-----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, MJsEi0L6oSjTNuaIF+7750ie8v0CHdM5SFP4LtsWW7b1lBZNzkPwr5/m5gMpm3+3 /Yci46HANx9D7zwoI2oh4A== 0000950147-98-000900.txt : 19981111 0000950147-98-000900.hdr.sgml : 19981111 ACCESSION NUMBER: 0000950147-98-000900 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981110 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: SEC FILE NUMBER: 000-18605 FILM NUMBER: 98743038 BUSINESS ADDRESS: STREET 1: 1455 HUDA WAY CITY: SPARKS STATE: NV ZIP: 89431 BUSINESS PHONE: 6022699700 MAIL ADDRESS: STREET 1: 2200 SOUTH 75TH AVENUE CITY: PHOENIX STATE: AZ ZIP: 85043 10-Q 1 QUARTERLY REPORT F.T.Q.E. 9/30/98 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, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-18605 SWIFT TRANSPORTATION CO., INC. (Exact name of registrant as specified in its charter) Nevada 86-0666860 (State or other jurisdiction of (I.R.S. employer 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 3, 1998) Common stock, $.001 par value: 42,345,481 shares EXHIBIT INDEX AT PAGE 16 TOTAL PAGES 27 PART I FINANCIAL INFORMATION Page Number Item 1. Financial statements Condensed consolidated balance sheets as of September 30, 1998 (unaudited) and December 31, 1997 3-4 Condensed consolidated statements of earnings (unaudited) for the three and nine month periods ended September 30, 1998 and 1997 5 Condensed consolidated statements of cash flows (unaudited) for the nine month periods ended September 30, 1998 and 1997 6-7 Notes to condensed consolidated financial statements 8-9 Item 2. Management's discussion and analysis of financial condition and results of operations 10-15 PART II OTHER INFORMATION Items 1, 2, 3, 4 and 5. Not applicable Item 6. Exhibits and Reports on Form 8-K 16 2 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) September 30, December 31, 1998 1997 ---- ---- (unaudited) ASSETS Current assets: Cash $ 4,308 $ 5,726 Accounts receivable, net 112,306 92,587 Equipment sales receivable 2,936 3,284 Inventories and supplies 2,975 4,509 Prepaid taxes, licenses and insurance 6,746 5,090 Assets held for sale 5,468 5,468 Deferred income taxes 7,472 5,280 -------- -------- Total current assets 142,211 121,944 -------- -------- Property and equipment, at cost: Revenue and service equipment 441,595 366,223 Land 8,756 7,520 Facilities and improvements 76,254 62,760 Furniture and office equipment 15,476 13,949 -------- -------- Total property and equipment 542,081 450,452 Less accumulated depreciation and amortization 125,339 111,917 -------- -------- Net property and equipment 416,742 338,535 -------- -------- Other assets 1,897 1,976 Goodwill 8,111 8,679 -------- -------- $568,961 $471,134 ======== ======== See accompanying notes to condensed consolidated financial statements. 3 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) September 30, December 31, 1998 1997 ---- ---- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 31,490 $ 14,469 Accrued liabilities 32,738 20,177 Current portion of claims accruals 24,156 16,281 Current portion of long-term debt 1,198 6,849 -------- -------- Total current liabilities 89,582 57,776 -------- -------- Borrowings under line of credit 79,000 56,500 Long-term debt, less current portion 15,227 16,920 Claims accruals, less current portion 26,148 21,343 Deferred income taxes 53,273 44,420 Stockholders' equity: Preferred stock, par value $.001 per share Authorized 1,000,000 shares; none issued Common stock, par value $.001 per share Authorized 75,000,000 shares; issued 43,167,441 and 42,793,557 shares at September 30,1998 and December 31, 1997, respectively 43 43 Additional paid-in capital 118,187 116,141 Retained earnings 200,499 161,407 -------- -------- 318,729 277,591 Less treasury stock, at cost (881,050 and 331,050 shares at September 30,1998 and December 31, 1997, respectively.) 12,998 3,416 -------- -------- Total stockholders' equity 305,731 274,175 -------- -------- Commitments and contingencies $568,961 $471,134 ======== ======== 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, 1998 1997 1998 1997 ---- ---- ---- ---- Operating revenue $227,184 $188,071 $634,624 $524,999 Operating expenses: Salaries, wages and employee benefits 84,307 64,677 229,906 183,718 Operating supplies and expenses 20,602 17,652 59,010 46,807 Fuel 23,213 22,118 69,080 67,584 Purchased transportation 33,948 25,638 97,817 69,224 Rental expense 11,039 11,809 30,215 35,198 Insurance and claims 6,648 4,721 19,201 15,863 Depreciation and amortization 11,127 9,858 33,071 27,748 Communication and utilities 3,001 2,848 8,387 7,915 Operating taxes and licenses 5,990 5,921 18,606 18,036 -------- -------- -------- -------- Total operating expenses 199,875 165,242 565,293 472,093 -------- -------- -------- -------- Operating income 27,309 22,829 69,331 52,906 Other (income) expenses: Interest expense 1,306 1,330 4,320 3,470 Interest income (90) (52) (213) (138) Other (206) (101) (483) (271) -------- -------- -------- -------- Other (income) expenses, net 1,010 1,177 3,624 3,061 -------- -------- -------- -------- Earnings before income taxes 26,299 21,652 65,707 49,845 Income taxes 10,655 8,770 26,615 20,200 -------- -------- -------- -------- Net earnings $ 15,644 $ 12,882 $ 39,092 $ 29,645 ======== ======== ======== ======== Basic earnings per share $ .37 $ .30 $ .92 $ .70 ======== ======== ======== ======== Diluted earnings per share $ .36 $ .30 $ .90 $ .69 ======== ======== ======== ======== 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, 1998 1997 ---- ---- Cash flows from operating activities: Net earnings $ 39,092 $ 29,645 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 30,396 27,815 