 2001. The increase is primarily due to increased capital expenditures and issuance of notes receivables, offset by increased proceeds from the sale of property and equipment. As of September 30, 2002, the Company had commitments outstanding to acquire replacement and additional revenue equipment for approximately $47.7 million. The Company has the option to cancel such commitments upon 60 days notice. Based upon its cancellation rights, the Company exercised its right to cancel truck orders scheduled for production in the fourth quarter of 2002, which were equipped with the 2002 EPA engine. The Company will continue to evaluate future purchases in 2003 after securing additional data regarding cost, reliability, fuel economy and durability of its new EPA engine. The Company expects to change from its current three year replacement cycle to a replacement cycle of either four or five years. 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 nine months of 2002, the Company incurred approximately $29.3 million of non-revenue equipment capital expenditures. These expenditures were primarily for facilities and equipment. The Company anticipates that it will expend approximately $5.8 million during the remainder of the year for various facilities upgrades and acquisition and development of terminal facilities. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures. The funding for capital expenditures has been and 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 used in financing activities amounted to $17.6 million in the first nine months of 2002 compared to $50.5 million in 2001. This decrease is 15 primarily due to reduced repayments of long-term debt and an increase in proceeds from the accounts receivable securitization, offset by proceeds from the Company's public stock offering in 2001 and purchases of treasury stock in 2002. The Company expects to refinance its line of credit in the fourth quarter of 2002. 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. 16 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has interest rate exposure arising from the Company's line of credit, revolving notes, equipment loan, approximately $63 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 $2.8 million. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal controls. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date on which the Company carried out this evaluation. 17 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 Annex A of the Registrant's Notice and Proxy Statement for its 2002 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on April 30, 2002) 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 10.19 - Offer of Employment Letter to Gary Enzor Exhibit 99.1 - Private Securities Litigation Reform Act of 1995 Safe Harbor Compliance Statement for Forward-Looking Statements Exhibit 99.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Jerry Moyes Exhibit 99.3 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Gary Enzor (b) On August 13, 2002, the Company filed a Current Report on Form 8-K regarding the sworn statements of its Chief Executive Officer and Chief Financial Officer delivered to the Securities and Exchange Commission pursuant to Order No. 4-460. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SWIFT TRANSPORTATION CO., INC. Date: November 13, 2002 /s/ Jerry Moyes ---------------------------------------- (Signature) Jerry Moyes Chairman, President and CEO Date: November 13, 2002 /s/ Gary Enzor ---------------------------------------- (Signature) Gary Enzor Chief Financial Officer 18 CERTIFICATIONS I, Jerry Moyes, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Swift Transportation Co., Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Jerry Moyes ---------------------------------------- Jerry Moyes President and Chief Executive Officer (Principal Executive Officer) 19 I, Gary Enzor, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Swift Transportation Co., Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Gary Enzor ---------------------------------------- Gary Enzor Chief Financial Officer (Principal Financial Officer) 20 EX-10.19 3 ex10-19.txt OFFER OF EMPLOYMENT LETTER TO GARY ENZOR Exhibit 10.19 July 8, 2002 Gary Enzor Re: Hiring Specifications Dear Mr. Enzor: You have been offered the position of Chief Financial Officer with Swift Transportation, Co., Inc. We have offered you the following compensation package: * $275,000.00 annual salary * 40% target bonus, with a guarantee of $110,000 in December of 2002 * $250,000.00 sign-on bonus to be paid upon hire. This sign-on bonus is being granted to replace your current restricted stock. Although it is not mandatory, we encourage you to purchase Swift stock with your net proceeds. In the event that your employment is terminated, you will repay the sign-on bonus to the company as follows: - If you voluntarily terminate your employment within the first 12 months of employment, you will repay 100% - If you voluntarily terminate your employment 13 to 24 months from your date of hire, you will repay 66%, - If you voluntarily terminate your employment 25 to 36 months from your date of hire, you will repay 33% * $700.00 monthly car allowance * 100,000 stock options will be granted upon hire - 66,666 will vest years 3, 4 and 5 - 33,334 will vest years 5, 6, 7, 8, and 9 * A one-year severance, based on salary, will be guaranteed if your employment is terminated unless the reason is for gross misconduct. * Health and Dental Insurance will be effective August 1, 2002 * 3 weeks of vacation This offer is contingent upon Negative Substance Abuse Screening Test results for controlled substances, job related reference checks, and a pre-employment physical (if required) taken prior to reporting to work. If the above terms are acceptable, please sign this form on the line indicated below and return it to Barbara Kennedy. Your start date will be mutually agreed upon at our next meeting to be held the week of July 1, 2002. We welcome you as new member to our Company! Sincerely, /s/ Jerry Moyes Jerry Moyes President/CEO RECEIVED AND ACCEPTABLE: /s/ GARY ENZOR DATE July 9, 2002 EX-99.1 4 ex99-1.txt SAFE HARBOR COMPLIANCE STATEMENT Exhibit 99.1 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"(i) 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; (xiv) the depressed market for used equipment, particularly tractors; and (xv) the possibility that the Company may not realize the expected benefits of its litigation settlement with an insurance carrier. With respect to Swift's merger with M.S. Carriers in the second quarter of 2001, 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. - ---------- (i) "Forward-looking statements" can be identified by use of words such as "expect," "believe," "estimate," "project," "forecast," "anticipate," "plan," and similar expressions. EX-99.2 5 ex99-2.txt CERTIFICATION PURSUANT TO SARBANES-OXLEY Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002 In connection with the Quarterly Report of Swift Transportation Co., Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jerry Moyes, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jerry Moyes Jerry Moyes Chairman and Chief Executive Officer November 13, 2002 EX-99.3 6 ex99-3.txt CERTIFICATION PURSUANT TO SARBANES-OXLEY Exhibit 99.3 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002 In connection with the Quarterly Report of Swift Transportation Co., Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary Enzor, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (3) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (4) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gary R. Enzor Gary R. Enzor Chief Financial Officer November 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----