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8-K - FORM 8-K - Knight-Swift Transportation Holdings Inc. | c11355e8vk.htm |
Exhibit 99
SWIFT TRANSPORTATION COMPANY REPORTS FOURTH QUARTER FINANCIAL AND OPERATING RESULTS
| Operating Revenue Increases $112.1 Million or 16.8%, Over 2009 Fourth Quarter |
| Operating Income, Excluding $22.6 Million Non-Cash Equity Compensation Charge Upon
IPO, Increases to $99.2 Million for Highest Quarterly Total in Company History |
| Operating Ratio Improves to 90.2%, while Adjusted Operating Ratio* Improves to 85.0%,
a 630 Basis Point Improvement from 2009 Fourth Quarter |
(* 2010 and 2009 results adjusted as detailed below.)
Phoenix, AZ January 24, 2011 Swift Transportation Company (NYSE: SWFT), a multi-faceted
transportation services company and the largest truckload carrier in North America, today reported
its results for the three months and year ended December 31, 2010.
Operating revenue for the fourth quarter of 2010 increased 16.8% to $780.4 million compared to
$668.3 million for the corresponding quarter of 2009. Excluding fuel surcharge revenue, net
revenue increased to $661.6 million for the fourth quarter of 2010, up 13.8% from the fourth quarter of 2009 for the largest
quarterly year over year increase in over five years.
The increase in revenue excluding fuel surcharge reflects a 6.8% increase in weekly trucking
revenue per tractor and a 4.4% increase in average tractors available for dispatch for the fourth
quarter of 2010 compared to the prior year quarter. We were able to achieve the increase in weekly
trucking revenue per tractor primarily because of a 5.1% increase in average trucking revenue per
loaded mile during the comparative periods, while our loaded miles, or trucking volumes, increased
6.2%. Intermodal revenue grew 20.6% during the fourth quarter of 2010 compared to the fourth
quarter of 2009, further contributing to the growth in revenue excluding fuel surcharge.
Jerry Moyes, Chief Executive Officer commented, Our pricing is improving as customers align with
our strong capacity and quality service, allowing us to improve our mix and recapture some of the
rate lost during the recession. Demand maintained the pace of improvement over the prior year and
was substantially flat with the third quarter of 2010, showing the typical holiday seasonal pattern
throughout the quarter.
Our operating ratio improved 280 basis points to 90.2% for the fourth quarter of 2010 compared with
93.0% for the fourth quarter of 2009 while our Adjusted Operating Ratio (adjusted to net fuel
surcharge revenue against fuel expense and to exclude certain special items as detailed below)
improved 630 basis points to 85.0% for the fourth quarter of 2010 compared to 91.3% for the
fourth quarter of 2009. The operating ratio improvement is primarily attributable to the increase
in pricing and utilization noted above as well as continued improvements in our intermodal business
and workers compensation costs. We also experienced a reduction in depreciation expense due to
reductions in our trailer fleet and delayed replacements on a portion of our tractor fleet,
resulting in a lower depreciable basis which is also being spread over an extended life. This
aging of the tractors also led to an increase in our maintenance expense, which partially offset the
above cost reductions.
For the fourth quarter of 2010, we had a net loss of $48.3 million, or $0.66 per share, compared to
a net loss of $357.1 million, or $5.94 per share, in the fourth quarter of 2009. These results in
accordance with generally accepted accounting principles in the United States (GAAP) include
several special items in each period as detailed below, primarily related to our initial public
offering and debt refinancing transactions in December 2010, and amendments to our previous senior
secured credit facility and second-priority senior secured note indentures in October 2009.
Excluding these items from each period, adjusted net income in the fourth quarter of 2010 was $24.6
million compared to a pro forma adjusted net loss of $21.8 million in the fourth quarter of 2009
(see following Actual and Pro Forma Adjusted Net Income (Loss) Reconciliation Table). Results for
the 2009 periods are presented on a pro forma basis as if we had been taxed as a subchapter C
corporation for income tax purposes for the entire period as discussed below.
