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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File No. 0-18605

Swift Transportation Co., Inc.

(602) 269-9700

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     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 þ          No o

     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.     o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

     At June 30, 2003, the aggregate market value of common stock held by non-affiliates of the registrant was $977,365,000 based on $18.61 per share, which is the average of the closing bid and ask prices of our common stock as reported on the Nasdaq National Market on June 30, 2003.

     The number of shares outstanding of the registrant’s common stock on March 10, 2004 was 83,547,625.

DOCUMENTS INCORPORATED BY REFERENCE

     Materials from the registrant’s Notice and Proxy Statement relating to the 2004 Annual Meeting of Stockholders have been incorporated by reference into Part III, Items 10, 11, 12, 13 and 14.

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PART I

Item 1.     Business

General

      Swift Transportation Co., Inc., a Nevada corporation headquartered in Phoenix, Arizona, is a holding company for the operating corporations named Swift Transportation Co., Inc. and Swift Transportation Corporation, (collectively referred to as “Swift”, “we”, “our”, “us” or the “Company”) which operate the largest fleet of truckload carrier equipment in the United States combining strong regional operations with a transcontinental van operation. The principal types of freight we transport include retail and discount department store merchandise, manufactured goods, paper products, non-perishable and perishable food, beverages and beverage containers and building materials. We operate throughout the continental United States, predominantly in one industry, road transportation, as a truckload motor carrier and thus have only one single reportable segment.

      This Annual Report on Form 10-K, including but not limited to the portions hereof entitled “Business — Operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements. Additional written or oral forward-looking statements may be made by us from time to time in filings with the Securities and Exchange Commission or otherwise. The words “believe,” “expect,” “anticipate,” and “project,” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are 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; plans relating to products or services of the Company; the benefits of our terminal network; the continued consolidation of the truckload industry and our ability to capitalize on this trend; the increase in the number of companies outsourcing their transportation requirements; our ability to sell our used trucks at favorable prices; our ability to attract and retain qualified drivers; our ability to pass on to our customers increased labor and fuel costs and protect against increases in fuel costs through the use of fuel efficient equipment; pending or future acquisitions; that our relationship with Wal-Mart will be enhanced as a result of our acquisition of Merit; the sufficiency of our capital resources; our plans to extend our vehicle replacement program to four or more years; the anticipated impact of receiving a conditional safety rating from the Federal Motor Carrier Safety Administration; the outcome of routine litigation incidental to our business; and the impact of new regulations issued by the Department of Transportation concerning the maximum number of hours of service that commercial truck drivers can operate; as well as assumptions relating to the foregoing. We undertake 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,” 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, Related Stockholder Matters and Issuer Repurchases of Equity Securities” in this Annual Report.

Operations

      We have developed a network of regional terminals and offices strategically located in areas that have strong and diverse economies and provide access to key population centers. Our terminal network establishes a local market presence in the regions we serve and enables us to respond more rapidly to our customers’ changing requirements. The terminals are located in close proximity to major customers who provide us with significant freight volume. To minimize competition with long-haul truckload carriers and railroads, we

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      We focus on achieving constant availability for service-sensitive customers in short-to-medium haul traffic lanes that regularly ship over established routes within our regional service areas. We seek to provide premium service with commensurate rates, rather than compete primarily on the basis of price. This regional network also enables us to enhance driver recruitment and retention by regularly returning drivers to their homes, reducing our purchases of higher priced fuel at truck stops and expediting lower cost, in-house equipment maintenance. The principal elements of our 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 that enhances on-time deliveries and driver satisfaction; a fully-integrated computer system to monitor shipment status and variations from schedule; an onboard communications system that enables us to dispatch and monitor traffic; timely deliveries; specialized equipment, such as high cubic capacity trailers, to respond promptly to customers’ varying requirements; multiple drops, appointment pick-ups and deliveries; assistance in loading and unloading; and extra trailers that can be placed for the convenience of our customers at their shipping locations.

      The achievement of significant regular freight volumes on high-density routes and maintaining consistent shipment scheduling over these routes are key elements of our operations. As a result, our operations personnel are better able to match available equipment to available loads and schedule regular maintenance and fueling at our terminals, thereby enhancing productivity and asset utilization and minimizing empty miles and expensive over-the-road fueling and repair costs. Consistent scheduling also allows us to be more responsive to our customers’ needs. Our regular scheduling and relatively short length of haul enable drivers to regularly return to their homes, which helps us with driver recruitment and retention.

      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. Nevertheless, the truckload industry remains highly fragmented, and we believe that overall growth in the truckload industry and continued industry consolidation will present opportunities for well-managed, financially stable carriers like us to expand.

      In addition to expanding our services to existing customers, we actively pursue new traffic commitments from high volume, financially stable shippers for whom we have not previously provided services. Furthermore, a number of large companies maintain their own private trucking fleets to facilitate distribution of their products. In order to reduce operating costs associated with private fleets, a number of large companies periodically evaluate the opportunity to outsource their transportation and logistics requirements. We believe our strong regional operations and average length of haul of less than 600 miles position allows us to take advantage of this trend. We already serve as a preferred supplier, or “core carrier” for many major shippers who are considering, or may in the future consider, outsourcing their private fleet transportation and logistics requirements.

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      We intend to take advantage of growth opportunities through a combination of internal growth and selective acquisitions. We generally limit our consideration of acquisitions to those we believe will be accretive to earnings within six months and produce a double-digit internal rate of return on investment.

      In addition to the domestic operations described above, we have a growing cross border operation into Mexico that primarily ships through commercial border crossings from Laredo, Texas westward to California. In 2000, we augmented our cross border operation by acquiring 49% of Trans-Mex, a carrier that focuses on shipments to and from Mexico and we purchased the remaining 51% in January 2004. For additional information regarding our purchase of the remaining interest in Trans-Mex as well as our guarantees of certain Trans-Mex obligations, see the Notes to Consolidated Financial Statements.

