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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, 1997
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)
2200 South 75th Avenue Phoenix, AZ 85043
(Address of principal executive offices) (Zip Code)
(602) 269-9700
(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 17, 1998, the aggregate market value of common stock held by
non-affiliates of the Registrant was $396,010,307.
The number of shares outstanding of the Registrant's common stock on March 17,
1998 was 42,506,760.
DOCUMENTS INCORPORATED BY REFERENCE
Materials from the Registrant's Notice and Proxy Statement relating to
the 1998 Annual Meeting of Stockholders have been incorporated by reference into
Part III, Items 10, 11, 12 and 13.
Exhibit Index at page 51
Total pages 67
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TABLE OF CONTENTS
Page
----
PART I ......................................................................
Item 1. Business.........................................................4
Item 2. Properties......................................................13
Item 3. Legal Proceedings...............................................14
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.........................................................15
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.....................27
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................50
PART III ......................................................................
Item 10. Directors and Executive Officers of the Registrant..............50
Item 11. Executive Compensation..........................................50
Item 12. Security Ownership of Certain Beneficial Owners and Management..50
Item 13. Certain Relationships and Related Transactions..................50
PART IV ......................................................................
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
................................................................51
SIGNATURES...................................................................S-1
3
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, manufactured goods, paper products,
non-perishable food, 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 annuual growth rate of 25.0% from $233.4 million
in 1992 to $713.6 million in 1997. During that same period, net earnings have
grown at a compound annual growth rate of 33.5% from $9.8 million to $41.6
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 are 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
similiar expressions identify forward-looking statements, which speak only as of
the date the statement was made. Such forward-looking statements are within the
meaning of that term in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements may include, but are not limited to, projections of revenues, income,
or loss, capital expenditures, plans for future operations, financing needs or
plans, the impact of inflation and plans relating to 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 29 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 571 miles in
1997, 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 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 1997 and 1996, Swift maintained an
operating ratio of 89.6% and 90.5%, respectively.
Growth Strategy
Major shippers continue to reduce the number of carriers 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
5
carriers such as Swift to expand. The Company intends to take advantage of
growth opportunites through a combination of internal growth and selective
acquisitions.
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 of 1995 increased by 62%
from 1995 to 1997. The largest 25, 10 and 5 customers, respectively,
accounted for 47%, 33% and 23% of revenues in 1997, with no customer
accounting for more than 7% of Swift's 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 it has not previously provided
services.
o Pursue Strategic Acquisitions. Swift's revenue growth has been
attributable, in significant part, to eight acquisitions completed in
the last nine 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 April 1997, Swift acquired 565 tractors
and 1,622 trailers from various lessors of Direct Transit, Inc.
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 which have strong, diverse
economies and provide access to other key Western population centers. In
addition to Phoenix, Swift's Western terminals are located in the areas of Los
Angeles, San Francisco and Willows, California; Portland, Oregon; Salt Lake
City, Utah; Lewiston, Idaho; Reno, Nevada; Pueblo and Denver, Colorado.
6
In the Eastern United States, Swift has terminals located in Auburn,
New York; Carlisle, Pennsylvania; Richmond, Virginia; Eden, North Carolina;
Greer, South Carolina; Decatur, Alabama; Atlanta and Albany, Georgia.
Swift's Midwest terminals are located in Gary and Shoals, Indiana;
Monroe and Columbus, Ohio; Dallas, Corsicana and Laredo, Texas; Oklahoma City,
Oklahoma; Memphis, Tennessee; Kansas City, Kansas; and Town of Manasha,
Wisconsin.
The terminals are located in close proximity to major customers who
tender significant traffic volume to Swift. To minimize competition with
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 1997 and
1996, Swift's average length of haul was 571 and 576 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
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 fuel consumption and schedule regular equipment
maintenance. Dispatchers monitor the location and delivery schedules of all
shipments and equipment to coordinate routes and increase equipment
7
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 35 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 established a significant regional operation in the
Midwestern 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"). In April 1997,
the Company acquired certain assets of Direct Transit, Inc. ("DTI"), a
Debtor-In-Possession in United States Bankruptcy Court. DTI was a dry van
carrier based in Sioux City, South Dakota and operated predominantly in the
eastern two-thirds of the United States.
See "Factors That May Affect Future Results and Financial Condition"
under Item 7.
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.
8
The following table shows the type and age of Company-owned and leased equipment
at December 31, 1997:
- --------------------------------------------------------------------------------
57', 53' and Sets of Flatbed Specialized
Model Year Tractors (1) 48' Vans Double Vans Trailers Trailers
- --------------------------------------------------------------------------------
1998 761 475
- --------------------------------------------------------------------------------
1997 1,518 3,388 274 97
- --------------------------------------------------------------------------------
1996 891 2,194 168 201
- --------------------------------------------------------------------------------
1995 1,439 1,024 94
- --------------------------------------------------------------------------------
1994 256 1,947 40
- --------------------------------------------------------------------------------
1993 6 1,329 40 105 1
- --------------------------------------------------------------------------------
1992 and prior 97 3,297 570 62 193
- --------------------------------------------------------------------------------
Total 4,968 13,654 778 776 291
- --------------------------------------------------------------------------------
- ----------------
(1) Excludes 910 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 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.
Swift has installed Qualcomm onboard, two-way vehicle satellite
communication systems in the majority of its tractors. This communications
system links drivers to regional terminals, allowing Swift to alter rapidly its
routes in response to customer requirements and to eliminate the need for driver
stops to report problems or delays. This system allows 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 60 miles per hour for Company
tractors (62 miles per hour for team drivers) and 65 miles per hour for
owner-operator tractors to reduce accidents,
9
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.
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 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 control of revenue equipment. By
concentrating on expanding its services to its existing customers, the Company's
revenues from its top 25 customers of 1995 increased 62% from 1995 to 1997.
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,
Arizona headquarters and each of its regional terminals through a marketing
staff of approximately 30 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, ten and five customers of 1995 accounted for
approximately 47%, 33% and 23% respectively, of Swift's revenues during 1997,
44%, 33% and 23%, respectively, of Swift's revenues during 1996 and 46%, 34% and
20%, respectively, of Swift's revenues during 1995. No customer accounted for
more than 7% 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, manufacturers, non-perishable food companies, beverage and
beverage container producers 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
10
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 which are managed by outside organizations as well
as local community colleges throughout the country. Candidates for the schools
must be at least 23 years old, with 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 to eight week, on-the-road training program.