In December 2010, we completed a series of deleveraging and refinancing transactions including an
initial public offering (IPO) of 73,300,000 shares of our Class A common stock, a new senior
secured term loan and senior secured revolving credit facility and new senior second lien secured
notes. The proceeds from these transactions were used to repay our previous term loan and
substantially all of our previous senior secured second lien notes as well as to terminate and
settle all of our remaining interest rate swap agreements. These transactions resulted in the
following pre-tax charges, which are included in our fourth quarter 2010 results in accordance with
GAAP:
| $22.6 million non-cash equity compensation charge included in salaries, wages, and
employee benefits related to certain stock options that vested upon our initial public
offering in December 2010; and |
| $95.5 million loss on debt extinguishment related to the premium and fees we paid to tender
for our old notes and the non-cash write-off of the deferred financing costs associated
with our previous indebtedness that was repaid as noted above. |
In October 2009, we amended our previous credit facility and senior notes and converted from a
subchapter S to a subchapter C corporation for income tax purposes. This resulted in the following
charges, which are included in our fourth quarter 2009 results in accordance with GAAP:
| $324.8 million of income tax expense to re-establish the Companys net deferred tax
liabilities as a subchapter C corporation; and |
| $3.9 million pre-tax expenses representing transaction costs included in operating
supplies and expenses for legal and advisory fees related to the amendments. |
The results in accordance with GAAP for the fourth quarters of 2010 and 2009 also include pre-tax
expenses of $1.1 million and $11.4 million, respectively, in derivative interest expense for the
change in market value of interest rate derivative agreements as well as $4.5 million and $5.3
million, respectively, of intangible assets amortization expense related to Swifts customer and
owner-operator relationships recognized under purchase accounting in conjunction with our
going-private transaction in 2007. The results for the fourth quarter of 2009 also include a $4.0
million pre-tax benefit in other income related to the sale of our investment in Transplace, Inc.,
representing the recovery of a note receivable that had been previously written off.
For the year ended December 31, 2010, our operating revenue increased 13.9% to $2.93 billion
compared to $2.57 billion for 2009. Net revenue excluding fuel surcharge revenue was $2.50
billion, up 8.9% over 2009. The increase in revenue excluding fuel surcharge was primarily driven
by a 4.7% growth in loaded miles, while our average trucking revenue per loaded mile also increased
1.9% year over year, reflecting a sequential quarterly increase throughout 2010 after a sequential
quarterly decrease throughout 2009.
2
Our operating ratio improved 320 basis points to 91.7% for 2010 compared to 94.9% for 2009 while
our Adjusted Operating Ratio improved 490 basis points to 89.0% for 2010 compared to 93.9% for
2009. Finally, Adjusted EBITDA for the year ended December 31, 2010, as defined in our new senior
secured credit facility and calculated below, was $497.7 million, up 22.6% from $405.9 million in
the prior year. The annual profitability improvement is based on similar trends as noted in the
fourth quarter discussion above, reflecting volume and pricing growth coupled with lower deadhead
and continued cost containment.
Richard Stocking, President and Chief Operating Officer commented, As a leadership team, we are
very proud of our entire organization. Since 2007, we have implemented in-depth leadership training
programs, and created a hyper-focus on key indicators throughout all levels of the organization,
which are reviewed regularly. This has created a strong sense of unity throughout the
organization, from the drivers to the executive team, and our customers have seen the change, as
evidenced by a record number of carrier of the year awards for the second consecutive year.
Through these efforts, combined with an improving freight environment and a reduction in
industry-wide trucking capacity, we have exceeded our financial targets for the year.
Excluding the $22.6 million non-cash equity compensation charge upon the IPO, we achieved our
highest quarterly operating income in our companys history, an accomplishment we are very proud
of. Our recent IPO and refinancing transactions have strengthened our balance sheet, allowing us
to focus our attention back on our business, as we press on toward Best in Class performance in all
areas. Our goal is to achieve sustained, superior performance. Weve come a long way, but
relative to our potential, we believe we have great room for improvement.
Net loss in accordance with GAAP for the year ended December 31, 2010 was $125.4 million or $1.98
per share, which included the $118.1 million of costs related to our IPO and refinancing as noted
in the fourth quarter discussion above and the following pre-tax items: $24.5 million expense for
change in market value of interest rate derivative agreements, $1.3 million impairment expense for
trailers reclassified to assets held for sale during the first quarter, and $7.4 million of
incremental depreciation expense during the first quarter reflecting revised estimates of salvage
value and useful lives on approximately 7,000 dry van trailers which management decided during the
first quarter to scrap. Net loss in accordance with GAAP for the year ended December 31, 2009 was
$435.6 million or $7.25 per share, which included the $328.7 million of credit agreement amendment
and tax conversion items noted in the fourth quarter discussion above and the following pre-tax
items: $3.7 million gain for change in market value of interest rate derivative agreements, $0.5
million impairment expense for a real estate property during the first quarter, an additional $2.6
million of transaction costs related to the debt amendments and a cancelled bond offering during
the third quarter, and a $12.5 million benefit in other income for certain litigation settlement
proceeds received during the third quarter. Excluding these items from each period, adjusted net
loss in 2010 was $32.8 million compared to a pro forma adjusted net loss of $115.9 million in 2009
(see following Actual and Pro Forma Adjusted Net Income (Loss) Reconciliation Table). The adjusted
net loss for 2010 and pro forma adjusted net loss for 2009 have not been adjusted for $19.3 million
and $22.0 million, respectively, of intangible assets amortization expense related to the
intangible assets recognized under purchase accounting in conjunction with our going-private
transaction in 2007.