      In April 2000, together with five other publicly traded truckload carriers, we founded Transplace, LLC, an Internet-based transportation logistics company. We contributed our transportation logistics business and associated intangible assets to Transplace.com upon its formation. Our interest in Transplace.com is approximately 29%, reflecting both our initial investment and that held by out subsidiary, M.S. Carriers. We report our equity interest in Transplace.com and our share of the profits and losses of Transplace.com in our consolidated financial statements using the equity method of accounting. See the Notes to Consolidated Financial Statements.

      As a transportation logistics company, Transplace matches shippers with trucking companies and receives a fee for this service. We may receive from Transplace the opportunity to provide transportation services to shippers. In addition, we may utilize Transplace to assist in obtaining additional capacity from other trucking companies for our customers. During the years ended December 31, 2003, 2002 and 2001, Swift received less than 3% of its operating revenue from Transplace and paid less than 1% of its purchased transportation to Transplace.

Acquisitions

      Our growth has been dependent in part upon the acquisition of trucking companies throughout the United States. From 1988 through 1997, we completed eight acquisitions through which we grew from a regional carrier in the Western United States to a national carrier with operations throughout the entire country.

      In January 2001, we further expanded our operations in the eastern United States through an agreement with Cardinal Freight Carriers Inc. (“Cardinal Freight”), a van and flatbed carrier based in Concord, North Carolina. Under this agreement, we hired a number of Cardinal Freight’s drivers and subleased a number of tractors from Cardinal Freight.

      In June 2001, we merged with M.S. Carriers, Inc. (“M.S. Carriers”), also a publicly- held truckload carrier operating predominantly in the eastern United States. In exchange for 19,464,322 shares of our common stock, M.S. Carriers became a wholly-owned subsidiary. The transaction was accounted for as a pooling of interests.

      In July 2003, we completed the acquisition of certain assets of Merit Distribution Services, Inc. Merit’s fleet consists of 825 tractors, including 140 owner operators, and 1,400 trailers of which 455 tractors and 1,100 trailers are leased. Merit’s primary business consists of a series of dedicated regional trucking fleets that serve Wal-Mart’s grocery distribution centers and retail outlets. This acquisition is expected to enhance our relationship with Wal-Mart, our largest customer.

      See “Factors That May Affect Future Results and Financial Condition” under Item 7.

Revenue Equipment

      We acquire premium tractors to help attract and retain drivers, promote safe operations and minimize maintenance and repair costs. We believe the higher initial investment is recovered through improved resale value, improved fuel economy and reduced maintenance costs.

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      The following table shows the type and age of our owned and leased equipment at December 31, 2003:

(1)	Excludes 3,692 owner-operator tractors.

      Historically, we have purchased tractors and trailers manufactured to our specifications. Since 1990, we have predominantly acquired tractors manufactured by Freightliner powered by Series 60 Detroit Diesel engines. This standardization of driveline components enhanced our maintenance program by allowing us to operate with a minimum spare parts inventory. We historically have had a three-year replacement program on the majority of our line-haul tractors. After evaluating the 2002 tractor engines, which were designed to conform to the emissions standards mandated by the U.S. Environmental Protection Agency (EPA) that became effective on October 1, 2002, we have decided to operate the majority of our equipment for a period of four years. Furthermore, we may operate some equipment for five years depending upon mileage and use of the equipment. In the future, we expect to acquire tractors from two or more manufacturers. We expect to work with these equipment manufacturers to specify components that are common to each tractor so that we can continue the benefits of parts standardization. We adhere to a comprehensive maintenance program that minimizes downtime and enhances the resale value of our equipment. In addition to our maintenance facility in Phoenix, Arizona, we perform routine servicing and maintenance of our equipment at most of our regional terminal facilities, thus avoiding costly on-road repairs and out-of-route trips.

      We have installed Qualcomm onboard, two-way vehicle satellite communication systems in virtually all of our tractors. This communication system links drivers to regional terminals and corporate headquarters, allowing us to rapidly alter routes in response to customer requirements and adverse weather conditions and to eliminate the need for driver stops to report problems or delays. This system allows drivers to inform dispatchers and driver managers of the status of routing, loading and unloading or the need for emergency repairs. We believe this communications system improves fleet control, the quality of customer service and driver recruitment and retention. We intend to continue to install the communication system in substantially all tractors acquired in the future.

Marketing and Customers

      We have targeted the service-sensitive segment of the truckload market, both common and contract, rather than that segment that uses price as its primary consideration. We have chosen to provide premium service with commensurate rates rather than compete primarily on the basis of price. The principal elements of our 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 that enhances on-time deliveries and driver satisfaction; a fully-integrated computer system to monitor shipment status and variations from schedule; an onboard communications system that enables us to dispatch and monitor traffic; timely deliveries; specialized equipment, such as high cubic capacity trailers, to respond promptly to customers’ varying requirements; multiple drops, appointment pick-ups and deliveries; assistance in loading and unloading; and extra trailers that can be placed for the convenience of our customers. We concentrate our marketing efforts on expanding the amount of service we provide to existing customers.

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      We maintain a strong commitment to marketing. We have assigned a member of senior management to each of our largest customers to ensure a high level of customer support. We solicit new customers from our Phoenix, Arizona headquarters and each of our regional terminals through a marketing staff of approximately 50 persons. Once a customer relationship has been established, regional customer service representatives maintain contact and solicit additional business. We concentrate 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; we attempt to obtain additional customers that will complement the new traffic flow. This strategy enables us to maximize equipment utilization.

      The largest 25, 10 and 5 customers accounted for approximately 55%, 39% and 30% respectively, of our revenues during 2003, 50%, 34% and 25%, respectively, of our revenues during 2002 and 48%, 33% and 23%, respectively, of our revenues during 2001. Wal-Mart is our largest customer and accounted for approximately 12%, 7% and 4% of our operating revenue during 2003, 2002 and 2001. No other customer accounted for more than 6% of operating revenue during the three years ended December 31, 2003. Our largest customers include retail and discount department store chains, manufacturers, non-perishable and perishable food companies, beverage and beverage container producers and building materials companies.

Employees

      Our larger terminals are staffed with terminal managers, driver managers and customer service representatives. Our terminal managers work with the fleet managers and the customer service representatives, as well as other operations personnel, to coordinate the needs of both our customers and our drivers. Terminal managers are also responsible for soliciting new customers and serving existing customers in their areas. Each driver 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.