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 safety and driving performance. Drivers
employed by Swift participate in company-sponsored health, life and dental
insurance plans and are eligible to participate in a 401(k) Profit Sharing Plan
and an 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, 1997, Swift employed approximately 7,800 full-time
persons, of whom approximately 6,000 were drivers (including driver trainees),
600 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 good.
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 maximum speed limits and rewards drivers with bonuses for complying with
the Company's safety policies. The Company believes that its
11
insurance and claims expense as a percentage of operating revenue is one of the
best in the industry and attributable to its overall strong safety program. In
December 1997, the Company received the highest safety rating given to motor
carriers by the United States Department of Transportation.
Fuel
In order to reduce fuel costs, the Company purchases approximately 72%
of its fuel in bulk at 21 of its 29 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 material adverse effect on the operations and profitability of the
Company. From time to time, the Company, in response to 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. 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 in the past but continues to evaluate this possibility.
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. There are some
trucking companies with which the Company competes that 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. This regulatory authority
has 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
12
and legislative changes which can affect the economics of the industry. The
Company is also regulated by various state agencies.
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 substantial 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 colder weather which causes higher fuel consumption from
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
Corsicana, Texas Leased
Decatur, Alabama Leased
Denver, Colorado Leased
Eden, North Carolina Owned
Edwardsville, Kansas Owned
Fontana, California Owned
Gary, Indiana Owned
13
Greer, South Carolina Owned
Irving, Texas Leased
Laredo, Texas Leased
Lewiston, Idaho Leased
Memphis, Tennessee Owned
Monroe, Ohio Leased
Oklahoma City, Oklahoma Owned
Phoenix, Arizona Owned
Pueblo, Colorado Owned
Richmond, Virginia Owned
Salt Lake City, Utah Owned
Shoals, Indiana Owned
Sparks, Nevada Owned
Stockton, California Leased
Troutdale, Oregon Owned
Town of Manasha, Wisconsin Owned
Willows, California Owned
Wilmington, California Leased
Swift's headquarters is 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 is held for sale.
As of December 31, 1997, the Company's aggregate monthly rent for all leased
properties was $79,000.
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.
14
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 1997.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
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 of the common stock reported by Nasdaq for the
periods shown.
Common Stock
------------
High Low
---- ---
1997
First Quarter $18.67 $16.17
Second Quarter 21.83 17.25
Third Quarter 21.33 18.33
Fourth Quarter 22.17 18.33
1996
First Quarter $14.17 $10.00
Second Quarter 14.08 11.50
Third Quarter 15.00 12.42
Fourth Quarter 16.33 13.50
On March 17, 1998, the last reported sales price of the Company's
common stock was $24.25 per share. At that date, the number of stockholder
accounts of record of the Company's common stock was 1,575. The Company
estimates there are approximately 4,900 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
15
financial condition, results of operations, and capital requirements of the
Company, as well as other factors deemed relevant by the Board of Directors.
On February 20, 1998, the Company's Board of Directors approved a
3-for-2 stock split effected in the form of a stock dividend and payable on
March 12, 1998 to the stockholders of record at the close of business on March
2, 1998. All share amounts, share prices and earnings per share in this Annual
Report on Form 10-K have been retroactively adjusted to reflect this 3-for-2
stock split.
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."
Influence by Principal Stockholder. Trusts established for the benefit
of Jerry C. Moyes and his family beneficially own approximately 43% 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.
16
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, 1997 is
derived from the Company's Consolidated Financial Statements. The Consolidated
Financial Statements as of December 31, 1997 and 1996, and for each of the years
in the three-year period ended December 31, 1997 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.
- ---------------------------------------------------------------------------------------------------------
Years Ended December 31,
----------------------------------------------------------
1997(1) 1996(2) 1995 1994(3) 1993(4)
----------------------------------------------------------
(dollar amounts in thousands, except per share amounts)
Consolidated Statements of Earnings Data:
- ---------------------------------------------------------------------------------------------------------
Operating revenue $713,638 $562,259 $458,165 $365,889 $276,982
- ---------------------------------------------------------------------------------------------------------
Earnings before income taxes $69,994 $47,212 $40,070 $39,309 $21,409
- ---------------------------------------------------------------------------------------------------------
Net earnings $41,644 $27,422 $23,040 $22,629 $12,274
- ---------------------------------------------------------------------------------------------------------
Diluted earnings per share (6) $.96 $.71 $.61 $0.60 $.32
- ---------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet Data (at end of year):
- ---------------------------------------------------------------------------------------------------------
Working capital $64,168 $36,938 $6,735 $14,012 $14,156
- ---------------------------------------------------------------------------------------------------------
Total assets $471,134 $380,605 $311,308 $275,991 $172,220
- ---------------------------------------------------------------------------------------------------------
Long-term obligations, less current portion $73,420 $ 40,284 $68,954 $77,715 $23,379
- ---------------------------------------------------------------------------------------------------------
Stockholders' equity $274,175 $226,666 $134,835 $111,342 $88,973
- ---------------------------------------------------------------------------------------------------------
Operating Statistics (at end of year):
- ---------------------------------------------------------------------------------------------------------
Operating ratio 89.6% 90.5% 89.9% 88.8% 92.1%
- ---------------------------------------------------------------------------------------------------------
Pre-tax margin (5) 9.8% 8.4% 8.7% 10.7% 7.7%
- ---------------------------------------------------------------------------------------------------------
Average line haul revenue per mile $1.13 $1.11 $1.11 $1.12 $1.10
- ---------------------------------------------------------------------------------------------------------
Empty mile percentage 13.7% 14.0% 13.9% 13.2% 13.4%
- ---------------------------------------------------------------------------------------------------------
Average length of haul (in miles) 571 576 591 590 608
- ---------------------------------------------------------------------------------------------------------
Total tractors at end of period:
- ---------------------------------------------------------------------------------------------------------
Company-operated 4,968 4,166 3,472 3,286 2,338
- ---------------------------------------------------------------------------------------------------------
Owner-operator 910 665 477 188 44
- ---------------------------------------------------------------------------------------------------------
Trailers at end of period 15,499 12,151 8,788 8,957 5,215
- ---------------------------------------------------------------------------------------------------------
(1) Includes the results of operations from the acquisition of certain
assets of DTI beginning April 8, 1997.