For the year ended December 31, 2010, our net cash capital expenditures were $126.1 million
compared to $1.5 million in the prior year, while the gross value of equipment and facilities
acquired through cash, capital lease, or operating lease financing was $239.0 million and $159.4
million in 2010 and 2009, respectively. The increased outlay in 2010 was driven by replacement of older
tractors and growth of our container fleet in 2010, while the 2009 expenditures were low as a
result of fleet reductions and because we delayed replacements as neither the lower utilization
levels of our existing equipment nor the anticipated financial returns justified the investment.
At December 31, 2010, we had cash of $47.5
million, excluding restricted cash of $84.6 million held primarily as collateral by our captive
insurance subsidiaries. We also had available liquidity of $249.3 million on December 31, 2010,
consisting of $246.8 million available on our new and undrawn
revolving line of credit, after giving effect for the $153.2 million of letters of credit
outstanding under this facility, and $2.5 million available under our accounts receivable securitization facility. Additionally, on January 20, 2011, we sold
an additional 6,050,000 shares of our Class A common stock to the underwriters of our IPO at the
IPO price of $11.00 per share, less the underwriters discount, pursuant to the over-allotment
option in the underwriting agreement and received proceeds of $63.2 million in cash.
3
Mr. Stocking concluded, We are well positioned to execute according to our plan for 2011, with
green CSA scores, a driver friendly environment and improved recruiting infrastructure, and room
for utilization improvement on our existing equipment to efficiently capture our customers growing
freight needs.
In this press release, we present financial results excluding the impact of certain items in
measures such as adjusted net income (loss), adjusted operating ratio, and adjusted EBITDA. Such
measures are not presented in accordance with GAAP and should be considered in addition to, not as
a substitute for, or superior to, measures of financial performance in accordance with GAAP. The
calculation of each measure, including a reconciliation to the most closely related GAAP measure
and the reasons management believes each non-GAAP measure is useful, are included in the attached
schedules.
Swift will hold a live conference call with a slide presentation to discuss these results at 12:30
p.m. Eastern time on Tuesday, January 25, 2011. Participants may access the call using the
following dial-in numbers: U.S./Canada: (866) 379-9391; International/Local: (706) 634-0901;
Confirmation ID: 37701188. The slides presented during the call, as well as a link for the replay,
will be available via our investor relations website: http://ir.swifttrans.com/ under the Event
Calendar section.
Swift is based in Phoenix, Arizona. As of December 31, 2010, Swift operated a tractor fleet of
approximately 16,100 units comprised of 12,200 tractors driven by company drivers and 3,900
owner-operator tractors, a fleet of 49,000 trailers, and 4,800 intermodal containers from 35 major
terminals positioned near major freight centers and traffic lanes in the United States and Mexico.
Swift offers customers the opportunity for one-stop shopping for their truckload transportation
needs through a broad spectrum of services and equipment. Swifts extensive suite of services
includes general, dedicated, and cross-border U.S./Mexico truckload services through dry van,
temperature-controlled, flatbed, and specialized trailers, in addition to rail intermodal and
non-asset based freight brokerage and logistics management services, making it an attractive choice
for a broad array of customers.
Forward-looking statement disclosure:
This press release contains statements that may constitute forward-looking statements, which are
based on information currently available, usually identified by words such as anticipates,
believes, estimates, plans, projects, expects, intends, will, could, may, or
similar expressions which speak only as of the date the statement was made. Such forward-looking
statements are made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.
Such statements include, but are not limited to, statements concerning the benefits of our IPO and
refinancing transactions, our outlook in 2011, including our potential for utilization improvement,
our future business focus, goals, potential for improvement and operations, and the use of
restricted cash for claims payments in future periods and the corresponding impact on claims
accruals. Such statements are based upon the current beliefs and expectations of Swifts
management and are subject to significant risks and uncertainties. Actual results may differ from
those set forth in the forward-looking statements.
