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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File No. 0-18605
SWIFT TRANSPORTATION CO., INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0666860
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1455 Hulda Way, Sparks, Nevada 89431
(Address of principal executive offices) (Zip Code)
(702) 359-9031
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value Nasdaq National Market
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 such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
At March 14, 1997, the aggregate market value of common stock held by
non-affiliates of the Registrant was $342,070,987.
The number of shares outstanding of the Registrant's common stock on
March 14, 1997 was 27,973,284.
DOCUMENTS INCORPORATED BY REFERENCE
Materials from the Registrant's Information Statement relating to the
1997 Annual Meeting of Stockholders to be held on May 22, 1997 have been
incorporated by reference into Part III, Items 10, 11, 12 and 13.
Exhibit Index at page 53
Total pages 149
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TABLE OF CONTENTS
Page
----
PART I .........................................................................................................
Item 1. Business............................................................................... 4
Item 2. Properties.............................................................................14
Item 3. Legal Proceedings......................................................................15
Item 4. Submission of Matters to a Vote of Security Holders....................................15
PART II .........................................................................................................
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters................................................................................16
Item 6. Selected Financial and Operating Data..................................................17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................19
Item 8. Financial Statements and Supplementary Data............................................28
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures..................................................................51
PART III .........................................................................................................
Item 10. Directors and Executive Officers of the Registrant.....................................52
Item 11. Executive Compensation.................................................................52
Item 12. Security Ownership of Certain Beneficial Owners and Management.........................52
Item 13. Certain Relationships and Related Transactions.........................................52
PART IV .........................................................................................................
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K...............................................................................53
SIGNATURES........................................................................................................S-1
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PART I
Item 1. Business
General
Swift Transportation Co., Inc. (with its subsidiaries, "Swift" or the
"Company") is the fourth largest publicly-held, national truckload carrier in
the United States. Swift operates primarily throughout the continental United
States, combining strong regional operations with a transcontinental van
operation. The principal types of freight transported by Swift include retail
and discount department store merchandise, paper products, non-perishable food,
tires, beverages and beverage containers and building materials.
By meeting its customers' specific needs for both regional and
transcontinental service and through selective acquisitions, Swift has been able
to achieve significant growth in revenues over the past five years. Operating
revenue has grown at a compound annual growth rate of 24.6% from $233.4 million
in 1992 to $562.3 million in 1996. During that same period, net earnings have
grown at a compound annual growth rate of 29.3% from $9.8 million to $27.4
million.
Swift Transportation Co., Inc., a Nevada corporation headquartered in
Sparks, Nevada, is a holding company for the Arizona operating corporation also
named Swift Transportation Co., Inc. These companies are collectively referred
to herein as the "Company." The Company's headquarters is located at 2200 South
75th Avenue, Phoenix, Arizona 85043, and its telephone number is (602) 269-9700.
This Annual Report on Form 10-K contains forward-looking statements.
Additional written or oral forward-looking statements may be made by the Company
from time to time in filings with the Securities and Exchange Commission or
otherwise. 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 withing the
meaning of that term in Section 27A of the Securities Act of 1993, 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 products or services of the
Company, as well as assumptions relating to the foregoing. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking statements. Statements in this Annual
Report, including the Notes to the Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations,"
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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 this Annual Report.
Operating Strategy
Swift focuses on achieving high density for service-sensitive customers
in short-to-medium haul traffic lanes. Through its network of 23 service
terminals, Swift is able to provide regional service on a nationwide basis.
Swift's terminal network establishes a local market presence in the regions
Swift serves and enables Swift to respond more rapidly to its customers'
changing requirements. This regional network also enables Swift to enhance
driver recruitment and retention by returning drivers to their homes regularly,
reduce its purchases of higher priced fuel at truck stops and expedite lower
cost, in-house equipment maintenance. With an average length of haul of 576
miles in 1996, Swift is able to limit its direct competition with railroads,
intermodal services and longer-haul, less specialized truckload carriers.
Swift seeks to provide premium service with commensurate rates, rather
than compete primarily on the basis of price. The principal elements of Swift's
premium service include: regional terminals to facilitate single and multiple
pick-ups and deliveries and maintain local contact with customers;
well-maintained, late model equipment; a fully-integrated computer system to
monitor shipment status and variations from schedule; an onboard communications
system that enables the Company to dispatch equipment and monitor traffic;
timely deliveries; and extra equipment to respond promptly to customers' varying
requirements.
To manage the higher costs and greater logistical complexity inherent
in operating in short- to-medium haul traffic lanes, Swift employs sophisticated
computerized management control systems to monitor key aspects of its
operations, such as availability of equipment, truck productivity and fuel
consumption. Swift has a three-year replacement program for substantially all of
its tractors, which allows Swift to maximize equipment utilization and fuel
economy by capitalizing on improved engine efficiency and vehicle aerodynamics
and to minimize maintenance expense. For 1996 and 1995, Swift maintained an
operating ratio of 90.5% and 89.9%, respectively.
Growth Strategy
Major shippers continue to reduce the number of carriers that they use
for their regular freight needs. This has resulted in a relatively small number
of financially stable "core carriers" and has contributed to consolidation in
the truckload industry in recent years. The truckload industry remains highly
fragmented, and management believes that overall growth in the truckload
industry and continued industry consolidation will present opportunities for
well managed, financially stable carriers such as Swift to expand. The Company
intends to take advantage of growth opportunities through a combination of
internal growth and selective acquisitions.
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The key elements of Swift's growth strategy are:
o Strengthen Core Carrier Relationships. Swift intends to
continue to strengthen its core carrier relationships, expand
its services to its existing customers and pursue new customer
relationships. By concentrating on expanding its services to
its existing customers, Swift's revenues from its top 25
customers increased by 38% from 1994 to 1996. The largest 25,
10 and 5 customers, respectively, accounted for 47%, 33% and
24% of revenues in 1996, with no customer accounting for more
than 9% of Swift's gross revenues during that same period. In
addition to expanding its services to existing customers,
Swift actively pursues new traffic commitments from high
volume, financially stable shippers for whom its has not
previously provided services.
o Pursue Strategic Acquisitions. Swift's revenue growth has been
attributable, in significant part, to seven acquisitions
completed in the last eight years. These acquisitions have
enabled Swift to expand from its historical operations base in
the Western United States and develop a strong regional
presence in the Midwestern, Eastern and Southeastern United
States. Swift generally limits its consideration of
acquisitions to those it believes will be accretive to
earnings within six months, and historically all of its
acquisitions have met this objective. Most recently, in
September 1996, Swift augmented its western operations by
acquiring the dry freight van division of Navajo Shippers,
Inc., Digby Leasing, Inc. and Digby- Ringsby Truck Line, Inc.
This acquisition added 287 tractors to Swift's fleet. In
April, 1997 the Company expects to acquire approximately 600
tractors and 2,100 trailers from Direct Transit, Inc. ("DTI"),
a Debtor In Possession in United States Bankruptcy Court. DTI
is a dry van carrier based in North Sioux City, South Dakota
and operates predominately in the eastern two-thirds of the
United States.
o Exploit Private Fleet Outsourcing. A number of large companies
maintain their own private trucking fleets to facilitate
distribution of their products. Swift believes that nearly 82%
of private fleet traffic is short-to-medium haul in nature,
traveling an average of 1,000 miles or less per round trip,
with 72% of such traffic traveling 500 miles or less. In order
to reduce operating costs associated with private fleets, a
number of large companies have begun to outsource their
transportation and logistics requirements. Swift believes that
its strong regional operations and average length of haul of
less than 600 miles position it to take advantage of this
trend, and Swift already serves as a preferred supplier or
"core carrier" to many major shippers who are considering, or
may in the future consider, outsourcing their transportation
and logistics requirements.
Operations
In the Western United States, Swift has developed a network of regional
terminals and offices strategically located in areas that have strong, diverse
economies and provide access to other key Western population centers. In
addition to Phoenix, Arizona, Swift's Western terminals
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are located in the areas of Los Angeles, San Francisco and Willows, California;
Portland, Oregon; Salt Lake City, Utah; Lewiston, Idaho; Reno, Nevada and
Denver, Colorado.
In the Eastern United States, Swift has terminals located in Auburn,
New York; Carlisle, Pennsylvania; Richmond, Virginia; Columbus, Ohio; Eden,
North Carolina; Greer, South Carolina; Decatur, Alabama; Atlanta and Albany,
Georgia. The terminals are located in close proximity to major customers who
tender significant traffic volume to Swift.
Swift's Midwest terminals are located in Gary and Shoals, Indiana;
Dallas and Laredo, Texas; Oklahoma City, Oklahoma; Memphis, Tennessee and Kansas
City, Kansas.
To minimize competition from long-haul truckload carriers and
railroads, Swift operates principally within short-to-medium-haul traffic lanes.
Although the Company's transcontinental division allows it to serve a broad
spectrum of shipper needs, the primary regions in which Swift operates are
ideally suited to short-to-medium-haul lanes because of the distribution of
population and economic centers. During 1996 and 1995, Swift's average length of
haul was 576 and 591 miles, respectively.
Swift focuses the marketing of its services to large, service-sensitive
customers that regularly ship over established routes within Swift's regional
service areas. Swift's service includes the availability of specialized
equipment suitable for the requirements of certain industries; high cubic
capacity trailers; computerized tracking of and frequent reporting on customer
shipments; onboard communications that enable instant re-routing or modification
of traffic; well-maintained, late-model equipment that enhances on-time
deliveries; multiple drops, appointment pick-ups and deliveries; assistance in
loading and unloading; extra trailers that can be placed for the convenience of
customers; and sufficient equipment to respond promptly to customers' varying
requirements.
The achievement of significant regular freight volumes on high-density
routes and consistent shipment scheduling over these routes are key elements of
Swift's operations. As a result, Swift's terminal managers are better able to
match available equipment to available loads and schedule regular maintenance
and fueling at Company terminals, thereby improving productivity and asset
utilization and minimizing empty miles and expensive over-the-road fueling and
repair costs. Consistent scheduling also allows Swift to be more responsive to
its customers' needs. Swift's regular scheduling and relatively short length of
haul enable drivers to return to their homes regularly, which has helped Swift
minimize driver turnover and improve recruitment.
In order to reduce the higher operating costs traditionally associated
with medium-length hauls and specialized equipment, Swift has installed
sophisticated computerized management control systems to monitor key aspects of
its operations. Swift has a significant investment in its computer hardware and
utilizes state-of-the-art software specially designed for the trucking industry.
The Company's fully integrated computer network allows its managers to
coordinate available equipment with the transportation needs of its customers,
monitor truck productivity and
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fuel consumption and schedule regular equipment maintenance. Dispatchers based
in Phoenix, Arizona and in each regional terminal monitor the location and
delivery schedules of all shipments and equipment to coordinate routes and
increase equipment utilization. The Company's computer system provides immediate
access to current information regarding driver and equipment status and
location, special load and equipment instructions, routing and dispatching.
Swift's larger terminals are staffed with terminal managers, fleet
managers and customer service representatives. Terminal managers work with both
the fleet managers and the customer service representatives, as well as all
other operations personnel, to coordinate the needs of both customers and
drivers. Terminal managers are also responsible for soliciting new customers and
serving existing customers in their areas. Each fleet manager is responsible for
the general operation of approximately 45 trucks and their drivers, including
driver retention, productivity per truck, routing, fuel consumption, safety and
scheduled maintenance. Customer service representatives are assigned specific
customers to ensure specialized, high-quality service and frequent customer
contact.