17
(2) 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.
(3) 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.
(4) Includes the results of operations from the acquisition of West's Best
Freight Systems, Inc. beginning June 1, 1993.
(5) 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.
(6) As adjusted to reflect the 3-for-2 stock split effected in the form of
a stock dividend and payable on March 12, 1998 to the stockholders of
record at the close of business on March 2, 1998. All share amounts,
share prices and earnings per share in this Annual Report on Form 10-K
have been retroactively adjusted to reflect this 3-for-2 stock split.
18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
During 1997, 1996 and 1995, 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 is 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. In the
"forward-looking statements" that may be included herein, important factors
such as the financial position of the Company, its customers needs, the cost of
new equipment and new construction, the availability of buyers in the
marketplace, fuel costs and other factors may cause actual results to vary.
Although the trend of shippers in the truckload segment of the motor
carrier industry over the past several years has been towards consolidation, the
truckload industry remains highly fragmented. Management believes the industry
trend towards financially stable "core carriers" will continue and result in
continued industry consolidation. In response to this trend, the Company
continues to expand its fleet with 4,968 tractors as of December 31, 1997
compared to 3,286 tractors as of December 31, 1994. 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 910 as of December 31, 1997 from 188 as of
December 31, 1994.
19
Results of Operations
The following table sets forth for the periods indicated certain
statement of earnings data as a percentage of operating revenue:
December 31,
------------------------
1997 1996 1995
---- ---- ----
Operating revenue................................... 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and employee benefits............ 34.5 34.2 37.1
Operating supplies and expenses.................. 8.9 9.3 8.9
Fuel............................................. 12.8 13.8 13.2
Purchased transportation......................... 13.5 12.8 9.3
Rental expense................................... 6.5 5.8 5.8
Insurance and claims............................. 3.2 3.6 2.9
Depreciation and amortization.................... 5.3 6.0 6.9
Communications and utilities..................... 1.5 1.5 1.6
Operating taxes and licenses..................... 3.4 3.5 4.2
----- ----- -----
Total operating expenses......................... 89.6 90.5 89.9
----- ----- -----
Operating income 10.4 9.5 10.1
Net interest expense................................ .7 1.2 1.5
Other (income) expense, net......................... (0.1) (0.1) (0.1)
----- ----- -----
Earnings before income taxes........................ 9.8 8.4 8.7
Income taxes........................................ 4.0 3.5 3.7
----- ----- -----
Net earnings........................................ 5.8% 4.9% 5.0%
===== ===== =====
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Operating revenue increased $151.3 million, or 26.9%, to $713.6 million
for the year ended December 31, 1997 from $562.3 million for the previous year.
The increase in operating revenue is due primarily to the expansion of the
Company's total fleet to 5,878 tractors at December 31, 1997 from 4,831 at
December 31, 1996, an increase of 1,047 tractors. The acquisition of tractors
from certain lessors of DTI in April 1997 accounted for 565 of this increase in
tractors. The Company's freight rates increased by appoximately 1% in 1997.
The Company's operating ratio was 89.6% and 90.5% in 1997 and 1996,
respectively. The Company's operating revenue and operating ratio for 1997
improved as a result of strong shipper demand which caused an increase in
operating revenue and the favorable impact in components of operating expenses
explained below. The Company's empty mile factor was 13.7% and 14.0% and the
average rate per mile was $1.118 and $1.103 (excluding fuel surcharge) for the
years ended December 31, 1997 and 1996, respectively.
20
Salaries, wages and employee benefits represented 34.5% of operating
revenue for the year ended December 31, 1997 compared with 34.2% for 1996. The
increase is due primarily to driver pay including retention bonuses offset in
part by expansion of the Company's owner operator fleet. Effective January 1,
1997, the Company began paying its drivers a bonus of two cents per mile. For
the first three quarters this bonus was payable quarterly, provided the driver
was still employed at the end of the quarter.
From time to time the industry has experienced shortages of qualified
drivers. If such a shortage were to occur over a prolonged period and increases
in driver pay rates were to occur in order to attract and retain drivers, the
Company's results of operations would be negatively impacted to the extent that
corresponding rate increases were not obtained.
Fuel expenses represented 12.8% and 13.8% of operating revenue in 1997
and 1996, respectively. The decrease in fuel as a percentage of revenue is due
primarily to decreased fuel prices and an 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 an option is necessary and
available. The Company has not used derivative-type hedging products as a hedge
against higher fuel costs.
Purchased transportation represented 13.5% and 12.8% of operating
revenue for the years ended December 31, 1997 and 1996, respectively. This
increase is the result of the growth of the Company's owner operator fleet from
665 at December 31, 1996 to 910 at December 31, 1997.
Rental expense as a percentage of operating revenue was 6.5% and 5.8%
for the years ended December 31, 1997 and 1996, respectively. This increase is
partially due to an increase in trailers under lease. 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
31,1997 and 1996, respectively, the Company recorded gains of approximately
$770,000 and $3.3 million from the sale of leased tractors. During 1997 and
1996, leased tractors represented approximately 61% and 55%, respectively of the
fleet (exclusive of owner operators).
Depreciation and amortization expense was 5.3% of operating revenue for
the year ended December 31, 1997 versus 6.0% for 1996. This decrease is
primarily due to expansion of the owner operator fleet. During the year ended
December 31, 1997 the Company recorded gains on the sale of revenue equipment of
approximately $3.6 million compared with approximately $2.2 million in 1996.
Exclusive of gains, which reduced depreciation and amortization expense, the
percentage of depreciation and amortization to operating revenue in 1997 and
1996 was 5.8% and 6.4%, respectively.
Insurance and claims expense represented 3.2% and 3.6% of operating
revenue in the year ended December 31,1997 and 1996, respectively. The Company's
insurance program for liability, physical damage and cargo damage involves
self-insurance with varying risk retention levels.