4
The factors that we believe could affect our results include, but are not limited to: any future
recessionary economic cycles and downturns in customers business cycles, particularly in market
segments and industries in which we have a significant concentration of customers; increasing
competition from trucking, rail, intermodal, and brokerage competitors; a significant reduction in,
or termination of, our trucking services by a key customer; our ability to sustain cost savings
realized as part of our recent cost reduction initiatives; our ability to achieve our strategy of
growing our revenue; volatility in the price or availability of fuel; increases in new equipment
prices or replacement costs; the regulatory environment in which we operate, including existing
regulations and changes in existing regulations, or violations by us of existing or future
regulations; the costs of environmental compliance and/or the imposition of liabilities under
environmental laws and regulations; difficulties in driver recruitment and retention; increases in
driver compensation to the extent not offset by increases in freight rates; potential volatility or
decrease in the amount of earnings as a result of our claims exposure through our wholly-owned
captive insurance companies; uncertainties associated with our operations in Mexico; our ability to
attract and maintain relationships with owner-operators; our ability to retain or replace key
personnel; conflicts of interest or potential litigation that may arise from other businesses owned
by Jerry Moyes; potential failure in computer or communications systems; our labor relations; our
ability to execute or integrate any future acquisitions successfully; seasonal factors such as
harsh weather conditions that increase operating costs; and our ability to service our outstanding
indebtedness, including compliance with our indebtedness covenants, and the impact such
indebtedness may have on the way we operate our business.
A more detailed discussion of factors that could cause Swifts results to differ materially from
those described in the forward-looking statements can be found in our Registration Statement on
Form S-1, filed with the Securities and Exchange Commission and available at the Securities and
Exchange Commissions internet site (http://www.sec.gov). Swift undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information,
future events, or otherwise. Furthermore, nothing herein shall constitute an adoption or approval
of any analyst report regarding Swift, nor any undertaking to update or comment upon analysts
expectations in the future.
Contact Info:
Jason Bates, Vice President Finance, and Investor Relations Officer
or
Ginnie Henkels, Executive Vice President and Chief Financial Officer
Office: 602-269-9700
Jason Bates, Vice President Finance, and Investor Relations Officer
or
Ginnie Henkels, Executive Vice President and Chief Financial Officer
Office: 602-269-9700
5
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||
Operating revenue |
$ | 780,427 | $ | 668,302 | $ | 2,929,723 | $ | 2,571,353 | ||||||||
Operating expenses: |
||||||||||||||||
Salaries, wages and employee benefits |
211,942 | 177,043 | 763,962 | 728,784 | ||||||||||||
Operating supplies and expenses |
56,815 | 50,318 | 217,965 | 209,945 | ||||||||||||
Fuel |
130,029 | 106,996 | 468,504 | 385,513 | ||||||||||||
Purchased transportation |
198,932 | 174,816 | 771,333 | 620,312 | ||||||||||||
Rental expense |
18,957 | 19,424 | 76,540 | 79,833 | ||||||||||||
Insurance and claims |
14,827 | 14,714 | 87,411 | 81,332 | ||||||||||||
Depreciation and amortization of property
and equipment |
49,830 | 54,450 | 206,279 | 230,339 | ||||||||||||
Amortization of intangibles |
4,840 | 5,603 | 20,472 | 23,192 | ||||||||||||
Impairments |
| | 1,274 | 515 | ||||||||||||
Gain on disposal of property and equipment |
(3,274 | ) | (808 | ) | (8,287 | ) | (2,244 | ) | ||||||||
Communication and utilities |
6,065 | 5,555 | 25,027 | 24,595 | ||||||||||||
Operating taxes and licenses |
14,891 | 13,298 | 56,188 | 57,236 | ||||||||||||
Total operating expenses |
703,854 | 621,409 | 2,686,668 | 2,439,352 | ||||||||||||
Operating income |