Deferred income taxes 6,661 3,600 Provision for losses on accounts receivable 770 180 Amortization of deferred compensation 152 90 Change in assets and liabilities: Increase in accounts receivable (20,489) (16,835) Decrease in inventories and supplies 1,534 417 Increase in prepaid expenses (1,656) (3,667) Increase in other assets (17) (689) Increase in accounts payable, accrued liabilities and claims accruals 42,262 17,169 --------- -------- Net cash provided by operating activities 98,705 57,725 --------- -------- Cash flows from investing activities: Proceeds from sale of property and equipment 48,117 17,727 Capital expenditures (158,556) (97,351) Cash expended for purchase of DTI assets (3,749) Treasury stock purchases (9,582) Payments received on equipment sale receivables 3,284 390 --------- -------- Net cash used in investing activities (116,737) (82,983) --------- -------- See accompanying notes to condensed consolidated financial statements. 6 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited) (In thousands) Nine Months Ended September 30, 1998 1997 ---- ---- Cash flows from financing activities: Repayments of long-term debt $ (7,780) $(23,510) Increase in borrowings under line of credit 22,500 56,000 Payment of stock split fractional shares (21) Proceeds from issuance of common stock under stock option and stock purchase plans 1,915 1,645 -------- -------- Net cash provided by financing activities 16,614 34,135 -------- -------- Net increase (decrease) in cash (1,418) 8,877 Cash at beginning of period 5,726 1,210 -------- -------- Cash at end of period $ 4,308 $ 10,087 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 4,147 $ 3,391 Income taxes $ 15,718 $ 13,079 Supplemental schedule of noncash investing and Financing activities: Equipment sales receivables $ 2,936 $ 5,324 Direct financing for purchase of equipment $ 436 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. The financial statements have been prepared in accordance with generally accepted accounting principles, pursuant to rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year. Note 2. Contingencies The Company is involved in certain claims and pending litigation arising from the normal course of business. Based on the knowledge of the facts and, in certain cases, opinions of outside counsel, management believes the resolution of claims and pending litigation will not have a material adverse effect on the financial condition of the Company. Note 3. Stock Split On February 20, 1998, the Company's Board of Directors approved a 3-for-2 stock split effected in the form of a stock dividend and payable on March 12, 1998 to the stockholders of record at the close of business on March 2, 1998. All share amounts, share prices and earnings per share have been retroactively adjusted to reflect this 3-for-2 stock split. Note 4. Line of Credit In August 1998, the Company modified its unsecured line of credit agreement to increase the maximum available borrowings from $110 million to $170 million and extend the maturity to January 16, 2003. 8 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) Note 5. Stock Repurchase The Company purchased 550,000 shares of its common stock during the three months ended September 30, 1998 for a total cost of $9,582,000. These shares are being held as treasury stock and may be used for issuances under the Company's employee stock option and purchase plans or for other general corporate purposes. 9 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Report on Form 10-Q contains forward-looking statements. The words "believe," "expect," "anticipate," and "project," and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, projections of revenues, income, or loss, capital expenditures, plans for future operations, financing needs or plans, the impact of inflation and plans relating to the foregoing. Statements in Exhibit 99 to this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K, including Notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations," describe factors, among others, that could contribute to or cause such differences. Additional factors that could cause actual results to differ materially from those expressed in such forward-looking statements are set forth in "Business" and " Market for the Registrant's Common Stock and Related Stockholder Matters" in the Company's Annual Report on Form 10-K. YEAR 2000 ISSUE The Company is in the process of performing a comprehensive review of its Year 2000 issues and has completed its initial review of internal systems (information technology ("IT") and non-IT). The majority of the Company's application software programs are purchased from and maintained by vendors. Therefore, the Company is working with these software vendors to verify these applications become Year 2000 compliant. The Company estimates the status of progress of these internal systems as follows: Vendor Modifications Testing Commenced Being Performed IT Systems 85% 20% Non-IT Systems 70% 15% The Company presently believes that with modifications and updates to existing software, the cost of which is not expected to be material, the Year 2000 problem will not pose significant operational problems for the Company's internal systems. 