21
Claims in excess of these risk retention levels are covered by insurance in
amounts which management considers adequate. The Company accrues the estimated
cost of the uninsured portion of pending claims. These accruals are estimated
based on management's evaluation of the nature and severity of individual claims
and an estimate of future claims development based on historical claims
development trends. Insurance and claims expense will vary as a percentage of
operating revenue from period to period based on the frequency and severity of
claims incurred in a given period as well as changes in claims development
trends.
Interest expense decreased to $4.6 million in 1997 from $7.1 million in
1996. This decline is due to a lower effective borrowing rate and a lower debt
level throughout most of the year which resulted from utilizing the proceeds of
the December 1996 common stock offering to reduce outstanding debt.
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 $1.103
and $1.110 (excluding fuel surcharge) for the years ended December 31, 1996 and
1995, respectively.
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.
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.
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
22
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 55% 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
deprecation and amortization expense, the percentage of depreciation and
amortization to operating revenue in 1996 and 1995 was 6.4% and 7.7%,
respectively.
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").
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 revolving line of credit,
the use of operating leases to finance the acquisition of revenue equipment and
from public offerings of common stock.
23
Net cash provided by operating activities was $75.9 million for the
year ended December 31, 1997 compared to $58.8 million for 1996. The increase is
primarily attributable to an increase in net earnings and a smaller increase in
accounts receivable offset primarily by a smaller increase in accounts payable,
accrued liabilities and claims accruals.
Net cash used in investing activities increased to $104.0 million for
the year ended December 31,1997 from $80.2 million for 1996. The increase is due
primarily to an increase in capital expenditures including the acquisition of
tractors and trailers from lessors of DTI, and fewer proceeds from the sale of
property and equipment. Cash expended for investment activities also includes
$3.7 million expended for the purchase of certain assets of DTI.
As of December 31, 1997, the Company had commitments outstanding to
acquire replacement and additional revenue equipment for approximately $170
million. The Company has the option to cancel such commitments upon 60 days
notice. The Company believes it has the ability to obtain debt and lease
financing and generate sufficient cash flows from operating activities to
support these acquisitions of revenue equipment.
During the year ended December 31, 1997, the Company incurred
approximately $12 million of non-revenue equipment capital expenditures. These
expenditures were primarily for the acquisition or construction of new facilites
in Pueblo, Colorado; Columbus, Ohio; Gary, Indiana; Memphis, Tennessee; and Town
of Manasha, Wisconsin.
The Company anticipates that it will expend approximately $33 million
in 1998 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, 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 $32.6 million in 1997
compared to $20.0 million in 1996. The increase in cash provided by financing
activities is primarily due to an increase in borrowings under the line 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 a combination of revenue equipment purchases and strategic
acquisitions, as opportunities become available, with cash flows from
operations, borrowings available under the line of credit and with long-term
debt and operating lease financing believed to be available to finance revenue
equipment purchases. Over the long term, the Company will continue to have
significant capital requirements, which may require the Company to seek
additional borrowings or equity capital. The availability of debt financing or
equity capital will depend upon the Company's financial condition and results of
operations as well as prevailing market conditions, the market price of the
Company's common stock and other factors over which the Company has little or no
control.
24
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 successfully provide truckload carrier
services to meet dynamic customer 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 and claims costs, 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 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 colder weather which causes higher fuel consumption from
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
25
structure. There are some trucking companies with which the Company competes
that have 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. Rodney K. Sartor, Executive Vice President, Mr. Patrick
J. Farley, Executive Vice President, and Mr. Kevin H. Jensen, 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. Sartor,
Mr. Farley or Mr. Jensen 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, Sartor, Farley or Jensen.
Regulation. The Company is regulated by the United States Department of
Transportation. This regulatory authority exercises 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 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.
26
Claims Exposure; Insurance. The Company currently self-insures for
liability resulting from cargo loss, personal injury and property damage and for
workers' compensation, and maintains insurance with licensed insurance companies
above its limits on 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 1997, the Company's top 25, 10
and 5 customers of 1995 accounted for 47%, 33% and 23% 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,
1997 and for each of the years in the three-year period ending December 31,
1997, 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.
27
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
December 31,
---------------------------------------
Assets 1997 1996
------ ------------------ ------------------
Current assets:
Cash $ 5,726 $ 1,210
Accounts receivable, net 92,587 77,918
Equipment sales receivables 3,284 362
Inventories and supplies 4,509 3,997
Prepaid taxes, licenses and insurance 5,090 3,274
Assets held for sale 5,468 5,453
Deferred income taxes 5,280 3,690
------------------ ------------------
Total current assets 121,944 95,904
------------------ ------------------
Property and equipment, at cost:
Revenue and service equipment 366,223 297,744
Land 7,520 7,351
Facilities and improvements 62,760 53,109
Furniture and office equipment 13,949 12,242
------------------ ------------------
Total property and equipment 450,452 370,446
Less accumulated depreciation and amortization 111,917 95,597
------------------ ------------------
Net property and equipment 338,535 274,849
Other assets 1,976 417
Goodwill 8,679 9,435
------------------ ------------------
$ 471,134 $ 380,605
================== ==================
See accompanying notes to consolidated financial statements.
28
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
December 31,
--------------------------------------
Liabilities and Stockholders' Equity 1997 1996
------------------------------------ ------------------ ------------------
Current liabilities:
Accounts payable $ 14,469 $ 16,779
Accrued liabilities 20,177 17,202
Current portion of claims accruals 16,281 14,668
Current portion of long-term debt 6,849 10,317
------------------ ------------------
Total current liabilities 57,776 58,966
------------------ ------------------
Borrowings under revolving line of credit 56,500 16,500
Long-term debt, less current portion 16,920 23,784
Claims accruals, less current portion 21,343 16,689
Deferred income taxes 44,420 38,000
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 42,793,557 and 42,202,026 shares
in 1997 and 1996, respectively 43 42
Additional paid-in capital 116,141 110,277
Retained earnings 161,407 119,763
------------------ ------------------
277,591 230,082
Less treasury stock, at cost (331,050 shares) 3,416 3,416
------------------ ------------------
Total stockholders' equity 274,175 226,666
Commitments, contingencies and subsequent events
------------------ ------------------
$ 471,134 $ 380,605
================== ==================
See accompanying notes to consolidated financial statements.