      All our 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 our policies and operations, safety techniques, and fuel-efficient operation of the equipment. All new drivers must pass a safety test and have a current Commercial Drivers License. In addition, we have ongoing driver efficiency and safety programs to ensure that our drivers comply with our safety procedures.

      Senior management is actively involved with the development and retention of drivers. Recognizing the need for qualified drivers, we have contracted with driver-training schools, which are managed by outside organizations including local community colleges throughout the country. Candidates for the schools must be at least 21 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 closed driving course time and a six to eight week, on-the-road training program.

      We base our drivers at terminals and monitor each driver’s location on our computer system. We use this information to schedule the routing for our drivers so they can return home frequently. In order to attract and retain highly qualified drivers and promote safe operations, we purchase 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. The majority of company drivers are compensated on the basis of miles driven, loading/unloading and number of stops or deliveries, plus bonuses. The base pay for the miles driven by a drive increase with a driver’s length of service. Drivers employed by Swift participate in company-sponsored health, life and dental insurance plans and are eligible to participate in our 401(k) Profit Sharing Plan and an Employee Stock Purchase Plan.

      We have 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, which is below the speed limits of many states. We

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      We enter into contracts with owner-operators. These owner-operators, unlike drivers we employ, own their tractors and are responsible for operating costs (for example fuel and maintenance) as opposed to drivers who are our employees. The owner-operators operate under our authority and are generally compensated based upon miles. Owner-operators currently comprise approximately 20% of our total fleet and we desire to aggressively expand this level. We believe that owner operators provide Swift with a noticeably higher return on our invested assets because owner operators incur the cost of acquiring their tractor, not Swift.

      We believe our innovative driver-training programs, driver compensation, regionalized operations, driver tracking and late-model equipment provide important incentives to attract and retain qualified drivers. Although we have 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 us in the future.

      As of December 31, 2003, Swift employed approximately 21,000 full-time persons, of whom approximately 16,600 were drivers (including driver trainees), 1,900 were mechanics and other equipment maintenance personnel and the balance were support personnel, such as sales personnel, corporate managers and administrative personnel. No driver or other employee is represented by a collective bargaining unit. In the opinion of management, our relationship with our drivers and employees is good.

Safety

      We have an active safety and loss prevention program at each of our terminals. Supervisors engage in ongoing training of drivers regarding safe vehicle operations. We have adopted maximum speed limits. We believe that our insurance and claims expense, as a percentage of operating revenue is one of the best in the industry, which is attributable to our overall strong safety program.

Fuel

      In order to reduce fuel costs, we purchase approximately 79% of our fuel in bulk at 33 of our 35 terminals. We store fuel in underground storage tanks at two of our bulk fueling terminals and in above ground storage tanks at our other bulk fueling terminals. We believe that we are 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 our operations and profitability. From time to time, we, in response to increases in fuel costs, have implemented fuel surcharges to pass on to our customers all or substantially all of increased fuel costs. However, there can be no assurance that such fuel surcharges could be used to offset future increases in fuel prices. We believe that our 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. We have generally not used derivative-type products as a hedge against higher fuel costs in the past but continue to evaluate this possibility.

Competition

      The trucking industry is extremely competitive and fragmented. We seek to provide premium service with commensurate rates, rather than compete primarily on the basis of price. We compete primarily with regional, medium-haul truckload carriers. We believe, because of our cost efficiencies, productive equipment utilization and financial resources, that we have a competitive advantage over most regional truckload carriers. We believe that competition for the freight transported by us is based, in the long term, as much upon service and efficiency as on freight rates. There are some trucking companies with which we compete that have greater financial resources, and one may own more revenue equipment and carry a larger volume of freight than us. Long-haul truckload carriers and railroads also provide competition, but to a lesser degree. We also compete with other motor carriers for the services of drivers.

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Regulation

      We are regulated by the United States Department of Transportation. This regulatory authority has broad powers, generally governing matters such as authority to engage in motor carrier operations, certain mergers, consolidations and acquisitions and periodic financial reporting. The trucking industry is subject to regulatory and legislative changes, which can affect the economics of the industry. We are also regulated by various state agencies.

      Our safety rating has always been and continues to be satisfactory, the highest rating given by Federal Motor Carrier Safety Administration (FMCSA). An October 2003 compliance review by the Arizona division of the FMCSA has resulted in a proposed safety rating of conditional. We have been in discussions with the FMCSA about the proposed rating and filed a petition for a stay of the effective date of the proposed safety rating pending a review as provided for under the FMCSA regulations. Our petition for a stay was granted by the FMCSA on December 18, 2003 and the Arizona division of the FMCSA was ordered to respond to Swift’s petition for review. We received this response on January 19, 2004 and submitted our reply on February 5, 2004. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Safety Rating Update” for additional discussion about this situation.

      Our operations are also 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. We believe that our operations are in substantial compliance with current laws and regulations and do not know of any existing condition that would cause compliance with applicable environmental regulations to have a material adverse effect on our 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. Our 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.

Internet Web Site

      Additional information about us is available on our Internet web site, www.swifttrans.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and other reports filed pursuant to Section 13 or 15 (d) of the Exchange Act are available, free of charge, on our website as soon as practical after they are filed. In addition, our press releases are posted to our web site as soon as practical after they are issued publicly. The information on our web site is not considered part of this report.

Item 2.     Properties

      Swift’s headquarters is situated on approximately 100 acres in the southwestern area of Phoenix, Arizona. The campus consists of a three story administration building with 126,000 square feet of office space, repair and maintenance buildings with 106,000 square feet, a 20,000 square foot drivers center and restaurant, an 8,000 square foot recruiting and training center, a 6,000 square foot warehouse, a two bay truck wash and an eight lane fueling facility.

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      Swift has terminals throughout the continental United States. A terminal may include customer service, marketing, fuel and repair facilities. The following table provides information regarding our significant facilities or terminals:

      As of December 31, 2003, our aggregate monthly rent for all leased properties was $264,000.

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Item 3.     Legal Proceedings

      We are a party to routine litigation incidental to our business, primarily involving claims for personal injury or property damage incurred in the transportation of freight. Our 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 to be adequate.