10 As part of the Company's comprehensive review, it is continuing to verify the Year 2000 readiness of third parties (vendors and customers) with whom the Company has material relationships. At present, the Company is not able to determine the effect on the Company's results of operations, liquidity, and financial condition in the event the Company's material vendors and customers are not Year 2000 compliant. The Company will continue to monitor the progress of its material vendors and customers and formulate a contingency plan at that point in time when the Company does not believe a material vendor or customer will be compliant. OVERVIEW Although the trend in the truckload segment of the motor carrier industry over the past several years has been towards consolidation, the truckload industry remains highly fragmented. Management believes the industry trend towards financially stable "core carriers" will continue and result in continued industry consolidation. In response to this trend, the Company continues to expand its fleet with an increase of 788 tractors to 6,578 tractors as of September 30, 1998 up from 5,790 tractors as of September 30, 1997. The owner operator portion of the Company's fleet increased to 1,166 as of September 30, 1998 from 848 as of September 30, 1997. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997 Operating revenue increased $39.1 million or 20.8% to $227.2 million for the three months ended September 30, 1998 from $188.1 million for the corresponding period of 1997. The increase in operating revenue is primarily the result of the expansion of the Company's fleet as a result of strong shipper demand. The Company's freight rates increased by approximately 2% in the third quarter of 1998 compared to the third quarter of 1997. The Company's operating ratio (operating expenses expressed as a percentage of operating revenue) for the third quarter of 1998 was 88.0% compared to 87.9% in the comparable period of 1997. The Company's operating ratio for the three months ended September 30, 1998 increased as a result of increases 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 13.2% and 13.1% and average loaded linehaul revenue per mile was $ 1.32 and $1.30 in the third quarter of 1998 and 1997, respectively. Salaries, wages and employee benefits represented 37.1% of operating revenue for the three months ended September 30, 1998 compared with 34.4% in 1997. The increase is primarily due to an increase in workmen's compensation, the accrual for the Company's profit sharing contribution, normal wage increases and associated benefits and taxes. From time to time the industry has experienced shortages of qualified drivers. If such a shortage were to occur over a prolonged period and increases in driver pay rates were to occur in order to attract and retain drivers, the Company's 11 results of operations would be negatively impacted to the extent that corresponding rate increases were not obtained. Fuel as a percentage of operating revenue was 10.2% for the third quarter of 1998 versus 11.8% in 1997. The decrease is partially due to an increase in the number of owner operators who are responsible for their own fuel. In addition, actual fuel cost per gallon decreased by approximately 13 cents per gallon in the third quarter of 1998 versus the third quarter of 1997. Increases in fuel costs, to the extent not offset by rate increases or fuel surcharges, could have an adverse effect on the operations and profitability of the Company. Management believes the most effective protection against fuel cost increases is to maintain a fuel efficient fleet and to implement fuel surcharges when such option is necessary and available. The Company currently does not use derivative-type hedging products but is currently evaluating the possible use of these products. Purchased transportation as a percentage of operating revenue was 14.9% for the three months ended September 30, 1998 compared to 13.6% in 1997. The increase is due to the growth of the owner operator fleet to 1,166 as of September 30, 1998 from 848 as of September 30, 1997. Rental expense as a percentage of operating revenue was 4.9% for the third quarter of 1998 versus 6.3% in 1997. At September 30, 1998 and 1997, leased tractors represented 54% and 63%, respectively, of the total fleet of Company tractors. In addition to the reduction in the percentage of tractors which were leased, rental expense was positively impacted by a reduction in the number of leased trailers as well as a slight reduction in the average lease rate for tractors in the third quarter of 1998 versus the third quarter of 1997. When it is economically advantageous to do so, the Company will purchase then sell tractors that it currently leases by exercising the purchase option contained in the lease. Gains on these activities are recorded as a reduction of rent expense. The Company recorded $223,000 in the third quarter of 1998 and no gain during the third quarter of 1997 from the sale of leased tractors. Depreciation and amortization expense as a percentage of operating revenue was 4.9% in the third quarter of 1998 versus 5.2% in 1997. The Company includes gains and losses from the sale of owned revenue equipment in depreciation and amortization expense. During the three month period ended September 30, 1998, net gains from the sale of revenue equipment reduced depreciation and amortization expense by approximately $2.1 million compared to approximately $1.1 million in the third quarter of 1997. Exclusive of gains, which reduced this expense, depreciation and amortization expense as a percentage of operating revenue was 5.8% in the third quarter of 1998 and 1997. Insurance and claims expense represented 2.9% and 2.5% of operating revenue in the third quarter of 1998 and 1997, respectively. The Company's insurance program for liability, physical damage and cargo damage involves self-insurance with varying risk retention levels. Claims in excess of 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 12 nature and severity of individual claims and an