76,573 | 46,893 | 243,055 | 132,001 | ||||||||||||
Other (income) expenses: |
||||||||||||||||
Interest expense |
61,670 | 62,171 | 251,129 | 200,512 | ||||||||||||
Derivative interest expense |
11,430 | 24,941 | 70,399 | 55,634 | ||||||||||||
Interest income |
(579 | ) | (444 | ) | (1,379 | ) | (1,814 | ) | ||||||||
Loss on debt extinguishment |
95,461 | | 95,461 | | ||||||||||||
Other |
(1,258 | ) | (3,620 | ) | (3,710 | ) | (13,336 | ) | ||||||||
Total other (income) expenses, net |
166,724 | 83,048 | 411,900 | 240,996 | ||||||||||||
Loss before income taxes |
(90,151 | ) | (36,155 | ) | (168,845 | ) | (108,995 | ) | ||||||||
Income tax (benefit) expense |
(41,837 | ) | 320,976 | (43,432 | ) | 326,650 | ||||||||||
Net loss |
$ | (48,314 | ) | $ | (357,131 | ) | $ | (125,413 | ) | $ | (435,645 | ) | ||||
Basic and diluted loss per share |
$ | (0.66 | ) | $ | (5.94 | ) | $ | (1.98 | ) | $ | (7.25 | ) | ||||
Shares used in per share calculations |
72,864 | 60,117 | 63,339 | 60,117 | ||||||||||||
Pro forma C corporation data (unaudited): (1) |
||||||||||||||||
Historical loss before income taxes |
N/A | $ | (36,155 | ) | N/A | $ | (108,995 | ) | ||||||||
Pro forma provision for income taxes |
N/A | 1,017 | N/A | 5,693 | ||||||||||||
Pro forma net loss |
N/A | $ | (37,172 | ) | N/A | $ | (114,688 | ) | ||||||||
Pro forma basic and diluted loss per share |
N/A | $ | (0.62 | ) | N/A | $ | (1.91 | ) | ||||||||
Note to Consolidated Statements of Operations: |
||
(1) | The Company was taxed under the Internal Revenue Code as a subchapter S corporation until its
conversion to a subchapter C corporation effective October 10, 2009. Under subchapter S, the
Company did not pay corporate income taxes on its taxable income. Instead, its stockholders
were liable for federal and state income taxes on the taxable income of the Company. For
comparative purposes, a pro forma income tax provision for corporate income taxes has been
calculated and presented as if the Company had been taxed as a subchapter C corporation in the
three months and year ended December 31, 2009 when the Companys subchapter S election was in
effect. |
6
ACTUAL AND PRO FORMA ADJUSTED NET INCOME (LOSS) RECONCILIATION TABLE (UNAUDITED) (a)
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Actual | Pro Forma | Actual | Pro Forma | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Net loss |
$ | (48,314 | ) | $ | (37,172 | ) | $ | (125,413 | ) | $ | (114,688 | ) | ||||
Adjustments for: |
||||||||||||||||
Mark-to-market impact of interest rate swaps |
1,075 | 11,370 | 24,502 | 7,677 | ||||||||||||
Acceleration of non-cash equity compensation |
22,605 | | 22,605 | | ||||||||||||
Loss on debt extinguishment |
95,461 | | 95,461 | | ||||||||||||
Impairment of revenue equipment |
| | 1,274 | | ||||||||||||
Other items |
| | 7,382 | (b) | | |||||||||||
Impairment of property |
| | | 515 | ||||||||||||
Excludable transaction costs |
| 3,876 | (c) | | 6,477 | (d) | ||||||||||
Recovery of Transplace note (e) |
| (4,024 | ) | | (4,024 | ) | ||||||||||
Settlement proceeds, net of legal fees |
| | | (12,500 | ) | |||||||||||
70,827 | (25,950 | ) | 25,811 | (116,543 | ) | |||||||||||
Income tax effect of above items |
(46,200 | ) | 4,178 | (58,645 | ) | 691 | ||||||||||
Adjusted net income (loss) (f) |
$ | 24,627 | $ | (21,772 | ) | $ | (32,834 | ) | $ | (115,852 | ) | |||||
(a) | We believe the presentation of financial results excluding the impact of the items noted
above provides a consistent basis for comparing our results from period to period due to the
historical volatility of the interest rate derivative agreements and the non-operating nature
of the impairment charges, transaction costs and other adjustment items. The adjusted net
loss is not presented in accordance with GAAP and should be considered in addition to, not as
a substitute for, or superior to, measures of financial performance in accordance with GAAP.
Additionally, the Company was taxed under the Internal Revenue Code as a subchapter S
corporation until its conversion to a subchapter C corporation effective October 10, 2009.
Under subchapter S, the Company did not pay corporate income taxes on its taxable income.
Instead, its stockholders were liable for federal and state income taxes on the taxable income
of the Company. For comparative purposes, we are applying the adjustments above to pro forma
net loss for the 2009 periods which reflect a pro forma income tax provision for corporate
income taxes as if the Company had been taxed as a subchapter C corporation in the three
months and year ended December 31, 2009 when the Companys subchapter S election was in
effect. |
|
(b) | Incremental pre-tax depreciation expense reflecting managements revised estimates regarding salvage
value and useful lives for approximately 7,000 dry van trailers, which management decided
during the first quarter to scrap. |
|
(c) | Pre-tax legal and advisory costs related to an amendment of our previous senior credit
facility and consents and amendments of our second-priority senior secured note indentures,
each effective October 13, 2009 (the 2009 Amendments). |
|
(d) | $4.2 million of pre-tax legal and advisory costs for the 2009 Amendments, and the $2.3
million of pre-tax professional fees incurred during the third quarter of 2009 in connection
with the Companys contemplated bond offering, which was cancelled prior to the Company
entering into the 2009 Amendments. |
|
(e) | Pre-tax benefit related to sale of our investment in Transplace, Inc., representing the
recovery of a note receivable the Company had previously written off. |
|
(f) | We have not included adjustments to adjusted net income (loss) to reflect the non-cash
amortization expense of $4.5 million and $5.3 million during the three months ended December
31, 2010 and 2009, respectively, and $19.3 million and $22.0 million during the years ended
December 31, 2010 and 2009, respectively, relating to certain intangible assets recognized
under purchase accounting in conjunction with our 2007 going private transaction. |
7
ADJUSTED OPERATING RATIO RECONCILIATION (UNAUDITED) (a)
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Operating revenue |
$ | 780,427 | $ | 668,302 | $ | 2,929,723 | $ | 2,571,353 | ||||||||
Less: Fuel surcharge revenue |
118,816 | 86,705 | 429,155 | 275,373 | ||||||||||||
Revenue excluding fuel surcharge
revenue |
661,611 | 581,597 | 2,500,568 | 2,295,980 | ||||||||||||
Operating expense |
703,854 | 621,409 | 2,686,668 | 2,439,352 | ||||||||||||
Adjusted for: |
||||||||||||||||
Fuel surcharge revenue |
(118,816 | ) | (86,705 | ) | (429,155 | ) | (275,373 | ) | ||||||||
Acceleration of non-cash equity
compensation |
(22,605 | ) | | (22,605 | ) | | ||||||||||
Non-cash impairments |
| | (1,274 | ) | (515 | ) | ||||||||||
Other items |
| | (7,382 | ) (b) | | |||||||||||
Excludable transaction costs |
| (3,876 | ) (c) | | (6,477 | ) (d) | ||||||||||
Adjusted operating expense |
$ | 562,433 | $ | 530,828 | $ | 2,226,252 | $ | 2,156,987 | ||||||||
Adjusted Operating Ratio (e) |
85.0 | % | 91.3 | % | 89.0 | % | 93.9 | % | ||||||||
Operating Ratio |
90.2 | % | 93.0 | % | 91.7 | % | 94.9 | % |
(a) | We define Adjusted Operating Ratio as (a) total operating expenses, less (i) fuel surcharge
revenue, (ii) non-cash impairment charges, (iii) certain other items, and (iv) excludable
transaction costs, as a percentage of (b) total revenue excluding fuel surcharge revenue. We
believe fuel surcharge is sometimes volatile and eliminating the impact of this source of
revenue (by netting fuel surcharge revenue against fuel expense) affords a more consistent
basis for comparing our results of operations. We also believe excluding impairments and other
unusual items enhances the comparability of our performance from period to period. Adjusted
Operating Ratio is not a recognized measure under GAAP. Adjusted Operating Ratio should be
considered in addition to, not as a substitute for, or superior to, measures of financial
performance in accordance with GAAP. |
|
(b) | Incremental pre-tax depreciation expense reflecting managements revised estimates regarding salvage
value and useful lives for approximately 7,000 dry van trailers, which management decided
during the first quarter to scrap. |
|
(c) | Pre-tax legal and advisory costs related to the 2009 Amendments. |
|
(d) | $4.2 million of pre-tax legal and advisory costs for the 2009 Amendments, and the $2.3
million of pre-tax professional fees incurred during the third quarter of 2009 in connection
with the Companys contemplated bond offering, which was cancelled prior to the Company
entering into the 2009 Amendments. |
|
(e) | We have not included adjustments to Adjusted Operating Ratio to reflect the non-cash
amortization expense of $4.5 million and $5.3 million during the three months ended December
30, 2010 and 2009, respectively, and $19.3 million and $22.0 million during the years ended
December 31, 2010 and 2009, respectively, relating to certain intangible assets identified in
the 2007 going private transaction. |
8
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (UNAUDITED) (a)
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
THREE MONTHS AND YEARS ENDED DECEMBER 31, 2010 AND 2009
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Net loss |
$ | (48,314 | ) | $ | (357,131 | ) | $ | (125,413 | ) | $ | (435,645 | ) | ||||
Adjusted for: |
||||||||||||||||
Depreciation and amortization |
54,670 | 60,053 | 226,751 | 253,531 | ||||||||||||
Interest expense |
61,670 | 62,171 | 251,129 | 200,512 | ||||||||||||
Derivative interest expense |
11,430 | 24,941 | 70,399 | 55,634 | ||||||||||||
Interest income |
(579 | ) | (444 | ) | (1,379 | ) | (1,814 | ) | ||||||||
Income tax (benefit) expense |
(41,837 | ) | 320,976 | (43,432 | ) | 326,650 | ||||||||||
Earnings before interest, taxes,
depreciation and amortization (EBITDA) |
$ | 37,040 | $ | 110,566 | $ | 378,055 | $ | 398,868 | ||||||||
Non-cash equity compensation (b) |
22,883 | | 22,883 | | ||||||||||||
Loss on debt extinguishment |
95,461 | | 95,461 | | ||||||||||||
Non-cash impairments |
| | 1,274 | 515 | ||||||||||||
Excludable transaction costs |
| 3,876 | (c) | | 6,477 | (d) | ||||||||||
Adjusted earnings before interest, taxes,
depreciation and amortization
(Adjusted EBITDA) |
$ | 155,384 | $ | 114,442 | $ | 497,673 | $ | 405,860 | ||||||||
(a) | We define Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii)
interest and derivative interest expense, including other fees and charges associated with
indebtedness, net of interest income, (iii) income taxes, (iv) non-cash impairments, (v)
non-cash equity compensation expense, (vi) other unusual non-cash items, and (vii) excludable
transaction costs. We believe that Adjusted EBITDA is a relevant measure for estimating the
cash generated by our operations that would be available to cover capital expenditures, taxes,
interest and other investments and that it enhances an investors understanding of our
financial performance. We use Adjusted EBITDA for business planning purposes and in measuring
our performance relative to that of our competitors. Adjusted EBITDA is not a recognized
measure under GAAP. Adjusted EBITDA should be considered in addition to, not as a substitute
for or superior to, net income, operating income or any other performance measures derived in
accordance with GAAP as measures of operating performance or operating cash flows as a measure
of liquidity. |
|
(b) | Includes the $22.6 million one-time non-cash equity compensation charge representing certain
stock options that vested upon our IPO and $0.3 million of ongoing equity compensation expense following our IPO,
each on a pre-tax basis. |
|
(c) | Pre-tax legal and advisory costs related to the 2009 Amendments. |
|
(d) | $4.2 million of pre-tax legal and advisory costs related to the 2009 Amendments, and the $2.3
million of pre-tax professional fees incurred during the third quarter of 2009 in connection
with the Companys contemplated bond offering, which was cancelled prior to the Company
entering into the 2009 Amendments. |
9
OPERATING STATISTICS (UNAUDITED)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Trucking revenue (1,2) |
$ | 576,012 | $ | 516,180 | $ | 2,201,684 | $ | 2,062,296 | ||||||||
Weekly trucking revenue per tractor (2) |
$ | 2,936 | $ | 2,748 | $ | 2,879 | $ | 2,660 | ||||||||
Deadhead miles percentage |
12.34 | % | 13.19 | % | 12.10 | % | 13.24 | % | ||||||||
Average loaded length of haul (miles) |
436 | 438 | 439 | 442 | ||||||||||||
Average tractors available for dispatch |
||||||||||||||||
Company |
10,991 | 10,655 | 10,838 | 11,262 | ||||||||||||
Owner Operator |
3,936 | 3,638 | 3,829 | 3,607 | ||||||||||||
Total |
14,927 | 14,293 | 14,667 | 14,869 | ||||||||||||
Notes to Operating Statistics: |
||
(1) | In thousands. |
|
(2) | Excludes fuel surcharge, rail, third party carrier, and leasing revenue. |
10
SELECTED CONSOLIDATED BALANCE SHEET DATA
(UNAUDITED)
AS OF DECEMBER 31, 2010 AND 2009
AS OF DECEMBER 31, 2010 AND 2009
December 31, 2010 | December 31, 2009 | |||||||
(Amounts in thousands) | ||||||||
Cash and cash equivalents (1) |
$ | 47,494 | $ | 115,862 | ||||
Restricted cash (1) |
84,568 | 24,869 | ||||||
Accounts receivable, net (2) |
276,879 | 21,914 | ||||||
Retained interest in accounts receivable
(2) |
| 79,907 | ||||||
Property and equipment, net |
1,339,638 | 1,364,545 | ||||||
Intangible assets, net |
368,744 | 389,216 | ||||||
Goodwill |
253,256 | 253,256 | ||||||
Other assets |
207,281 | 264,305 | ||||||
Total assets |
$ | 2,577,860 | $ | 2,513,874 | ||||
Total debt and capital lease obligations
(3) |
1,784,065 | 2,466,934 | ||||||
Securitization of accounts receivable (2) |
171,500 | | ||||||
Other liabilities |
705,466 | 912,721 | ||||||
Total liabilities |
2,661,031 | 3,379,655 | ||||||
Stockholders deficit |
(83,171 | ) | (865,781 | ) | ||||
Total liabilities and stockholders deficit |
$ | 2,577,860 | $ | 2,513,874 | ||||
Notes to Selected Consolidated Balance Sheet Data: |
||
(1) | The increase in restricted cash and decrease in unrestricted cash during the year ended
December 31, 2010 largely reflects increased collateral requirements pertaining to our
captive insurance subsidiaries, which, beginning on February 1, 2010, collectively insure
the first $1 million (per occurrence) of our motor vehicle liability risk. To comply with
certain state insurance regulatory requirements, we have funded approximately $55 million
to the captive insurance subsidiaries during 2010 as collateral in the form of restricted
cash for anticipated losses incurred in 2010. This restricted cash will be used to make
payments on these losses as they are settled in future periods, and such payments will
reduce our claims accruals balances. Moving this $1 million of risk (per occurrence) to
our captive insurance subsidiaries and away from third party insurers helped facilitate the
reduction in our outstanding letters of credit collateralizing that and other risk by $73.8
million during the year ended December 31, 2010. |
|
(2) | Financial Accounting Standards Board Accounting Standards Codification Accounting
Standards Update, (ASU), No. 2009-16, Accounting for Transfers of Financial Assets (Topic
860), was effective for the Company on January 1, 2010. Following adoption of ASU No.
2009-16, the Companys accounts receivable securitization facility no longer qualifies for
true sale accounting treatment but instead is treated as a secured borrowing. As a result,
the $148.0 million of de-recognized accounts receivable at December 31, 2009 were brought
back onto the Companys balance sheet and the related securitization proceeds were
recognized as debt, while the program fees for the facility are reported as interest
expense effective January 1, 2010. |
|
(3) | Total debt and capital lease obligations as
of December 31, 2010 includes $1,059.4
million net carrying value of new senior secured first lien term loan, $500.0 million of senior second
priority secured notes, $11.0 million of unsecured floating rate notes, $15.7 million of
unsecured fixed rate notes, and $198.0 million of other secured indebtedness and capital
lease obligations. Total debt and capital lease obligations as of December 31, 2009
includes $1,511.4 million of old senior secured first lien term loan, $203.6 million of
senior secured secondpriority floating rate notes, $595.0 million of senior secured
secondpriority fixed rate notes, and $156.9 million of other secured indebtedness and
capital lease obligations. |
11
SELECTED CONSOLIDATED CASH FLOW DATA
(UNAUDITED)
YEAR ENDED DECEMBER 31, 2010 AND 2009
YEAR ENDED DECEMBER 31, 2010 AND 2009
Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
(Amounts in thousands) | ||||||||
Net loss |
$ | (125,413 | ) | $ | (435,645 | ) | ||
Adjustments to reconcile net loss to net cash
provided by operating activities |
314,507 | 585,570 | ||||||
Decrease in cash resulting from changes in |
||||||||
Interest rate swap liability (1) |
(66,350 | ) | | |||||
Accounts receivable, inventories, other assets,
accounts payable, accrued liabilities and other liabilities |
(64,305 | ) | (34,590 | ) | ||||
Net cash provided by operating activities |
$ | 58,439 | $ | 115,335 | ||||
Capital expenditures, net of disposal proceeds |
$ | (126,107 | ) | $ | (1,492 | ) | ||
Increase in restricted cash |
(59,699 | ) | (6,430 | ) | ||||
Other investing activities |
7,285 | 6,795 | ||||||
Net cash used in investing activities |
$ | (178,521 | ) | $ | (1,127 | ) | ||
Proceeds from refinancing transactions, net of
fees and costs of issuance (1) |
$ | 2,249,924 | $ | | ||||
Repayment of existing credit facility and notes (1) |
(2,171,040 | ) | | |||||
Other financing activities, net of the effect of exchange rate changes |
(27,170 | ) | (56,262 | ) | ||||
Net cash provided by (used in) financing activities, net of
the effect of exchange rate changes |
$ | 51,714 | $ | (56,262 | ) | |||
Net increase (decrease) in cash and cash equivalents |
(68,368 | ) | 57,946 | |||||
Cash and cash equivalents at beginning of period |
115,862 | 57,916 | ||||||
Cash and cash equivalents at end of period |
$ | 47,494 | $ | 115,862 | ||||
Notes to Selected Consolidated Cash Flow Data: |
||
(1) | As part of our IPO and refinancing transactions in December 2010, we used $66.4 million
of the proceeds to terminate and settle our remaining interest rate swap agreements, which
payment is included in cash flows from operating activities. |
12