29
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except share data)
Years ended December 31,
-------------------------------------------------------
1997 1996 1995
---------------- ---------------- -----------------
Operating revenue $ 713,638 $ 562,259 $ 458,165
---------------- ---------------- -----------------
Operating expenses:
Salaries, wages and employee benefits 246,231 192,572 169,805
Operating supplies and expenses 63,622 52,362 40,582
Fuel 91,257 77,063 60,697
Purchased transportation 96,107 72,040 42,592
Rental expense 46,545 32,599 26,633
Insurance and claims 23,161 20,358 13,121
Depreciation and amortization 37,849 33,883 31,726
Communications and utilities 10,695 8,219 7,547
Operating taxes and licenses 24,132 19,584 19,377
---------------- ---------------- -----------------
Total operating expenses 639,599 508,680 412,080
---------------- ---------------- -----------------
Operating income 74,039 53,579 46,085
---------------- ---------------- -----------------
Other (income) expenses:
Interest expense 4,647 7,106 6,728
Interest income (183) (107) (75)
Other (419) (632) (638)
---------------- ---------------- -----------------
Other (income) expenses, net 4,045 6,367 6,015
---------------- ---------------- -----------------
Earnings before income taxes 69,994 47,212 40,070
Income taxes 28,350 19,790 17,030
---------------- ---------------- -----------------
Net earnings $ 41,644 $ 27,422 $ 23,040
================ ================ =================
Basic earnings per share $ .99 $ .73 $ .62
================ ================ =================
Diluted earnings per share $ .96 $ .71 $ .61
================ ================ =================
See accompanying notes to consolidated financial statements.
30
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
Common Stock Additional Total
------------------------- paid-in Retained Treasury stockholders'
Shares Par value capital earnings stock equity
------------ ----------- ---------- --------- -------- ------------
Balance, January 1, 1995 36,828,984 $ 38 $ 43,048 $ 69,301 $ (1,045) $ 111,342
Issuance of common stock under stock option
and employee stock purchase plans 487,317 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 213,450 shares of treasury stock (2,371) (2,371)
Net earnings 23,040 23,040
---------- ------- ----------- ---------- ---------- -----------
Balance, December 31, 1995 37,316,301 38 45,872 92,341 (3,416) 134,835
Issuance of common stock under stock option
and employee stock purchase plans 438,225 1,676 1,676
Issuance of common stock upon public offering,
net of issuance costs of $300 4,312,500 4 59,410 59,414
Issuance of common stock for Navajo Shippers
acquisition 135,000 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 42,202,026 42 110,277 119,763 (3,416) 226,666
Issuance of common stock under stock option and
employee stock purchase plans 591,531 1 2,963 2,964
Income tax benefit arising from the exercise of
stock options 2,765 2,765
Amortization of deferred compensation 136 136
Net earnings 41,644 41,644
---------- ------- ----------- ---------- ---------- -----------
Balance, December 31, 1997 42,793,557 $ 43 $ 116,141 $ 161,407 $ (3,416) $ 274,175
========== ======= =========== ========== ========== ===========
See accompanying notes to consolidated financial statements.
31
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Years ended December 31,
------------------------------------------------------------
1997 1996 1995
----------------- ----------------- ------------------
Cash flows from operating activities:
Net earnings $ 41,644 $ 27,422 $ 23,040
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 37,104 33,883 31,726
Deferred income taxes 4,830 3,510 5,250
Income tax benefit arising from the exercise
of stock options 2,765 1,330 1,056
Provision for losses on accounts
receivable 240 616 870
Amortization of deferred compensation 136 71 48
Change in assets and liabilities (net of
effects of acquisitions in 1997 and 1996):
Increase in accounts receivable (14,890) (22,637) (12,519)
Decrease (increase) in inventories and
supplies (512) (774) 574
Decrease (increase) in prepaid expenses and
other current assets (1,636) 1,912 54
Decrease (increase) in other assets (720) 416 (15)
Increase in accounts payable, accrued
liabilities and claims accruals 6,932 13,035 8,703
----------------- ----------------- ------------------
Net cash provided by operating
activities 75,893 58,784 58,787
----------------- ----------------- ------------------
Cash flows from investing activities:
Proceeds from sale of property and
equipment 30,680 36,692 43,944
Capital expenditures (131,310) (111,820) (65,726)
Payments received on equipment sales
receivables 389 106 80
Business acquisitions (3,749) (5,148)
----------------- ----------------- ------------------
Net cash used in investing activities
(103,990) (80,170) (21,702)
----------------- ----------------- ------------------
See accompanying notes to consolidated financial statements.
32
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(in thousands)
Years ended December 31,
------------------------------------------------------------
1997 1996 1995
----------------- ----------------- ------------------
Cash flows from financing activities:
Repayments of long-term debt $ (10,332) $ (60,897) $ (24,113)
Proceeds from issuance of long-term debt 15,026
Increase (decrease) in borrowings under
revolving line of credit 40,000 4,750 (13,727)
Proceeds from sale of common stock, net of
issuance costs 2,945 61,090 1,720
Purchase of treasury stock (2,371)
----------------- ----------------- ------------------
Net cash provided by (used in) financing
activities 32,613 19,969 (38,491)
----------------- ----------------- ------------------
Net increase (decrease) in cash 4,516 (1,417) (1,406)
Cash at beginning of year 1,210 2,627 4,033
----------------- ----------------- ------------------
Cash at end of year $ 5,726 $ 1,210 $ 2,627
================= ================= ==================
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 4,568 $ 7,112 $ 6,919
================= ================= ==================
Income taxes $ 23,059 $ 14,163 $ 12,225
================= ================= ==================
Supplemental schedule of noncash investing
and financing activities:
Equipment sales receivables $ 3,284 $ 362 $ 596
================= ================= ==================
Direct financing for purchase of equipment $ $ $ 35,911
================= ================= ==================
See accompanying notes to consolidated financial statements.
33
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(in thousands)
Years ended December 31,
--------------------------------------
1997 1996
----------------- -----------------
During 1997 and 1996, in connection with
business acquisitions, assets were acquired
and liabilities were incurred as follows:
Current assets $ 180 $ 222
Property and equipment 2,554 5,644
Intangibles 1,015 1,200
Issuance of common stock (1,918)
----------------- -----------------
Cash paid $ 3,749 $ 5,148
================= =================
See accompanying notes to consolidated financial statements.