Item 4.     Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of our security holders during the fourth quarter of 2003.

PART II

      Our common stock is publicly traded on the Nasdaq National Market (“Nasdaq”) under the symbol “SWFT”. The following table sets forth the high and low sales prices of the common stock reported by Nasdaq for the periods shown.

      On March 10, 2004, the last reported sales price of our common stock was $20.91 per share. At that date, the number of stockholder accounts of record of our common stock was 4,800. We estimate there are approximately 6,400 beneficial holders of our common stock.

      We have not paid cash dividends on our common stock in the current year or either of the two preceding fiscal years. Our revolving credit facility and one of our notes payable include limitations on the payment of cash dividends. It is the current intention of management to retain earnings to finance the growth of our business. Future payment of cash dividends will depend upon the financial condition, results of operations, and capital requirements of the Company, as well as other factors deemed relevant by the Board of Directors.

Factors That May Affect Future Stock Performance

      The performance of our 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 34% of our common stock. Accordingly, Mr. Moyes will have a significant

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      Possible Volatility of Stock Price. The market price of our common stock could be subject to significant fluctuations in response to certain factors, including, among others, variations in the anticipated or actual results of our operations or other companies in the transportation industry, changes in conditions affecting the economy generally, fluctuations in interest rates and fuel prices, increases in insurance premiums affecting the trucking industry generally, the depressed market for used tractors affecting the trucking industry generally, analysts’ reports or general trends in the industry, as well as other factors unrelated to our operating results.

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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, 2003 is derived from our Consolidated Financial Statements. The selected consolidated financial data for the years 2000 and 1999 has been restated to include the financial position, results of operations, and cash flows of M.S. Carriers (See Pooling of Interests note to the financial statements). The Consolidated Financial Statements as of December 31, 2003 and 2002, and for each of the years in the three-year period ended December 31, 2003 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.

(1)	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), we believe that the most meaningful comparative measure of our operating efficiency is our pre-tax margin, which takes into consideration both our total operating expenses and net interest expense as a percentage of operating revenue.
(2)	Excludes fuel surcharge revenue.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

      Management’s Discussion and Analysis contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in “Factors That May Affect Future Results and Financial Condition.”

OVERVIEW

      We operate the largest fleet of truckload carrier equipment in the United States. As part of the truckload segment of the trucking industry, we transport freight for shippers in large quantities who generally pay for our services based upon the number of miles between pick-up and delivery. Our fleet of tractors and trailers is as follows:

*	Total tractors owned and leased includes tractors being prepared for service and tractors waiting to be returned under lease or resold at the end of our replacement program. Average tractors is calculated on a monthly basis and represents tractors available for dispatch.

      Our tractors are either owned by us or financed under leases. Our fleet has operated on a three-year cycle for many years. Generally, we traded a tractor for a new tractor every three years. After evaluating the 2002 tractor engines, which were designed to conform to the emissions standards mandated by the U.S. Environmental Protection Agency (EPA) that became effective on October 1, 2002, we have decided to operate the majority of our equipment for a minimum of four years. Furthermore, we may operate some equipment for five years depending upon mileage and use of the equipment.

      The owner-operators own their tractor and are responsible for operating costs (for example fuel and maintenance). The owner-operators operate under our authority and are generally compensated based upon miles. We believe that owner operators provide Swift with a noticeably higher return on our invested assets because owner operators incur the cost of acquiring their tractor, not Swift.

      Trucking revenue is generated from freight hauled by our fleet. There are three factors that significantly impact our trucking revenue. First, as mentioned above, the truckload industry in which we operate is generally compensated based upon miles. Therefore, an increase in miles will increase the revenue. We monitor utilization of our tractors in the form of miles per tractor per week. The second factor is revenue per mile. Increases in revenue per mile will increase revenue. We monitor our revenue per mile on a daily basis. Finally, the percentage of miles our tractors travel that do not generate revenue, known as deadhead, will adversely affect revenue. We monitor deadhead miles on a daily basis.

      In addition to trucking revenue, our operating revenue includes fuel surcharge revenue and other revenue primarily for freight moved for our customers on rail or purchased transportation.

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      We are also compensated, in some instances, for accessorial charges such as loading and unloading freight for our customers. The Department of Transportation (“DOT”), recently revised their regulations to increase the maximum daily drive time from 10 to 11 hours, but no longer allow for breaks in the on-duty period. In situations where productivity losses could occur as a result of these regulations, we expect to seek compensation from the shippers and in turn compensate our drivers and owner-operators accordingly so as to maintain our existing pay structure. If we are not successful in working with our shippers to adjust for the impact these new regulations will have on our driver and owner-operator productivity, it could have a negative impact on our financial results. See “Factors That May Affect Future Results and Financial Conditions — Regulation” for information on this and other regulatory matters.

      We believe our cost structure is evenly divided between fixed costs, such as overhead and variable costs, such as driver wages, purchased transportation and fuel. Therefore, an increase in revenue will generally improve our financial results through a reduction in our operating ratio.

      We have communicated our goal to reduce our operating ratio by 3% this year. Based on our current view of the first quarter, we expect to fall significantly below our improvement objective due to adverse weather, early retirement charges, driver availability and higher fuel cost.

      In 2003, our net earnings rose to $79.4 million as trucking revenue increased 12% and we were able to absorb more of our fixed costs.

      In 2002, our net earnings increased to $59.6 million. Although trucking revenue was down 1% from 2001, lower interest expense, the lack of integration adjustments, and merger related synergies all contributed to our rise in net earnings.

      In the first quarter of 2004, we offered a voluntary early retirement option to selected employees. This program includes a severance payment, acceleration of stock options and COBRA insurance coverage. We estimate the one time pretax expense of this program, to be recognized in the first quarter of 2004, will be approximately $3 million. Furthermore, we expect to realize a reduction in salaries and benefits of approximately $3 million annually.