Acquisitions
The growth of the Company has been, and will continue to be, dependent
in significant part upon the acquisition of small-to-medium sized trucking
companies throughout the United States. In 1988, the Company acquired Cooper
Motor Lines ("Cooper"), which established the Company's operations in the
Eastern United States. In September 1991, Swift further expanded its eastern
operations by acquiring Arthur H. Fulton, Inc. ("Fulton"). In June 1993, the
Company strengthened its presence in the Northwestern United States with the
acquisition of West's Best Freight Systems, Inc. ("West's Best").
During 1994, the Company completed the acquisition of both East-West
Transportation, Inc. ("East-West") and Missouri-Nebraska Express, Inc. ("MNX").
The MNX acquisition was the largest acquisition to date and established a
significant regional operation in the Midwest United States. In September 1996,
the Company acquired the dry freight van division of Navajo Shippers, Inc.,
Digby Leasing, Inc. and Digby-Ringsby Truck Line, Inc. (collectively, "Navajo
Shippers"). This acquisition added 287 tractors to the Company's fleet.
On March 20, 1997 the United States Bankruptcy Court approved the
Company's purchase agreement with Direct Transit, Inc. ("DTI"), a Debtor In
Possession in United States Bankruptcy Court, to purchase certain assets of DTI.
DTI is a dry van carrier based in North Sioux City, South Dakota and operates
predominately in the eastern two-thirds of the United States. At closing, which
is expected to occur in April 1997, the Company will acquire approximately 600
tractors and 2,100 trailers along with the inventory and miscellaneous assets of
DTI.
To date, the Company has been successful in identifying trucking
companies to acquire and in integrating such companies' operations into the
Company's operations. The Company generally limits its consideration of
acquisitions to those it believes will be accretive to earnings within six
months, and historically all of its acquisitions have met this objective. The
Company may face competition from transportation companies or other third
parties for acquisition opportunities that become available. There can be no
assurance that the Company will identify acquisition candidates that will result
in successful combinations in the future. Any future acquisitions by the Company
may result in the incurrence of additional debt and amortization of expenses
related to
8
goodwill and intangible assets, which could adversely affect the Company's
profitability, or could involve the potentially dilutive issuance of additional
equity securities. In addition, acquisitions involve numerous risks, including
difficulties in assimilation of the acquired company's operations particularly
in the period immediately following the consummation of such transactions, the
diversion of the attention of the Company's management from other business, and
the potential loss of customers, key employees and drivers of the acquired
company, all of which could have a material adverse effect on the Company's
business and operating results.
Revenue Equipment
Swift acquires premium tractors to help attract and retain drivers,
promote safe operations and minimize maintenance and repair costs. Management
believes the higher initial investment is recovered through improved resale
value.
The following table shows the type and age of Company-owned and leased
equipment at December 31, 1996.
57', 53' and Sets of Flatbed Specialized
Model Year Tractors(1) 48' Vans Double Vans Trailers Trailers
- -------------------- --------------- ----------------- ---------------- ------------ ---------------
1997 1,102 1,573 -- 150 --
1996 764 2,085 -- 185 --
1995 1,580 660 170 94 --
1994 597 1,162 -- 40 --
1993 11 1,107 40 105 1
1992 70 1,010 69 -- --
1991 and prior 42 2,547 822 128 203
- -------------------- --------------- ----------------- ---------------- ------------ ---------------
Total 4,166 10,144 1,101 702 204
- ----------------------------
(1) Excludes 665 owner-operator tractors.
When purchasing new revenue equipment, Swift acquires standardized
tractors and trailers manufactured to the Company's specifications. Since 1990,
Swift has acquired predominantly tractors manufactured by Freightliner powered
by Series 60 Detroit Diesel engines. Standardization of drive-line components
allows Swift to operate with a minimum spare parts inventory, enhances Swift's
maintenance program and simplifies driver training. Swift adheres to a
comprehensive maintenance program that minimizes downtime and enhances the
resale value of its equipment. In addition to its primary maintenance facility
in Phoenix, Arizona, Swift performs routine servicing and maintenance of its
equipment at most of its regional terminal
9
facilities, thus avoiding costly on-road repairs and out-of-route trips. Swift
has adopted a three-year replacement program on the majority of its line-haul
tractors. This replacement policy allows Swift to attract drivers, maximize its
fuel economy by capitalizing on improvement in both engine efficiency and
vehicle aerodynamics, stabilize maintenance expense and maximize equipment
utilization.
In 1996, the Company began replacing its fleet of double van trailers
with 13 1/2 foot high 53 foot trailers to be used in the Eastern United States
and 14 foot high 53 foot trailers to be used in the Western United States.
Management believes that this conversion to a standardized fleet of 53 foot
trailers will provide cost reductions, such as decreasing licensing costs,
simplifying driver training and increasing equipment utilization. The conversion
to a standardized fleet of 53 foot trailers will result in the sale of
substantially all of the Company's fleet of double van trailers. While the
Company believes that the market value of its double van trailer fleet is
currently greater than the book value, there can be no assurance that the market
value of such equipment will not decline or that the sale of such equipment will
result in gains. The sale of the Company's double van trailer fleet may result
in significant fluctuations in the amount of gains or losses recorded in any
given quarter. The amount of such gains or losses recorded in a particular
quarter will be dependent upon the quantity of trailers sold and the prevailing
market prices for used trailer equipment. The Company intends to retain an
adequate inventory of specialized equipment to continue to provide service to
those existing and prospective customers that require such equipment. In 1996,
the Company implemented new trailer configurations designed for railroad
intermodal services that has allowed it to achieve greater operating
efficiencies in certain high-density balanced traffic lanes.
Swift has installed Qualcomm onboard, two-way vehicle satellite
communication systems in the majority of its tractors. The communications system
links drivers to regional terminals, allowing Swift to alter rapidly its routes
in response to customer requirements and eliminating the need for driver stops
to report problems or delays. The system employs code buttons that allow drivers
to inform dispatchers and fleet managers of the status of routing, loading and
unloading or the need for emergency repairs. Swift believes the communications
system improves fleet control, the quality of customer service and driver
retention. Swift intends to continue to install the communication system in
substantially all tractors acquired in the future.
Swift has adopted a speed limit of 57 miles per hour for Company
tractors and 62 miles per hour for owner-operator tractors to reduce accidents,
enhance fuel mileage and minimize maintenance expense. Substantially all of
Swift's Company tractors are equipped with electronically controlled engines
that are set to limit the speed of the vehicle to 57 mph.
Marketing and Customers
Swift has targeted the service-sensitive segment of the truckload
market, both common and contract, rather than that segment that uses price as
its primary consideration. The Company has chosen to provide premium service
with commensurate rates rather than compete primarily on the
10
basis of price. The principal elements of Swift's premium service include:
regional terminals to facilitate single and multiple pick-ups and deliveries and
to maintain local contact with customers; a fully-integrated computer system to
monitor shipment location and variations from schedule; an onboard communication
system that enables the Company to reroute traffic; well-maintained, late model
equipment; timely deliveries; extra equipment for the convenience of customers,
which enables Swift to respond promptly to customers' varying requirements;
assistance in loading and unloading; and Company ownership and control of
revenue equipment rather than significant reliance upon owner-operators. By
concentrating on expanding its services to its existing customers, the Company's
revenues from its top 25 customers increased 38% from 1994 to 1996.
Swift maintains a strong commitment to marketing. Swift has assigned a
member of senior management to each of its largest customers to ensure a high
level of customer support. Swift solicits new customers from its Phoenix
headquarters and each of its regional terminals through a marketing staff of
approximately 20 persons. Once a customer relationship has been established,
regional customer service representatives maintain contact and solicit
additional business. Swift concentrates on attracting non-cyclical customers
that regularly ship multiple loads from locations that complement existing
traffic flows. Customer shipping point locations are regularly monitored and, as
shipping patterns of existing customers expand or change, Swift attempts to
obtain additional customers that will complement the new traffic flow. This
strategy enables Swift to maximize equipment utilization.
The largest 25, 10 and 5 customers accounted for approximately 47%, 33%
and 24% respectively, of Swift's revenues during 1996, 51%, 37% and 26%,
respectively, of Swift's revenues during 1995 and 52%, 35% and 22%,
respectively, of Swift's revenues during 1994. No customer accounted for more
than 9% of Swift's gross revenues during any of the three most recent fiscal
years. Swift's largest customers include retail and discount department store
chains, tire manufacturers, paper manufacturers, non-perishable food companies,
beverage and beverage container producers, manufacturers and building materials
companies.
Drivers and Employees
All Swift drivers must meet or exceed specific guidelines relating
primarily to safety records, driving experience and personal evaluations,
including a physical examination and mandatory drug testing. Upon being hired, a
driver is trained in all phases of Swift's policies and operations, safety
techniques, and fuel efficient operation of the equipment. All new drivers must
pass a safety test and have a current Commercial Drivers License. In addition,
Swift has ongoing driver efficiency and safety programs to ensure that its
drivers comply with its safety procedures.
Senior management is actively involved with the development and
retention of drivers. Recognizing the need for qualified drivers, Swift
established its own driver-training school in Phoenix, Arizona in 1987, which is
certified by the Arizona Department of Transportation. Swift also has contracted
with driver-training schools that are managed by outside organizations as well
as local community colleges throughout the country. Candidates for the schools
must be at least
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23 years old, possess a high school education or equivalent, pass a basic skills
test and pass the U.S. Department of Transportation ("DOT") physical
examination, which includes drug and alcohol screening. Students are required to
complete three weeks of classroom study and driving range time and a six-week,
on-the-road training program.
To take advantage of the large number of displaced military personnel,
the Company has established a military employment program to recruit both
qualified drivers and student trainees being furloughed from the armed forces.
Swift bases its drivers at the regional terminals and monitors each
driver's location on its computer system. Swift uses this information to
schedule the routing for its drivers so that they can return home frequently. In
order to attract and retain highly qualified drivers and promote safe
operations, the Company purchases premium quality tractors equipped with
optional comfort and safety features, such as air ride suspension, air
conditioning, high quality interiors, power steering, engine brakes and raised
roof double sleeper cabs. Company drivers are compensated on the basis of miles
driven and number of stops or deliveries, plus bonuses. Base pay for miles
driven increases with a driver's length of service. The Company maintains a
bonus system for its drivers based upon months of service, safety and driving
performance. Drivers employed by Swift participate in company-sponsored health,
life and dental insurance plans and are eligible to participate in Swift's
401(k) Profit Sharing Plan and Employee Stock Purchase Plan.
Swift believes its innovative driver-training programs, driver
compensation, regionalized operations, driver tracking and late-model equipment
provide important incentives to attract and retain qualified drivers. Although
Swift has had no significant downtime due to inability to secure qualified
drivers, no assurance can be given that a shortage of qualified drivers will not
adversely affect the Company in the future.
As of December 31, 1996, Swift employed approximately 6,700 full-time
persons, of whom approximately 5,360 were drivers (including driver trainees),
450 were mechanics and other equipment maintenance personnel and the balance
were support personnel, such as sales personnel, corporate managers and
administration. None of Swift's drivers or other employees is represented by a
collective bargaining unit. In the opinion of management, Swift's relationship
with its drivers and employees is excellent.
Safety
The Company has an active safety and loss prevention program at each of
its terminals. Safety supervisors engage in ongoing training of drivers
regarding safe vehicle operations and loading procedures. The Company has
adopted a maximum speed limit of 57 miles per hour for Company tractors and
rewards drivers with bonuses for complying with the Company's safety policies.
The Company believes that its insurance and claims expense as a percentage of
operating revenue is one of the best in the industry, which is attributable to
its overall strong safety program.