34
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(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 1997, 1996 and 1995 were $3,626,000, $2,185,000 and
$2,663,000, 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, 1997, 1996 and 1995, the Company
capitalized interest related to self-constructed assets totaling
$586,000, $428,000 and $357,000, 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.
35
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 $2,901,000 and $2,144,000 at December 31, 1997 and 1996,
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
determining 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.
Earnings Per Share
Basic earnings per share is computed using the weighted average number of
common shares outstanding during each period (42,242,000, 37,434,000 and
36,867,000 for 1997, 1996, and 1995, respectively). Diluted earnings per
common share includes the impact of stock options assumed to be exercised
using the treasury stock method. The denominator for diluted earnings per
share is greater than the denominator used in the basic earnings per
share by 942,000, 1,069,000, and 1,155,000 shares in 1997, 1996, and
1995, respectively. The numerator is the same for both basic and diluted
earnings per share.
All share data has been restated to reflect the 3-for-2 stock split as
described in Note 18.
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.
Accounting Standards Not Yet Adopted By the Company
The Financial Accounting Standards Board has issued several Statements of
Financial Accounting Standards for which the required implementation date
has not yet become effective. None of these accounting standards will
have a material impact on the Company's consolidated financial
statements.
36
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Accounts Receivable
Accounts receivable consists of:
December 31,
--------------------------------------
1997 1996
----------------- -----------------
(in thousands)
Trade customers $ 88,373 $ 76,287
Equipment manufacturers 2,657 475
Other 1,848 1,709
----------------- -----------------
92,878 78,471
Less allowance for doubtful accounts 291 553
----------------- -----------------
$ 92,587 $ 77,918
================= =================
The schedule of allowance for doubtful accounts is as follows:
Beginning Ending
balance Additions Deductions balance
-------------- ---------------- --------------- --------------
(in thousands)
Year ended December 31:
-----------------------
1997 $ 553 $ 240 $ (502) $ 291
============== ================ =============== ==============
1996 $ 927 $ 616 $ (990) $ 553
============== ================ =============== ==============
1995 $ 387 $ 870 $ (330) $ 927
============== ================ =============== ==============
(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
depreciated cost or fair value less costs to sell.
37
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Accrued Liabilities
Accrued liabilities consists of:
December 31,
--------------------------------------
1997 1996
----------------- -----------------
(in thousands)
Employee compensation $ 12,400 $ 10,741
Fuel and mileage taxes 2,662 2,002
Income taxes payable 1,575 1,113
Other 3,540 3,346
----------------- -----------------
$ 20,177 $ 17,202
================= =================
(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. 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 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 $12.1 million
at December 31, 1997.
38
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,
--------------------------------------
1997 1996
------------------ -----------------
(in thousands)
Notes payable to commercial lending institutions
with varying payments through the year 2006,
secured by revenue and service equipment with
a net book value of approximately $18 million
at December 31, 1997:
Fixed interest rates ranging from 2.8% to 7.3% $ 2,206 $ 3,986
Floating interest rate based on LIBOR plus .45%
to .625% (effective rates ranging from 6.2% to
6.32% at December 31, 1997) 6,563 15,115
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 15,000
------------------ -----------------
Total long-term debt 23,769 34,101
Less current portion 6,849 10,317
------------------ -----------------
Long-term debt, less current portion $ 16,920 $ 23,784
================== =================
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,
1997 are as follows:
Year ending
December 31 (in
----------- thousands)
----------
1998 $ 6,849
1999 1,920
2000 0
2001 0
2002 3,000
Thereafter 12,000
-----------------
$ 23,769
=================
39
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, 1997, the future minimum lease
payments under noncancelable operating leases are as follows:
Year ending Revenue
December 31 Equipment Facilities Total
----------- ----------------- ----------------- -----------------
(in thousands)
1998 $ 39,329 $ 898 $ 40,227
1999 25,307 561 25,868
2000 11,285 338 11,623
2001 6,447 228 6,675
2002 1,325 164 1,489
Thereafter 613 613
----------------- ----------------- -----------------
Total minimum lease payments $ 83,693 $ 2,802 $ 86,495
================= ================= =================
The revenue equipment leases generally include purchase options
exercisable at the completion of the lease. The Company recorded gains of
approximately $700,000, $3.3 million, and $2.1 million from the sale of
leased tractors in 1997, 1996, and 1995, respectively.
Purchase Commitments
The Company had commitments outstanding to acquire revenue equipment for
approximately $170 million at December 31, 1997. 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, 1997, 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. Accordingly, no
compensation cost has been recognized for its Employee Stock Purchase
Plan. The compensation cost that has been charged against income for its
Fixed Stock Option Plans was $136,000, $71,000, and $48,000 for 1997,
1996, and 1995, respectively.
40
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:
1997 1996 1995
----------------- ----------------- -----------------
Net earnings As Reported $41,644 $27,422 $23,040
================= ================= =================
Pro forma $41,147 $27,154 $22,795
================= ================= =================
Basic earnings per share As Reported $.99 $.73 $.62
================= ================= =================
Pro forma $.97 $.71 $.62
================= ================= =================
Diluted earnings per share As Reported $.96 $.71 $.61
================= ================= =================
Pro forma $.95 $.71 $.60
================= ================= =================
Pro forma net earnings reflect only options granted in 1995 through 1997.