CRITICAL ACCOUNTING ESTIMATES

Claims Accruals

      We are self-insured for a portion of our liability, property damage and cargo damage risk. This self-insurance results from buying insurance coverage with deductible amounts. Each reporting period we accrue the cost of the uninsured portion of pending claims. These accruals are estimated based on our evaluation of the nature and severity of individual claims and an estimate of future claims development based upon historical claims development trends. Insurance and claims expense will vary as a percentage of operating revenue from period to period based on the frequency and severity of claims incurred in a given period as well as changes in claims development trends.

Revenue Recognition

      Operating revenues and related direct costs are recognized as of the date the freight is picked up for shipment. M.S. Carriers (see Pooling of Interests note) recognized revenue on the date freight was delivered. Beginning January 1, 2002, M.S. Carriers was operationally combined with us and recognizes revenue on the date freight is picked up for shipment. Our revenue recognition policy is consistent with method two under EITF 91-9. We do not believe the financial results derived from the application of this method differ materially from the results that would be derived under method three discussed within EITF 91-9 due to our relatively short length of haul.

      We have discussed the methodology of these accounting estimates with the audit committee of the Board of Directors and the audit committee has reviewed our disclosure relating to it in this Annual Report on Form 10-K.

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POOLING OF INTERESTS

      On June 29, 2001, we acquired M.S. Carriers through the merger of a wholly-owned subsidiary with and into M.S. Carriers (the “Merger”). The Merger has been accounted for as a pooling of interests. Accordingly, all historical financial data discussed below has been restated to include the financial position, results of operations, and cash flows of M.S. Carriers.

      In addition, the results for 2001 include:

	•	a $7 million increase to M.S. Carriers insurance and claims reserves;
	•	a $10.5 million adjustment, of which $8.5 million relates to the impairment of our 50% equity investment held by M.S. Carriers in Transportes EASO, the largest intra-Mexico truckload carrier, and $2 million is associated with the write off of a cash advance made to EASO in the third quarter of 2001; and
	•	a $4.0 million adjustment for the change in market value of the interest rate derivative agreements of M.S. Carriers.

      Prior to the merger, M.S. Carriers calculated a range of claims reserves and recorded in their financial statements an amount that they believed was appropriate. We believed, based upon our experience with historical development trends, it was more appropriate to record amounts at a higher level within the range. Upon closing the merger with M.S. Carriers, we completed our evaluation of the claims exposure of M.S. Carriers and recorded a $7 million increase in this accrual.

      M.S. Carriers held the equity investment in Transportes EASO prior to its merger with us. Nothing came to our attention to indicate there was an impairment of this investment during the acquisition process or the period subsequent to the merger and prior to the August 2001 request from Transportes EASO management for an advance to meet its cash requirements. The $2 million cash advance to Transportes EASO was made in August 2001. As a result of this advance, we began an evaluation of this investment. Based upon our evaluation, it was our determination that there had been a significant decline in the value of EASO and that our investment in it was impaired. Therefore, we adjusted the carrying value of the investment.

RESULTS OF OPERATIONS FOR 2003, 2002 AND 2001

      The following table sets forth for the periods indicated certain statement of earnings data as a percentage of operating revenue for the years ending December 31:

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REVENUE

      As discussed above, we believe there are three factors that have a significant impact on our trucking revenue. These three factors, along with operating revenue and its components (dollars in thousands) are shown in the table below for the last three years.

      Our trucking revenue increased by approximately 12% in 2003 compared to 2002 and decreased 1% in 2002 compared to 2001. In 2003, we improved our utilization, revenue per loaded mile and deadhead percentage. Our acquisition of Merit Distribution Services, Inc. accounted for 3% of this increase in 2003. Services provided to our largest customer, Wal-Mart, generated 12% of our revenue in 2003.

      Comparing 2002 to 2001, the improvement in deadhead percentage was offset by a decrease in utilization. We began 2002 with approximately 650 trucks without drivers. The number of trucks without drivers decreased throughout 2002 and we ended the year with approximately 150 trucks without drivers.

      Other revenue increased in both 2003 and 2002 primarily due to an increase in freight moved for our customers on rail and third party carriers for our customers.

OPERATING EXPENSES

      Our most significant operating costs are salaries, wages and employee benefits, fuel and purchased transportation. Our salaries, wages and employee benefits were 36.4%, 36.9% and 37% of operating revenue in 2003, 2002 and 2001, respectively. The percentage was fairly consistent after adjusting for fuel surcharge revenue, 37.8% in 2003 and 37.6% in 2002. The percentage decreased slightly in 2002 when compared to 2001 as we experienced some driver attrition that was offset by an increase in workers’ compensation costs. Our deductible amount for workers’ compensation rose from zero to $350,000 per incident in 2002. In 2003, this deductible amount for workers’ compensation rose from $350,000 to $500,000 per incident. The deductible will rise in 2004 to $3,000,000, however, we believe that the decrease in the cost of our premiums based on a $3,000,000 deductible will more than offset the cost of claims that occur within the $500,000 to $3,000,000 range, which has historically been a small number.

      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, our results of operations would be negatively impacted to the extent we did not obtain corresponding rate increases.

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      Fuel was 13.6%, 12.4% and 13.0% of operating revenue in 2003, 2002 and 2001, respectively. This percentage is primarily affected by fuel prices. Fuel as a percentage of revenue is directly related to our average fuel cost per gallon, which was $1.39, $1.21 and $1.28, in 2003, 2002 and 2001, respectively.

      Increases in fuel costs, to the extent not offset by rate increases or fuel surcharges, would have an adverse effect on our operations and profitability. We believe 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. We do not use derivative-type hedging products, but periodically evaluate their possible use.

      Purchased transportation was 17.4%, 17.1% and 17.3% of operating revenue in 2003, 2002 and 2001, respectively. This percentage increased in 2003 as our owner operator fleet has increased from 3,048 at December 31, 2001 to 3,692 at December 31, 2003 and our use of rail increased.

      Operating supplies and expenses was 9.7%, 9.2% and 8.8% of operating revenue in 2003, 2002 and 2001, respectively, as we experienced an increase in maintenance costs. This anticipated increase resulted from our extensions of the life of some of our tractors into the fourth year beginning in late 2002, which increased maintenance costs. This increase is offset by a reduction in depreciation expense discussed below.