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Fuel
In order to reduce fuel costs, the Company purchases approximately 73%
of its fuel in bulk at 20 of its 25 terminals. Swift stores fuel in underground
storage tanks at two of its bulk fueling terminals and in above ground storage
tanks at its other bulk fueling terminals. The Company believes that it is in
substantial compliance with applicable environmental laws and regulations.
Shortages of fuel, increases in fuel prices or rationing of petroleum products
could have a materially adverse effect on the operations and profitability of
the Company. From time to time, the Company, in response to sudden, large
increases in fuel costs, has implemented fuel surcharges to pass on to its
customers all or substantially all of such costs. For example, in April 1996,
the Company implemented a fuel surcharge program in response to a significant
increase in fuel cost. This fuel surcharge program recovered more than half of
the increase in the Company's fuel prices. However, there can be no assurance
that such fuel surcharges could be used to offset future increases in fuel
prices. The Company believes that its 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 has not used
derivative- type products as a hedge against higher fuel costs.
Competition
The trucking industry is extremely competitive and fragmented. The
Company competes primarily with regional, medium-haul truckload carriers.
Management believes, because of its cost efficiencies, productive equipment
utilization and financial resources, that the Company has a competitive
advantage over most regional truckload carriers. The Company believes that
competition for the freight transported by the Company is based, in the long
term, as much upon service and efficiency as on freight rates. Some of the
trucking companies with which the Company competes have greater financial
resources, own more revenue equipment and carry a larger volume of freight than
the Company. Long-haul truckload carriers and railroads also provide
competition, but to a lesser degree. The Company also competes with other motor
carriers for the services of drivers.
Regulation
Prior to December 29, 1995 the Company was regulated by the Interstate
Commerce Commission ("ICC"). On December 29, 1995, the ICC ceased operations.
However, substantially all of the jurisdiction over motor carriers was
transferred to the United States Department of Transportation, and most of the
regulatory requirements remain essentially unchanged. The Company is also
regulated by various state agencies. These regulatory authorities have broad
powers, generally governing matters such as authority to engage in motor carrier
operations, rates and charges, certain mergers, consolidations and acquisitions
and periodic financial reporting. The trucking industry is subject to regulatory
and legislative changes which can affect the economics of the industry.
13
The Company's operations also are subject to various federal, state and
local environmental laws and regulations dealing with transportation, storage,
presence, use, disposal and handling of hazardous materials, discharge of
stormwater and underground fuel storage tanks. The Company believes that its
operations are in material compliance with current laws and regulations and does
not know of any existing condition that would cause compliance with applicable
environmental regulations to have a material adverse effect on the Company's
business or operating results.
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 increased operating costs in colder weather and higher fuel
consumption due to increased idle time.
Item 2. Properties
The following table provides information regarding the Company's
regional terminals and/or offices.
Company Owned
Location or Leased
-------------------------
Albany, Georgia Leased
Atlanta, Georgia Leased
Auburn, New York Owned
Carlisle, Pennsylvania Leased
Columbus, Ohio Leased
Decatur, Alabama Leased
Denver, Colorado Leased
Eden, North Carolina Owned
Edwardsville, Kansas Owned
Fontana, California Owned
Gary, Indiana Owned
Greer, South Carolina Owned
Hutchins, Texas Leased
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Laredo, Texas Leased
Lewiston, Idaho Owned/Leased
Memphis, Tennessee Leased
Oklahoma City, Oklahoma Owned
Phoenix, Arizona Owned/Leased
Richmond, Virginia Owned
Salt Lake City, Utah Owned
Shoals, Indiana Owned
Sparks, Nevada Owned
Stockton, California Leased
Troutdale, Oregon Owned
Willows, California Owned
Wilmington, California Leased
Swift's new headquarters, which the Company moved into in June 1996,
are located on approximately 153 acres in Phoenix, Arizona, and contains 83,000
square feet of office space, 74,000 square feet of shop and maintenance
facilities, 27,000 square feet of a drivers' center, a recruiting and training
center, a warehouse facility, a two-bay truck wash and an eight lane fueling
center. The Company's prior headquarters are held for sale. As of December 31,
1996, the Company's aggregate monthly rent for all leased properties was
$136,000.
Item 3. Legal Proceedings
The Company is a party to routine litigation incidental to its
business, primarily involving claims for personal injury or property damage
incurred in the transportation of freight. The Company's insurance program for
liability, workers' compensation, 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 to be adequate. The Company is not aware of any claims or threatened
claims that might have a material adverse effect upon the Company's financial
condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1996.
15
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
General
The Company's common stock is publicly traded on the Nasdaq National
Market ("Nasdaq") under the symbol "SWFT." The following table sets forth the
high and low closing sales prices, adjusted for stock splits, of the common
stock, as reported by Nasdaq, for the periods indicated below.
1996 High Low
---- ---
First Quarter $21.25 $15.00
Second Quarter 21.125 17.25
Third Quarter 22.5 18.625
Fourth Quarter 24.5 20.25
1995
First Quarter $25.75 $15.25
Second Quarter 17.75 13.00
Third Quarter 20.75 14.50
Fourth Quarter 17.75 14.75
On March 14, 1997, the last reported sales price of the Company's
common stock was $25.625 per share. At that date, the number of stockholder
accounts of record of the Company's common stock was 946. The Company estimates
that these are approximately 4,100 beneficial holders of the Company's common
stock.
The Company has not paid cash dividends on its common stock in either
of the two preceding fiscal years, and one of the Company's notes payable
includes limitations on the payment of cash dividends. It is the current
intention of management to retain earnings to finance the growth of the
Company's business. Future payment of cash dividends will depend upon the
financial condition, results of operations, and capital requirements of the
Company, as well as other factors deemed relevant by the Board of Directors.
Factors That May Affect Future Stock Performance
The performance of the Company's common stock is dependent upon several
factors, including those set forth below and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Factors That May
Affect Future Results and Financial Condition."
16
Influence by Principal Stockholder. Trusts established for the benefit
of Jerry C. Moyes and his family beneficially own approximately 42% of the
Company's common stock. Accordingly, Mr. Moyes will have a significant influence
upon the activities of the Company, as well as on all matters requiring approval
of the stockholders, including electing members of the Company's Board of
Directors and causing or restricting the sale or merger of the Company. This
concentration of ownership, as well as the ability of the Board to establish the
terms of and issue preferred stock of the Company without stockholder approval,
may have the effect of delaying or preventing changes in control or management
of the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over their current market prices.
Possible Volatility of Stock Price. The market price of the Company's
common stock could be subject to significant fluctuations in response to certain
factors, such as, among others, variations in the anticipated or actual results
of operations of the Company or other companies in the transportation industry,
changes in conditions affecting the economy generally, analysts' reports or
general trends in the industry, as well as other factors unrelated to the
Company's operating results.
Item 6. Selected Financial and Operating Data
The selected consolidated financial data presented below for, and as of
the end of, each of the years in the five-year period ended December 31, 1996
are derived from the Company's Consolidated Financial Statements. The
Consolidated Financial Statements as of December 31, 1996 and 1995, and for each
of the years in the three-year period ended December 31, 1996 and the
independent auditors' report thereon, are included in Item 8 of this Form 10-K.
This data should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in Item 8 of this Form 10-K.
17
Years Ended December 31,
(dollar amounts in thousands, except per share amounts and operating data)
--------------------------------------------------------------------
1996(1) 1995 1994(2) 1993(3) 1992
------- ---- ------- ------- ----
Consolidated Statements of Earnings Data:
Operating revenue $562,259 $458,165 $365,889 $276,982 $233,409
Earnings before income taxes $47,212 $40,070 $39,309 $21,409 $16,414
Net earnings $27,422 $23,040 $22,629 $12,274 $9,834
Net earnings per common and equivalent share $1.07 $.91 $0.89 $.48 $.43
Consolidated Balance Sheet Data (at end of year):
Working capital $36,938 $6,735 $14,012 $14,156 $13,862
Total assets $380,605 $311,308 $275,991 $172,220 $119,009
Long-term obligations, less current portion $ 40,284 $68,954 $77,715 $23,379 $8,997
Stockholders' equity $226,666 $134,835 $111,342 $88,973 $71,842
Operating Statistics (at end of year):
Operating ratio 90.5% 89.9% 88.8% 92.1% 92.2%
Pre-tax margin(4) 8.4% 8.7% 10.7% 7.7% 7.0%
Average line haul revenue per mile $1.11 $1.11 $1.12 $1.10 $1.07
Empty mile percentage 14.0% 13.9% 13.2% 13.4% 13.6%
Average length of haul (in miles) 576 591 590 608 711
Total tractors at end of period:
Company-operated 4,166 3,472 3,286 2,338 1,882
Owner-operator 665 477 188 44 29
Trailers at end of period 12,151 8,788 8,957 5,215 4,235
(1) Includes the results of operations from the asset acquisition of the
dry freight van division of Navajo Shippers, Inc., Digby Leasing, Inc.
and Digby-Ringsby Truck Line, Inc. beginning on September 12, 1996.
(2) Includes the results of operations from the asset acquisitions of
East-West Transportation, Inc. beginning on July 1, 1994 and
Missouri-Nebraska Express, Inc. beginning October 2, 1994.
(3) Includes the results of operations from the acquisition of West's Best
Freight Systems, Inc. beginning June 1, 1993.
(4) Pre-tax margin represents earnings before income taxes as a percentage
of operating revenue. Because of the impact that equipment financing
methods can have on the operating ratio (operating expenses as a
percentage of operating revenue), the Company believes that the most
meaningful comparative measure of its operating efficiency is its
pre-tax margin, which takes into consideration both the Company's total
operating expenses and net interest expense as a percentage of
operating revenue.
18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
During 1996, 1995 and 1994, Swift's fleet has been predominantly
comprised of Company-owned and leased tractors. The Company's decisions whether
to buy or lease new and replacement revenue equipment are based upon the overall
economic impact of the alternative financing methods, including market prices
available and income tax considerations. Depending on whether revenue equipment
is purchased or leased, several categories of the Company's operating expenses
have varied, and will continue to vary, as a percentage of the Company's
revenues. Because of the impact that equipment financing methods can have on the
operating ratio (operating expenses as a percentage of operating revenue), the
Company believes that the most meaningful comparative measure of its operating
efficiency is its pre-tax margin (earnings before income taxes as a percentage
of operating revenue), which takes into consideration both the Company's total
operating expenses and net interest expense as a percentage of operating
revenue. Accordingly, in the discussion and analysis below, the Company has
focused on the factors contributing to operating revenue increases and to the
increase or decrease in its pre-tax margin during the periods presented.
The trend of shippers in the truckload segment of the motor carrier
industry over the past several years has been towards use of a relatively small
number of financially stable "core carriers." This trend has resulted in
consolidation of the truckload industry. However, the truckload industry remains
highly fragmented. Management believes that the industry trend towards core
carriers will continue and will result in continued industry consolidation. In
response to this trend, the Company has nearly doubled the size of its fleet to
4,166 tractors as of December 31, 1996 from 2,338 as of December 31, 1993. This
fleet growth was accomplished through a combination of internal growth and
through strategic acquisitions. See "Business -- General." During this same
period, the Company's owner operator fleet has expanded to 665 as of December
31, 1996 from 44 as of December 31, 1993.
As discussed in "Business-Acquisitions," the Company expects to acquire
certain assets of Direct Transit, Inc. The Company will pay approximately $54
million, which includes $43 million in cash and the assumption of lease
obligations on approximately $11 million of revenue equipment, to acquire
approximately 600 tractors and 2,100 trailers along with inventory and
miscellaneous assets.