estimate of future claims development based on historical claims development trends. NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Operating revenue increased $109.6 million or 20.9% to $634.6 million for the nine months ended September 30, 1998 from $525.0 million for the corresponding period of 1997. The increase in operating revenue is primarily the result of the expansion of the Company's fleet and rate increases. The Company's operating ratio (operating expenses expressed as a percentage of operating revenue) for the first nine months of 1998 was 89.1% compared to 89.9% in the comparable period of 1997. The Company's operating ratio for the nine months ended September 30, 1998 improved as a result of the aforementioned increase in operating revenue combined with decreases in certain components of operating expenses as a percentage of operating revenue as discussed below. The Company's empty mile factor for linehaul operations was 13.6% and 13.9% and average loaded linehaul revenue per mile was $1.32 and $1.30 in the first nine months of 1998 and 1997, respectively. Salaries, wages and employee benefits represented 36.2% of operating revenue for the nine months ended September 30, 1998 compared with 35.0% in 1997. The increase is primarily due to an increase in the accrual for the Company's profit sharing contribution and normal wage increases and associated benefits and taxes. Fuel as a percentage of operating revenue was 10.9% for the first nine months of 1998 versus 12.9% in 1997. The decrease is due to an increase in the number of owner operators who are responsible for their own fuel and the reduction in fuel prices as discussed above. Purchased transportation as a percentage of operating revenue was 15.4% for the nine months ended September 30, 1998 compared to 13.2% in 1997. The increase is due to the growth of the owner operator fleet to 1,166 as of September 30, 1998 from 848 as of September 30, 1997. Rental expense as a percentage of operating revenue was 4.8% for the first nine months of 1998 versus 6.7% in 1997. When it is economically advantageous to do so, the Company will purchase then sell tractors that it currently leases by exercising the purchase option contained in the lease. Gains on these activities are recorded as a reduction of rent expense. The Company recorded $2.7 million in 1998 and no gain during the first nine months of 1997 from the sale of leased tractors. As discussed above, rental expense decreased in the first nine months of 1998 versus 1997 as a result of a reduction in the percentage of leased tractors, number of leased trailers and the average lease rate for tractors. Depreciation and amortization expense as a percentage of operating revenue was 5.2% in the first nine months of 1998 versus 5.3% in 1997. The Company includes gains and losses from the sale of owned revenue equipment in depreciation and amortization expense. During the nine month period ended September 30, 1998, net gains from the sale of revenue equipment reduced depreciation and amortization expense by approximately $4.6 million compared to approximately $2.9 million in the first nine months of 1997. Exclusive of gains, which reduced this expense, 13 depreciation and amortization expense as a percentage of operating revenue was 5.9% and 5.8% in the first nine months of 1998 and 1997, respectively. Insurance and claims expense represented 3.0% of operating revenue in the first nine months of 1998 and 1997. The Company's insurance program for liability, physical damage and cargo damage involves self-insurance with varying risk retention levels. Claims in excess of these risk retention levels are covered by insurance in amounts which management considers adequate. The Company accrues the estimated cost of the uninsured portion of pending claims. These accruals are estimated based on management's evaluation of the nature and severity of individual claims and an estimate of future claims development based on historical claims development trends. LIQUIDITY AND CAPITAL RESOURCES The continued growth in the Company's business requires significant investment in new revenue equipment, upgraded and expanded facilities, and enhanced computer hardware and software. The funding for this expansion has been from cash provided by operating activities, proceeds from the sale of revenue equipment, long-term debt, borrowings on the Company's line of credit, the use of operating leases to finance the acquisition of revenue equipment and from periodic public offerings of common stock. Net cash provided by operating activities was $98.7 million in the first nine months of 1998 compared to $57.7 million in 1997. The increase is primarily attributable to an increase in net earnings and accounts payable, accrued liabilities and claims accruals. Prepaid expenses increased by $1.7 million from December 31, 1997 to September 30, 1998. The increase is primarily due to significant annual license fees which are prepaid in the first quarter of each year and amortized over the remainder of the year. Net cash used in investing activities increased to $116.7 million in the first nine months of 1998 from $83.0 million in 1997. The increase is due primarily to greater capital expenditures and treasury stock purchases in 1998 offset by increased proceeds from the sale of property and equipment and payments received on equipment sales receivable in 1998 along with a reduction in cash expended for Direct Transit, Inc. assets in 1997. As of September 30, 1998, the Company had commitments outstanding to acquire replacement and additional revenue equipment for approximately $243 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 nine months of 1998, the Company incurred approximately $18.5 million of non-revenue equipment capital expenditures. These expenditures were primarily for facilities and equipment. 