      Insurance and claims was 3.9%, 4.1% and 4.5% of operating revenue in 2003, 2002 and 2001, respectively. The year ended December 31, 2001 includes a $7 million increase to M.S. Carriers insurance and claims reserves and $4.1 million of increased insurance premiums, with the same coverage, over the prior year.

      As discussed under Critical Accounting Estimates, we are self-insured for some portion of our liability, property damage and cargo damage risk. We buy insurance coverage with deductible amounts. Beginning in 2003, the deductible amount for general liability rose from $250,000 to $1,000,000 per incident. This increase in our deductible was a part of the settlement agreement between us and our insurance company that is discussed in the following paragraph. We believe that the benefits we will receive from the insurance settlement outweigh that the additional costs that will result from a higher deductible. This 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.

      As we discussed in the notes to our financial statements, we entered into a settlement agreement with our insurance company that carries a portion of our transportation liability insurance. Pursuant to this settlement, the insurance company agreed to provide certain insurance coverage, at no cost to the Company, through December 2004, in exchange for our releasing all claims that were the subject of the litigation. We have been recognizing this settlement amount as a reduction of insurance expense as the insurance coverage is provided during the period from July 1, 2002 through December 31, 2004. In addition, we deferred the $21.1 million of legal expenses, which were paid pursuant to a contingent fee arrangement based upon our estimate of the value of the insurance provided of between $65 million and $74 million. These legal expenses are being amortized on a straight-line basis over the thirty-month period beginning July 1, 2002. In the event that we do not receive the future insurance coverage due to the liquidation, rehabilitation, bankruptcy or other similar insolvency of the insurers, we will receive a reimbursement of our legal expenses on a declining basis ranging from $15.8 million through December 15, 2002 to $3.9 million through July 1, 2004.

      Rental expense was 3.4%, 4.1% and 4.7% of operating revenue in 2003, 2002 and 2001, respectively. This decrease is primarily due to a decrease in our average cost per leased tractor and a decrease in the number of tractors on lease.

      Depreciation and amortization expense was 6.3%, 7.0% and 6.8% of operating revenue in 2003, 2002 and 2001. The decrease in 2003 is primarily due to the extension of the life of some of our tractors into the fourth year. At the acquisition date of tractors, we estimate the expected life and depreciate the cost over this expected life to the expected residual value. Historically, for most of our tractors, the expected life is three years. When we chose to extend the life an additional year, the depreciation for that additional year is equal to the change in the expected residual value. As with most depreciating assets, the loss in value in later years is less when compared to the earlier years of an asset’s life.

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      When it is economically advantageous to do so, we will purchase and then resell tractors that we currently lease by exercising a purchase option contained in the lease. Gains on these activities are recorded as a reduction of rental expense. We also generate gains from the sale of tractors we own. These gains are recorded as a reduction of depreciation expense. These gains are summarized below.

OTHER EXPENSES

      Our largest pre-tax non-operating expense is interest. Our debt balance combining the operating line of credit, accounts receivable securitization, capital leases, Senior Notes and other debt was $419 million, $402 million and $401 million at December 31, 2003, 2002 and 2001, respectively.

      As shown below, our interest expense, net of the impact of the derivative agreements, increased in 2003. In June 2003, we completed our private placement of Senior Notes, which have a weighted average interest rate of 4%. Although this fixed rate is currently higher than our variable rate debt, these Senior Notes provide us with strategic capital with five and seven year maturities. We also benefited in 2003 from lower interest rates and a shift in borrowings from more costly debt related to capital leases, entered into under M.S. Carriers, to less costly Swift debt.

      Our interest expense decreased in 2002 as we shifted to lower cost borrowings and interest rates declined.

      Included in other (income) expense are the equity earnings of Transplace and Tran-Mex. An additional nonrecurring charge of $1.3 million within the earnings of our equity investment in Transplace was recorded in 2002. Other expense in 2001 included an $8.5 million adjustment for the impairment of the 50% equity investment held by M.S. Carriers in Transportes EASO, and the equity loss of $3.0 million for Transplace.

      Our effective tax rate was 38%, 38% and 40% in 2003, 2002 and 2001, respectively. The higher rate in 2001 was primarily due to the nondeductible portion ($5.2 million) of the EASO impairment adjustment.

LIQUIDITY AND CAPITAL RESOURCES

      Our cash flow sources and uses by operating, investing and financing activities are shown below:

      The increase in our net earnings in 2003 was the primary driver of our increase in cash provided by operating activities. In 2002, our cash provided by operating activities increased slightly compared to 2001, despite a substantial increase in net earnings primarily because our accounts receivable increased by a comparable amount.

      Our cash used in investing activities is mainly driven by our capital expenditures, net of sales proceeds. Our capital expenditures, net of cash sales proceeds were $223 million, $219 million and $165 million in 2003,

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      Regarding our financing activities, in 2003 we issued $200 million of Senior Notes and repaid $185 million of debt, net of borrowings under the line of credit (including capital leases and securitization). Also, we repurchased $18.9 million and $52 million of our common stock in 2003 and 2002. In addition, we received $13.9 million and $13.6 million in stock option exercise and employee stock purchase plan proceeds in 2003 and 2002, respectively.

      In 2001, we repaid a total of $161 million of long-term debt, capital leases and borrowings under revolving credit agreement and received $20 million from our public stock offering and $27 million from issuance of stock to our employees.

      As of December 31, 2003 and 2002 we had a working capital deficit of $24.3 million and $69.6 million, respectively. As discussed in the notes to the financial statements, the accounts receivable securitization is reflected as a current liability because the committed term, subject to annual renewals, is 364 days. The funds received under the accounts receivable securitization are generally used for capital expenditures or repurchases of our common stock. Therefore, our working capital will be reduced by the amount of the proceeds received under the accounts receivable securitization but the increase in fixed assets or treasury stock is not included in working capital.