19
Results of Operations
The following table sets forth for the periods indicated certain
statements of earnings data as a percentage of operating revenue:
December 31,
-----------------------------------------------
1996 1995 1994
---- ---- ----
Operating revenue....................................... 100.0 100.0 100.0
Operating expenses:
Salaries, wages and employee benefits................ 34.2 37.1 37.4
Operating supplies and expenses...................... 9.3 8.9 8.6
Fuel................................................. 13.8 13.2 13.8
Purchased transportation............................. 12.8 9.3 5.4
Rental expense....................................... 5.8 5.8 6.9
Insurance and claims................................. 3.6 2.9 4.2
Depreciation and amortization........................ 6.0 6.9 6.7
Communications and utilities......................... 1.5 1.6 1.1
Operating taxes and licenses......................... 3.5 4.2 4.7
----- ----- ----
Total operating expenses............................. 90.5 89.9 88.8
Net interest expense.................................... 1.2 1.5 0.9
Other (income) expense, net............................. (0.1) (0.1) (0.4)
----- ----- ----
Earnings before income taxes............................ 8.4 8.7 10.7
Income taxes............................................ 3.5 3.7 4.5
----- ----- ----
Net earnings............................................ 4.9% 5.0% 6.2%
===== ===== ====
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Operating revenue increased $104.1 million, or 22.7%, to $562.3 million
for the year ended December 31, 1996 from $458.2 million for the previous year.
The increase in operating revenue is due primarily to the expansion of the
Company's fleet to 4,831 tractors at December 31, 1996 from 3,949 at December
31, 1995, an increase of 882 tractors. The acquisition of Navajo Shippers in
September 1996 accounted for 287 of this increase in tractors. There were no
significant changes in the Company's freight rates in 1996 and 1995.
The Company's operating ratio was 90.5% and 89.9% in 1996 and 1995,
respectively. The Company's operating revenue and operating ratio for 1996 were
impacted by overall soft shipper demand in the first four months of 1996, harsh
winter conditions and an increase in fuel costs. This resulted in slightly lower
equipment utilization and a slightly higher revenue per mile. The Company's
empty mile factor was 14.0% and 13.9% and the average rate per mile was $1.114
and $1.110 for the years ended December 31, 1996 and 1995, respectively.
20
Salaries, wages and employee benefits represented 34.2% of operating
revenue for the year ended December 31, 1996 compared with 37.1% for 1995. The
improvement is due primarily to the increase in owner operators. Effective
January 1, 1997, the Company will pay its Company drivers a bonus of two cents
per mile, payable quarterly, provided the driver is still employed at the end of
the quarter. The Company anticipates receiving rate increases from its customers
to substantially offset the additional cost associated with the pay increase.
Fuel expenses represented 13.8% and 13.2% of operating revenue in 1996
and 1995, respectively. The increase in fuel as a percentage of revenue is due
primarily to increased fuel prices partially offset by the increase in the owner
operator fleet. Increases in fuel costs (including fuel taxes), 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 that 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 has not used derivative-type hedging products as a
hedge against higher fuel costs.
Purchased transportation represented 12.8% and 9.3% of operating
revenue for the years ended December 31, 1996 and 1995, respectively. This
increase is the result of the growth of the Company's owner operator fleet from
477 at December 31, 1995 to 665 at December 31, 1996.
Rental expense as a percentage of operating revenue was 5.8% for the
years ended December 31, 1996 and 1995. When it is economically feasible to do
so, the Company will purchase then sell tractors it leases by exercising the
purchase option contained in the lease. Gains on these activities are recorded
as a reduction of rent expense. During the year ended December 31,1996 and 1995,
respectively, the Company recorded gains of approximately $3.3 million and $2.1
million from the sale of leased tractors. During 1996 and 1995, leased tractors
represented approximately 62% and 46%, respectively of the fleet (exclusive of
owner operators).
Depreciation and amortization expense was 6.0% of operating revenue for
the year ended December 31, 1996 versus 6.9% for 1995. This decrease is a result
of the higher percentage of tractors which are leased rather than purchased in
1996 versus 1995. During the year ended December 31, 1996 the Company recorded
gains on the sale of revenue equipment of approximately $2.2 million compared
with approximately $2.7 million in 1995. Exclusive of gains, which reduced
depreciation and amortization expense, the percentage of depreciation and
amortization to operating revenue in 1996 and 1995 was 6.4% and 7.7%,
respectively.
In 1996, the Company began replacing its fleet of double van trailers
with 13 1/2 foot high 53 foot trailers to be used in the Eastern United States
and 14 foot high 53 foot trailers to be used in the Western United States.
Management believes that this conversion to a standardized fleet of 53 foot
trailers will provide cost reductions, such as decreasing licensing costs,
simplifying driver training and increasing equipment utilization.
21
The conversion to a standardized fleet of 53 foot trailers will result
in the sale of substantially all of the Company's fleet of double van trailers.
While the Company believes that the market value of its double van trailer fleet
is currently greater than the book value, there can be no assurance that the
market value of such equipment will not decline or that the sale of such
equipment will result in gains. The sale of the Company's double van trailer
fleet may result in significant fluctuations in the amount of gains or losses
recorded in any given quarter. The amount of such gains or losses recorded in a
particular quarter will be dependent upon the quantity of trailers sold and the
prevailing market prices for used trailer equipment.
Insurance and claims expense represented 3.6% and 2.9% of operating
revenue in the year ended December 31,1996 and 1995, respectively. The Company's
insurance program for liability, physical damage and cargo damage involves
self-insurance with varying risk retention levels. Claims in excess of these
risk retention levels are covered by insurance in amounts which management
considers adequate. The Company accrues the estimated cost of the uninsured
portion of pending claims. These accruals are estimated based on management's
evaluation of the nature and severity of individual claims and an estimate of
future claims development based on historical claims development trends.
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 increased to $7.1 million in 1996 from $6.7 million in
1995. Higher interest expense is a result of higher outstanding balances of
interest-bearing debt throughout 1996, offset by lower interest rates. The
higher average balance of interest-bearing debt in 1996 is due to borrowings to
fund capital expenditures such as the new corporate headquarters facility and
the Edwardsville, Kansas terminal. The Company's weighted average interest rate
on borrowings under its revolving line of credit in 1996 and 1995 was 5.89% and
6.65%, respectively. As of December 31, 1996, approximately $15 million of the
Company's outstanding debt had floating interest rates, the majority of which is
based upon the London Interbank Offered Rate ("LIBOR").
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Operating revenue increased by $92.3 million or 25.2% to $458.2 million
in 1995 from $365.9 million in 1994. This increase is primarily attributable to
expansion of the Company fleet to 3,949 tractors as of December 31, 1995 from
3,474 as of December 31, 1994, a net growth of 475 tractors. The net fleet
growth corresponds with the increase in transportation demands from the
Company's major customers. On July 1, 1994, the Company completed asset
acquisitions of East-West Transportation, Inc. ("East-West") which added
approximately, 190 tractors, and Missouri Nebraska Express ("MNX") on October 2,
1994 which added approximately 550 tractors. In 1995, the revenue increase is
also attributable to the availability of this additional revenue equipment for a
full year. There were no significant changes in the Company's freight rates
during 1995 and 1994.
22
The Company's operating ratio was 89.9% and 88.8% in 1995 and 1994,
respectively. The Company's operating revenue and operating ratio in 1995 was
impacted by overall soft economic conditions as compared to 1994. This resulted
in lower equipment utilization and a slightly lower revenue per mile. The
Company's empty mile factor was 13.9% and 13.2% and the average rate per mile
was $1.110 and $1.123 in 1995 and 1994, respectively. The impact of the soft
economic conditions in 1995 was partially offset by the fact the Company's fixed
costs have not grown as rapidly as the tractor fleet. Therefore, fixed costs
were more fully absorbed by operations.
Salaries, wages and employee benefits represented 37.1% and 37.4% of
operating revenue in 1995 and 1994, respectively. The improvement in 1995, as a
percentage of operating revenue, is due to an increase in the owner operator
fleet to 477 as of December 31, 1995 from 188 as of December 31, 1994, a
reduction in driver bonuses and a smaller contribution to the 401(k) Retirement
Plan.
Fuel expenses represented 13.2% and 13.8% of operating revenue in 1995
and 1994, respectively. The decrease in fuel as a percentage of revenue is due
primarily to the increase in the owner operator fleet.
Purchased transportation as a percentage of operating revenue was 9.3%
in 1995 versus 5.4% in 1994. The increase is due to the increase in owner
operators to 477 at December 31, 1995 from 188 at December 31, 1994.
Rental expense represented 5.8% and 6.9% of operating revenue in 1995
and 1994, respectively. The reduction in rental expense as a percentage of
operating revenue is attributable to the increasing percentage of owned versus
leased revenue equipment. During 1995 and 1994, leased tractors represented
approximately 46% and 49%, respectively of the fleet (exclusive of owner
operators).
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 in these activities are recorded as a
reduction of rent expense. During 1995, the Company recorded gains of
approximately $2.1 million.
The increase in the percentage of owned versus leased revenue equipment
has resulted in an increase in depreciation and amortization expense.
Depreciation and amortization expense increased as a percentage of operating
revenue to 6.9% in 1995 from 6.7% in 1994. Depreciation and amortization expense
in 1995 also includes higher amortization attributable to a full year
amortization of goodwill attributable to the MNX acquisition on October 2, 1994.
The increase in depreciation and amortization expense was partially offset by
increased net gains from the sale of owned revenue equipment which totaled
approximately $2.7 million in 1995 compared to $590,000 in 1994.
23
Insurance and claims expense represented 2.9% and 4.2% of operating
revenue in 1995 and 1994, respectively. The Company accrues the estimated cost
of the uninsured portion of the 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.
Interest expense increased to $6.7 million in 1995 from $3.1 million in
1994. Higher interest expense is a result of higher outstanding balances of
interest-bearing debt throughout 1995, together with higher interest rates. The
higher average balances of interest-bearing debt in 1995 are due to borrowings
to finance the East-West and MNX acquisitions which were completed in 1994 and
affect the full year 1995. In addition, in 1994 and 1995 the Company increased
the percentage of owned revenue equipment versus financing such equipment
through operating leases. The Company's weighted average interest rate on
borrowings under its revolving line of credit in 1995 and 1994 was 6.65% and
5.41%, respectively. As of December 31, 1995, approximately $75.6 million of the
Company's outstanding debt had floating interest rates, the majority of which is
based upon the London Interbank Offered Rate ("LIBOR").
Liquidity and Capital Resources
The growth in the Company's business has required 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
public offerings of common stock.
Net cash provided by operating activities was $58.8 million for each of
the years ended December 31, 1996 and 1995. An increase in accounts receivable
was offset primarily by an increase in net earnings, increases in accounts
payable, accrued liabilities and claims accruals and a decrease in prepaid
expenses.
Net cash used in investing activities increased to $80.2 million for
the year ended December 31,1996 from $21.7 million for 1995. The increase is due
primarily to greater expenditures for revenue equipment and for facilities and
improvements, which were offset in part by fewer proceeds from the sale of
property and equipment. Cash expended for investment activities also includes
$5.1 million expended for the purchase of Navajo Shippers.
As of December 31, 1996, the Company had commitments outstanding to
acquire replacement and additional revenue equipment for approximately $132
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.
24
During the year ended December 31, 1996, the Company incurred
approximately $25 million of non-revenue equipment capital expenditures. These
expenditures were primarily for the completion of the construction of the
Company's facility in Edwardsville, Kansas and for construction of the Company's
new corporate headquarters facility in Phoenix, Arizona. In the second quarter
of 1996, the Company relocated its corporate headquarters facility to the newly
constructed facility. The former headquarters facility is currently held for
sale and the net assets are reflected as such on the accompanying consolidated
balance sheet.