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
3.825 million shares of common stock. Under the 1994 Non-Employee
Directors Plan, the Company may grant options to non-employee directors
for up to 90,000 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 Employee Stock Option 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 1995 through 1997:
1997 1995 and 1996
---- -------------
Dividend yield 0% 0%
Expected volatility 35% 46.5%
Risk free interest rate 6% 6.5%
Expected lives (days after vesting date) 36 42
41
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, 1997 and 1996, and changes during the years then ended on
those dates is presented below:
1997 1996 1995
------------------------ ------------------------ ------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
--------- --------- --------- --------- --------- ---------
Outstanding at be-
ginning of year 2,449,200 $ 4.36 2,779,575 $ 4.00 2,851,950 $ 3.00
Granted 670,875 $ 15.29 75,000 $ 11.03 405,825 $ 9.87
Exercised (461,235) $ 2.05 (334,050) $ 2.11 (378,750) $ 1.94
Forfeited (204,600) $ 2.89 (71,325) $ 7.98 (99,450) $ 7.01
--------- --------- ---------
Outstanding at end of
year 2,454,240 $ 7.91 2,449,200 $ 4.36 2,779,575 $ 4.00
========= ========= =========
Options exercisable
at year-end 118,050 121,950 24,000
========= ========= =========
Weighted-average fair
value of options
granted during
the year $ 10.86 $ 12.61 $ 11.61
========= ========= =========
The following table summarizes information about fixed stock options
outstanding at December 31, 1997:
Options Outstanding Options Exercisable
------------------------------ -------------------------------
Weighted-
Number Average Weighted- Number Weighted-
Outstanding Remaining Average Exercisable Average
at Contractual Exercise at Exercise
12/31/97 Life Price 12/31/97 Price
-------------- -------------- ------------ --------------- --------------
$1.86 605,250 2.74 $1.86 11,250 $1.86
$2.31 to $7.30 735,690 5.12 $5.01 100,800 $3.38
$8.00 to $13.17 449,325 7.60 $9.89 3,000 $9.95
$15.02 516,975 9.25 $15.02
$15.58 to $18.27 147,000 9.61 $16.24 3,000 $18.27
----------- ------------
2,454,240 6.12 $7.91 118,050 $3.78
=========== ============
42
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 3 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 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. Each employee is restricted to
purchasing during each period a maximum of $12,500 of stock determined by
using the beginning-of-period price. Under the Plan, the Company sold
130,500, 102,274 and 110,490 shares to 1,143, 482 and 516 employees in
1997, 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:
1997 1995 and 1996
---- -------------
Dividend yield 0% 0%
Expected volatility 35% 46.5%
Risk free interest rate 5% 5%
The weighted-average fair value of those purchase rights granted in 1997,
1996 and 1995 was $4.63, $3.79 and $3.56 respectively.
(9) Income Taxes
Income tax expense consists of:
1997 1996 1995
----------------- ------------------ ------------------
(in thousands)
Current expense:
Federal $ 19,395 $ 13,610 $ 9,800
State 4,125 2,670 1,980
----------------- ------------------ ------------------
23,520 16,280 11,780
----------------- ------------------ ------------------
Deferred expense:
Federal 4,242 2,980 4,370
State 588 530 880
----------------- ------------------ ------------------
4,830 3,510 5,250
----------------- ------------------ ------------------
$ 28,350 $ 19,790 $ 17,030
================= ================== ==================
43
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company's effective tax rate was 40.5%, 42.0% and 42.5% in 1997, 1996
and 1995, 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,
----------------------------------------------------
1997 1996 1995
---------------- ----------------- ----------------
(in thousands)
Computed "expected" tax expense $ 24,498 $ 16,524 $ 14,025
Increase in income taxes resulting
from:
State income taxes, net of
federal income tax benefit 3,002 2,080 1,859
Other, net 850 1,186 1,146
---------------- ----------------- ----------------
$ 28,350 $ 19,790 $ 17,030
================ ================= ================
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,
---------------------------------
1997 1996
---------------- ---------------
(in thousands)
Deferred tax assets:
Claims accruals $ 14,790 $ 12,320
Accounts receivable due to allowance for doubtful
accounts 110 210
Other 100 170
---------------- ---------------
Total deferred tax assets 15,000 12,700
---------------- ---------------
Deferred tax liabilities:
Property and equipment, principally due to differ-
ences in depreciation (52,140) (45,160)
Prepaid taxes, licenses and permits deducted for tax
purposes (2,000) (1,850)
---------------- ---------------
Total deferred tax liabilities (54,140) (47,010)
---------------- ---------------
Net deferred tax liability $ (39,140) $ (34,310)
================ ===============
44
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,
------------------------------------
1997 1996
----------------- -----------------
(in thousands)
Current deferred tax asset $ 5,280 $ 3,690
Noncurrent deferred tax liability (44,420) (38,000)
----------------- -----------------
Net deferred tax liability $ (39,140) $ (34,310)
================= =================
(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, 1997 and 1996. 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.
45
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, 1997, 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 $4.2 million, $2.9 million and $2.4 million for
1997, 1996 and 1995, respectively.
(13) Related Party Transactions
The Company leases various properties from entities owned by the
principal stockholder. Rents paid under these leases totaled $700,000,
$1.0 million and $1.1 million for the years ended December 31, 1997, 1996
and 1995, respectively.
The Company provided transportation services to entities owned by its
principal stockholder. For the years ended December 31, 1997, 1996 and
1995, the Company recognized $318,000, $213,000 and $79,000,
respectively, in operating revenue from these entities. At December 31,
1997, $46,000 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
1997, 1996 and 1995, the Company acquired new tractors and sold them to
this entity for $22.8 million, $13.2 million and $7.5 million,
respectively, and recognized fee income of $1.4 million, $855,000 and
$495,000, respectively. During 1997, 1996, and 1995, the Company also
sold used revenue equipment to this entity totaling $238,000, $700,000
and $3.7 million respectively, and recognized gains of $36,000 in 1997,
$114,000 in 1996 and $765,000 in 1995.
A Company owned by the principal stockholder provides aircraft services
to the Company. Payments for such services totaled $590,000, $450,000 and
$338,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. At December 31, 1997, $69,000 was owed to this entity for
such services.
During 1997, 1996 and 1995, the Company purchased parts and maintenance
services from an entity owned by one of the Company's outside directors
totaling $3,217,000, $2,379,000 and $1,222,000, respectively.
46
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company's principal stockholder acquired a significant ownership
interest in a less than truckload carrier during 1997. The Company
provides transportation services to this carrier and recognized $1.5
million in operating revenue in 1997. At December 31, 1997, $277,000 was
owed to the Company for these services. In addition, the Company paid
$80,000 to the carrier for facilities rental.
The Company's principal stockholder owns an entity with a fleet of
approximately 200 tractors which operates as a fleet operator for the
Company. During 1997, the Company paid $5,251,000 to this fleet operator
for purchased transportation services. At December 31, 1997, $90,000 was
owed for these purchased transportation services. Also, the Company was
paid $264,000 by this fleet operator and paid $117,000 to this fleet
operator for various services including training and repairs. At December
31, 1997, $65,000 was owed to the Company and $110,000 was owed by the
Company for these services.
All of the above related party arrangements were approved by the
independent members of the Company's Board of Directors.
(14) Acquisitions
On April 8, 1997, the Company completed its acquisition of certain assets
of Direct Transit, Inc. ("DTI"), a Debtor-In-Possession in United States
Bankruptcy Court. DTI was a dry van carrier based in North Sioux City,
South Dakota and operated predominantly in the eastern two-thirds of the
United States. The Company acquired inventory, furniture and office
equipment, computer equipment and miscellaneous assets from DTI for $2.7
million. Also, the Company paid $1 million to the principal shareholder
of DTI in exchange for a covenant not to compete. Separately, the Company
acquired 565 tractors and 1,622 trailers from various lessors. Certain of
the revenue equipment was purchased for $31 million and new lease
agreements were negotiated on $11 million of revenue equipment. The
Company used working capital and borrowings under its existing line of
credit to acquire the assets described above and for payments under the
covenant not to compete.
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 135,000 shares of the Company's
common stock valued at $1,918,000. The Company paid the sellers
approximately $1.2 million for commissions on revenues 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 is
being amortized on a straight-line basis over 15 years.
47
SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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 share data)
Year ended December 31, 1997
- ----------------------------
Operating revenue $ 156,074 $ 180,855 $ 188,071 $ 188,640
Operating income 11,123 18,979 22,829 21,138
Net earnings 6,231 10,556 12,882 12,005
Basic earnings per share .15 .25 .30 .28
Diluted earnings per share .14 .24 .30 .28
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
Basic earnings per share .07 .18 .25 .23
Dilutive earnings per share .07 .18 .25 .22
(18) Subsequent Event
On February 20,1998, the Company's Board of Directors approved a 3-for-2
stock split effected in the form of a stock dividend and payable on March
12, 1998 to the stockholders of record at the close of business on March
2, 1998. All share amounts, share prices and earnings per share have been
retroactively adjusted to reflect this 3-for-2 stock split.
48
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, 1997 and 1996, 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, 1997.
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, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
February 20, 1998
49
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Company has never filed a Form 8-K to report a change in
accountants because of a disagreement over accounting principles or procedures,
financial statement disclosure, or otherwise.
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 of the Board of Directors and its Committees,"
and "Director Compensation" in the Registrant's Notice and Proxy Statement
relating to its 1998 Annual Meeting of Stockholders ("the 1998 Notice and Proxy
Statement") to be held on May 28,1998 incorporated by reference into this Form
10-K Report. With the exception of the foregoing information and other
information specifically incorporated by reference into this Form 10-K Report,
the Registrant's 1998 Notice and 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" and "Employment Agreements"
in the 1998 Notice and 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 1998 Notice and 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 1998 Notice and 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 1998 Notice and Proxy Statement and is incorporated herein by reference.
50
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 49
(2) Consolidated Financial Statements and Notes to Page 28-48
Consolidated Financial Statements of the Company,
including Consolidated Balance Sheets as of December
31, 1997 and 1996 and related Consolidated
Statements of Earnings, Stockholders' Equity and
Cash Flows for each of the years in the three-year
period ended December 31, 1997
(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
None
(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
51
Exhibit Page or
Number Description Method of Filing
------ ----------- ----------------
4 Specimen of Common Stock Certificate Incorporated by reference to
Exhibit 4 of the Company's
Annual Report on Form 10-K
for the 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
52
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 Incorporated by reference to
and between Swift Transportation Co., Inc. Exhibit 10.11 of the
and Wells Fargo Bank, N.A., ABN Amro Company's Annual Report on
Bank N.V., The Chase Manhattan Bank and Form 10-K for the year ended
The First National Bank of Chicago. December 31,1996 (the "1996
Form 10-K")
10.12 Asset Purchase Agreement Dated as of Incorporated by reference to
February 20, 1997 Among Swift Exhibit 1 of the Company's
Transportation Co., Inc. And Direct Transit, Current Report on Form 8-K
Inc. And Charles G. Peterson dated April 8, 1997 (the
"4/8/97 8-K")
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
53
Exhibit Page or
Number Description Method of Filing
------ ----------- ----------------
27.1 Financial Data Schedule for twelve months Filed herewith
ended December 31, 1997
27.2 Restated Financial Data Schedule for nine Filed herewith
months ended September 30, 1997
27.3 Restated Financial Data Schedule for six Filed herewith
months ended June 30, 1997
27.4 Restated Financial Data Schedule for three Filed herewith
months ended March 31, 1997
27.5 Restated Financial Data Schedule for twelve Filed herewith
months ended December 31, 1996
27.6 Restated Financial Data Schedule for nine Filed herewith
months ended September 30, 1996
27.7 Restated Financial Data Schedule for six Filed herewith
months ended June 30, 1996
27.8 Restated Financial Data Schedule for three Filed herewith
months ended March 31, 1996
99 Private Securities Litigation Reform Act of Filed herewith
1995 Safe Harbor Compliance Statement for
Forward-Looking Statements
* Indicates a compensation plan
54
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 23rd
day of March, 1998.
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 23, 1998
- ------------------------ President and Chief Executive
Jerry C. Moyes Officer (Principal Executive
Officer)
/s/ William F. Riley III Executive Vice President, March 23, 1998
- ------------------------ Secretary, Chief Financial
William F. Riley III Officer (Principal Accounting
Officer) and Director
S-1
Signature Title Date
- --------- ----- ----
/s/ Rodney K. Sartor Executive Vice President and March 23, 1998
- ------------------------ Director
Rodney K. Sartor
/s/ Lou A. Edwards Director March 17, 1998
- ------------------------
Lou A. Edwards
/s/ Alphonse E. Frei Director March 23, 1998
- -------------------------
Alphonse E. Frei
/s/ Earl H. Scudder, Jr. Director March 23, 1998
- --------------------------
Earl H. Scudder, Jr.
S-2