      As of December 31, 2003, we had $30 million of borrowings and $103 million of letters of credit outstanding on our $300 million line of credit, leaving $167 million available. Interest on outstanding borrowings is based upon one of two options, which we select at the time of borrowing: the bank’s prime rate or the London Interbank Offered Rate (LIBOR) plus applicable margins ranging from 62.5 to 137.5 basis points, as defined in the Credit Agreement (currently 70 basis points). The unused portion of the line of credit is subject to a commitment fee ranging from 17.5 to 25 basis points (currently 20 basis points). The Credit Agreement requires us to meet certain covenants with respect to leverage and fixed charge coverage ratios and tangible net worth. The Credit Agreement also requires us to maintain unencumbered assets of not less than 120% of indebtedness (as defined).

      Our accounts receivable securitization allows us to sell up to $200 million of our eligible trade accounts receivable to a financial institution. As of December 31, 2003, we had received sales proceeds of $142 million. Under the terms of our agreement, 65% of our trade receivables collateralize the securitization arrangement as of December 31, 2003.

      As of December 31, 2003, we had commitments outstanding to acquire replacement and additional revenue equipment for approximately $379 million. We have the option to cancel such commitments upon 60 days notice. We believe we will be able to support these acquisitions of revenue equipment through debt and lease financings and cash flows generated by operating activities. We historically have had a three-year replacement program on the majority of our line-haul tractors. After evaluating the 2002 tractor engines, which were designed to conform to the emissions standards mandated by the U.S. Environmental Protection Agency (EPA) that became effective on October 1, 2002, we have decided to operate the majority of our equipment for a period of four years. Furthermore, we may operate some equipment for five years depending upon mileage and use of the equipment. This change has caused a deferral of our revenue equipment purchases during the past two years.

      During the year ended December 31, 2003, we incurred approximately $76.8 million of non-revenue equipment capital expenditures. These expenditures were primarily for facilities, facilities-related improvements and equipment.

      We anticipate that we will expend approximately $39 million in 2004 for various facilities upgrades and acquisition and development of terminal facilities. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.

      We believe we will be able to finance needs for working capital, facilities improvements and expansion, as well as anticipated fleet growth, with cash flows from operations, borrowings available under the line of credit,

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SAFETY RATING UPDATE

      Our safety rating has always been and continues to be satisfactory, the highest rating given by Federal Motor Carrier Safety Administration (FMCSA). An October 2003 compliance review by the Arizona division of the FMCSA has resulted in a proposed safety rating of conditional. We have been in discussions with the FMCSA about the proposed rating and filed a petition for a stay of the effective date of the proposed safety rating pending a review as provided for under the FMCSA regulations. Our petition for a stay was granted by the FMCSA on December 18, 2003 and the Arizona division of the FMCSA was ordered to respond to Swift’s petition for review. We received this response on January 19, 2004 and submitted our reply on February 5, 2004.

      Although the scope of the compliance review involved many areas within the authority of the FMCSA, there is only one issue in dispute. This area involves the accuracy of the documentation of driving logs maintained by our drivers and owner operators.

      We anticipate a positive outcome. We have always maintained safety as a top priority and have a comprehensive internal audit program for review of driver log compliance. In addition, we regulate the speed of our tractors and vigorously enforce a company speed limit that is lower than many state speed limits. No operational safety issues have been raised by the FMCSA compliance review.

      There are three safety ratings assigned to motor carriers: “satisfactory”, which we have historically maintained; “conditional”, which means that there are deficiencies requiring correction, but not so significant to warrant loss of carrier authority; and “unsatisfactory”, which is the result of acute deficiencies and would lead to revocation of carrier authority.

      Even when a carrier temporarily drops to conditional status, it does not lose its carrier authority or ability to transport hazardous materials. Federal regulations do not preclude a carrier from transporting hazardous materials unless the carrier has an unsatisfactory safety rating. There are, however, certain standard industry provisions in our contracts with our customers that could allow a customer to reduce or terminate its relationship with us if we do not have a “satisfactory” rating. In addition, there is a possibility that “conditional” rating could affect our ability to self-insure for personal injury and property damage claims relating to the transportation of freight which could increase our cost of insurance.

      Based upon internal data, external data, and consultation with our regulatory counsel, we believe that if our rating were changed to conditional, it would be temporary and any loss of revenue would not be material.

OFF-BALANCE SHEET ARRANGEMENTS

      As discussed in the Commitments note to the financial statements, we have guaranteed certain financing arrangements of Trans-Mex in which we hold equity interests. These guarantees were issued to assist Trans-Mex when entering into its financing arrangements. In January 2004, we completed an acquisition of an additional 51% interest in Trans-Mex. After this acquisition, we own 100% of this company and as a result it will be consolidated in our 2004 financial statements. Furthermore, the Company guarantees certain residual values under its operating lease agreements for revenue equipment. At the termination of these operating leases, the Company would be responsible for the excess of the guarantee amount over the fair market value, if any. The maximum potential amount of future payments the Company would be required to make under these guarantees is $101 million, although management does not believe it is likely that we will ultimately be required to fund any material amount of these guarantees. The Company utilizes operating leases as an additional financing source.

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CONTRACTUAL OBLIGATIONS

      The tables below summarize our contractual obligations as of December 31, 2003:

(1)	We expect to refinance the $30 million line of credit included in Long-Term Debt upon maturity.
(2)	Operating leases include an interest element within the commitment amount as opposed to the Long-Term Debt and Capital Lease Obligations amounts, which do not include an interest element.
(3)	Deferred taxes and long-term portion of claims accruals are excluded from Other Long-Term Obligations in the table above.
(4)	The table excludes purchase commitments for revenue equipment which are cancellable.

SUBSEQUENT EVENT — ACQUISITION OF TRANS-MEX, INC

      We completed the acquisition of an additional 51% interest in Trans-Mex, Inc. S.A. de C.V. in January 2004. After this acquisition, we own 100% of this Mexican truckload carrier. The purchase price for this 51% interest was $31 million consisting of $11 million in cash and 942,155 shares of common stock. We have agreed to file a registration statement with the Securities and Exchange Commission for these shares within the next 90 days. Trans-Mex is one of the top five international trucking companies operating in Mexico. Through this acquisition, we become the only United States trucking company with a 100% ownership interest in a Mexican carrier. We utilize Trans-Mex as a provider of freight services for our customers and we paid Trans-Mex $23.7 million in 2003, which is included in purchase transportation on the consolidated financial statements.