The Company anticipates that it will expend approximately $24 million
in 1997 for various facilities upgrades and acquisitions of terminal facilities.
Factors such as costs and opportunities for future terminal expansions may
change the amount of such expenditures.
The funding for capital expenditures has been and will be from a
combination of cash provided by operating activities, long-term debt including
$15 million borrowed to finance the new Phoenix, Arizona headquarters facility,
amounts available under the Company's $110 million line of credit, lease
financing and equity offerings. 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 was $20.0 million in 1996
compared to net cash used in financing activities of $38.5 million in 1995. The
increase in cash provided by financing activities is due to proceeds from the
sale of common stock primarily through the public offering in December 1996 and
proceeds from issuance of long-term debt offset in part by repayments of
long-term debt. The net use of cash in financing activities in 1995 was
primarily the result of repayments of long-term debt of $24.1 million and
reductions in borrowings under the revolving line of credit of $2.4 million.
On January 17, 1997, the Company entered into an agreement for a line
of credit with maximum borrowings of $110 million. The Company anticipates that
a portion of the line of credit will be used to pay off existing secured revenue
equipment debt with current interest rates exceeding the line of credit rate.
The new line will also be used for funding letters of credit.
Management believes that it will be able to finance its needs for
working capital, facilities improvements and expansion, as well as anticipated
fleet growth through additional revenue equipment acquisitions and additional
strategic acquisitions as opportunities become available, through cash flows
from operations, borrowings available under the line of credit and through
long-term debt and operating lease financing believed to be available to finance
revenue equipment acquisitions. 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 conditions 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.
25
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 increased operating costs in colder weather and higher fuel
consumption due to increased idle time.
Factors That May Affect Future Results and Financial Condition
The Company's future operating results and financial condition are
dependent on the Company's ability to continue to successfully provide truckload
carrier services to meet shipper demand patterns. Inherent in this process are a
number of factors that the Company must successfully manage in order to achieve
favorable future operating results and financial condition. Potential risks and
uncertainties that could affect the Company's future operating results and
financial condition include, without limitation, the factors discussed below.
General Economic and Business Factors. The Company's business is
dependent upon a number of factors that may have a material adverse effect on
its results of operations, many of which are beyond the Company's control. These
factors include excess capacity in the trucking industry, 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, and difficulty in attracting and
retaining qualified drivers and owner operators. The Company's results of
operations also are affected by recessionary economic cycles and downturns in
customers' business cycles, particularly in market segments and industries (such
as retail and paper products) in which the Company has a significant
concentration of customers. In addition, the Company's results of operations are
affected by seasonal factors. Customers tend to reduce shipments after the
winter holiday season and the Company's operating expenses tend to be higher in
the winter months primarily due to increased operating costs in colder weather
and higher fuel consumption due to increased idle time.
Competition. The trucking industry is extremely competitive and
fragmented. The Company competes with many other truckload carriers of varying
sizes and, to a lesser extent, with railroads. Competition has created downward
pressure on the truckload industry's pricing structure. Some of the trucking
companies with which the Company competes have
26
greater financial resources than the Company, own more revenue equipment and
carry a larger volume of freight than the Company.
Capital Requirements. The trucking industry is very capital intensive.
The Company depends on cash from operations, operating leases and debt financing
for funds to expand the size of its fleet and maintain modern revenue equipment.
If the Company were unable in the future to enter into acceptable financing
arrangements, it would have to limit its growth and might be required to operate
its revenue equipment for longer periods, which could have a material adverse
effect on the Company's operating results.
Acquisitions. The growth of the Company has been, and will continue to
be, dependent in significant part upon the acquisition of small-to-medium sized
trucking companies throughout the United States. To date, the Company has been
successful in identifying trucking companies to acquire and in integrating such
companies' operations into the Company's operations. The Company may face
competition from transportation companies or other third parties for acquisition
opportunities that become available. There can be no assurance that the Company
will identify acquisition candidates that will result in successful combinations
in the future. Any future acquisitions by the Company may result in the
incurrence of additional debt and amortization of expenses related to goodwill
and intangible assets, which could adversely affect the Company's profitability,
or could involve the potentially dilutive issuance of additional equity
securities. In addition, acquisitions involve numerous risks, including
difficulties in assimilation of the acquired company's operations particularly
in the period immediately following the consummation of such transactions, the
diversion of the attention of the Company's management from other business, and
the potential loss of customers, key employees and drivers of the acquired
company, all of which could have a material adverse effect on the Company's
business and operating results.
Dependence on Key Personnel. The Company is highly dependent upon the
services of Mr. Jerry Moyes, Chairman of the Board, President and Chief
Executive Officer, Mr. William F. Riley, III, Executive Vice President and Chief
Financial Officer, Mr. Robert W. Cunningham, Executive Vice President, and Mr.
Rodney K. Sartor, Executive Vice President. Although the Company believes it has
an experienced and talented management group, the loss of the services of Mr.
Moyes, Mr. Riley, Mr. Cunningham or Mr. Sartor could have a material adverse
effect on the Company's operations and future profitability. The Company does
not have employment agreements with nor does it maintain key man life insurance
on Messrs. Moyes, Riley, Cunningham or Sartor.
Regulation. The Company is regulated by the United States Department of
Transportation and by various state agencies. These regulatory authorities
exercise broad powers, generally governing activities such as authorization to
engage in motor carrier operations, rates and charges, operations, safety,
financial reporting, and certain mergers, consolidations and acquisitions. In
addition, the Company's operations are subject to various environmental laws and
regulations dealing with the transportation, storage, presence, use, disposal
and handling of hazardous materials, discharge of stormwater and underground
fuel storage tanks. If the Company should
27
be involved in a spill or other accident involving hazardous substances or if
the Company were found to be in violation of applicable laws or regulations, it
could have a material adverse effect on the Company's business and operating
results.
Claims Exposure; Insurance. The Company currently self-insures for
liability resulting from cargo loss, personal injury and property damage and for
worker's compensation, and maintains insurance with licensed insurance companies
above its limits on such self-insurance. To the extent the Company were to
experience an increase in the number of claims for which it is self-insured, the
Company's operating results would be materially adversely affected. In addition,
significant increases in insurance costs, to the extent not offset by freight
rate increases, would reduce the Company's profitability.
Dependence on Key Customers. A significant portion of the Company's
revenue is generated from key customers. During 1996, the Company's top 25, 10
and 5 customers accounted for 47%, 33% and 24% of revenues, respectively. The
Company does not have long-term contractual relationships with many of its key
customers, and there can be no assurance that the Company's relationships with
its key customers will continue as presently in effect. A reduction in or
termination of the Company's services by a key customer could have a material
adverse effect on the Company's business and operating results.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements of the Company as of December 31,
1996 and for each of the years in the three-year period ending December 31,
1996, together with related notes and the report of KPMG Peat Marwick LLP,
independent auditors, are set forth on the following pages. Other required
financial information set forth herein is more fully described in Item 14 of
this Form 10-K.
28
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Swift Transportation Co., Inc.:
We have audited the accompanying consolidated balance sheets of Swift
Transportation Co., Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Swift Transportation
Co., Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations, and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
February 14, 1997
29
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31,
---------------------------------------
Assets 1996 1995
------
------------------ ------------------
Current assets:
Cash $ 1,210 $ 2,627
Accounts receivable, net 78,280 56,477
Current portion of contracts receivable -- 16
Inventories and supplies 3,997 3,223
Prepaid taxes, licenses and insurance 3,274 4,964
Assets held for sale 5,453 --
Deferred income taxes 3,690 1,250
------------------ ------------------
Total current assets 95,904 68,557
------------------ ------------------
Property and equipment, at cost:
Revenue and service equipment 297,744 259,362
Land 7,351 10,226
Facilities and improvements 53,109 35,936
Furniture and office equipment 12,242 10,295
------------------ ------------------
Total property and equipment 370,446 315,819
Less accumulated depreciation and amortization 95,597 82,946
------------------ ------------------
Net property and equipment 274,849 232,873
Contracts receivable, less current portion 243 349
Other assets 174 590
Goodwill 9,435 8,939
------------------ ------------------
$ 380,605 $ 311,308
================== ==================
See accompanying notes to consolidated financial statements.
30
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands, except share and per share amounts)
December 31,
---------------------------------------
Liabilities and Stockholders' Equity 1996 1995
------------------------------------
------------------ ------------------
Current liabilities:
Accounts payable $ 16,779 $ 13,089
Accrued liabilities 17,202 15,508
Claims accruals 14,668 10,457
Current portion of long-term debt 10,317 22,768
------------------ ------------------
Total current liabilities 58,966 61,822
------------------ ------------------
Borrowings under revolving line of credit 16,500 11,750
Long-term debt, less current portion 23,784 57,204
Claims accruals 16,689 13,647
Deferred income taxes 38,000 32,050
Stockholders' equity:
Preferred stock, par value $.001 per share. Authorized 1,000,000
shares; none issued -- --
Common stock, par value $.001 per share. Authorized 75,000,000
shares; issued 28,134,684 and 24,877,534 shares in 1996 and
1995, respectively 28 25
Additional paid-in capital 110,291 45,885
Retained earnings 119,763 92,341
------------------ ------------------
230,082 138,251
Less treasury stock, at cost (220,700 shares) 3,416 3,416
------------------ ------------------
Net stockholders' equity 226,666 134,835
Commitments, contingencies and subsequent events
------------------ ------------------
$ 380,605 $ 311,308
================== ==================
See accompanying notes to consolidated financial statements.
31
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Years ended December 31,
------------------------------------------------------------
1996 1995 1994
----------------- ----------------- ------------------
Operating revenue $ 562,259 $ 458,165 $ 365,889
----------------- ----------------- ------------------
Operating expenses:
Salaries, wages and employee benefits 192,572 169,805 136,997
Operating supplies and expenses 52,362 40,582 31,630
Fuel 77,063 60,697 50,434
Purchased transportation 72,040 42,592 19,809
Rental expense 32,599 26,633 25,166
Insurance and claims 20,358 13,121 15,273
Depreciation and amortization 33,883 31,726 24,649
Communications and utilities 8,219 7,547 4,014
Operating taxes and licenses 19,584 19,377 17,069
----------------- ----------------- ------------------
Total operating expenses 508,680 412,080 325,041
----------------- ----------------- ------------------
Operating income 53,579 46,085 40,848
----------------- ----------------- ------------------
Other (income) expenses:
Interest expense 7,106 6,728 3,101
Interest income (107) (75) (78)
Other (632) (638) (1,484)
----------------- ----------------- ------------------
Other (income) expenses, net 6,367 6,015 1,539
----------------- ----------------- ------------------
Earnings before income taxes 47,212 40,070 39,309
Income taxes 19,790 17,030 16,680
----------------- ----------------- ------------------
Net earnings $ 27,422 $ 23,040 $ 22,629
================= ================= ==================
Net earnings per common and equivalent share
$ 1.07 $ .91 $ .89
================= ================= ==================
Shares used in per share calculations 25,669 25,348 25,325
================= ================= ==================
See accompanying notes to consolidated financial statements.
32
SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(dollars in thousands)
Common stock Additional Totsl
------------------------- paid-in Retained Treasury stockholders'
Shares Par value capital earnings stock equity
----------- ------------ ------------ ----------- ----------- -----------
Balance, January 1, 1994 24,528,583 $ 25 $ 42,704 $ 46,672 $ (428) $ 88,973
Issuance of common stock under
employee stock purchase plan 24,073 -- 315 -- -- 315
Amortization of deferred com-
pensation -- -- 42 -- -- 42
Purchase of 33,500 shares of
treasury stock -- -- -- -- (617) (617)
Net earnings -- -- -- 22,629 -- 22,629
----------- ------------ ------------ ----------- ----------- -----------
Balance, December 31, 1994 24,552,656 25 43,061 69,301 (1,045) 111,342
Issuance of common stock under
stock option and employee
stock purchase plans 324,878 -- 1,720 -- -- 1,720
Income tax benefit arising from
the exercise of stock options
-- -- 1,056 -- -- 1,056
Amortization of deferred
compensation -- -- 48 -- -- 48
Purchase of 142,300 shares of
treasury stock -- -- -- -- (2,371) (2,371)
Net earnings -- -- -- 23,040 -- 23,040
----------- ------------ ------------ ----------- ----------- -----------
Balance, December 31, 1995 24,877,534 25 45,885 92,341 (3,416) 134,835
Issuance of common stock under
stock option and employee
stock purchase plans 292,150 -- 1,676 -- -- 1,676
Issuance of common stock upon
public offering, net of
issuance costs of $300 2,875,000 3 59,411 -- -- 59,414
Issuance of common stock for
Navajo Shippers acquisition 90,000 -- 1,918 -- -- 1,918
Income tax benefit arising from
the exercise of stock options -- -- 1,330 -- -- 1,330
Amortization of deferred
compensation -- -- 71 -- -- 71
Net earnings -- -- -- 27,422 -- 27,422
----------- ------------ ------------ ----------- ----------- -----------
Balance, December 31, 1996 28,134,684 $ 28 $ 110,291 $ 119,763 $ (3,416) $ 226,666
=========== ============ ============ =========== =========== ===========
See accompanying notes to consolidated financial statements.
33
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Years ended December 31,
------------------------------------------------------------
1996 1995 1994
----------------- ----------------- ------------------
Cash flows from operating activities:
Net earnings $ 27,422 $ 23,040 $ 22,629
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 33,883 31,726 24,649
Deferred income taxes 3,510 5,250 9,265
Income tax benefit arising from the exercise
of stock options 1,330 1,056 --
Provision for losses on accounts receivable 616 870 500
Amortization of deferred compensation 71 48 42
Change in assets and liabilities (net of
effects of acquisitions in 1996
and 1994):
Increase in accounts receivable (22,637) (12,519) (8,935)
Decrease (increase) in inventories and
supplies (774) 574 (1,268)
Decrease (increase) in prepaid expenses and
other current assets 1,912 54 (908)
Decrease (increase) in other assets 416 (15) 346
Increase in accounts payable, accrued
liabilities and claims accruals 13,035 8,703 12,562
----------------- ----------------- ------------------
Net cash provided by operating activities
58,784 58,787 58,882
----------------- ----------------- ------------------
Cash flows from investing activities:
Proceeds from sale of property and equipment 36,692 43,944 9,027
Capital expenditures (111,820) (65,726) (65,840)
Payments received on contracts receivable 106 120 338
Disbursements for contracts receivable -- (40) (133)
Business acquisitions (5,148) -- (12,242)
----------------- ----------------- ------------------
Net cash used in investing activities
(80,170) (21,702) (68,850)
----------------- ----------------- ------------------
34
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(in thousands)
Years ended December 31,
------------------------------------------------------------
1996 1995 1994
----------------- ----------------- ------------------
Cash flows from financing activities:
Repayments of long-term debt $ (60,897) $ (24,113) $ (11,741)
Proceeds from issuance of long-term debt 15,026 -- --
Increase (decrease) in borrowings under
line of credit 4,750 (13,727) 20,477
Proceeds from sale of common stock, net of
issuance costs 61,090 1,720 315
Purchase of treasury stock -- (2,371) (617)
----------------- ----------------- ------------------
Net cash provided by (used in) financing
activities 19,969 (38,491) 8,434
----------------- ----------------- ------------------
Net decrease in cash (1,417) (1,406) (1,534)
Cash at beginning of year 2,627 4,033 5,567
----------------- ----------------- ------------------
Cash at end of year $ 1,210 $ 2,627 $ 4,033
================= ================= ==================
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 7,112 $ 6,919 $ 3,009
================= ================= ==================
Income taxes $ 14,163 $ 12,225 $ 6,978
================= ================= ==================
Supplemental schedule of noncash investing and
financing activities:
Equipment sales contracts receivable $ 362 $ 596 $ 5,233
================= ================= ==================
Direct financing for purchase of equipment $ -- $ 35,911 $ 14,022
================= ================= ==================
Assumption of loan upon purchase of land $ -- $ -- $ 615
================= ================= ==================
35
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(in thousands)
Years ended December 31,
------------------------------------------------------------
1996 1995 1994
----------------- ----------------- ------------------
During 1996 and 1994, in connection with
business acquisitions, assets were acquired
and liabilities were incurred as follows:
Current assets $ 222 $ 1,340
Current liabilities -- (602)
Property and equipment 5,644 40,379
Goodwill 1,200 6,671
Long-term debt -- (35,546)
Issuance of common stock (1,918) --
----------------- ------------------
Cash paid $ 5,148 $ 12,242
================= ==================
See accompanying notes to consolidated financial statements.
36
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The 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 in consolidation.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with original maturities of
three months or less to be cash equivalents.
Inventories and Supplies
Inventories and supplies consist primarily of spare parts, tires, fuel
and supplies and are stated at cost. Cost is determined using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost. Gains and losses from the sale
of revenue equipment are included as a component of depreciation expense.
Net gains in 1996, 1995 and 1994 were $2,185,000, $2,663,000 and
$590,000, respectively.
To obtain certain tax incentives, the Company financed the construction
of its Edwardsville, Kansas terminal with municipal bonds issued by the
city. Subsequently, the Company purchased 100% of the bonds and intends
to hold them to maturity, effectively financing the construction with
internal cash flow. The Company has offset the investment in the bonds
against the related liability and neither is reflected on the
consolidated balance sheet.
For the years ended December 31, 1996, 1995 and 1994 the Company
capitalized interest related to self-constructed assets totaling
$428,000, $357,000 and $135,000, respectively.
Depreciation on property and equipment is calculated on the straight-line
method over the estimated useful lives of 10 to 40 years for facilities
and improvements, 5 to 12 years for revenue and service equipment and 3
to 5 years for furniture and office equipment.
Tires on revenue equipment purchased are capitalized as a component of
the related equipment cost when the vehicle is placed in service and
depreciated over the life of the vehicle. Replacement tires are expensed
when placed in service.
37
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Goodwill
Goodwill represents the excess of purchase price over fair value of net
assets acquired. Such goodwill is being amortized on the straight-line
method over periods ranging from 15 to 20 years. Accumulated amortization
was $2,144,000 and $1,440,000 at December 31, 1996 and 1995,
respectively. The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful
life of goodwill may warrant revision or that the remaining balance may
not be recoverable. When factors indicate that the asset should be
evaluated for possible impairment, the Company uses an estimate of the
undiscounted net cash flows over the remaining life of the asset in
measuring whether the asset is impaired.
Revenue Recognition
Operating revenues and related direct costs are recognized as of the date
the freight is picked up for shipment.
Income Taxes
The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the period that includes the enactment date.
Net Earnings Per Common and Equivalent Share
Net earnings per common and equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during each period. Dilutive common equivalent shares consist
of stock options (using the treasury stock method).
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenues and
expenses and the disclosure of contingent liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS No. 121). This adoption
resulted in no adjustments to recorded amounts of long-lived assets in
the accompanying financial statements.
38
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Accounts Receivable
Accounts receivable consists of:
December 31,
--------------------------------------
1996 1995
----------------- -----------------
(in thousands)
Trade customers $ 76,762 $ 54,318
Equipment manufacturers 362 596
Income tax refund receivable -- 1,004
Other 1,709 1,486
----------------- -----------------
78,833 57,404
Less allowance for doubtful accounts 553 927
----------------- -----------------
$ 78,280 $ 56,477
================= =================
The schedule of allowance for doubtful accounts is as follows:
Beginning Ending
balance Additions Deductions balance
---------------- ------------------- ----------------- ----------------
(in thousands)
Year ended December 31:
1996 $ 927 $ 616 $ (990) $ 553
================ =================== ================= ================
1995 $ 387 $ 870 $ (330) $ 927
================ =================== ================= ================
1994 $ 787 $ 500 $ (900) $ 387
================ =================== ================= ================
(3) Assets Held for Sale
Assets held for sale consist of land, land improvements, building and
equipment related to the Company's former corporate headquarters and
terminal located in Phoenix, Arizona and is stated at the lower of
carrying amount or fair value less costs to sell.
39
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Accrued Liabilities
Accrued liabilities consists of:
December 31,
--------------------------------------
1996 1995
----------------- -----------------
(in thousands)
Employee compensation $ 10,741 $ 9,684
Fuel and mileage taxes 2,002 4,128
Income taxes payable 1,113 --
Other 3,346 1,696
----------------- -----------------
$ 17,202 $ 15,508
================= =================
(5) Borrowings Under Revolving Line of Credit
The Company has a $110 million unsecured revolving line of credit (the
line of credit) under an agreement with four major banks (the Credit
Agreement) which matures on January 16, 2001. This line of credit, signed
on January 17, 1997, replaces the Company's previous line of credit of
$36 million. Interest on outstanding borrowings is based upon one of two
options which the Company selects at the time of borrowing: the bank's
prime rate or the London Interbank Offered Rate (LIBOR) plus applicable
margins, as defined in the Credit Agreement. The unused portion of the
line of credit is subject to a commitment fee. The weighted average
interest rate on outstanding borrowings was 5.89% and 6.65% at December
31, 1996 and 1995, respectively.
The Credit Agreement requires the Company to meet certain covenants with
respect to debt to equity and debt coverage ratios. The Credit Agreement
also requires the Company to maintain unencumbered assets of not less
than 120% of unsecured indebtedness (as defined).
The Credit Agreement includes financing for letters of credit. The
Company has outstanding letters of credit primarily for workers'
compensation and liability self-insurance purposes totaling $11.3 million
at December 31, 1996.
40
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Long-Term Debt
Long-term debt consists of the following:
December 31,
---------------------------------------
1996 1995
------------------ ------------------
(in thousands)
Notes payable to commercial lending institutions with varying payments
through the year 2006, secured by revenue equipment with a net book
value of approximately $26.1 million at December 31, 1996:
Fixed interest rates ranging from 2.8% to 7.3% $ 3,986 $ 16,123
Floating interest rate based on LIBOR plus .45% to 1.25% (effective
rates ranging from 5.95% to 6.52% at December 31, 1996) 15,115 63,849
Note payable to insurance company bearing interest at 6.78% payable
monthly with principal payments of $3,000,000 due in 2002 through
2006 secured by deed of trust on Phoenix facilities. Covenant
requirements include minimum debt to equity and debt coverage ratios
and tangible net worth. The covenants include limitations on
dividends and treasury stock purchases. 15,000 --
------------------ ------------------
Total long-term debt 34,101 79,972
Less current portion 10,317 22,768
------------------ ------------------
Long-term debt, less current portion $ 23,784 $ 57,204
================== ==================
The aggregate annual maturities of long-term debt exclusive of amounts
due under the revolving line of credit (see note 5) as of December 31,
1996 are as follows:
Year ending
December 31 (in thousands)
1997 $ 10,317
1998 6,823
1999 1,961
2000 --
2001 --
Thereafter 15,000
-----------------
$ 34,101
=================
41
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Commitments
Leases
The Company leases various revenue equipment and terminal facilities
under operating leases. At December 31, 1996, the future minimum lease
payments under noncancelable operating leases are as follows:
Year ending Revenue
December 31 Equipment Facilities Total
----------- ----------------- ----------------- -----------------
(in thousands)
1997 $ 35,888 $ 386 $ 36,274
1998 25,831 184 26,015
1999 12,542 133 12,675
2000 2,013 96 2,109
2001 1,889 19 1,908
Thereafter 1,324 333 1,657
----------------- ----------------- -----------------
Total minimum lease payments $ 79,487 $ 1,151 $ 80,638
================= ================= =================
The revenue equipment leases generally include purchase options
exercisable at the completion of the lease.
Purchase Commitments
The Company had commitments outstanding to acquire revenue equipment for
approximately $132 million at December 31, 1996. These purchases are
expected to be financed by operating leases, debt, proceeds from sales of
existing equipment and cash flows from operations. The Company has the
option to cancel such commitments with 60 days notice.
(8) Stockholders' Equity
Stock Compensation Plans
At December 31, 1996, the Company has three stock-based compensation
plans, which are described below. The Company applies APB Opinion No. 25
and related interpretations in accounting for its plans.
42
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Had compensation cost for the Company's three stock-based compensation
plans been determined consistent with FASB Statement No. 123, the
Company's net earnings and earnings per share would have been reduced to
the pro forma amounts indicated below:
1996 1995
----------------- -----------------
Net earnings As Reported $27,422 $23,040
================= =================
Pro forma $27,154 $22,795
================= =================
Net earnings per common and equivalent
share As Reported $1.07 $0.91
================= =================
Pro forma $1.06 $0.90
================= =================
Pro forma net earnings reflect only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options' vesting period of 9 years and compensation cost for options
granted prior to January 1, 1995 is not considered under SFAS No. 123.
Fixed Stock Option Plans
The Company has two fixed stock option plans. Under the 1990 Employee
Stock Option Plan, the Company may grant options to employees for up to
2.3 million shares of common stock. Under the 1994 Non-Employee Directors
Plan, the Company may grant options to non-employee directors for up to
60,000 shares of common stock. Under both plans, the exercise price of
each option equals 85 percent of the market price of the Company's stock
on the date of the grant, and an option's maximum term is ten years.
Options under the Employees Plan vest 20 percent after five years and 20
percent each succeeding year. Options under the non-employee Directors
Plan vest on the grant date.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995:
Dividend yield 0%
Expected volatility 46.49%
Risk free interest rate 6.50%
Expected lives 42 days after vesting date
43
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the status of the Company's two fixed stock option plans as
of December 31, 1996 and 1995, and changes during the years then ended on
those dates is presented below:
1996 1995
-------------------------------------- --------------------------------------
Weighted- Weighted-
Average Average
Shares Exercise Shares Exercise
(000) Price (000) Price
----------------- ----------------- ----------------- -----------------
Outstanding at
beginning of year 1,853,050 $6.01 1,901,300 $4.50
Granted 50,000 $16.55 270,550 $14.80
Exercised (222,700) $3.17 (252,500) $2.91
Forfeited (47,550) $11.97 (66,300) $10.52
----------------- -----------------
Outstanding at end of
year 1,632,800 $6.54 1,853,050 $6.01
================= =================
Options exercisable
at year-end 81,300 16,000
================= =================
Weighted-average fair
value of options
granted during
the year $18.92 $17.41
================= =================
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
Options Outstanding Options Exercisable
----------------------------------- -----------------------------------
Weighted-
Number Average Weighted- Number Weighted-
Outstanding Remaining Average Exercisable Average
at Contractual Exercise at Exercise
12/31/96 Life Price 12/31/96 Price
---------------- --------------- ---------------- ---------------- ---------------
$2.79 to $3.47 959,300 4.0 $2.91 74,300 $3.05
$6.85 to $7.08 173,250 6.0 $7.08 3,000 $6.85
$10.94 to $17.22 222,200 7.2 $11.14 2,000 $12.22
$12.64 to $19.76 278,050 8.7 $15.07 2,000 $14.93
---------------- ----------------
1,632,800 5.4 $6.54 81,300 $3.70
================ ================
44
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Employee Stock Purchase Plan
Under the 1994 Employee Stock Purchase Plan, the Company is authorized to
issue up to 2 million shares of common stock to full-time employees,
nearly all of whom are eligible to participate. Under the terms of the
Plan, employees can choose each year to have up to 15 percent of their
annual base earnings ($25,000 maximum) withheld to purchase the Company's
common stock. The purchase price of the stock is 85 percent of the lower
of the beginning-of-period or end-of-period (each period being the first
and second six calendar months) market price. Approximately two percent
of eligible employees have participated in the plan in the last 3 years.
Under the Plan, the Company sold 68,183 shares and 73,660 shares to
employees in 1996 and 1995, respectively. Compensation cost is calculated
as the fair value of the employees' purchase rights, which was estimated
using the Black-Scholes model with the following assumptions:
Dividend yield 0.00%
Expected volatility 46.49%
Risk free interest rate 5.00%
The weighted-average fair value of those purchase rights granted in 1996
and 1995 was $5.68 and $5.34, respectively.
(9) Income Taxes
Income tax expense consists of:
1996 1995 1994
----------------- ------------------ ------------------
(in thousands)
Current expense:
Federal $ 13,610 $ 9,800 $ 6,335
State 2,670 1,980 1,080
----------------- ------------------ ------------------
16,280 11,780 7,415
----------------- ------------------ ------------------
Deferred expense:
Federal 2,980 4,370 7,545
State 530 880 1,720
----------------- ------------------ ------------------
3,510 5,250 9,265
----------------- ------------------ ------------------
$ 19,790 $ 17,030 $ 16,680
================= ================== ==================
45
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company's effective tax rate was 42.0%, 42.5% and 42.4% in 1996, 1995
and 1994, respectively. The actual tax expense differs from the
"expected" tax expense (computed by applying the U.S. Federal corporate
income tax rate of 35% to earnings before income taxes) as follows:
Years ended December 31,
------------------------------------------------------------
1996 1995 1994
----------------- ------------------ ------------------
(in thousands)
Computed "expected" tax expense $ 16,524 $ 14,025 $ 13,758
Increase in income taxes resulting
from:
State income taxes, net of
federal income tax benefit 2,080 1,859 1,820
Other, net 1,186 1,146 1,102
----------------- ------------------ ------------------
$ 19,790 $ 17,030 $ 16,680
================= ================== ==================
The net effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
December 31,
--------------------------------------
1996 1995
----------------- -----------------
(in thousands)
Deferred tax assets:
Claims accruals $ 12,320 $ 9,470
Accounts receivable due to allowance for doubtful accounts 210 360
Alternative minimum tax credits -- 1,870
Other 170 130
----------------- -----------------
Total deferred tax assets 12,700 11,830
----------------- -----------------
Deferred tax liabilities:
Property and equipment, principally due to differences
in depreciation (45,160) (39,410)
Revenues deferred for income tax purposes -- (1,420)
Prepaid taxes, licenses and permits deducted for tax
purposes (1,850) (1,800)
----------------- -----------------
Total deferred tax liabilities (47,010) (42,630)
----------------- -----------------
Net deferred tax liabilities $ 34,310 $ 30,800
================= =================
46
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
These amounts are presented in the accompanying consolidated balance
sheets as follows:
December 31,
--------------------------------------
1996 1995
----------------- -----------------
(in thousands)
Current deferred income taxes $ 3,690 $ 1,250
Noncurrent deferred income taxes (38,000) (32,050)
----------------- -----------------
Net deferred tax liabilities $ (34,310) $ (30,800)
================= =================
(10) Claims Accruals
The Company's insurance program for liability, workers' compensation,
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.
Claims accruals represent accruals for the uninsured portion of pending
claims at December 31, 1996 and 1995. The current portion reflects the
amounts of claims expected to be paid in the following year. 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 the Company's past claims experience. Claims
accruals also include accrued medical expenses under the Company's group
medical insurance program.
(11) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following
summary presents a description of the methodologies and assumptions used
to determine such amounts.
Cash
The carrying amount is assumed to be the fair value because of the
liquidity of these instruments.
Accounts Receivables and Payables
Fair value is considered to be equal to the carrying value of the
accounts receivable and accounts payable and accrued liabilities, as they
are generally short-term in nature and the related amounts approximate
fair value or are receivable or payable on demand.
Long-term Debt and Borrowings Under Revolving Line of Credit
The fair value of all of these instruments is assumed to approximate
their respective carrying values given the duration of the notes, their
interest rates and underlying collateral.
47
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Limitations
Fair value estimates are made at a specific point in time and are based
on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Changes in assumptions
could significantly affect these estimates. Since the fair value is
estimated as of December 31, 1996, the amounts that will actually be
realized or paid at settlement or maturity of the instruments could be
significantly different.
(12) Employee Benefit Plans
The Company maintains a 401(k) profit sharing plan for all employees who
are 19 years of age or older and have completed one year of service. The
Plan provides for a mandatory matching contribution equal to the amount
of the employee's salary reduction, but not to exceed 1% of the
employee's compensation. Also, the plan provides for a discretionary
matching contribution not to exceed 4% of the employee's compensation,
limited to the amount permitted under the Internal Revenue Code as
deductible expenses. The Company may also make voluntary profit sharing
contributions. Employees' rights to employer contributions vest after
five years from their date of employment. The Company's contribution
totaled approximately $2.9 million, $2.4 million and $3.3 million for
1996, 1995 and 1994, respectively.
(13) Related Party Transactions
The Company leases various properties from entities owned by the
principal stockholder. Rents paid under these leases totaled $1.0
million, $1.1 million and $1.1 million for the years ended December 31,
1996, 1995 and 1994, respectively. During 1994, the Company acquired land
used in its Phoenix operation from one of these entities for a purchase
price of $840,000 including the assumption of the underlying land loan
with a balance of $615,000.
The Company provided transportation services to entities owned by its
principal stockholder. For the years ended December 31, 1996, 1995 and
1994, the Company recognized $213,000, $79,000 and $87,000, respectively,
in operating revenue from this entity. At December 31, 1996, $22,000 was
owed to the Company for these services.
A company owned by the Company's principal stockholder leases tractors to
some of the Company's owner operators. In connection with this program in
1996, 1995 and 1994, the Company acquired new tractors and sold them to
this entity for $13.2 million, $7.5 million and $4.1 million,
respectively, and recognized fee income of $855,000, $495,000 and
$280,000, respectively. During 1996, 1995, and 1994, the Company also
sold used revenue equipment to this entity totaling $700,000, $3.7
million and $1.9 million, respectively, and recognized gains of $114,000
in 1996, $765,000 in 1995 and $260,000 in 1994.
A Company owned by the principal stockholder provides aircraft services
to the Company. Payments for such services totaled $450,000, $338,000 and
$175,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. At December 31, 1996, $40,000 was owed to this entity for
such services.
48
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
During 1996, 1995 and 1994, the Company purchased parts and maintenance
services from an entity owned by one of the Company's outside directors
totaling $2,379,000, $1,222,000 and $340,000, respectively.
The Company believes that the terms of the foregoing related party
transactions were as favorable to the Company as those which would have
been available from an independent third party. All of the above related
party arrangements were approved by the independent members of the
Company's Board of Directors.
(14) Acquisitions
On September 12, 1996, the Company acquired substantially all of the
operating assets utilized in the dry freight van division of Navajo
Shippers, Inc. and two of its wholly-owned subsidiaries, Digby Leasing
and Digby-Ringsby Truck Lines, Inc. (collectively, "Navajo Shippers").
The acquisition was accounted for as a purchase and the results of
operations of Navajo Shippers have been included in the consolidated
financial statements beginning on September 12, 1996. The Company
acquired 287 tractors and 417 trailers and related on-board communication
equipment. The Company assumed Navajo Shipper's position on operating
leases for 257 tractors and acquired 30 owner operators. Total
consideration for the assets purchased and goodwill was $7,066,000
consisting of cash of $5,148,000 and 90,000 shares of the Company's
common stock valued at $1,918,000. The Company will pay the sellers
approximately $1.2 million for commissions on revenues expected to be
generated by the Company in the 12 months following the date of
acquisition. The excess of cost over net book value has been accounted
for as goodwill. Goodwill will be amortized on a straight-line basis over
15 years.
On July 1, 1994, the Company acquired certain assets of East-West
Transportation, Inc. (East-West). The acquisition was accounted for as a
purchase and the results of operations of East-West have been included in
the consolidated financial statements beginning on July 1, 1994. The
Company acquired 150 tractors and 239 van trailers and assumed leases on
an additional 40 tractors and 55 trailers. Total consideration for the
assets was approximately $11.2 million consisting of cash of
approximately $2.7 million and assumption of debt.
On October 3, 1994, the Company acquired the tractors, trailers and other
selected assets of Missouri-Nebraska Express (MNX), a subsidiary of Mark
VII, Inc. The purchase price of approximately $40.7 million was financed
through equipment loans of $27.0 million, conversion of assumed capital
lease obligations of $4.2 million to operating leases, and cash of $9.5
million. Additionally, the Company assumed various operating leases for
revenue equipment. The acquired and leased assets include approximately
550 tractors and 1,800 trailers. The acquisition was accounted for as a
purchase in the fourth quarter of 1994. Prior to the acquisition, the
Company managed the assets and business of MNX from July 3, 1994 through
October 1, 1994 (the Management Period). Included in other income is $1.0
million which represents the management fee earned by the Company during
the Management Period. The revenues and expenses of the operations
acquired from MNX have been included in the Company's consolidated
financial statements since October 2, 1994.
49
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On January 10, 1997 the Company signed a letter of intent to acquire
certain assets of Direct Transit, Inc. ("DTI"), a Debtor In Possession in
United States Bankurptcy Court. On March 20, 1997 the United States
Bankruptcy Court approved the Company's purchase agreement with DTI. DTI
is a dry van carrier based in North Sioux City, South Dakota and operates
predominately in the eastern two-thirds of the United States. At closing,
the Company will acquire approximately 600 tractors and 2,100 trailers
from various lessors along with the inventory and miscellaneous assets of
DTI. The purchase price of approximately $54 million, which includes $43
million in cash and the assumption of lease obligations on approximately
$11 million of revenue equipment, will be paid to DTI, DTI's principal
shareholder and DTI's lessors of revenue equipment. The acquisition which
is expected to close in April 1997 is subject to the satisfaction of
certain closing conditions.
(15) Commitments and Contingencies
The Company is involved in certain claims and pending litigation arising
in 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.
(16) Industry Segment Information
The Company operates predominantly in one industry, road transportation,
as a truckload motor carrier subject to regulation by the Department of
Transportation and various state regulatory authorities.
(17) Quarterly Results of Operations (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------- --------------- ---------------- ----------------
(in thousands, except per share amounts)
Year ended December 31, 1996
Operating revenue $ 124,524 $ 137,210 $ 146,739 $ 153,786
Operating income 5,716 13,961 17,728 16,174
Net earnings 2,571 6,772 9,451 8,628
Net earnings per common and
equivalent share $ .10 $ .27 $ .37 $ .33
Year ended December 31, 1995
Operating revenue $ 106,715 $ 111,940 $ 118,463 $ 121,047
Operating income 8,536 15,221 12,133 10,195
Net earnings 3,986 7,764 6,014 5,276
Net earnings per common and
equivalent share $ .16 $ .31 $ .24 $ .21
50
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
The Company has never filed a Current Report on Form 8-K to report a
change in accountants because of a disagreement over accounting principles or
procedures, financial statement disclosure, or otherwise.
51
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to continuing directors and nominees of the
Company is set forth under the captions "Information Concerning Directors,
Nominees and Officers,""Meetings and Compensation," and "Section 16(a)
Beneficial Ownership Reporting Compliance," in the Registrant's Notice and Proxy
Statement relating to its 1997 Annual Meeting of Stockholders ("the 1997 Proxy
Statement") to be held on May 22, 1997, which is incorporated by reference into
this Form 10-K. With the exception of the foregoing information and other
information specifically incorporated by reference into this Form 10-K, the 1997
Proxy Statement is not being filed as a part hereof.
Item 11. Executive Compensation
Information with respect to executive compensation is set forth under
the captions "Executive Compensation," "Compensation Committee Interlocks and
Insider Participation," "Meetings and Compensation,""Employment Agreements" and
"Change of Control Arrangements" in the 1997 Proxy Statement and is incorporated
herein by reference; provided, however, that the information set forth under the
captions "Compensation Committee Report on Executive Compensation" and "Stock
Price Performance Graph" contained in the 1997 Proxy Statement are not
incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to security ownership of certain beneficial
owners and management is included under the caption "Security Ownership of
Principal Stockholders and Management" in the 1997 Proxy Statement and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and transactions of
management is set forth under the caption "Certain Transactions and
Relationships" and "Compensation Committee Interlocks and Insider Participation"
in the 1997 Proxy Statement and is incorporated herein by reference.
52
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a) Financial Statements and Schedules.
(i) Financial Statements Page or
Method of Filing
----------------
(1) Report of KPMG Peat Marwick LLP Page 29
(2) Consolidated Financial Statements and Notes to Page 30-50
Consolidated Financial Statements of the Company, including
Consolidated Balance Sheets as of December 31, 1996 and 1995 and
related Consolidated Statements of Earnings, Stockholders' Equity
and Cash Flows for each of the years in the three-year period ended
December 31, 1996
(ii) Financial Statement Schedules
Schedules have been omitted because of the absence of conditions under
which they are required or because the required material information is
included in the Consolidated Financial Statements or Notes to the
Consolidated Financial Statements included herein.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fourth quarter of
1996.
(c) Exhibits.
Exhibit Page or
Number Description Method of Filing
------ ----------- ----------------
3.1 Articles of Incorporation of the Company Incorporated by reference to
Exhibit 3.1 of the Company's
Form S-3 Registration
Statement No. 33-66034 ("S-3
#33-66034")
3.2 Bylaws of the Company Incorporated by reference to
Exhibit 3.2 of S-3 #33-66034
53
Exhibit Page or
Number Description Method of Filing
------ ----------- ----------------
4 Specimen of Common Stock Certificate Incorporated be reference to
Exhibit 4 of the Company's
Annual Report on Form 10-K
for the fiscal year ended
December 31, 1992 (the "1992
Form 10-K")
10.1 Lease Agreement between Jerry and Vickie Incorporated by reference to
Moyes and the Company relating to Stockton, Exhibit 10-E(1) of the
California property, dated April 10, 1990 Company's Form S-1
Registration Statement No.
#33-34983 ("S-1 #33-34983")
10.2 Lease Agreement between Jerry and Vickie Incorporated by reference to
Moyes, the Company and Common Market Exhibit 10-E(3) of S-1
Distributing Corp., relating to Wilmington, #33-34983
California property, dated April 10, 1990
10.3 Lease Agreement between Mohave Properties Incorporated by reference to
of the Southwest, Inc. and Swift Leasing, Exhibit 10-E(5) of S-1 #33-
Inc., relating to the Phoenix, Arizona Body 34983
Repair Shop, dated July 1, 1991
10.4.1 Asset Purchase Agreement dated June 17, Incorporated by reference to
1994 by and among Swift Transportation Co., Exhibit 1 of the Company's
Inc., a Nevada corporation; Swift Current Report on Form 8-K
Transportation Co., Inc., an Arizona dated October 6, 1994 (the
corporation; Mark VII, Inc., a Missouri "10/6/94 8-K")
corporation; MNX Carriers, Inc., a Delaware
corporation; and Missouri-Nebraska Express,
Inc., an Iowa corporation
10.4.2 Amendment No. 1, dated September 30, Incorporated by reference to
1994, to the Asset Purchase Agreement Exhibit 2 of the 10/6/94 8-K
10.5 Stock Option Plan, as amended through Incorporated by reference to
November 18, 1994* Exhibit 10.7 of the
Company's Annual Report on
Form 10-K for the year ended
December 31, 1994 (the "1994
Form 10-K")
10.6 Non-Employee Directors Stock Option Plan, Incorporated by reference to
as amended through November 18, 1994* Exhibit 10.8 of the 1994 Form
10-K
54
Exhibit Page or
Number Description Method of Filing
------ ----------- ----------------
10.7 Employee Stock Purchase Plan, as amended Incorporated by reference to
through November 18, 1994* Exhibit 10.9 of the 1994 Form
10-K
10.8 Swift Transportation Co., Inc. Retirement Incorporated by reference to
(401(k)) Plan dated January 1, 1992* Exhibit 10.14 of the Company's
Form S-1 Registration Statement
No. #33-52454
10.9 Note Agreement dated February 26, 1996 by Incorporated by reference to
and between Swift Transportation Co., Inc. Exhibit 10.12 of the
and Great-West Life & Annuity Insurance Company's Annual Report on
Company Form 10-K for the year ended
December 31, 1995 (the "1995
Form 10-K")
10.10 Construction Contract dated November 14, Incorporated by reference to
1994 by and between Swift Transportation Exhibit 10.13 of the 1995
Co., Inc. and Opus Southwest Corporation Form 10-K
10.11 Note Agreement dated January 16, 1997 by Filed herewith
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.
11 Schedule of computation of net earnings per Filed herewith
share
22 Subsidiaries of Registrant Incorporated by reference to
Exhibit 22 to the 1995 Form
10-K
23 Consent of KPMG Peat Marwick LLP Filed herewith
24.1 Power of Attorney of Robert W. Cunningham Filed herewith
24.2 Power of Attorney of Rodney K. Sartor Filed herewith
24.3 Power of Attorney of Alphonse E. Frei Filed herewith
24.4 Power of Attorney of Lou A. Edwards Filed herewith
24.5 Power of Attorney of Earl H. Scudder, Jr. Filed herewith
27 Financial Data Schedule Filed herewith
- ------------------------------------
* Indicates a compensation plan.
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, this
28th day of March, 1997.
SWIFT TRANSPORTATION CO., INC.,
a Delaware corporation
By /s/Jerry C. Moyes
------------------------------------------------
Jerry C. Moyes
Chairman of the Board, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jerry C. Moyes and William F. Riley III,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Form
10-K Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he might or could do in person hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/Jerry C. Moyes Chairman of the Board, March 28, 1997
- ------------------------ President and Chief Executive
Jerry C. Moyes Officer (Principal Executive
Officer)
S-1
Signature Title Date
* Executive Vice President and March 28, 1997
- ----------------------- Director
Robert W. Cunningham
/s/William F. Riley III Executive Vice President, March 28, 1997
- ----------------------- Secretary, Chief Financial
William F. Riley III Officer (Principal Accounting
Officer) and Director
* Director March 28, 1997
- -----------------------
Rodney K. Sartor
* Director March 28, 1997
- -----------------------
Alphonse E. Frei
* Director March 28, 1997
- -----------------------
Lou A. Edwards
* Director March 28, 1997
- -----------------------
Earl H. Scudder, Jr.
*By: /s/ Jerry C. Moyes
-----------------------
Jerry C. Moyes
Attorney-in-fact
S-2