14 The Company anticipates that it will expend approximately $10 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 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 $16.6 million in the first nine months of 1998 compared to $34.1 million in 1997. This decrease is primarily due to reduced borrowings under the line of credit. Management believes it will be able to finance its needs for working capital, facilities improvements and expansion, as well as anticipated fleet growth through a combination of revenue equipment purchases and strategic acquisitions, as opportunities become available, with cash flows from future operations, borrowings available under the line of credit and with long-term debt and operating lease financing believed to be available to finance revenue equipment purchases. Over the long term, the Company will continue to have significant capital requirements, which may require the Company to seek additional borrowings or equity capital. The availability of debt financing or equity capital will depend upon the Company's financial condition and results of operations as well as prevailing market conditions, the market price of the Company's common stock and other factors over which the Company has little or no control. INFLATION Inflation can be expected to have an impact on the Company's operating costs. A prolonged period of inflation would cause interest rates, fuel, wages and other costs to increase and would adversely affect the Company's results of operations unless freight rates could be increased correspondingly. However, the effect of inflation has been minimal over the past three years. SEASONALITY In the transportation industry, results of operations generally show a seasonal pattern as customers reduce shipments after the winter holiday season. The Company's operating expenses also tend to be higher in the winter months primarily due to colder weather which causes higher fuel consumption from increased idle time. 15 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 10.13 - First Modification Agreement to Note Agreement dated January 16, 1997 by and between Swift Transportation Co., Inc. and Wells Fargo Bank, N.A., ABN Amro Bank N.V., The Chase Manhattan Bank and The First National Bank of Chicago. Exhibit 10.14 - Second Modification Agreement to Note Agreement dated January 16, 1997 by and between Swift Transportation Co., Inc. and Wells Fargo Bank, N.A., ABN Amro Bank N.V., The First National Bank of Chicago, Norwest Bank Arizona, N.A., Keybank National Association and Union Bank of California, N.A. Exhibit 11 - Schedule of Computation of Net Earnings Per Share Exhibit 27 - Financial Data Schedule Exhibit 99 - Private Securities Litigation Reform Act of 1995 Safe Harbor Compliance Statement for Forward-Looking Statements (b) No Current Reports on Form 8-K were filed during the three months ended September 30, 1998. SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SWIFT TRANSPORTATION CO., INC. Date: November 9, 1998 /s/ William F. Riley III -------------------------------- (Signature) William F. Riley III Chief Financial Officer 16 EX-10.13 2 1ST MODIFICATION AGREEMENT TO NOTE AGR. MODIFICATION AGREEMENT BY THIS MODIFICATION AGREEMENT (the "Agreement"), made and entered into as of the 25th day of September, 1997, WELLS FARGO BANK, N.A., as administrative agent for the Banks listed in the hereinafter defined Credit Agreement (the "Banks") and as Issuing Bank, and SWIFT TRANSPORTATION CO., INC., an Arizona corporation (the "Borrower"), in consideration of the mutual covenants herein contained and other good and valuable consideration. the receipt and sufficiency of which is hereby acknowledged, hereby confirm and agree as follows: SECTION 1. RECITALS. 1.1 Borrower and the Administrative Agent, ABN AMRO Bank N.V. as Co-Agent, and the Banks entered into that Credit Agreement dated January 16, 1997 (the "Credit Agreement") to provide financial accommodations to the Borrower as provided therein. 1.2 Borrower and the Administrative Agent, with the consent of the Banks, desire to modify the Credit Agreement as set forth herein. 1.3 All undefined capitalized terms used herein shall have the meaning given them in the Credit Agreement. SECTION 2. CREDIT AGREEMENT. 2.1 Section 2.3(a)(i) of the Credit Agreement is hereby amended to read as follows: (i) the Borrower shall not be entitled to request any Borrowing which, if made, would result in an aggregate of more than twenty separate Borrowings being outstanding collectively under the Revolving Loan at any one time and SECTION 3. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS. 3.1 All references to the Credit Agreement in the other Loan Documents are hereby amended to refer to the Credit Agreement as hereby amended. 3.2 Borrower hereby reaffirms to the Banks each of the representations, warranties covenants and agreements of Borrower set forth in the Credit Agreement, with the same force and effect as if each were separately stated herein and made as of the date hereof. 3.3 Borrower hereby ratifies, reaffirms, acknowledges, and agrees that the Notes and the Credit Agreement represent valid, enforceable and collectible obligations of Borrower, and that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to any of these documents or instruments. Borrower further acknowledges and represents that no event has occurred and no condition exists that, after notice or lapse of time, or both, would constitute a default under this Agreement, the Notes or the Credit Agreement. 3.4 All terms, conditions and provisions of the Credit Agreement are continued in full force and effect and shall remain unaffected and unchanged except as specifically amended hereby. The Credit Agreement, as amended hereby, is hereby ratified and reaffirmed by Borrower, and Borrower specifically acknowledges the validity and enforceability thereof. SECTION 4. GENERAL. 4.1 This Agreement in no way acts as a release or relinquishment of those rights securing Payment of the Loans. Such rights are hereby ratified, confirmed, renewed and extended by Borrower in all respects. 4.2 The modifications contained herein shall not be binding upon the Banks until the Administrative Agent shall have received all of the following: (a) An original of this Agreement fully executed by the Borrower. (b) An original of the Consent and Agreement of Guarantor fully executed by the Guarantor and Swift Leasing. (c) Such resolutions or authorizations and such other documents as the Administrative Agent may require relating to the existence and good standing of the Borrower and the authority of any person executing this Agreement or other documents on behalf of the Borrower. 4.3 Borrower shall execute and deliver such additional documents and do such other acts as the Banks may reasonably require to fully implement the intent of this Agreement. 4.4 Borrower shall pay all costs and expenses, including, but not limited to, reasonable attorneys' fees incurred by the Administrative Agent in connection herewith, whether or not all of the conditions described in Paragraph 4.2 above are satisfied. Banks, at their option, but without any obligation to do so, may advance funds to pay any such costs and expenses that are the obligation of the Borrower, and all such funds advanced shall bear interest at the highest rate provided in the Notes and shall be due and payable upon demand. 4.5 Notwithstanding anything to the contrary contained herein or in any other instrument executed by Borrower, the Administrative Agent or the Banks, or in any other action or conduct undertaken by Borrower, the Administrative Agent or the Banks on or before the date hereof, the agreements, covenants and provisions contained herein shall constitute the only evidence of the Banks' consent to modify the terms and provisions of the Credit Agreement. Accordingly, no express or implied consent to any further modifications involving any of the matters set forth in this Agreement or otherwise shall be inferred or implied by 2 the Banks' consent to this Agreement. Further, the Banks' consent to this Agreement shall not constitute a waiver (either express or implied) of the requirement that any further modification of the Credit Agreement shall require the express written consent of the Banks; no such consent (either express or implied) has been given as of the date hereof. 4.6 Time is hereby declared to be of the essence hereof of the Credit Agreement, and Banks require, and Borrower agrees to, strict performance of each and every covenant, condition, provision and agreement hereof, of the Credit Agreement. 4.7 This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their heirs, personal representatives, successors and assigns. 4.8 This Agreement is made for the sole protection and benefit of the parties hereto, and no other person or entity shall have any right of action hereon, 4.9 This Agreement shall be governed by and construed according to the laws of the State of Arizona. IN WITNESS WHEREOF, these presents are executed as of the date indicated above. WELLS FARGO BANK, N.A. By: /s/ Stephanie Arnold -------------------------------- Name: Stephanie Arnold ------------------------------ Its: Vice President ------------------------------- ADMINISTRATIVE AGENT SWIFT TRANSPORTATION, CO., INC.. an Arizona corporation By: /s/ William F. Riley III -------------------------------- Name: William F. Riley III ------------------------------ Its: EVP - CFO ------------------------------- BORROWER 3 EX-10.14 3 2ND MODIFICATION AGREEMENT TO NOTE AGR. SECOND MODIFICATION AGREEMENT BY THIS SECOND MODIFICATION AGREEMENT (the "Agreement"), dated as of the 3rd day of August, 1998, WELLS FARGO BANK, N.A., as administrative agent for the Banks listed in the hereinafter defined Credit Agreement (the "Banks") and as Issuing Bank, and SWIFT TRANSPORTATION CO., INC., an Arizona corporation (the "Borrower"), in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby confirm and agree as follows: SECTION 1. RECITALS. 1.1 Borrower and the Administrative Agent, ABN AMRO Bank N.V. as Co-Agent, and the Banks entered into that Credit Agreement dated January 16, 1997 (the "Credit Agreement") to provide financial accommodations to the Borrower as provided therein, which Credit Agreement was previously amended by that Modification Agreement dated September 25, 1997. 1.2 Borrower and the Administrative Agent, with the consent of the Banks, desire to modify the Agreement as set forth herein. 1.3 All undefined capitalized terms used herein shall have the meaning given them in the Credit Agreement. 1.4 The "Effective Date" means August 6, 1998, SECTION 2. CREDIT AGREEMENT 2.1 The following definitions contained in Section 1.1 of the Credit Agreement are hereby amended to read as follows: "Maturity Date" shall mean January 16, 2003. "Maximum Commitment" shall mean $170,000,000.00. 2.2 Schedule 2.1 to the Credit Agreement is hereby amended to read as attached hereto. 2.3 Article V of the Credit Agreement is hereby amended by the addition of the following Section 5.9: Section 5.9 YEAR 2000 COMPLIANT. Perform all acts reasonably necessary to ensure that Borrower and any business in which Borrower holds a substantial interest become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of Borrower's systems and adopting a plan for the remediation, monitoring and testing of such systems. As used in this paragraph, "Year 2000 Compliant" shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems material to the business operations or financial condition of such entity, will properly perform date sensitive functions after December 31, 1999. Borrower shall, immediately upon request, provide to the Administrative Agent such certifications or other evidence of Borrower's compliance with the terms of this paragraph as the Banks may from time to time require. SECTION 3. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS. 3.1 All references to the Credit Agreement in the other Loan Documents are hereby amended to refer to the Credit Agreement as hereby amended. 3.2 Borrower hereby reaffirms to the Banks each of the representations, warranties, covenants and agreements of Borrower set forth in the Credit Agreement, with the same force and effect as if each were separately stated herein and made as of the date hereof and hereby affirms that the representations and warranties set forth in Article III of the Credit Agreement remain true and correct in all material respects as of the Effective Date, except to the extent such representations and warranties expressly relate and are limited to a different date. 3.3 Borrower hereby represents and warrants to the Administrative Agent and the Banks that it has reviewed the areas within its business and operations and that of its Subsidiaries which could be adversely affected by, and has developed or is developing a program to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by the Borrower and its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), and has made related appropriate inquiry of material suppliers and vendors. Based on such review and program, the Borrower believes that the "Year 2000 Problem" will not result in a Material Adverse Change with respect to the Borrower. 3.4 Borrower hereby ratifies, reaffirms, acknowledges, and agrees that the Notes and the Credit Agreement represent valid, enforceable and collectible obligations of Borrower, and that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to any of these documents or instruments. Borrower further acknowledges and represents that no event has occurred and no condition exists that, after notice or lapse of time, or both, would constitute a default under this Agreement, the Notes or the Credit Agreement. 3.5 All terms, conditions and provisions of the Credit Agreement are continued in full force and effect and shall remain unaffected and unchanged except as specifically amended hereby. The Credit Agreement, as amended hereby, is hereby ratified and reaffirmed by Borrower, and Borrower specifically acknowledges the validity and enforceability thereof. The Credit Agreement is hereby modified to provide that it shall be a default or an event of default thereunder if Borrower shall fail to comply with any of the covenants of 2 Borrower herein or if any representation or warranty by Borrower herein or by any guarantor in the Consent and Agreement of Guarantors is materially incomplete, incorrect, or misleading as of the date hereof. 3.6 Any Bank whose Commitment is changed to zero on the Effective Date shall deliver one or more executed Assignments and Acceptances to the Administrative Agent and shall upon the Effective Date cease to be a Bank party to the Credit Agreement. 3. 7 Each Person listed on the revised Schedule 2.1 which is not a party to the Credit Agreement shall, if required by the Administrative Agent, deliver to the Administrative Agent an executed Administrative Details Reply Form and shall become a Bank party to the Credit Agreement upon the Effective Date. SECTION 4. GENERAL. 4.1 This Agreement in no way acts as a release or relinquishment of those rights securing payment of the Loans. Such rights are hereby ratified, confirmed, renewed and extended by Borrower in all respects. 4.2 The modifications contained herein shall not be binding upon the Banks until the later of the Effective Date or the date when the Administrative Agent shall have received from each Bank an executed Consent of the Banks and from the Borrower all of the following: (a) An original of this Agreement fully executed by the Borrower. (b) An original of the Consent and Agreement of Guarantors fully executed by the Guarantor and Swift Leasing. (c) A duly executed Note for each Bank, dated as of August 3, 1998, in the amount shown on Schedule 2.1 hereto. (d) An amended and restated Continuing Guarantee fully executed by the Guarantor and Swift Leasing. (e) Such resolutions or authorizations and such other documents as the Administrative Agent may require relating to the existence and good standing of the Borrower and Guarantor and the authority of any person executing this Agreement or other documents on behalf of the Borrower and Guarantor. 4.3 Borrower shall execute and deliver such additional documents and do such other acts as the Banks may reasonably require to fully implement the intent of this Agreement. 4.4 Borrower shall pay all costs and expenses, including, but not limited to, reasonable attorney's fees incurred by the Administrative Agent in connection herewith, whether or not all of the conditions described in Paragraph 4.2 above are satisfied. Banks, at their option, but without any obligation 3 to do so, may advance funds to pay any such costs and expenses that are the obligation of the Borrower, and all such funds advanced shall bear interest at the highest rate provided in the Notes and shall be due and payable upon demand. 4.5 Notwithstanding anything to the contrary contained herein or in any other instrument executed by Borrower, the Administrative Agent or the Banks, or in any other action or conduct undertaken by Borrower, the Administrative Agent or the Banks on or before the date hereof, the agreements, covenants and provisions contained herein shall constitute the only evidence of the Banks' consent to modify the terms and provisions of the Credit Agreement. Accordingly, no express or implied consent to any further modifications involving any of the matters set forth in this Agreement or otherwise shall be inferred or implied by the Banks' consent to this Agreement. Further, the Banks' consent to this Agreement shall not constitute a waiver (either express or implied) of the requirement that any further modification of the Credit Agreement shall require the express written consent of the Banks; no such consent (either express or implied) has been given as of the date hereof. 4.6 Time is hereby declared to be of the essence hereof of the Credit Agreement, and Banks require, and Borrower agrees to, strict performance of each and every covenant, condition, provision and agreement hereof, of the Credit Agreement. 4.7 This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their heirs, personal representatives, successors and assigns. 4.8 This Agreement is made for the sole protection and benefit of the parties hereto, and no other person or entity shall have any right of action hereon. 4 4.9 This Agreement shall be governed by and construed according to the laws of the State of Arizona. IN WITNESS WHEREOF, these presents are executed as of the date indicated above. WELLS FARGO BANK, N.A. By: /s/ Stephanie Arnold -------------------------------- Name: Stephanie Arnold ------------------------------ Its: Vice President ------------------------------- ADMINISTRATIVE AGENT AND ISSUING BANK SWIFT TRANSPORTATION, CO., INC., an Arizona corporation By: /s/ William F. Riley III -------------------------------- Name: William F. Riley III ------------------------------ Its: EVP - CFO ------------------------------- BORROWER 5 EX-11 4 SCHEDULE OF COMP. OF NET EARNINGS PER SHARE EXHIBIT 11 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Schedule of Computation of Net Earnings Per Share (in thousands, except per share amounts) Three months ended Nine months ended September 30, September 30, 1998 1997 1998 1997 ---- ---- ---- ---- Net earnings $15,644 $12,822 $39,092 $29,645 ======= ======= ======= ======= Weighted average shares: Common shares outstanding 42,688 42,368 42,638 42,197 Common equivalent shares issuable upon exercise of employee stock options 718 931 824 1,008 ------- ------- ------- ------- Diluted weighted average shares 43,406 43,299 43,462 43,205 ======= ======= ======= ======= Basic earnings per share $ .37 $ .30 $ .92 $ .70 ======= ======= ======= ======= Diluted earnings per share $ .36 $ .30 $ .90 $ .69 ======= ======= ======= ======= EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTACTED FROM THE FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 863557 SWIFT TRANSPORTATION CO., INC. 1,000 U.S. DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1 4,308 0 112,306 0 2,975 142,211 542,081 125,339 568,961 89,582 0 0 0 43 305,688 568,961 634,624 634,624 0 565,293 (696) 0 4,320 65,707 26,615 39,092 0 0 0 39,092 .92 .90
EX-99 6 SAFE HARBOR COMPLIANCE FOR FWD-LOOKING STMT EXHIBIT 99 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS In passing the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), Congress encouraged public companies to make "forward-looking statements" 1 by creating a safe-harbor to protect companies from securities law liability in connection with forward-looking statements. Swift Transportation Co., Inc. ("Swift") intends to qualify both its written and oral forward-looking statements for protection under the PSLRA. To qualify oral forward-looking statements for protection under the PSLRA, a readily available written document must identify important factors that could cause actual results to differ materially from those in the forward-looking statements. Swift provides the following information in connection with its continuing effort to qualify forward-looking statements for the safe harbor protection of the PSLRA. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, the following: (i) excess capacity in the trucking industry; (ii) significant increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, tolls, license and registration fees and insurance premiums, to the extent not offset by increases in freight rates or fuel surcharges; (iii) difficulty in attracting and retaining qualified drivers and owner operators, especially in light of the current shortage of qualified drivers and owner operators; (iv) recessionary economic cycles and downturns in customers' business cycles, particularly in market segments and industries (such as retail and 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; and (x) a significant reduction in or termination of the Company's trucking services by a key customer. Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, the investment community is urged not to place undue reliance on forward-looking statements. In addition, Swift undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time. 1. "Forward-looking statements" can be identified by use of words as "expect," "believe," "estimate," "project," "forecast," "anticipate," "plan," and similar expressions. -----END PRIVACY-ENHANCED MESSAGE-----