INFLATION

      Inflation can be expected to have an impact on our operating costs. A prolonged period of inflation would cause interest rates, fuel, wages and other costs to increase and would adversely affect our results of operations unless freight rates could be increased correspondingly. However, the effect of inflation has been minimal over the past three years.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

      Our future operating results and financial condition are dependent on our ability to successfully provide truckload carrier services to meet dynamic customer demand patterns. Inherent in this process are a number of factors that we must successfully manage in order to achieve favorable future operating results and financial condition. Potential risks and uncertainties that could affect future operating results and financial condition include, without limitation, the factors discussed below.

      General Economic and Business Factors. Our business is dependent upon a number of factors that may have a material adverse effect on our results of operations, many of which are beyond our control. These factors include excess capacity in the trucking industry and 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. The results of operations also are affected by

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      Competition. The trucking industry is extremely competitive and fragmented. We compete with many other truckload carriers of varying sizes and, to a lesser extent, with railroads. There are some trucking companies with which we compete that have greater financial resources and carry a larger volume of freight.

      Capital Requirements. The trucking industry is very capital intensive. We depend on cash from operations, operating leases and debt financing for funds to expand the size of our fleet and maintain modern revenue equipment. If we were unable in the future to enter into acceptable financing arrangements, it would limit our growth.

      Difficulty In Attracting Drivers Could Affect Our Profitability And Ability To Grow. Periodically, the trucking industry experiences substantial difficulty in attracting and retaining qualified drivers, including independent contractors. If we are unable to continue to attract drivers or contract with independent contractors, we could be required to adjust our driver compensation package or let trucks sit idle, which could adversely affect our growth and profitability.

      Acquisitions. Our growth has been dependent, in part, upon the acquisition of trucking companies throughout the United States. To date, we have been successful in identifying trucking companies to acquire and in integrating such companies’ operations into our operations. We may face competition from transportation companies or other third parties for acquisition opportunities that become available. There can be no assurance that we will identify acquisition candidates that will result in successful combinations in the future. Any future acquisitions by us may result in the incurrence of additional debt, which could adversely affect our 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 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 our business and operating results.

      Dependence on Key Personnel. Many of our executive officers are key to the management of our business and operations. Our future success depends on our ability to retain these officers and other capable managers. Although we believe we could replace key personnel given adequate prior notice, the unexpected departure of key executive officers could cause substantial disruption to our business and operations. In addition, we may not be able to retain and recruit talented personnel without incurring substantial costs.

      Regulation. We are 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, safety, financial reporting, and certain mergers, consolidations and acquisitions. We may also become subject to new or more comprehensive or restrictive regulations relating to fuel emissions and ergonomics. The increased cost of complying with such regulations could have a material adverse effect on our business and operating results.

      Recently, a compliance review by the Arizona division of the Federal Motor Carrier Safety Division (FMSCA) resulted in a proposed rating status for Swift of “conditional.” There are three possible ratings assigned by FMSCA: satisfactory, conditional and unsatisfactory. The proposed drop in our rating status relates to the accuracy of the documentation of driving logs maintained by our drivers and owner operators. We have appealed this rating and petitioned FMSCA for a review of our rating status. Until this review is complete, our the conditional rating is stayed and our rating remains “satisfactory.” If FMSCA ultimately determines our safety rating to be “conditional” it could result in certain material adverse consequences to our business and operations.

      Although a conditional rating will not result in the loss of our authority to transport hazardous materials, certain industry standard provisions in our contracts with our customers could allow the customer to reduce or

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      In addition, our 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 we should be involved in a spill or other accident involving hazardous substances or if we were found to be in violation of applicable laws or regulations, it could have a material adverse effect on our business and operating results.

      In January 2004, the Department of Transportation adopted new regulations concerning the maximum number of hours of service that commercial truck drivers may operate. The revised regulations increased the maximum daily drive time from 10 to 11 hours, but no longer allow for breaks in the on on-duty period. These changes could reduce the time that a driver is available to drive as a result of the calculation of the on-duty period and productivity losses could occur with respect to our business. If we are unsuccessful in working with our shippers to adjust for the impact of these new regulations, it could have a negative impact on our financial results.

      Used Equipment Market. We rely on the sale of used equipment to offset the cost of purchasing new equipment. In the past three years, used tractor values have deteriorated significantly. Should this trend continue, it could have a material adverse effect on our business and operating results.

      Claims Exposure; Insurance. We currently self-insure for liability resulting from cargo loss, personal injury, workers’ compensation, and property damage, and maintain insurance with licensed insurance companies above our limits on self-insurance. To the extent we were to experience an increase in the number of claims for which we are self-insured, our 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 our profitability.

      Dependence on Key Customers. A significant portion of our revenue is generated from key customers. During 2003, our top 25, 10 and 5 customers accounted for 55%, 39% and 30% of revenues, respectively. Our largest customer, Wal-Mart accounted for 12% of our revenues in 2003. We do not have long-term contractual relationships with many of our key customers, and there can be no assurance that our relationships with our key customers will continue as presently in effect. A reduction in or termination of our services by a key customer could have a material adverse effect on our business and operating results.

      We have interest rate exposure arising from the line of credit ($30 million), variable rate capital lease obligations ($18 million) and the accounts receivable securitization ($142 million), all of which have variable interest rates. These variable interest rates are impacted by changes in short-term interest rates. We manage interest rate exposure through a mix of variable rate debt, fixed rate lease financing and $70 million notional amount of interest rate swaps (weighted average rate of 5.88%). The fair value of our long-term debt approximates carrying values. Assuming the current level of borrowings, a hypothetical one-percentage point increase in interest rates would increase our interest expense by $1.2 million.

      Our Consolidated Financial Statements of the Company as of December 31, 2003 and 2002 for each of the years in the three-year period ended December 31, 2003, together with related notes and the report of KPMG LLP, independent certified public accountants, are set forth on the following pages. Other required financial information set forth herein is more fully described in Item 15 of this Form 10-K.

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors

      We have audited the accompanying consolidated balance sheets of Swift Transportation Co., Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2003. 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 auditing standards generally accepted in the United States of America. 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, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

	KPMG LLP

Phoenix, Arizona

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SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

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SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS