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EX-31.1 - EXHIBIT 31.1 CERTIFICATION BY CEO PURSUANT TO RULE 13A-14(A) OR 15D-14(A) - Knight-Swift Transportation Holdings Inc.swft-ex31112312014.htm
EX-23.1 - EXHIBIT 23.1 CONSENT OF KPMG LLP - Knight-Swift Transportation Holdings Inc.swft-ex23112312014.htm
EX-31.2 - EXHIBIT 31.2 CERTIFICATION BY CFO PURSUANT TO RULE 13A-14(A) OR 15D-14(A) - Knight-Swift Transportation Holdings Inc.swft-ex31212312014.htm
EX-23.2 - EXHIBIT 23.2 CONSENT OF GRANT THORNTON LLP - Knight-Swift Transportation Holdings Inc.swft-ex23212312014.htm
EX-21.1 - EXHIBIT 21.1 SUBSIDIARIES OF SWIFT TRANSPORTATION COMPANY - Knight-Swift Transportation Holdings Inc.swft-ex21112312014.htm
EXCEL - IDEA: XBRL DOCUMENT - Knight-Swift Transportation Holdings Inc.Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 CERTIFICATION BY CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350 - Knight-Swift Transportation Holdings Inc.swft-ex32112312014.htm

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________________________________________
Form 10-K
___________________
ý    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2014
OR
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-35007
 ______________________________________________________________________
 Swift Transportation Company
(Exact name of registrant as specified in its charter)
    ______________________________________________________________________
Delaware
 
20-5589597
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
2200 South 75th Avenue
Phoenix, AZ 85043
(Address of principal executive offices and zip code)
(602) 269-9700
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par value $0.01 per share
New York Stock Exchange
(Title of each class)
(Name of each exchange on which registered)
Securities registered pursuant to section 12(g) of the Act: None
  ______________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ý    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  ¨    No  ý
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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No  ý
As of June 30, 2014, the aggregate market value of our Class A common stock held by non-affiliates was $2,216,403,173, based on the closing price of our common stock as quoted on the NYSE as of such date.
There were 91,129,162 shares of the registrant’s Class A Common Stock and 50,991,938 shares of the registrant’s Class B Common Stock outstanding as of February 13, 2015.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission (the “SEC”) are incorporated by reference into Part III of this report.
 
 
 
 
 



SWIFT TRANSPORTATION COMPANY
 
2014 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1


SWIFT TRANSPORTATION COMPANY
 
2014 FORM 10-K ANNUAL REPORT
GLOSSARY OF TERMS
 
The following glossary provides definitions for certain acronyms and terms used in this Annual Report on Form 10-K. These acronyms and terms are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document.
 
Term
 
Definition
Swift/the Company/Management/We/Us/Our
 
Unless otherwise indicated or the context otherwise requires, these terms represent Swift Transportation Company and its subsidiaries. Swift Transportation Company is the holding company for Swift Transportation Co., LLC (a Delaware limited liability company) and Interstate Equipment Leasing, LLC.
2007 Plan
 
The Company's 2007 Omnibus Incentive Plan, as amended and restated
2007 Transactions

In April 2007, Jerry Moyes and his wife contributed their ownership of all of the issued and outstanding shares of IEL to Swift Corporation in exchange for additional Swift Corporation shares. In May 2007, the Moyes Affiliates, contributed their shares of Swift Transportation Co., Inc. common stock to Swift Corporation in exchange for additional Swift Corporation shares. Swift Corporation then completed its acquisition of Swift Transportation Co., Inc. through a merger on May 10, 2007, thereby acquiring the remaining outstanding shares of Swift Transportation Co., Inc. common stock. Upon completion of the 2007 Transactions, Swift Transportation Co., Inc. became a wholly-owned subsidiary of Swift Corporation. At the close of the market on May 10, 2007, the common stock of Swift Transportation ceased trading on NASDAQ.
2010 METS
 
Mandatory Common Exchange Securities issued by Jerry Moyes and the Moyes Affiliates in 2010
2011 RSA
 
The Company's previous Receivables Sale Agreement, entered into in 2011, with unrelated financial entities
2012 Agreement
 
The Company's previous credit agreement, replaced by the 2013 Agreement
2012 ESPP
 
Employee Stock Purchase Plan, effective beginning in 2012
2013 Agreement
 
The Company's Second Amended and Restated Credit Agreement, replaced by the 2014 Agreement
2013 RSA
 
Amended and Restated Receivables Sale Agreement, entered into in 2013 by SRCII, with unrelated financial entities, "The Purchasers"
2014 Agreement
 
The Company's Third Amended and Restated Credit Agreement
2014 Plan
 
The Company's 2014 Omnibus Incentive Plan
AOCI
 
Accumulated Other Comprehensive Income
ASC
 
Accounting Standards Codification
ASU
 
Accounting Standards Update
BASICs
 
Behavioral Analysis and Safety Improvement Categories - part of the new enforcement and compliance model introduced by the FMCSA
C-TPAT
 
Customs-Trade Partnership Against Terrorism
CDL
 
Commercial Drivers' License
Central
 
Central Refrigerated Transportation, LLC (formerly Central Refrigerated Transportation, Inc.)
Central Acquisition
 
Swift's acquisition of all of the outstanding capital stock of Central
CMV
 
Commercial Motor Vehicle
COFC
 
Container on Flat Car
CSA
 
Compliance Safety Accountability
Deadhead
 
Tractor movement without hauling freight (unpaid miles driven)
DHS
 
United States Department of Homeland Security
DOE
 
United States Department of Energy
DOT
 
United States Department of Transportation
EBITDA
 
Earnings Before Interest, Taxes, Depreciation and Amortization
ELD
 
Electronic Logging Device
EPA
 
United States Environmental Protection Agency
EPS
 
Earnings per Share
FASB
 
Financial Accounting Standards Board
FMCSA
 
Federal Motor Carrier Safety Administration
GDP
 
Gross Domestic Product
IEL
 
Interstate Equipment Leasing, LLC (formerly Interstate Equipment Leasing, Inc.)
IPO
 
Initial Public Offering
LIBOR
 
London InterBank Offered Rate
LTL
 
Less-than-truckload

2


SWIFT TRANSPORTATION COMPANY
 
2014 FORM 10-K ANNUAL REPORT
GLOSSARY OF TERMS
 
The following glossary provides definitions for certain acronyms and terms used in this Annual Report on Form 10-K. These acronyms and terms are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document.
 
Term
 
Definition
Mohave
 
Mohave Transportation Insurance Company, a Swift wholly-owned captive insurance subsidiary,
Moyes Affiliates
 
Jerry Moyes, The Jerry and Vickie Moyes Family Trust dated December 11, 1987, and various Moyes children’s trusts
NASDAQ
 
National Association of Securities Dealers Automated Quotations
NLRB
 
National Labor Relations Board
NYSE
 
New York Stock Exchange
OID
 
Original Issue Discount
Red Rock
 
Red Rock Risk Retention Group, Inc., a Swift captive insurance subsidiary
Revenue xFSR
 
Revenue, Excluding Fuel Surcharge Revenue
Revolver
 
Revolving line of credit
RSU
 
Restricted Stock Unit: represents a right to receive a share of Class A common stock, when it vests - awarded to employees of the Company
SafeStat
 
Safety Status measurement system
SEC
 
Securities and Exchange Commission
Senior Notes
 
The Company's senior secured second priority notes
SPA
 
Stock Purchase Agreement
SPS
 
Swift Power Services, LLC
SRCII
 
Swift Receivables Company II, LLC
The Purchasers
 
Unrelated financial entities in the 2013 RSA, which was entered into by SRCII
Term Loan A
 
The Company's first lien term loan A under the 2014 Agreement
Term Loan B
 
The Company's first lien term loan B under the 2014 Agreement
TOFC
 
Trailer on Flat Car
TSA
 
United States Transportation Security Administration
US-GAAP (or GAAP)
 
United States Generally Accepted Accounting Principles
VPF
 
Variable Prepaid Forward


3


PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the federal securities laws that involve risks and uncertainties. Forward-looking statements include statements we make concerning:
our plans, objectives, goals, strategies (including our growth strategies and the benefits and advantages to us compared to others in the trucking industry), future events, future revenues or performance and financing needs;
our compliance with, and the impact on Swift of, proposed, established or new environmental, transportation, tax, accounting, labor and other laws and regulations;
the benefits of our business model, operations and strategies in light of changing trends in the trucking industry;
the benefits of our driver academies and driver development programs;
our opportunities in the temperature-controlled market;
our addition of intermodal containers as volumes grow;
the benefits of our C-TPAT status;
our expectations to pursue acquisitions;
our compliance with environmental, transportation and other laws and regulations;
adjustments to income tax assessments as the result of ongoing and future audits;
the outcome of pending claims, litigation and actions in respect thereof;
trucking industry supply, demand, pricing and cost trends;
our expectation of increasing driver wages and hiring expenses;
our expectation that depreciation costs for equipment will increase in the future;
recent trends, and our expectations concerning the mix and composition of our operating revenues and expenses that could result from changes in the mix or combination of company-driven miles, owner-operator driven miles, and intermodal miles;
trends in the age of our tractor and trailer fleet;
the benefits of our fuel surcharge program and our ability to recover increasing fuel costs through surcharges;
the impact of the lag effect relating to our fuel surcharges;
the sources and sufficiency of our liquidity and financial resources to pay debt, make capital expenditures and operate our business;
the value of equipment under operating leases relating to our residual value guarantees;
our intentions concerning the potential use of derivative financial instruments to hedge fuel price increases;
our expectations regarding the use of the NYSE's "controlled company" exemption concerning certain corporate governance requirements;
our ability to alter our trade cycle and purchase agreements;
the sufficiency and condition of our facilities;
our intention to reinvest foreign earnings outside the United States;
our intentions concerning the payment of dividends; and
the timing and amount of future acquisitions of trucking equipment and other capital expenditures, as well as the use and availability of cash, cash flow from operations, leases and debt to finance such acquisitions.

Such statements appear under the headings entitled "Risk Factors," "Management’s Discussion and Analysis of Financial Condition and Results of Operations," and "Business." When used in this report, the words "estimates," "expects," "anticipates," "projects," "forecasts," "plans," "intends," "believes," "foresees," "seeks," "likely," "may," "will," "should," "goal," "target," and variations of these words or similar expressions (or the negative versions of any such words) are intended to identify forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and therefore, our actual results may differ materially from those that we expected. Accordingly, undue reliance should not be placed on our forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on the date of this report. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by law.

Important factors that could cause actual results to differ materially from our expectations ("cautionary statements") are disclosed under "Risk Factors" and elsewhere in this report. All forward-looking statements in this report and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.

4


ITEM 1.
DESCRIPTION OF BUSINESS
Certain acronyms and terms used throughout this Annual Report on Form 10-K are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document. Definitions for these acronyms and terms are provided in the "Glossary of Terms," available in the front of this document.
Company Overview
Swift is a multi-faceted transportation services company, operating the largest fleet of truckload equipment in North America from over 40 terminals near key freight centers and traffic lanes. We principally operate in short- to medium-haul traffic lanes around our terminals and dedicated customer locations. As of December 31, 2014, our fleet of 18,836 tractors was comprised of 13,882 company tractors and 4,954 owner-operator tractors, together covering 2.1 billion miles for shippers throughout North America during 2014. Our fleet also included 61,652 trailers and 9,150 intermodal containers as of December 31, 2014. Our extensive suite of service offerings provides our customers with the opportunity to "one-stop-shop" for their truckload transportation needs. In 2014, we generated consolidated operating revenue of $4.3 billion from our service offerings, which include line-haul services, dedicated customer contracts, temperature-controlled units, intermodal freight solutions, cross-border United States/Mexico and United States/Canada freight, flatbed hauling, freight brokerage and logistics, and others. Consolidated operating income in 2014 was $370.1 million.
Company Background

Jerry Moyes, along with his father and brother, founded Swift Transportation Co., Inc. ("Swift Transportation"), which began operations in 1966 with only one truck. In 1990, Swift Transportation went public on the NASDAQ stock market.
The 2007 Transactions In April 2007, Mr. Moyes and his wife contributed their ownership of all of the issued and outstanding shares of IEL to Swift Corporation in exchange for additional Swift Corporation shares. In May 2007, the Moyes Affiliates, contributed their shares of Swift Transportation common stock to Swift Corporation in exchange for additional Swift Corporation shares. Swift Corporation then completed its acquisition of Swift Transportation through a merger on May 10, 2007, thereby acquiring the remaining outstanding shares of Swift Transportation common stock. Upon completion of the 2007 Transactions, Swift Transportation became a wholly-owned subsidiary of Swift Corporation. At the close of market on May 10, 2007, the common stock of Swift Transportation ceased trading on NASDAQ.
The IPO On May 20, 2010, Swift Corporation formed Swift Transportation Company, a Delaware corporation. Swift Transportation Company did not engage in any business or other activities except in connection with its formation and the IPO and held no assets or subsidiaries prior to such offering. Immediately prior to the consummation of the IPO, Swift Corporation merged with and into Swift Transportation Company, with Swift Transportation Company surviving as a Delaware corporation. In the merger, all of the outstanding common stock of Swift Corporation was converted into shares of Swift Transportation Company Class B common stock on a one-for-one basis, and all outstanding stock options of Swift Corporation were converted into options to purchase shares of Class A common stock of Swift Transportation Company. All outstanding Class B shares are held by Mr. Moyes and the Moyes Affiliates. Swift Transportation Company went public on the NYSE in December 2010, at an initial trading price of $11.00 per share.
Central Acquisition On August 6, 2013, Swift acquired all of the outstanding capital stock of Central in a cash transaction. Jerry Moyes, our Chief Executive Officer and controlling stockholder, was the principal owner of Central. Given Mr. Moyes’ interests in the temperature-controlled truckload industry, our board of directors established a special committee comprised solely of independent and disinterested directors in May of 2011 to evaluate Swift’s expansion of its temperature-controlled operations. The special committee evaluated alternative business opportunities, including organic growth and various acquisition targets, and negotiated the transaction contemplated by the SPA, with the assistance of its independent financial advisors. Upon the unanimous recommendation of the special committee, the Central Acquisition was approved by the board of directors (with Mr. Moyes not participating in the vote).
Central is a premium service truckload carrier specializing in temperature-controlled freight transportation and was a large provider of temperature-controlled truckload services in the United States. With the addition of Central to its dedicated temperature-controlled business, Swift is now the second largest temperature-controlled truckload provider in the United States. Our accounting treatment of the Central Acquisition and other details are discussed in Note 1 of the consolidated financial statements.
Industry and Competition

Truckload carriers represent the largest part of the transportation supply chain for most retail and manufactured goods in North America and typically transport a full trailer (or container) of freight for a single customer from origin to destination without intermediate sorting and handling. Generally, the truckload industry is compensated based on miles, whereas the LTL industry is compensated based on package size and/or weight. Overall, the United States trucking industry is large, fragmented, and highly competitive.

5


We compete with thousands of truckload carriers, most of whom operate much smaller fleets than we do. To a lesser extent, our intermodal services, as well as our freight brokerage and logistics business, compete with railroads, LTL carriers, logistics providers, and other transportation companies.
Our industry has encountered the following major economic cycles since 2000:
2000 - 2001 industry over-capacity and depressed freight volumes;
2002 - 2006 economic expansion;
2007 - 2009 freight slowdown, fuel price spike, economic recession, and credit crisis; and
2010 - present moderate recovery. The industry freight data began to show positive trends for both volume and pricing. The slow, steady growth is a result of moderate increases in GDP, coupled with a tighter supply of available tractors. Trends in supply of available tractors were lower due to several years of below average truck builds, an increase in truckload fleet bankruptcies in 2009 and 2010, increasing equipment prices due to stringent EPA requirements, less available credit, and less driver availability.
The principal means of competition in our industry are customer service, capacity, and price. In times of strong freight demand, customer service and capacity become increasingly important, and in times of weak freight demand, pricing becomes increasingly important. Most truckload contracts (other than dedicated contracts) do not guarantee truck availability or load levels. Pricing is influenced by supply and demand.
The trucking industry faces the following primary challenges, which we believe we are well-positioned to address, as discussed under "Our Competitive Strengths" and "Company Strategy," below:
uncertainty in the extent and timing of the current economic recovery;
potential reduction in driver pool from recent regulatory initiatives such as hours-of-service limitations for drivers, electric on-board recorders, and the FMCSA's CSA;
potential decreases in utilization of an already shrinking driver pool from new or changing regulatory constraints on drivers that may further decrease the utilization of an already shrinking driver pool;
significant increases and rapid fluctuations in fuel prices; and
increased prices for new revenue equipment, design changes of new engines, and volatility in the used equipment sales market.
Our Mission and Vision

Our mission is to attract and retain customers by providing best in class transportation solutions and fostering a profitable, disciplined culture of safety, service and trust. Our vision consists of seven primary themes:
We are an efficient and nimble world class service organization that is focused on the customer.
We are aligned and working together at all levels to achieve our common goals.
Our team enjoys our work and co-workers and this enthusiasm resonates both internally and externally.
We are on the leading edge of service, always innovating to add value to our customers.
Our information and resources can easily be adapted to analyze and monitor what is most important in a changing environment.
Our financial health is improved, generating excess operating cash flows and growing profitability year-after-year with a culture that is cost-and environmentally-conscious.
We train, build, and develop our employees through perpetual learning opportunities to enhance their skill sets, allowing us to maximize potential of our talented people.
Our Competitive Strengths

We aspire to achieve the themes of our mission and vision and believe our competitive strengths and strategies will enable us to attain our desired level of service to customers and results for our shareholders. We believe the following competitive strengths provide a solid platform for pursuing our goals and strategies:
North American Truckload Leader with Broad Terminal Network and a Modern Fleet Our fleet size offers wide geographic coverage, while maintaining the efficiencies associated with significant traffic density within our operating regions. Our terminals are strategically located near key population centers, driver recruiting areas, and cross-border hubs, often in close proximity to our customers. This broad network offers benefits such as in-house maintenance, more frequent equipment inspections, localized driver recruiting, rapid customer response, and personalized marketing efforts. Our size allows us to achieve substantial economies of scale in purchasing items such as tractors, trailers, containers, fuel, and tires where pricing is volume-sensitive. We believe our scale also offers additional benefits in brand awareness and access to capital.
Our company tractor fleet has an average age of 2.0 years for our approximately 13,700 core operating sleeper units. By maintaining a newer fleet over most of our industry competitors with older fleets, we believe that we have the following advantages:
Newer tractors typically have fewer repairs and lower operating costs.
Newer tractors are available for dispatch more often.
Drivers are typically more attracted to newer tractors, which helps with driver retention.
Many competitors that allowed their fleets to age excessively will likely face a deferred capital expenditure spike, accompanied by difficulty in replacing their tractors because new tractor prices have increased, the value received for the old tractors will be low, and financing sources have diminished.

6


High Quality Customer Service and Extensive Suite of Services Our intense focus on customer satisfaction has helped us establish a strong platform for cross-selling our other services to our strong and diversified customer base. We believe customers continue to search for ways to better streamline their transportation management functions. We respond to this need by providing our customers with solutions that include a wide variety of shipping services, including general and specialized truckload, cross-border services, regional distribution, high-service dedicated operations, intermodal service, and surge capacity through fleet flexibility and brokerage and logistics operations. This breadth of service helps diversify our customer base and provides us with a competitive advantage, especially for customers with multiple needs and cross-border United States/Mexico and United States/Canada shipments.
Strong Owner-operator Business We supplement our company tractor fleet with owner-operators, who own and operate their own tractors and are responsible for ownership and operating expenses. We believe that owner-operators provide significant advantages that primarily arise from the entrepreneurial motivation of business ownership. Our owner-operators tend to be more experienced, have fewer accidents per million miles, and on average, produce higher weekly trucking revenue per tractor than company drivers.
Leader in Driver Development Historically, driver recruiting and retention have been significant challenges for truckload carriers. To address these challenges, we employ nationwide recruiting efforts through our terminal network, operate eight driver academies, partner with third-party driver training facilities, provide drivers modern tractors, and promote numerous driver satisfaction policies.
Regional Operating Model Our short- and medium-haul regional operating model contributes to higher revenue per mile and takes advantage of shipping trends toward regional distribution. We also experience less competition in our short- and medium-haul regional business from railroads. In addition, our regional terminal network allows our drivers to be home more often, which assists with driver retention.
Experienced Management, Aligned with Corporate Success Our management team has a proven track record of growth and cost control. Management focuses on disciplined execution and financial performance by measuring our progress through a combination of financial metrics. We align management’s priorities with our stockholders’ through equity incentive awards and an annual performance-based bonus plan.
Company Strategy

Our key financial goals include improving our asset utilization, controlling costs, growing Adjusted EPS, improving return on net assets, and generating cash flow to repay debt and reinvest in our business. We align our company focus to attain these goals by implementing the following strategies, which we believe also serve to minimize the impact of challenges currently faced in the trucking industry:
Profitable Revenue Growth To increase freight volumes and yield, we intend to further penetrate our existing customer base, cross-sell our services, pursue new customer opportunities by leveraging our outstanding customer service and extensive suite of truckload services, and effectively price fuel surcharges. In our pursuit to be best in class, we survey our customers and identify areas where we can accelerate the capture of new freight opportunities, improve our customers’ experience, and profit from enhancing the value our customers receive. We are enhancing our sophisticated freight management tools to allocate our equipment to more profitable loads and complementary lanes. In addition to growth in our core over-the-road dry van truckload business, we are targeting expansion in the following areas:
Intermodal We have favorable intermodal agreements with most major North American rail carriers, which have helped increase our volumes through more competitive pricing. Our intermodal presence, which expanded to service Mexico in 2013, complements our regional operating model and allows us to better serve customers in longer haul lanes and reduce our investment in fixed assets. Our intermodal fleet has more than doubled its size since its inception in 2005. In 2013, we focused on increasing utilization of our existing fleet of containers before adding capacity of over 400 containers in the latter half of 2014.
Dedicated Services and Private Fleet Outsourcing Dedicated contracts are often used by our customers with high-service and high-priority freight, sometimes to replace private fleets previously operated by them. The size and scale of our fleet and terminal network allow us to provide the equipment availability and high service levels required for dedicated contracts. We believe these opportunities will increase in times of scarce capacity in the truckload industry.
Temperature-controlled With the acquisition of Central, we are now able to compete in the over-the-road temperature-controlled business to complement our dedicated temperature-controlled and our over-the-road dry van service offerings. Growth in the temperature-controlled market has kept pace with the dry van market over the past ten years, and many of our current customers have a need for this service. We believe the scale provided by the Central Acquisition and our ability to penetrate our existing customer base will provide us future opportunities in this growing market.
Cross-border United States/Mexico and United States/Canada Freight The combination of our United States, cross-border, customs brokerage, and Mexican operations enables us to provide efficient door-to-door service between the United States and Mexico, as well as Canada. We believe our sophisticated load security measures, as well as our DHS status as a C-TPAT carrier, allow us to offer more efficient service than most competitors and afford us substantial advantages with major cross-border United States/Mexico and United States/Canada shippers.

7


Freight Brokerage and Logistics We believe we have a substantial opportunity to continue to increase our non-asset-based freight brokerage and logistics services. We believe many customers increasingly seek transportation companies that offer both asset-based and non-asset-based services to gain additional certainty that safe, secure and timely truckload service will be available on demand. We intend to continue growing our transportation management and freight brokerage capability to build market share, earn marginal revenue on more loads, and preserve our assets for the most attractive lanes and loads.
Increase Asset Productivity and Return on Capital Because of our size and operating leverage, even small improvements in our asset productivity and yield can have a significant impact on our operating results. We believe we have substantial opportunity to improve the productivity and yield of our existing assets as follows:
Disciplined Tractor Fleet Growth We will continue to focus on maintaining discipline regarding the timing and extent of company tractor fleet growth, based on availability of high-quality freight.
Process Improvement and System Integration — Successful implementation of process improvements and effective systems integration will achieve more efficient utilization of our tractors, trailers, and drivers' available hours of service. For example, our entire tractor fleet is retrofitted with electronic on-board recorders, which we believe can help us more efficiently utilize our drivers' available hours-of-service.
Tractor Utilization — We use equipment pools, relays, team drivers and similar measures to improve company tractor utilization.
Owner-operator Trucking Capacity — On average, owner-operators produce higher weekly trucking revenue per tractor than company drivers. As such, we continue to work on increasing the percentage of our trucking capacity provided by owner-operators.
Elimination of Unproductive Assets — Our return on capital improves as we successfully eliminate unproductive assets.
Continue to Focus on Efficiency and Cost Control To ensure that we respond appropriately to economic change, we closely manage our costs and capital resources and continually monitor the economic environment, as well as its potential impact on our customers and end-markets. We presently have ongoing efforts in the following areas that we expect will yield benefits in future periods:
Tractor Capacity — In order to balance freight flows and reduce deadhead miles, we manage the flow of our tractor capacity through our network.
Driver Satisfaction — Attrition costs are reduced and performance is improved by improving driver satisfaction. We believe our driver development programs, including our driver academies and nationwide recruiting, will become increasingly advantageous to us in countering attrition effects stemming from internal policies and procedures, as well as recent regulatory initiatives (discussed below). In addition, we believe that the negative impact of such regulations will be partially mitigated by our average length of haul, regional terminal network, and less mileage-intensive operations, such as intermodal, dedicated, brokerage, and cross-border operations.
Waste Reduction — Reducing waste in shop methods and procedures and in other administrative processes remains important to us.
Pursue Selected Acquisitions From time to time, we take advantage of opportunities to add complementary operations to our company by pursuing acquisitions. Acquisitions can provide us an opportunity to expand our fleet with customer revenue and drivers already in place. In our history, we have completed 13 acquisitions, including Central in 2013, most of which were immediately integrated into our existing business. Given our size in relation to most competitors, we expect most future acquisitions to be integrated quickly.
We believe that by achieving profitable revenue growth, improving asset utilization, continuing to control costs, and streamlining our processes, we will be able to grow our Adjusted EPS and our return on net assets, while generating free cash flow to repay debt and reduce our leverage ratio. These goals are in part dependent on continued improvement in industry-wide truckload volumes and pricing. Although we expect the economic environment and capacity constraints in our industry to support achievement of our goals, we have limited ability to affect industry volumes and pricing and cannot provide assurance that this environment will sustain. Nevertheless, we believe our competitive strengths and the current supply and demand environment in the truckload industry are aligned to support the achievement of our goals through the strategies outlined above.
Information by Segment and Geography

Segments Our four reportable segments are Truckload, Dedicated, Central Refrigerated and Intermodal. In the first quarter of 2014, the Company reorganized its reportable segments to reflect management's revised reporting structure of its lines of business, following the Central Acquisition. In connection with the operational reorganization, the operations of Central's TOFC business are reported within the Company's Intermodal segment. Additionally, the operations of Central's logistics business, third-party leasing, and other services provided to owner-operators are reported in the Company's other non-reportable segment. All prior period historical results related to the above noted segment reorganization have been retrospectively recast.
Segment information is provided in Notes 1 and 27 to the consolidated financial statements, including accounting and reporting policy, segment definitions, and financial information. Supplementary segment information is available in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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Geography The required disclosures relating to revenue and long-lived assets by geography are included in Note 27 to the consolidated financial statements. Income tax information by geography is included in Note 18 to the consolidated financial statements.
Customers and Marketing

Customers Our customers are typically large corporations in the retail (including discount and online retail), food and beverage, consumer products, paper products, transportation and logistics, housing and building, automotive, and manufacturing industries. Many of our customers have extensive operations, geographically distributed locations, and diverse shipping needs. Customer satisfaction is an important priority for us, which is demonstrated by the numerous “carrier of the year” or similar awards received from our customers over the past several years. Such achievements have helped us maintain a large and stable customer base featuring Fortune 500 and other leading companies from a number of different industries. Consistent with industry practice, our typical customer contracts (other than dedicated contracts) do not guarantee shipment volumes by our customers or truck availability by us. This affords us and our customers some flexibility to negotiate rates in response to changes in freight demand and industry-wide truck capacity. We believe our fleet capacity, terminal network, customer service and breadth of services offer a competitive advantage to major shippers, particularly in times of rising freight volumes when shippers must quickly access capacity across multiple facilities and regions.
Our top customers, based on percentage of operating revenue are as follows:
 
 
Sales as a Percentage of Operating Revenue
Customer Group Size
 
2014
 
2013
 
2012
Top 200 customers
 
87%
 
83%
 
83%
Top 25 customers
 
51%
 
48%
 
49%
Top 10 customers
 
35%
 
34%
 
38%
Top 5 customers
 
25%
 
25%
 
28%
Largest customer (Wal-Mart)
 
11%
 
11%
 
11%
No other customer accounted for more than 10% of our operating revenue during any of the three years ended December 31, 2014, 2013, or 2012.
Marketing We concentrate our marketing efforts on cross-selling our extensive suite of services we provide to existing customers, as well as on establishing new customers with shipment needs that complement our terminal network and existing routes. At December 31, 2014, we had a sales staff of approximately 70 individuals across the United States, Mexico and Canada, who work closely with management to establish and expand accounts.
Revenue Equipment

We operate a modern company tractor fleet to help attract and retain drivers, promote safe operations, and reduce maintenance and repair costs. The following table shows the age of our owned and leased tractors and trailers as of December 31, 2014:
Model Year:
Tractors (1)
 
Trailers
2015
3,037

 
6,061

2014
3,707

 
4,581

2013
2,841

 
4,559

2012
2,522

 
3,756

2011
349

 
3,205

2010
29

 
123

2009
523

 
4,787

2008
336

 
1,967

2007
111

 
118

2006
120

 
5,351

2005
112

 
1,548

2004 and prior
195

 
25,596

Total
13,882

 
61,652

_______________
(1) Excludes 4,954 owner-operator tractors.
We typically purchase or lease tractors and trailers manufactured to our specifications. We follow a comprehensive maintenance program designed to reduce downtime and enhance the resale value of our equipment. In addition to our major maintenance

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facilities in Phoenix, Arizona; Memphis, Tennessee; Greer, South Carolina; and West Valley City, Utah, we perform routine servicing and maintenance of our revenue equipment at most of our regional terminal facilities, in an effort to avoid costly on-road repairs and deadhead miles. The contracts governing our equipment purchases typically contain specifications of equipment, projected delivery dates, warranty terms, and trade or return conditions, and are cancelable upon 60 to 90 days notice without penalty.
Our current tractor trade-in cycle ranges from approximately 48 months to 72 months, depending on equipment type and usage. Management has re-evaluated the appropriateness of the Company's tractor trade-in cycle and decided to accelerate it to an average of approximately 36 to 48 months, beginning in 2015. Management believes that having a shorter tractor trade-in cycle will lower the overall life cycle costs by reducing safety-related expenses, lowering repair and maintenance expenses, improving fuel economy and improving driver satisfaction. In 2015, we will continue to monitor the appropriateness of this shorter tractor trade-in cycle against the lower capital expenditure and financing costs of a longer tractor trade-in cycle, based on current and future business needs.
Technology

We equip virtually all of our trucks with certain OmniTRACStm technologies that enhance communication between the regional terminals and corporate headquarters, as well as the added benefits of electronic, on-board recorders, text-to-voice messaging, and turn-by-turn directions designed specifically for our industry. This allows us to alter driver routes rapidly, in case of urgent customer requests, adverse weather conditions, or other potential delays. It also enables our drivers to timely communicate route status or the need for emergency repairs. These technologies have afforded us additional productivity, improved safety, and increased customer and driver satisfaction.
We reduce costs through programs that manage equipment maintenance, select fuel purchasing locations in our nationwide network of terminals and approved truck stops, and inform us of inefficient or undesirable driving behaviors that are monitored and reported through electronic engine sensors. We believe our technologies and systems are superior to those employed by most of our smaller competitors.
Our trailers and containers are equipped with tracking devices that monitor locations of empty and loaded equipment via satellite. Notification is sent to us if a unit is moved outside of the electronic geofence encasing on each piece of equipment. This enables us to identify unused or hijacked units, enhance our ability to charge for units detained by customers, and reduce theft.
Employees

The strength of our company is our people, working together with a common goal. There were approximately 21,100 full-time employees in our total headcount of 21,274 employees as of December 31, 2014, which was comprised as follows:
Company drivers (including driver trainees)
 
16,305

Technicians and other equipment maintenance personnel
 
1,654

Support personnel (such as corporate managers, sales, and administrative personnel)
 
3,315

Total
 
21,274


As of December 31, 2014, our 821 Trans-Mex drivers in Mexico were our only employees represented by a union.
Company Drivers All of our drivers must meet specific guidelines relating primarily to safety records, driving experience, and personal evaluations, including a physical examination and mandatory drug and alcohol testing. Upon hire, drivers are trained in our policies, operations, safety techniques, and fuel-efficient operation of the equipment. All new drivers must pass a safety test and have a current CDL. In addition, we have ongoing driver efficiency and safety programs to ensure that our drivers comply with our safety procedures.
We have established eight driver academies across the United States. Our academies are strategically located in areas where external driver-training organizations were lacking. In other areas of the United States we have contracted with driver-training schools, which are managed by third parties. There are certain minimum qualifications for candidates to be accepted into the academy, including passing the DOT physical examination and drug/alcohol screening. Students are required to complete three weeks of instructor-led study/training and then spend a minimum of 200 behind-the-wheel hours, driving with an experienced trainer.
In order to attract and retain qualified drivers and promote safe operations, we purchase high quality tractors equipped with optional comfort and safety features. We base our drivers at terminals and monitor each driver’s location in order to schedule routing for our drivers so they can return home regularly. The majority of company drivers are compensated based on industry standard dispatched miles, loading/unloading, and number of stops or deliveries, plus bonuses. The driver’s base pay per mile increases with the driver’s length of experience. Our driver ranking system measures safety, compliance, customer service, and number of miles driven. Higher rankings provide drivers with additional benefits and/or privileges, such as special recognition, the ability to self-select freight, and the opportunity for increased pay.
Upon enrollment eligibility, drivers employed by us may participate in company-sponsored health, life and dental insurance

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plans and participate in our 401(k) and employee stock purchase plans.
Terminal Staff Our larger terminals are staffed with terminal leaders, fleet leaders, driver leaders, planners, safety coordinators and customer service representatives. Our terminal leaders work with driver leaders, customer service representatives, and other operations personnel to coordinate the needs of both our customers and our drivers. Terminal leaders also are responsible for soliciting new customers and serving existing customers in their areas. Each fleet leader supervises approximately five driver leaders at our larger terminals. Each driver leader is responsible for the general operation of approximately 40 trucks and their drivers, focusing on driver retention, productivity per truck, routing, fuel consumption and efficiency, safety, and scheduled maintenance. Customer service representatives are assigned specific customers to ensure specialized, high-quality service and frequent customer contact.
Owner-Operators

In addition to Swift-employed company drivers, we enter into contractor agreements with third parties who own and operate tractors (or hire their own drivers to operate the tractors) that service our customers. We reimburse these owner-operators for their services, based on a contracted rate per mile. By operating safely and productively, owner-operators can improve their own profitability and ours. Owner-operators are responsible for most costs incurred for owning and operating their tractors. For convenience, we offer owner-operators maintenance services at our in-house shops and fuel at our terminals at competitive and attractive prices. As of December 31, 2014, owner-operators comprised approximately 26% of our total fleet, as measured by tractor count.
We offer tractor financing to independent owner-operators through our financing subsidiaries. Our financing subsidiaries generally lease premium equipment from the original equipment manufacturers and sublease the equipment to owner-operators. The owner-operators are qualified for financing, based on their driving and safety records. In the event of default, our financing subsidiaries have the option to repossess the tractor and sublease it to a replacement owner-operator.
Safety and Insurance

We take pride in our safety-oriented culture and maintain an active safety and loss-prevention program, which is led by regional safety management personnel at each of our terminals. We also equip our tractors with many safety features, such as roll-over stability devices and critical-event recorders, to help prevent, or reduce the severity of, accidents.
We self-insure for a significant portion of our claims exposure and related expenses. We currently carry six main types of insurance, which generally have the following self-insured retention amounts, maximum benefits per claim, and other limitations:
Automobile Liability, General Liability, and Excess Liability — $250.0 million of coverage per occurrence ($200.0 million through October 31, 2014, subject to a $10.0 million per-occurrence, self-insured retention);
Cargo Damage and Loss — $2.0 million limit per truck or trailer with a $10.0 million limit per occurrence; provided that there is a $250 thousand limit for tobacco loads and a $250 thousand deductible;
Property and Catastrophic Physical Damage — $150.0 million limit for property and $100.0 million limit for vehicle damage, excluding over the road exposures, subject to a $1.0 million deductible;
Workers' Compensation/Employers' Liability — statutory coverage limits; employers' liability of $1.0 million bodily injury by accident and disease, subject to a $5.0 million self-insured retention for each accident or disease;
Employment Practices Liability — primary policy with a $10.0 million limit subject to a $2.5 million self-insured retention, plus an excess liability policy that provides coverage for the next $17.5 million of liability for a total coverage limit of $27.5 million; and
Health Care — $500 thousand specific deductible with an aggregating individual deductible of $150 thousand beginning January 1, 2013, of each employee health care claim, as well as commercial insurance for the balance. As of January 1, 2015, we are fully insured, subject to contributed premiums.
We insure certain casualty risks through our wholly-owned captive insurance subsidiary, Mohave. In addition to insuring a proportionate share of our corporate casualty risk, Mohave provides reinsurance coverage to third-party insurance companies associated with our affiliated companies’ owner-operators. Mohave provides reinsurance associated with a share of our automobile liability risk. In February 2010, we initiated operations of a second captive insurance subsidiary, Red Rock, which insures a share of our automobile liability risk.
While under dispatch and our operating authority, our owner-operators are covered by our liability coverage and self-insurance retention limits. However, each is responsible for physical damage to his or her own equipment, occupational accident coverage and liability exposure while the truck is used for non-company purposes. Additionally, fleet operators are responsible for any applicable workers’ compensation requirements for their employees.
We regulate the speed of our company tractors to a maximum of 62 miles per hour and for safety reasons have contractually agreed with owner-operators to limit their speed to 68 miles per hour. These adopted speed limits are below the limits established by statute in many states. We believe our adopted speed limits for company drivers reduce the frequency and severity of accidents, enhance fuel efficiency, and reduce maintenance expense, when compared to operating without our imposed speed limits. Substantially all

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of our company tractors are equipped with electronically-controlled engines that are set to limit the speed of the vehicle.
Fuel

We actively manage our fuel purchasing network in an effort to maintain adequate fuel supplies and reduce our fuel costs. Additionally, we utilize a fuel surcharge program to pass a majority of increases in fuel costs to our customers. In 2014, we purchased 13.6% of our fuel in bulk at 39 Swift and dedicated customer locations across the United States and Mexico. We purchased substantially all of the remainder through a network of retail truck stops with which we have negotiated volume purchasing discounts. The volumes we purchase at terminals and through the fuel network vary based on procurement costs and other factors. We seek to reduce our fuel costs by routing our drivers to truck stops when fuel prices at such stops are cheaper than the bulk rate paid for fuel at our terminals. We store fuel in underground storage tanks at three of our bulk fueling terminals and in above-ground storage tanks at our other bulk fueling terminals. We believe that we are sufficiently in compliance with applicable environmental laws and regulations relating to the storage and dispensing of fuel.
Seasonality

In the transportation industry, results of operations generally show a seasonal pattern. As customers ramp up for the holiday season at year-end, the late third and fourth quarters have historically been our strongest volume quarters. As customers reduce shipments after the winter holiday season, the first quarter has historically been a lower volume quarter for us than the other three quarters. In recent years, the macro consumer buying patterns combined with shippers’ supply chain management, which historically contributed to the fourth quarter “peak” season, continued to evolve. As a result, our fourth quarter 2014, 2013 and 2012 volumes were more evenly disbursed throughout the quarter rather than peaking early in the quarter. In the Eastern and Midwestern United States, and to a lesser extent in the Western United States, the winter season typically causes declines in our equipment utilization. Harsh weather conditions can also cause higher accident frequency, increased claims, and more equipment repairs. Our revenue may further be affected by bad weather and holidays as a result of curtailed operations or vacation shutdowns, because our revenue is directly related to available working days of shippers. From time to time, we also suffer short-term impacts from weather-related events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes, and explosions that could harm our results of operations or make our results of operations more volatile.
Environmental Regulation
General — We have bulk fuel storage and fuel islands at many of our terminals, as well as vehicle maintenance, repair, and washing operations at some of our facilities, which exposes us to certain environmental risks. Soil and groundwater contamination have occurred at some of our facilities, for which we have been responsible for remediating the environmental contamination. Also, less than one percent of our total shipments contain hazardous materials, which are generally rated as low- to medium-risk. In the past we have been responsible for the costs of clean-up of cargo and diesel fuel spills caused by traffic accidents or other events.
We have instituted programs to monitor and mitigate environmental risks and maintain compliance with applicable environmental laws dealing with the hauling, handling and disposal of hazardous materials, fuel spillage or seepage, emissions from our vehicles and facilities, engine-idling, discharge and retention of storm water, and other environmental matters. As part of our safety and risk management program, we periodically perform internal environmental reviews. We are a Charter Partner in the EPA’s SmartWay Transport Partnership, a voluntary program promoting energy efficiency and air quality. We believe that our operations are sufficiently in compliance with current laws and regulations and do not know of any existing environmental condition that would reasonably be expected to have a material adverse effect on our business or operating results.
If we are held responsible for the cleanup of any environmental incidents caused by our operations or business, or if we are found to be in violation of applicable laws or regulations, we could be subject to liabilities, including substantial fines or penalties or civil and criminal liability. We have paid penalties for spills and violations in the past.
California Regulations — On November 14, 2011, the NHTSA and the EPA finalized regulations that regulate fuel efficiency and greenhouse gas emissions beginning in 2014. The state of California has adopted its own regulations, including:
new performance requirements for diesel trucks, with targets to be met between 2011 and 2023;
implementing its own trailer regulations, which require all 53-foot or longer box-type trailers (dry vans and refrigerated vans) that operate at least some of the time in California (no matter where they are registered) to meet specific aerodynamic and tire efficiency requirements when operating in California; and
requiring that refrigerated trailer operators comply with emissions standards and register certain trailers with the California Air Resources Board.

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Additionally, box-type trailers greater than or equal to 53 feet long are subject to the following requirements:
Effective Date
 
Model Year
 
Requirements
January 1, 2010
 
2011 and newer
 
Trailers are required to be either SmartWay certified or equipped with low-rolling, resistance tires and retrofitted with SmartWay-approved, aerodynamic technologies.
December 31, 2012
 
Older than 2011 (except for certain 2003 to 2008 refrigerated van trailers)
 
Requirements are consistent with 2011 and newer model year. Otherwise, a compliance plan, based on fleet size, must have been prepared and submitted that allows for phase-in of compliance over time.
2017 to 2019 phase-in
 
Certain 2003 to 2008 refrigerated van trailers
 
Requirements are pending until the phase-in period.
Climate-change Proposals — Federal and state lawmakers are considering a variety of climate-change proposals related to carbon emissions and greenhouse gas emissions. The proposals could potentially limit carbon emissions for certain states and municipalities, which continue to restrict the location and amount of time that diesel-powered tractors (like ours) may idle. Increasing efforts to control greenhouse gas emissions are also likely to impact us. The EPA announced a finding that may result in promulgation of greenhouse gas air quality standards. New greenhouse gas regulations could increase the cost of new tractors, impair productivity, and increase our operating expenses.
Other Regulation

Our operations are regulated and licensed by various federal, state and local government agencies in North America, including the DOT, the FMCSA, and the DHS, among others. Our company, as well as our drivers and contracted owner-operators, must comply with enacted governmental regulations regarding safety, equipment, environmental protection, and operating methods. Examples include regulation of equipment weight, equipment dimensions, fuel emissions, driver hours-of-service, driver eligibility requirements, on-board reporting of operations, and ergonomics. The following discussion presents recently enacted federal, state and local regulations that have an impact on our operations.
Hours-of-service — In December 2011, the FMCSA released its final rule on hours-of-service, which was effective on July 1, 2013. The key provisions included:
retaining the current 11-hour daily driving time limit;
reducing the maximum number of hours a truck driver can work within a week from 82 hours to 70 hours;
limiting the number of consecutive driving hours a truck driver can work to eight hours before requiring the driver to take a 30 minute break.

On December 13, 2014, Congress passed the fiscal year 2015 Omnibus Appropriations bill, which included language that temporarily suspended enforcement of the 1:00 to 5:00 am provision and the 168-hour rule in the hours-of-service regulation. This change is in effect until September 30, 2015.  All other provisions of the hours-of-service rules that went into effect on July 1, 2013 remained unchanged.
BASICs — In December 2010, the FMCSA introduced a new enforcement and compliance model that ranks both fleets and individual drivers on seven categories of safety-related data, eventually replacing the current SafeStat model. The seven categories of safety-related data, known as BASICs, include Unsafe Driving, Fatigued Driving (hours-of-service), Driver Fitness, Controlled Substances/Alcohol, Vehicle Maintenance, Cargo-Related, and Crash Indicator.
In August 2012, the FMCSA modified several BASICs categories by moving certain violations previously classified within the Cargo-related category to the Vehicle Maintenance category and simultaneously renamed the Cargo-Related category to Hazardous Materials Compliance category, which identifies hazardous material related safety and compliance problems.
Implementation and effective dates are unclear, as there is currently no proposed rulemaking with respect to BASICs, leaving SafeStat the authoritative safety measurement system in effect. However, certain BASICs information has been published and made available to carriers, as well as the public. Per these publically disclosed results, we score within the acceptable level in the safety-related categories, based on our CSA rankings. We currently have a satisfactory SafeStat DOT rating, which is the best available rating under the current safety rating scale. The FMCSA is also considering revisions to the existing rating system and safety labels assigned to motor carriers evaluated by the DOT. Under the revised rating system currently under consideration by the FMCSA, our safety rating would reflect a more in-depth assessment of safety-based violations and would be evaluated more regularly.
Moving Ahead for Progress in the 21st Century Bill — On July 6, 2012, Congress passed the Moving Ahead for Progress in the 21st Century bill into law. Included in the new highway bill is a provision that mandates electronic logging devices in commercial motor vehicles to record hours-of-service. During 2012, the FMCSA published a Supplemental Notice of Proposed rulemaking announcing its plan to proceed with the Electronic On-Board Recorders and Hours-of-Service Supporting Documents rulemaking. As noted under the heading “Revenue Equipment” above, we have already installed Qualcomm units in our tractors, which include electronic, on-board recorders, in conjunction with our efforts to improve efficiency and communications with drivers and owner-operators.

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The TSA — In the aftermath of the September 11, 2001 terrorist attacks, federal, state and municipal authorities implemented and continue to implement various security measures on large trucks, including checkpoints and travel restrictions. The TSA adopted regulations that require drivers applying for or renewing a license for carrying hazardous materials to obtain a TSA determination that they are not a security threat.
TIPA and WOTC — In December of 2014, United States President, Barack Obama, signed the Tax Increase Prevention Act of 2014 ("TIPA"). Among other things, TIPA extended 50% bonus depreciation and the Work Opportunity Tax Credit ("WOTC"). During the first three quarters of 2014, the Company did not include 50% bonus depreciation or WOTC in its income tax provision, as these items were not allowed under the previous tax code. Income tax calculations performed for the year ended December 31, 2014 include the full year's adjustment for 50% bonus depreciation and WOTC, as TIPA allowed for retrospective inclusion.
Available Information

General information about Swift is provided, free of charge, on our website, swifttrans.com. This website also includes our annual reports on Form 10-K with accompanying XBRL documents, quarterly reports on Form 10-Q with accompanying XBRL documents, current reports on Form 8-K, and amendments to those reports that are filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable once the material is electronically filed or furnished to the SEC.
ITEM 1A.
RISK FACTORS
When evaluating our company, the following risks should be considered in conjunction with the other information contained in this annual report on Form 10-K. If we are unable to mitigate and/or are exposed to any of the following risks in the future, then there could be a material, adverse effect on our business, results of operations, or financial condition.
Strategic Risk
The truckload industry is affected by economic and business risks that are largely beyond our control.
The truckload industry is highly cyclical, and our business is dependent on a number of factors that may have a negative impact on our results of operations, many of which are beyond our control. We believe that some of the most significant of these factors are economic changes that affect supply and demand in transportation markets, such as:
recessionary economic cycles, such as the period from 2007 to 2009;
changes in customers’ inventory levels, including shrinking product/package sizes, and in the availability of funding for their working capital;
excess tractor capacity in comparison with shipping demand; and
downturns in customers’ business cycles.
The risks associated with these factors are heightened when the United States economy is weakened. Some of the principal risks during such times, which we experienced during the recent recession, are as follows:
low overall freight levels, which may impair our asset utilization;
customers with credit issues and cash flow problems;
changing freight patterns from redesigned supply chains, resulting in an imbalance between our capacity and customer demand;
customers bidding out freight or selecting competitors that offer lower rates, in an attempt to lower their costs, forcing us to lower our rates or lose freight; and
more deadhead miles incurred to obtain loads.
We also are subject to cost increases outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently.
In addition, events outside our control, such as strikes or other work stoppages at our facilities or at customer, port, border, or other shipping locations, actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state, or heightened security requirements could lead to reduced economic demand, reduced availability of credit, or temporary closing of shipping locations or United States borders.

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The truckload industry is highly competitive and fragmented, which subjects us to competitive pressures pertaining to pricing, capacity, and service.
Our operating segments compete with many truckload carriers, and some LTL carrier, railroad, logistics, brokerage, freight forwarding, and other transportation companies. Additionally, some of our customers may utilize their own private fleets rather than outsourcing loads to us. Some of our competitors may have greater access to equipment, a wider range of services, greater capital resources, less indebtedness, or other competitive advantages. Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include the following:
Many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth in the economy. This may make it difficult for us to maintain or increase freight rates, or may require us to reduce our freight rates. Additionally, it may limit our ability to maintain or expand our business.
Since some of our customers also operate their own private trucking fleets, they may decide to transport more of their own freight.
Some shippers have selected core carriers for their shipping needs, for which we may not be selected.
Many customers periodically solicit bids from multiple carriers for their shipping needs, which may depress freight rates or result in a loss of business to competitors.
The continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources and other competitive advantages, with which we may have difficulty competing.
Higher fuel prices and higher fuel surcharges to our customers may cause some of our customers to consider freight transportation alternatives, including rail transportation.
Competition from freight logistics and brokerage companies may negatively impact our customer relationships and freight rates.
Smaller carriers may build economies of scale with procurement aggregation providers, which may improve the smaller carriers’ abilities to compete with us.
Our company strategy includes pursuing selected acquisitions; however, we may not be able to execute or integrate future acquisitions successfully.
Historically, a key component of our growth strategy has been to pursue acquisitions of complementary businesses, for example, the Central Acquisition. Although we currently do not have any additional acquisition plans, we expect to consider acquisitions in the future. Current or future acquisition and integration of target companies may negatively impact our business, financial condition, and results of operations because:
The business may not achieve anticipated revenue, earnings, or cash flows.
We may assume liabilities beyond our estimates or what was disclosed to us.
We may be unable to integrate successfully and realize the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems.
The acquisition could disrupt our ongoing business, distract our management, and divert our resources.
We may have limited experience in the acquiree's market and may experience difficulties operating in its market.
There is a potential for loss of customers, employees, and drivers of the acquired company.
We may incur indebtedness or issue additional shares of stock.
Operational Risk
Consistent with industry trends, we face challenges with attracting and retaining qualified company drivers and owner -operators.
Recent driver shortages require, and could continue to require, us to spend more for hiring, including recruiting and advertising. Our challenge with attracting and retaining qualified drivers stems from intense market competition, which subjects us to increased payments for driver compensation and owner-operator contracted rates. We recently increased these rates to better attract and retain drivers. To the extent that the economy improves, we expect that we would need to continue to increase driver compensation and owner-operator contracted rates in order to remain competitive. Our high driver turnover rate (especially within 90 days of hire) requires us to continually recruit a substantial number of drivers in order to operate existing revenue equipment. If we do not attract and retain enough drivers, we could be forced to operate with fewer trucks. This would likely erode our size and profitability.

Our contractual agreements with our owner-operators expose us to risks that we do not face with our company drivers.
Our financing subsidiaries offer financing to some of our owner-operators to purchase tractors from us. If these owner-operators experience a default or other lease termination in conjunction with these agreements and we cannot replace them, we may incur losses on amounts owed to us. Also, if liquidity constraints or other restrictions prevent us from providing financing to our owner-operators in the future, then we could experience a shortage of owner-operators. This would be detrimental to our efforts at increasing the percentage of our capacity contracted out to owner-operators.

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Pursuant to the fuel reimbursement program, when fuel prices increase above a certain level, we share the cost with our owner-operators in order to mute the impact that increasing fuel prices may have on their business operations. A significant increase or rapid fluctuation in fuel prices could cause our reimbursement costs under this program to be higher than the revenue we receive under our customer fuel surcharge programs.
Owner-operators are third-party service providers, as compared to company drivers, who are employed by Swift. As independent business owners, our owner-operators may make business or personal decisions that conflict with the best interests of Swift. For example, if a load is unprofitable, route distance is too far from home, personal scheduling conflicts arise, or for other reasons, owner-operators may deny loads of freight from time to time. In these circumstances, Swift must be able to timely deliver the freight in order to maintain relationships with customers.
We depend on key personnel to manage our business and operations.
Our success depends on our ability to retain our executive officers, including Jerry Moyes (our founder and Chief Executive Officer), Richard Stocking (our President), and Virginia Henkels (our Chief Financial Officer). Inadequate succession planning or unexpected departure of key executive officers could cause substantial disruption to our business operations, deplete our institutional knowledge base and erode our competitive advantage. We currently do not have employment agreements with any of our management, including Mr. Moyes. We believe that the executive officers identified above possess valuable knowledge about the trucking industry and that their knowledge and relationships with our key customers and vendors would be very difficult to replicate. Although we believe we could replace key personnel, we may not be able to do so without incurring substantial costs.

Our ability to offer intermodal and brokerage services could be limited if we experience performance instability from third parties we use in those businesses.
Our intermodal business utilizes railroads and some third-party drayage carriers to transport freight for our customers. In most markets, rail service is limited to a few railroads or even a single railroad. Our ability to provide intermodal services in certain traffic lanes would be reduced or eliminated if the railroads' services became unstable. The cost of our rail-based services would likely increase, and the reliability, timeliness and overall attractiveness of these services would likely decrease. Furthermore, railroads increase shipping rates as market conditions permit. Price increases could result in higher costs to our customers and negatively impact the demand for our intermodal services. In addition, we may not be able to negotiate additional contracts with railroads to expand our capacity, add additional routes, or obtain multiple providers, which could limit our ability to provide this service.
Our brokerage business is dependent upon the services of third-party capacity providers, including other truckload carriers. These third-party providers seek other freight opportunities and may require increased compensation in times of improved freight demand or tight trucking capacity. Our inability to secure the services of these third parties, or increases in the prices we must pay to secure such services, could have an adverse effect on our operations and profitability.
We are dependent on computer and communications systems; and a systems failure or data breach could cause a significant disruption to our business.
Our business depends on the efficient and uninterrupted operation of our computer and communications hardware systems and infrastructure. We currently maintain our computer system at our Phoenix, Arizona headquarters, along with computer equipment at each of our terminals. Our operations and those of our technology and communications service providers are vulnerable to interruption by fire, earthquake, natural disasters, power loss, telecommunications failure, terrorist attacks, Internet failures, computer viruses, data breaches (including cyber-attacks or cyber intrusions over the Internet, malware and the like) and other events generally beyond our control. We mitigate the risk of business interruption by maintaining redundant computer systems, redundant networks, and backup systems at an alternative location in Phoenix, Arizona. However, this alternative location is subject to some of the same interruptions that may affect the Phoenix headquarters. In the event of a significant system failure, our business could experience significant disruption.
Seasonality, weather and other catastrophic events affect our operations and profitability.
We discuss seasonality and weather events that affect our business in Part I, Item 1, under "Seasonality." These events and other catastrophic events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, damage or destroy our assets, or adversely affect the business or financial condition of our customers, any of which could harm our results or make our results more volatile.
Compliance Risk
Since our industry is highly regulated, we may inadvertently violate existing or future regulations or be adversely affected by changes to existing regulations.
We have the authority to operate in the continental United States (as granted by the DOT), Mexico (as granted by la Secretaría de Comunicaciones y Transportes), and various Canadian provinces (as granted by the Ministries of Transportation and Communications in such provinces). Our company, as well as our drivers and contracted owner-operators, must comply with enacted governmental regulations regarding safety, equipment, environmental protection, and operating methods. Examples include

16


regulation of equipment weight, equipment dimensions, fuel emissions, driver hours-of-service, driver eligibility requirements, on-board reporting of operations, and ergonomics. We may also become subject to new or more restrictive regulations related to safety or operating methods. We discuss several proposed and pending regulations that could impact our operations in Part I, Item 1, under "Environmental Regulation" and "Other Regulation."
Additionally, our lease contracts with owner-operators are governed by the federal leasing regulations, which impose specific requirements on us and the owner-operators. In the past, we have been the subject of lawsuits, alleging the violation of lease agreements or failure to follow the contractual terms. It is possible that we could be subjected to similar lawsuits in the future, which could result in added liability.
If current or future legislation deems that owner-operators are deemed to be equivalent to employees, we would incur more employee-related expenses.
Tax, federal, and other regulatory authorities have argued that owner-operators in the trucking industry are employees, rather than independent contractors. In April 2010, federal legislation was proposed that increased the recordkeeping requirements for companies that engage independent contractors and heightened the penalties to employers that misclassified individuals and violated overtime and/or wage requirements. Some states have put initiatives in place to increase their revenues from items such as unemployment, workers’ compensation, and income taxes, and a reclassification of owner-operators as employees would help states achieve this objective. Further, class actions and other lawsuits have been filed against us and others in our industry seeking to reclassify owner-operators as employees for a variety of purposes, including workers’ compensation and health care coverage. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If our owner-operators are deemed employees, we would incur additional exposure under laws for federal and state tax, workers’ compensation, unemployment benefits, labor, employment, and tort. The exposure could include prior period compensation, as well as potential liability for employee benefits and tax withholdings.
Changes in rules or legislation by the NLRB or Congress and/or organizing efforts by labor unions could result in litigation, divert management attention and have a material adverse effect on our operating results.
Although our only collective bargaining agreement exists at our Mexican subsidiary, Trans-Mex, we always face the risk that our employees will try to unionize. If our owner-operators were ever re-classified as employees, the magnitude of this risk would increase. The NLRB, Congress or states could impose rules or legislation significantly affecting our business and our relationship with our employees. On December 12, 2014, the NLRB implemented a final rule amending the agency's representation-case proceedings which govern the procedures for union representation. Pursuant to this amendment, union elections can now be held within 10-21 days after the union requests a vote. These new rules make it easier for unions to successfully organize all employers, in all industries. Any attempt to organize by our employees could result in increased legal and other associated costs. In addition, if we entered into a collective bargaining agreement, the terms could negatively affect our costs, efficiency, and ability to generate acceptable returns on the affected operations.
CSA rulemaking could adversely affect us, including our ability to maintain or grow our fleet, as well as our customer relationships.
Under CSA, drivers and fleets are evaluated and ranked based on certain safety-related standards. The current methodology for determining a carrier’s DOT safety rating has been expanded, and as a result, certain current and potential drivers may no longer be eligible to drive for us. Additionally, our safety rating could be adversely affected. We recruit and retain a substantial number of first-time drivers. These drivers may have a higher likelihood of creating adverse safety events under CSA. A reduction in eligible drivers or a poor fleet ranking may result in difficulty attracting and retaining qualified drivers. This could cause our customers to transition to carriers with higher fleet rankings, and away from us.
Our captive insurance companies are subject to substantial government regulation.
Our captive insurance companies are regulated by state authorities. State regulations generally provide protection to policy holders, rather than stockholders, and generally involve:
approval of premium rates for insurance;
standards of solvency;
minimum amounts of statutory capital surplus that must be maintained;
limitations on types and amounts of investments;
regulation of dividend payments and other transactions between affiliates;
regulation of reinsurance;
regulation of underwriting and marketing practices;
approval of policy forms;
methods of accounting; and
filing of annual and other reports with respect to financial condition and other matters.
These regulations may increase our costs of regulatory compliance, limit our ability to change premiums, restrict our ability to access cash held in our captive insurance companies, and otherwise impede our ability to take actions we deem advisable.

17


We are subject to certain risks arising from doing business in Mexico.
We have a growing operation in Mexico, through our wholly-owned subsidiary, Trans-Mex, which subjects us to general international business risks, including:
foreign currency fluctuation;
changes in the economic strength of Mexico;
difficulties in enforcing contractual obligations and intellectual property rights;
burdens of complying with a wide variety of international and Unites States export, import and business procurement laws; and
social, political and economic instability.
In addition, if we are unable to maintain our C-TPAT status, we may have significant border delays. This could cause our Mexican operations to be less efficient than those of competitor truckload carriers that have C-TPAT status and operate in Mexico. We also face additional risks associated with our foreign operations, including restrictive trade policies and imposition of duties, taxes, or government royalties imposed by the Mexican government, to the extent not preempted by the terms of North American Free Trade Agreement.
Financial Risk
A material portion of our revenue is concentrated in a group of major customers. As such, we would be adversely affected if we lost one or more of these major customers.
Our revenue is concentrated in a group of major customers, as discussed in Part I, Item 1, under "Customers and Marketing." Retail and discount retail customers account for a substantial portion of our freight, creating a dependency on consumer spending and retail sales for us. Given this, our results may be more susceptible to trends in unemployment and retail sales than carriers that do not have this concentration.
Economic conditions and capital markets may adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our results of operations and financial condition if they were to curtail their operations or delay or default on their payments to us. Aside from our Dedicated segment, we generally do not have contractual relationships that guarantee any minimum volumes with our customers, and we cannot provide assurance that our customer relationships will continue. Our Dedicated segment is generally subject to longer-term written contracts than our Truckload segment business; however, certain of these contracts contain cancellation clauses. There is no assurance that any of our customers will continue to utilize our services, renew our existing contracts, or continue at the same volume levels.
We have significant ongoing capital requirements that necessitate sufficient cash flow from operations and/or obtaining financing on favorable terms.
The truckload industry is capital intensive. Historically, we have depended on cash from operations, borrowings from banks and finance companies, issuances of notes, and leasing activities to expand the size of our terminal network and upgrade and expand the size of revenue equipment fleet.
Credit markets are likely to weaken again at some point in the future, which would make it difficult for us to access our current sources of credit and difficult for our lenders to find the capital to fund us. We may need to incur additional debt, or issue debt or equity securities in the future, to refinance existing debt, fund working capital requirements, make investments, or support other business activities. Declines in consumer confidence, decreases in domestic spending, economic contractions and other trends in the credit market may impair our future ability to secure financing on satisfactory terms, or at all.
In the future, we could face inabilities with generating sufficient cash from operations, obtaining sufficient financing on favorable terms, or maintaining compliance with financial and other covenants in our financing agreements. If any of these events occur, then we may face liquidity constraints, be forced to enter into less favorable financing arrangements, or operate our revenue equipment for longer periods of time. Additionally, such events could adversely impact our ability to provide services to our customers.
Because our operations are dependent upon diesel fuel, fluctuations in price or availability, volume and terms of purchase commitments, and surcharge collection could materially increase our costs of operation.
Fuel is one of our largest operating expenses. Diesel fuel prices greatly fluctuate due to factors entirely beyond our control, such as political events, terrorist activities, armed conflicts, and depreciation of the dollar against other currencies. Hurricanes and other natural or man-made disasters, such as the oil spill in the Gulf of Mexico in 2010, tend to lead to an increase in the cost of fuel. Rising demand, matched with falling supply of fuel, adversely impacts the price. Examples include, rising demand in developing countries like China, diminishing supply from less drilling activity, and sharing supply with industries using crude oil and oil reserves for other purposes. These events may lead to fuel shortages and disruptions in the fuel supply chain.
Fuel is also subject to regional pricing differences and often costs more on the West Coast and in the Northeast, where we have significant operations. Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges, have an adverse effect on our operations and profitability. We obtain some protection against fuel cost increases by maintaining a fuel-efficient fleet and a compensatory fuel surcharge program. We have fuel surcharge programs in place with the vast majority of our customers,

18


which have helped us offset the majority of the negative impact of rising fuel prices associated with loaded or billed miles. Our fuel surcharge recovery lags behind changes in fuel prices. As such, it may not capture the increased costs we pay for fuel, especially when prices are rising. This leads to fluctuation in our levels of reimbursement, which has occurred in the past. During periods of low freight volumes, shippers can use their negotiating leverage to impose less robust fuel surcharge policies. We cannot ensure that such fuel surcharges will be indefinitely maintained or sufficiently effective. Additionally, there are certain fuel costs that we cannot recover, despite our fuel surcharge programs, such as those associated with deadhead miles and engine idling time.
We have not historically used derivatives to mitigate volatility in our fuel costs, but periodically evaluate the benefits of employing this strategy. To mitigate the impact of rising fuel costs, we contract with some of our fuel suppliers to buy fuel at a fixed price or within banded pricing for a specific period, usually not exceeding twelve months. However, these purchase commitments only cover a small portion of our fuel consumption. Accordingly, fuel price fluctuations may still negatively impact us.
We operate a modern fleet of tractors, some of which are leased or financed. This subjects us to costs associated with increasing equipment prices, new engine design changes, volatility in the used equipment sales market, and the failure of manufacturers to meet their sale or trade-back obligations.
Our modern fleet of tractors give us a competitive advantage in many ways. However, there are also disadvantages we face by obtaining newer equipment. For example, engines used in tractors manufactured in 2010 and after are subject to more stringent emissions control regulations issued by the EPA. Compliance with such regulations has increased the cost of the tractors, and resale and residual values may not increase to the same extent. Accordingly, our equipment costs, including depreciation expense per tractor, are expected to increase in future periods. To comply with the EPA’s 2010 diesel engine emissions standards, many engine manufacturers are using special equipment that needs diesel exhaust fluid. If we purchase new tractors that have this special equipment, we will be exposed to additional costs associated with price and availability of diesel exhaust fluid, the weight of the equipment, maintenance, and training our drivers to use the equipment.
We have certain revenue equipment leases and financing arrangements with ending balloon payments equal to the residual value the Company is contracted to receive from equipment manufacturers upon sale or trade back to the manufacturers. If we do not purchase new equipment that triggers the trade-back obligation, or the equipment manufacturers do not pay the contracted value at the end of the lease term, we could be exposed to losses equal to the excess of the balloon payment owed to the lease or finance company over the proceeds from selling the equipment on the open market. In addition, if we purchase equipment subject to a buy-back agreement and the manufacturer refuses to honor the agreement, or we are unable to replace equipment at a reasonable price, we may be forced to sell the equipment at a loss.
We have paid higher prices for new tractors over the past few years, while the resale and residual values have not increased to the same extent. Used equipment prices are subject to substantial fluctuations based on freight demand, supply of used trucks, availability of financing, presence of buyers for export to countries such as Russia and Brazil, and commodity prices for scrap metal. These and any impacts of a depressed market for used equipment could require us to trade our revenue equipment below the carrying value. This leads to losses on disposal or impairments of revenue equipment, when not otherwise protected by residual value arrangements. Deteriorations of resale prices or trades at depressed values could cause more losses on disposal or impairment charges in future periods.
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our debt obligations.
As of December 31, 2014, our total outstanding long-term debt, excluding capital lease obligations was $903.1 million. Since we are highly leveraged, we could be at a competitive disadvantage compared to our competitors that are less leveraged. This could have negative consequences that include:
increased vulnerability to adverse economic, industry, or competitive developments;
substantial cash flows from operations that are committed to payment of principal and interest, thereby reducing our ability to use cash for our operations, capital expenditures, and future business opportunities;
increased interest rates that would affect our variable rate debt;
noncompliance with restrictive covenants, borrowing conditions, and other debt obligations, which could result in an event of default;
non-strategic divestitures or inability to make strategic acquisitions;
lack of financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and
limits on our flexibility to plan for, or react to, changes in our business, market conditions, or in the economy.
Our debt agreements contain restrictions that limit our flexibility in operating our business.
As detailed in Note 12 to the consolidated financial statements, our senior secured credit facility agreement requires compliance with various affirmative, negative, and financial covenants. A breach of any of these covenants could result in default or (when applicable) cross-default. Upon default under our senior secured credit facility, the lenders could elect to declare all outstanding amounts to be immediately due and payable, as well as terminate all commitments to extend further credit. Such actions by those

19


lenders could cause cross defaults with our other debt agreements. If we were unable to repay those amounts, the lenders could secure the debt with the collateral granted to them. If the lenders accelerated our debt repayments, we might not have sufficient assets to repay all amounts borrowed.
In addition, our 2013 RSA includes certain restrictive covenants and cross default provisions with respect to our senior secured credit facility. Failure to comply with these covenants and provisions may jeopardize our ability to continue to sell receivables under the facility and could negatively impact our liquidity.
Insuring risk through our captive insurance companies could adversely impact our operations.
We insure a significant portion of our risk through our captive insurance companies, Mohave and Red Rock. In addition to insuring portions of our own risk, Mohave provides reinsurance coverage to third-party insurance companies associated with our affiliated companies' owner-operators. Red Rock insures a share of our automobile liability risk. The insurance and reinsurance markets are subject to market pressures. Our captive insurance companies’ abilities or needs to access the reinsurance markets may involve the retention of additional risk, which could expose us to volatility in claims expenses.
To comply with certain state insurance regulatory requirements, cash and cash equivalents must be paid to Red Rock and Mohave as capital investments and insurance premiums, to be restricted as collateral for anticipated losses. The restricted cash is used for payment of insured claims. In the future, we may continue to insure our automobile liability risk through our captive insurance subsidiaries, which will cause rises in the required amount of our restricted cash or other collateral, such as letters of credit. Significant increases in the amount of collateral required by third-party insurance carriers and regulators would reduce our liquidity.
We face risks related to self-insurance and third-party insurance that can be volatile to our earnings.
We self-insure a significant portion of our claims exposure and related expenses for cargo loss, employee medical expense, bodily injury, workers’ compensation and property damage, and maintain insurance with insurance companies above our limits of self-insurance. Self-insurance retention and other limitations are detailed in Part I, Item 1, under "Safety and Insurance." Our large self-insured retention limits can make our insurance and claims expense higher or more volatile. Additionally, if our third-party insurance carriers or underwriters leave the trucking sector, it could materially increase our insurance costs or collateral requirements, or create difficulties in finding insurance in excess of our self-insured retention limits.
We accrue for the costs of the uninsured portion of pending claims, based on the nature and severity of individual claims and historical claims development trends. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. This, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates. We try to limit our exposure to claims that ultimately prove to be more severe than originally assessed. However, this may not be possible if carrier subcontractors under our brokerage operations are inadequately insured for any accident.
Although we believe our aggregate insurance limits are sufficient to cover reasonably expected claims, it is possible that one or more claims could exceed those limits. In this case, we would bear the excess expense, in addition to the amount of self-insurance. Our insurance and claims expense could increase, or we could find it necessary to raise our self-insured retention or decrease our aggregate coverage limits when our policies are renewed or replaced.
Our stock price could decline due to the large number of outstanding shares of our common stock eligible for future sale.
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our Class A common stock to decline. These sales also could make it more difficult for us to sell equity or equity- related securities in the future at a time and price that we deem appropriate.
As of December 31, 2014, we have approximately 91.1 million outstanding shares of Class A common stock, assuming no exercise of options outstanding as of the date of this report and approximately 51.0 million outstanding shares of Class B common stock, which are convertible into an equal number of shares of Class A common stock. All of the Class A shares are freely tradable, except that any shares owned by “affiliates” (as that term is defined in Rule 144 under the Securities Act) may only be sold in compliance with the limitations described in Rule 144 under the Securities Act.
In addition, we have an aggregate of nearly 12 million shares and 2 million shares of Class A common stock reserved for issuances under our 2014 Omnibus Incentive Plan and our 2012 Employee Stock Purchase Plan, respectively. Issuances of Class A common stock to our directors, executive officers, and employees pursuant to the exercise of stock options under our employee benefits arrangements or purchases by our executive officers and employees through our employee stock purchase plan will dilute a stockholder's interest in Swift.
We could determine that our goodwill and other indefinite-lived intangibles are impaired, thus recognizing a related loss.
As of December 31, 2014, we had goodwill of $253.3 million and indefinite-lived intangible assets of $181.0 million primarily from the 2007 Transactions. We evaluate goodwill and indefinite-lived intangible assets for impairment in accordance with the accounting policies discussed in Note 1 to the consolidated financial statements. Our evaluations in 2014, 2013 and 2012 produced no indication of impairment. We could recognize impairments in the future, and we may never realize the full value of our intangible assets. If these events occur, our profitability and financial condition will suffer.

20


We currently do not intend to pay dividends on our Class A common stock or Class B common stock.
We currently do not anticipate paying cash dividends on our Class A common stock or Class B common stock. We anticipate that we will retain all of our future earnings, if any, for use in the development and expansion of our business, the repayment of debt and for general corporate purposes. Any determination to pay dividends and other distributions in cash, stock, or property by Swift in the future will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial condition and results of operations, contractual restrictions, such as restrictive covenants contained in our senior secured credit facility, capital requirements, and other factors.
Conflict of Interest Risk
Our Chief Executive Officer and the Moyes Affiliates control a large portion of our stock and have substantial control over us, which could limit other stockholders’ ability to influence the outcome of key transactions, including changes of control.
Our Chief Executive Officer, Mr. Moyes, and the Moyes Affiliates beneficially own approximately 38% of our outstanding common stock. Mr. Moyes and the Moyes Affiliates beneficially own 100% of our Class B common stock and approximately 3% of our Class A common stock. On all matters with respect to which our stockholders have a right to vote, including the election of directors, the holders of our Class A common stock are entitled to one vote per share, and the holders of our Class B common stock are entitled to two votes per share. All outstanding shares of Class B common stock are convertible to Class A common stock on a one-for-one basis at the election of the holders thereof or automatically upon transfer to someone other than Mr. Moyes or the Moyes Affiliates.
This voting structure gives Mr. Moyes and the Moyes Affiliates approximately 54% of the voting power of all of our outstanding stock. Furthermore, due to our dual class structure, Mr. Moyes and the Moyes Affiliates are able to control all matters submitted to our stockholders for approval even though they own less than 50% of the total outstanding shares of our common stock. This significant concentration of share ownership may adversely affect the trading price for our Class A common stock because investors may perceive disadvantages in owning stock in companies with controlling stockholders. Also, these stockholders can exert significant influence over our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations, or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation, or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if other stockholders perceived that change of control to be beneficial.
Because Mr. Moyes and the Moyes Affiliates control a majority of the voting power of our common stock, we qualify as a “controlled company” as defined by the NYSE and as such, we may elect not to comply with certain corporate governance requirements of this stock exchange. We do not currently intend to utilize these exemptions, but may choose to do so in the future.
Mr. Moyes has borrowed against and pledged a portion of his Class B common stock, which may cause a conflict of interests between him and our other stockholders, and adversely affect the trading price of our Class A Common Stock.
Pursuant to our second amended and restated securities trading policy, our board of directors limited the right of employees or directors, including Mr. Moyes and the Moyes Affiliates, to pledge more than 20% of their family holdings to secure margin loans through June 30, 2014. Effective July 1, 2014, the limitation on margin pledging was reduced to 15% of their family holdings and effective July 1, 2015, the limitation on margin pledging will be reduced to 10% of holdings.
In July 2011 and December 2011, Cactus Holding Company II, LLC ("Cactus II"), an entity controlled by Mr. Moyes, pledged 12,023,343 shares of Class B common stock on margin as collateral for personal loan arrangements entered into by Cactus II and relating to Mr. Moyes. In connection with these December 2011 transactions, Cactus II converted 6,553,253 of the 12,023,343 pledged shares of Class B common stock into shares of Class A common stock on a one-for-one basis. During 2012, the Moyes Affiliates converted an additional 1,068,224 shares of Class B common stock to Class A common stock and sold 4,831,878 of these pledged Class A shares to a counter-party pursuant to a sale and repurchase agreement with a full recourse obligation to repurchase the securities at the same price on the fourth anniversary of sale. As of December 31, 2014, the Moyes Affiliates had pledged 7,951,055 shares, which could cause Mr. Moyes’ interest to conflict with the interests of our other stockholders and could result in the future sale of such shares. Such sales could adversely affect the trading price or otherwise disrupt the market for our Class A common stock.
In addition to the shares that are allowed to be pledged on margin pursuant to our second amended and restated securities trading policy, on October 29, 2013, an affiliate of Mr. Moyes (“M Capital II”) entered into a VPF contract with Citibank, N.A. that was intended to facilitate settlement of the 2010 METS, issued in 2010 by an unaffiliated trust concurrently with the Company’s IPO, which was required to be settled with shares of the Company’s Class A common stock, or cash, on December 31, 2013. This transaction effectively replaced the 2010 METS with the VPF contract and allowed the parties to the 2010 METS transaction to satisfy their obligations under the 2010 METS (as contemplated by their terms) without reducing the number of shares owned by these parties. The VPF transaction will also allow Mr. Moyes and certain of his affiliates, through their ownership of M Capital II, to participate in future price appreciation of the Company’s Common Stock, and retain the voting power of the shares collateralized to secure the VPF contract as described below.
Under the VPF contract, M Capital II is obligated to deliver to Citibank a variable amount of stock or cash during two twenty trading day periods beginning on January 4, 2016, and July 5, 2016, respectively.  In connection with the VPF transaction, 25,994,016

21


shares of Class B Common Stock are collateralized by Citibank, N.A. to secure M Capital II’s obligations under the VPF Contract.  As these shares are not pledged to secure a loan on margin, they are not subject to the securities trading policy limitation discussed above.  Although M Capital II may settle its obligations to Citibank N.A. in cash, any or all of the collateralized shares could be converted into Class A common stock and delivered on such dates to settle such obligations. Such transfers of our common stock, or the perception that they may occur, may have an adverse effect on the trading price of our Class A common stock and may create conflicts of interests for Mr. Moyes.   
We engage in transactions with other businesses controlled by our Chief Executive Officer, Jerry Moyes. This could create conflicts of interest between Mr. Moyes and our other stockholders.
We engage in multiple transactions with related parties. These transactions include providing and receiving freight services and facility leases with entities owned by Mr. Moyes and certain members of his family and the use of air transportation services from an entity owned by Mr. Moyes and certain members of his family. Because certain entities controlled by Mr. Moyes and certain members of his family operate in the transportation industry, Mr. Moyes’ ownership may create conflicts of interest or require judgments that are disadvantageous to our stockholders in the event we compete for the same freight or other business opportunities. As a result, Mr. Moyes may have interests that conflict with our stockholders.
We have adopted a policy relating to prior approval of related party transactions and our amended and restated certificate of incorporation contains provisions that specifically relate to prior approval for transactions with Mr. Moyes, the Moyes Affiliates, and any Moyes affiliated entities. However, we cannot provide assurance that the policy or these provisions will be successful in eliminating conflicts of interests. Our amended and restated certificate of incorporation also provides that in the event that any of our officers or directors is also an officer or director or employee of an entity owned by or affiliated with Mr. Moyes or any of the Moyes Affiliates and acquires knowledge of a potential transaction or other corporate opportunity not involving the truck transportation industry or involving refrigerated transportation or less-than-truckload transportation, then, subject to certain exceptions, we shall not be entitled to such transaction or corporate opportunity an there should be no expectancy that such transaction or corporate opportunity will be available to us.
Mr. Moyes, our Chief Executive Officer, has substantial ownership interests in and guarantees related to several other businesses and real estate investments, which may expose Mr. Moyes to significant lawsuits or liabilities.
In addition to being our Chief Executive Officer and principal stockholder, Mr. Moyes is the principal stakeholder of, and serves as chairman of the board of directors of SME Industries, Inc., a steel erection and fabrication company, Southwest Premier Properties, LLC a real estate management company, and is involved in other business endeavors in a variety of industries and has made substantial real estate investments. Although Mr. Moyes devotes the substantial majority of his time to his role as Chief Executive Officer of Swift, the breadth of Mr. Moyes’ other interests may place competing demands on his time and attention.
In addition, in one instance of litigation arising from another business owned by Mr. Moyes, Swift was named as a defendant even though Swift was not a party to the transactions that were the subject of the litigation. It is possible that litigation relating to other businesses owned by Mr. Moyes in the future may result in Swift being named as a defendant and, even if such claims are without merit, that we will be required to incur the expense of defending such matters. In many instances, Mr. Moyes has given personal guarantees to lenders to the various businesses and real estate investments in which he has an ownership interest and in certain cases, the underlying loans are in default and are in the process of being restructured and/or settled. If Mr. Moyes is otherwise unable to settle or raise the necessary amount of proceeds to satisfy his obligations to such lenders, he may be subject to significant lawsuits.
Our acquisition of Central may be contested by our stockholders.
We acquired Central in 2013. A Swift stockholder served a books and records demand (“Demand”) upon the Company pursuant to 8 Delaware Code Section 220. The purpose of the Demand is to investigate whether or not there were any breaches of fiduciary duties and mismanagement by Swift’s board of directors or officers in connection with our acquisition of Central and whether the price and other terms of the transaction were fair to the Company and its stockholders, or resulted in the unjust enrichment of Jerry Moyes (the majority owner of Central). Although no lawsuit or other legal proceedings have been initiated, the Demand may be used in support of a stockholder lawsuit to contest the fairness of Swift’s acquisition of Central to the Company Class A stockholders. Such a lawsuit could result in significant expense and have an adverse impact on our stock price.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our headquarters are owned by the Company and situated on approximately 118 acres in Phoenix, Arizona. Our headquarters consist of a three-story administration building with 126,000 square feet of office space; 106,000 square feet of repair and maintenance buildings; 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 300-space parking structure; a two-bay truck wash; and an eight-lane fueling facility.

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We have over 40 locations in the United States and Mexico, including terminals, driver academies and certain other locations. Our terminals may include customer service, marketing, fuel, and/or repair facilities. We believe that substantially all of our property and equipment is in good condition and our facilities have sufficient capacity to meet our current needs. From time to time, we invest in additional facilities to meet the needs of our business as we pursue additional growth.
 
 
 
 
 
 
 
Description of Activities Performed at Each Location
Region
Location
 
Owned
/
Leased
 
Customer Service
Marketing
Admin.
Fuel
Repair
Driver Academy
W
Arizona - Phoenix
 
ü
 
 
 
ü
ü
ü
ü
ü
ü
E
California - Fontana
 
ü
 

 
 
 
 
 
 
ü
S
California - Jurupa Valley
 
ü

 
 
 
ü
ü
 
ü

ü

 
T
California - Lathrop
 
ü
 
 
 
ü
ü
 
ü
ü
 
E
California - Otay Mesa
 
ü
 
 
 
ü
 
 
 
ü
 
R
California - Willows
 
ü
 
 
 
 
 
 
ü
ü
 
N
Colorado - Denver
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Idaho - Lewiston
 
ü
 
ü
 
ü
ü
 
ü
ü
ü
 
Nevada - Sparks
 
ü
 
 
 
ü
 
 
ü
ü
 
 
New Mexico - Albuquerque
 
ü
 
 
 
ü
 
 
ü
ü
 
 
Oklahoma - Oklahoma City
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Oregon - Troutdale
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Texas - El Paso
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Texas - Houston
 
 
 
ü
 
ü
 
 
ü
ü
 
 
Texas - Lancaster
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Texas - Laredo
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Texas - Corsicana
 
ü
 
 
 
 
 
 
 
 
ü
 
Utah - West Valley City*
 
ü
 
 
 
ü
ü
 
ü
ü
ü
 
Washington - Sumner
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Washington - Pasco*
 
 
 
ü
 
ü
 
 
 
ü
 
E
Florida - Ocala
 
ü
 
 
 
ü
ü
 
ü
ü
 
A
Georgia - Decatur
 
ü
 
 
 
ü
ü
 
ü
ü
 
S
Georgia - Decatur
 
 
 
ü
 
 
 
 
 
 
ü
T
Illinois - Manteno
 
ü
 
 
 
ü
 
 
ü
ü
 
E
Illinois - Rochelle*
 
ü
 
 
 
ü
ü
 
 
ü
 
R
Indiana - Gary
 
ü
 
 
 
ü
 
 
ü
ü
 
N
Kansas - Edwardsville
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Michigan - New Boston
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Minnesota - Inver Grove Heights
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
New Jersey - Avenel
 
ü
 
 
 
 
 
 
 
ü
 
 
New York - Syracuse
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Ohio - Columbus
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Pennsylvania - Jonestown
 
ü
 
 
 
ü
 
 
ü
ü
 
 
South Carolina - Greer
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
South Carolina - Greer
 
ü
 
 
 
 
 
 
 
ü
 
 
Tennessee - Memphis
 
ü
 
 
 
 
 
 
 
ü
 
 
Tennessee - Memphis
 
ü
 
 
 
ü
ü
 
ü
ü
 
 
Tennessee - Millington
 
 
 
ü
 
 
 
 
 
 
ü
 
Virginia - Richmond
 
ü
 
 
 
ü
ü
 
ü
ü
ü
 
Wisconsin - Town of Menasha
 
ü
 
 
 
ü
ü
 
ü
ü
 
M
Tamaulipas - Nuevo Laredo
 
ü
 
 
 
ü
ü
 
ü
ü
 
E
X
Sonora - Nogales
 
ü
 
 
 
ü
 
 
 
ü
 
I
C
Nuevo Leon - Monterrey
 
ü
 
 
 
ü
 
ü
 
 
 
O
 
State of Mexico - Mexico City
 
 
 
ü
 
ü
 
ü
 
ü
 
 
____________
* Acquired as part of the Central Acquisition
In addition to the above, we own parcels of vacant land and several non-operating facilities in various locations around the United States. We also maintain various drop yards throughout the United States, Mexico and Canada. As of December 31, 2014, our aggregate monthly rent for all leased properties was approximately $0.5 million with varying terms expiring through December 2053.

23


Substantially all of our owned properties are securing our senior secured credit facility.
ITEM 3.
LEGAL PROCEEDINGS
We are party to certain lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
Information about our legal proceedings is included in Note 15 of the notes to the consolidated financial statements, included in Part II, Item 8, in this Annual Report on Form 10-K for the year ended December 31, 2014 and is incorporated by reference herein.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock trades on the NYSE under the symbol “SWFT”. The following table sets forth the high and low sales prices per share of our Class A common stock as reported on the NYSE for the periods indicated.
Year Ended December 31, 2014:
High
 
Low
    First quarter
$
26.71

 
$
19.89

    Second quarter
$
26.54

 
$
21.49

    Third quarter
$
26.15

 
$
18.53

    Fourth quarter
$
29.44

 
$
20.01

 
 
 
 
Year Ended December 31, 2013:
High
 
Low
    First quarter
$
15.67

 
$
9.11

    Second quarter
$
17.88

 
$
12.75

    Third quarter
$
20.76

 
$
15.69

    Fourth quarter
$
23.74

 
$
18.99

As of December 31, 2014, we had 91,103,643 shares of Class A common stock, of which the Moyes Affiliates held 2,590,177 shares. The Moyes Affiliates also held all 50,991,938 shares of Class B common stock outstanding as of December 31, 2014.
On December 31, 2014, there were eight holders of record of our Class A common stock and three holders of record of our Class B common stock. Because many of our shares of Class A common stock are held by brokers or other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.
There is currently no established trading market for our Class B common stock. As of February 13, 2015, all of our Class B common stock was owned by Mr. Moyes and the Moyes Affiliates, of which 26.0 million shares were collateralized in an unaffiliated trust.
Dividend Policy
We anticipate that we will retain all of our future earnings, if any, for use in the development and expansion of our business, the repayment of debt and for general corporate purposes. Any determination to pay dividends and other distributions in cash, stock, or property by Swift in the future will be at the discretion of our board of directors. Such determinations will be dependent on then-existing conditions, including our financial condition and results of operations, contractual restrictions, including restrictive covenants contained in our debt agreements, capital requirements, and other factors. For further discussion about restrictions on our ability to pay dividends, see Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Material Debt Agreements” in this Annual Report on Form 10-K.







24





Stockholders Return Performance Graph
Our Class A common stock began trading on the NYSE on December 16, 2010. The following graph compares the cumulative yearly total return of stockholders from the closing date of our IPO on December 16, 2010 to December 31, 2014 of our Class A common stock relative to the cumulative total returns of the S&P 500 index and an index of other companies within the trucking industry (Dow Jones U.S. Trucking Total Stock Market Index) over the same period.  The graph assumes that the value of the investment in our Class A common stock and in each of the indexes (including reinvestment of dividends) was $100 on December 16, 2010, and tracks it through December 31, 2014.  The stock price performance included in this graph is not necessarily indicative of future stock price performance.
 
December 16,
 
December 31,
 
2010
 
2010
 
2011
 
2012
 
2013
 
2014
Swift Transportation Company
$
100.00

 
$
112.70

 
$
74.23

 
$
79.91

 
$
200.09

 
$
257.93

S&P 500
$
100.00

 
$
106.68

 
$
108.94

 
$
126.37

 
$
167.30

 
$
190.20

Dow Jones US Trucking TSM
$
100.00

 
$
109.29

 
$
102.00

 
$
107.24

 
$
134.84

 
$
174.19

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any of our equity securities during the reporting period, and there are currently no share repurchase programs authorized by our board of directors.

25


ITEM 6.
SELECTED FINANCIAL DATA
The information presented below is derived from our audited consolidated financial statements, included elsewhere in this report. In management's opinion, all necessary adjustments for the fair presentation of the information outlined in these financial statements have been applied. The selected financial data for 2014, 2013 and 2012 should be read alongside the consolidated financial statements and accompanying footnotes in Part II, Item 8. Factors that materially affect the comparability of the data for those years are available in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. Factors that materially affect the comparability of the selected financial data for 2011 and 2010 are set forth below the table.
The following table highlights key measures of the Company's financial condition and results of operations (dollars in thousands, except per share data):
Consolidated income statement data (1):
2014
 
2013
 
2012
 
2011
 
2010
Operating revenue
$
4,298,724

 
$
4,118,195

 
$
3,976,085

 
$
3,778,963

 
$
3,300,543

Operating income
370,070

 
356,959

 
351,816

 
322,036

 
254,282

Interest and derivative interest expense (2)
86,559

 
103,386

 
127,150

 
165,038

 
323,985

Income (loss) before income taxes
250,626

 
256,404

 
201,701

 
161,239

 
(159,730
)
Net income (loss)
161,152

 
155,422

 
140,087

 
102,747

 
(116,389
)
Diluted earnings (loss) per share
1.12

 
1.09

 
1.00

 
0.74

 
(1.84
)
 
 
 
 
 
 
 
 
 
 
Consolidated balance sheet data (1):
December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
Cash and cash equivalents, excluding restricted cash
$
105,132

 
$
59,178

 
$
53,596

 
$
80,452

 
$
49,130

Net property and equipment
1,542,130

 
1,447,807

 
1,397,536

 
1,404,031

 
1,408,563

Total assets
2,937,582

 
2,809,008

 
2,791,981

 
2,814,347

 
2,696,751

Debt:
 
 
 
 
 
 
 
 
 
Securitization of accounts receivable
334,000

 
264,000

 
204,000

 
180,000

 
171,500

Revolving line of credit
57,000

 
17,000

 
2,531

 
9,037

 

Total long-term debt and obligations under capital leases
1,104,066

 
1,321,820

 
1,430,598

 
1,673,036

 
1,819,243

 
 
 
 
 
 
 
 
 
 
Non-GAAP financial data (1):
2014
 
2013
 
2012
 
2011
 
2010
Adjusted EBITDA (unaudited) (3)
$
619,825

 
$
615,236

 
$
598,934

 
$
567,637

 
$
518,024

Adjusted Operating Ratio (unaudited) (3)
89.0
%
 
88.8
%
 
88.3
%
 
88.8
%
 
89.2
%
Adjusted EPS (unaudited) (3)
$
1.38

 
$
1.23

 
$
1.11

 
$
0.84

 
$
0.10

____________
(1)
Data for all periods includes the results of Central, which was acquired by Swift on August 6, 2013. See further details regarding the Central Acquisition in Note 1 to the consolidated financial statements in Part II, Item 8.
(2)
Interest expense during 2011 primarily related to outstanding balances on the Company's previous first lien term loan, senior secured second priority notes, accounts receivable securitization and capital lease obligations. In aggregate, the outstanding debt balance related to these facilities was $1.7 billion as of December 31, 2011.
Interest expense during 2010 primarily related to outstanding balances on the Company's previous first lien term loan, senior secured second priority notes, and capital lease obligations. In aggregate, the outstanding debt balance related to these facilities was $1.7 billion as of December 31, 2010.
The decrease in interest expense from 2010 to 2011 was largely due to the IPO and refinancing transactions in December 2010, and our application of the proceeds from the underwriters’ exercise of the over-allotment option in January 2011. We also voluntarily prepaid $75.0 million on our first lien term loan in September 2011, resulting in lower debt balances and lower interest rates on the senior secured credit facility and fixed rate notes. The decrease in derivative expense from 2010 to 2011 was attributed to termination of our previous interest rate swaps in December 2010 in conjunction with the IPO and refinancing transactions.
(3)
Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS are non-GAAP financial measures. These non-GAAP financial measures should not be considered alternatives to or superior to GAAP financial measures. However, management believes that presentation of these non-GAAP financial measures provides useful information to investors regarding the Company's results of operations. Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS are reconciled to the most directly comparable GAAP financial measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7.

26


ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain acronyms and terms used throughout this Annual Report on Form 10-K are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document. Definitions for these acronyms and terms are provided in the "Glossary of Terms," available in the front of this document.
Management's discussion and analysis of financial condition and results of operations should be read together with the Description of Business in Part I, Item 1, as well as the consolidated financial statements and accompanying footnotes in Part II, Item 8, of this Annual Report on Form 10-K. This discussion contains forward-looking statements as a result of many factors, including those set forth under Part I, Item 1A. “Risk Factors,” Part I “Cautionary Note Regarding Forward Looking Statements," and elsewhere in this report. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those discussed.
Executive Summary
Company Overview — Swift is a multi-faceted transportation services company, operating the largest fleet of truckload equipment in North America from over 40 terminals near key freight centers and traffic lanes. We principally operate in short- to medium-haul traffic lanes around our terminals and dedicated customer locations. As of December 31, 2014, our fleet of 18,836 tractors was comprised of 13,882 company tractors and 4,954 owner-operator tractors, together covering 2.1 billion miles for shippers throughout North America during 2014. Our fleet also included 61,652 trailers and 9,150 intermodal containers as of December 31, 2014. Our extensive suite of service offerings provides our customers with the opportunity to "one-stop-shop" for their truckload transportation needs. In 2014, we generated consolidated operating revenue of $4.3 billion from our service offerings, which include line-haul services, dedicated customer contracts, temperature-controlled units, intermodal freight solutions, cross-border United States/Mexico and United States/Canada freight, flatbed hauling, freight brokerage and logistics, and others. Consolidated operating income in 2014 was $370.1 million.
Revenue — We primarily generate revenue by transporting freight for our customers, generally at a predetermined rate per mile. We supplement this revenue by charging for fuel surcharges, stop-off pay, loading and unloading activities, tractor and trailer detention, and other ancillary services. The main factors that affect our revenue from transporting freight are the rate per mile we receive from our customers and the number of loaded miles we run. The main factors that affect fuel surcharge revenue are the price of diesel fuel and the number of loaded miles. Fuel surcharges are billed on a lagging basis, meaning that we typically bill customers in the current week based on a previous week's applicable index. Therefore, in times of increasing fuel prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is true.
Revenue in our non-reportable segment is generated by our non-asset-based freight brokerage and logistics management service, tractor leasing revenue from our financing subsidiaries, premium revenue from our captive insurance companies, and revenue from third parties serviced by our repair and maintenance shops. Main factors affecting revenue in our non-reportable segment are demand for brokerage and logistics services and number of equipment leases to our owner-operators by our financing subsidiaries.
Expenses — Our most significant expenses vary with miles traveled and include fuel, driver-related expenses (such as wages and benefits) and services purchased from owner-operators and other transportation providers (such as railroads, drayage providers, and other trucking companies). Maintenance and tire expenses and cost of insurance and claims generally vary with the miles we travel, but also have a controllable component based on safety improvements, fleet age, efficiency, and other factors. Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, interest expense, and non-driver compensation.
Changes in deadhead miles percentage generally have the largest proportionate effect on our profitability because we still bear all of the expenses for each deadhead mile, but do not earn any revenue to offset those expenses. Changes in rate per mile have the next largest proportionate effect on profitability because incremental improvements in rate per mile are not offset by any additional expenses. Changes in loaded miles generally have a smaller effect on profitability because variable expenses fluctuate with changes in miles. However, changes in mileage are affected by driver satisfaction and network efficiency, which indirectly effect expenses.
Financial Overview
 
2014
 
2013
 
2012
 
(Dollars in thousands, except per share data)
Operating revenue
$
4,298,724

 
$
4,118,195

 
$
3,976,085

Revenue xFSR
$
3,535,391

 
$
3,326,714

 
$
3,181,571

Net income
$
161,152

 
$
155,422

 
$
140,087

Diluted earnings per common share
$
1.12

 
$
1.09

 
$
1.00

Operating Ratio
91.4
%
 
91.3
%
 
91.2
%
Non-GAAP financial data:
 
 
 
 
 
Adjusted Operating Ratio (1)
89.0
%
 
88.8
%
 
88.3
%
Adjusted EBITDA (1)
$
619,825

 
$
615,236

 
$
598,934

Adjusted EPS (1)
$
1.38

 
$
1.23

 
$
1.11


27


____________
(1)
Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS are non-GAAP financial measures. These non-GAAP financial measures should not be considered alternatives to or superior to GAAP financial measures. However, management believes that presentation of these non-GAAP financial measures provides useful information to investors regarding the Company's results of operations. Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS are reconciled to the most directly comparable GAAP financial measures under "Non-GAAP Financial Measures," below.
Factors Affecting Comparability Between Periods
2014 Results of OperationsOur net income for the year ended December 31, 2014 was $161.2 million. Items impacting comparability between 2014 and prior periods include the following:
$39.9 million loss on debt extinguishment resulting from the repurchase of our Senior Notes and replacement of the 2013 Agreement;
$19.5 million reduction in interest expense in 2014 as compared to 2013, primarily due to the redemption of the Senior Notes, lower debt balances, and the replacement of the 2013 Agreement with the 2014 Agreement;
280 basis point difference in the effective tax rate, which was 35.7%, as compared to the expected effective tax rate of 38.5%, primarily due to the benefit of prior year federal income tax credits realized in the third quarter of 2014 and federal employment income tax credits realized in the fourth quarter of 2014;
$2.3 million pre-tax impairment charge for the write-off of certain operational software replaced; and
$3.0 million in pre-tax gain on disposal of redundant Central properties.
2013 Results of Operations Our net income for the year ended December 31, 2013 was $155.4 million. Items impacting comparability between 2013 and other periods include the following:
$22.5 million reduction in interest expense for the year ended December 31, 2013 compared to the corresponding period in 2012 resulting from the replacement of our previous Amended and Restated Credit Agreement in the first quarter of 2013 and our voluntary debt repayments;
$6.9 million pre-tax gain on the sale of three properties classified as held for sale;
$4.9 million in merger and acquisition expense for financial advisory, severance and other professional fees related to the Central Acquisition;
$5.5 million loss on debt extinguishment resulting from the repayment of certain outstanding Central debt in full at closing of the Acquisition, resulting in a loss on debt extinguishment of $0.5 million, and $5.0 million from the replacement of our previous Amended and Restated Credit Agreement in the first quarter of 2013; and
$0.9 million in one-time non-cash equity compensation charge incurred by Central for certain stock options that accelerated upon closing of the Central Acquisition.
2012 Results of OperationsOur net income for the year ended December 31, 2012 was $140.1 million. Items impacting comparability between 2012 and other periods include the following:
$27.9 million reduction in interest expense in 2012 as compared to 2011 resulting from the amendment of the senior credit facility in March 2012 and our voluntary debt prepayments made throughout 2012;
$22.2 million loss on debt extinguishment resulting from the call of our remaining $15.2 million face value 12.50% fixed rate notes due May 15, 2017 and the replacement of the first lien term loan;
$6.0 million pre-tax impairment of a note receivable that was recorded in Impairments of non-operating assets in the fourth quarter of 2012 related to SPS, an entity in which we own a minority interest;
$5.2 million gain relating to a contractual settlement with the City of Los Angeles;
$4.6 million benefit reflecting the deferred state tax benefit related to an internal corporate restructuring of our subsidiaries; and
$3.4 million in pre-tax impairment charges comprised of a $2.3 million impairment charge for a deposit related to certain fuel technology equipment and a related asset and a $1.1 million impairment of real property.
Non-GAAP Financial Measures
The terms "Adjusted EBITDA," "Adjusted Operating Ratio," and "Adjusted EPS," as we define them, are not presented in accordance with GAAP. These financial measures supplement our GAAP results in evaluating certain aspects of our business. We believe that using these measures improves comparability in analyzing our performance because they remove the impact of items from our operating results that, in our opinion, do not reflect our core operating performance. Management and the board of directors

28


focus on Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS as key measures of our performance, all of which are reconciled to the most comparable GAAP financial measures and further discussed below. We believe our presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance and compliance with debt covenants.
Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS are not substitutes for their comparable GAAP financial measures, such as net income, cash flows from operating activities, operating margin, or other measures prescribed by GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing our period to period performance, they could limit comparability to other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis. In the GAAP to non-GAAP reconciliations below, 2011 and 2010 are included to support the five-year presentation in Part II, Item 6, "Selected Financial Data."
Adjusted EBITDA — We define Adjusted EBITDA as net income (loss) plus (a) depreciation and amortization; (b) interest and derivative interest expense, including other fees and charges associated with indebtedness, net of interest income; (c) income taxes; (d) non-cash impairments; (e) non-cash equity compensation expense; (f) other special non-cash items; and (g) excludable transaction costs.
The following table is a GAAP to non-GAAP reconciliation for Adjusted EBITDA:
 
2014
 
2013
 
2012
 
2011
 
2010
 
(Dollars in thousands)
Net income (loss)
$
161,152

 
$
155,422

 
$
140,087

 
$
102,747

 
$
(116,389
)
Adjusted for:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
221,122

 
226,008

 
218,839

 
218,098

 
215,139

Amortization of intangibles
16,814

 
16,814

 
16,925

 
18,258

 
20,472

Interest expense
80,064

 
99,534

 
122,049

 
149,981

 
253,586

Derivative interest expense
6,495

 
3,852

 
5,101

 
15,057

 
70,399

Interest income
(2,909
)
 
(2,474
)
 
(2,156
)
 
(1,997
)
 
(1,460
)
Income tax (benefit) expense
89,474

 
100,982

 
61,614

 
58,492

 
(43,341
)
EBITDA
$
572,212

 
$
600,138

 
$
562,459

 
$
560,636

 
$
398,406

Non-cash impairments (2)
2,308

 

 
3,387

 

 
1,274

Non-cash equity compensation (3)
5,396

 
4,645

 
4,890

 
7,001

 
22,883

Loss on debt extinguishment (4)
39,909

 
5,540

 
22,219

 

 
95,461

Excludable transaction costs (5)

 
4,913

 

 

 

Non-cash impairments of non-operating assets (6)

 

 
5,979

 

 

Adjusted EBITDA (1)
$
619,825

 
$
615,236

 
$
598,934

 
$
567,637

 
$
518,024

____________
(1)
Our method of computing Adjusted EBITDA is consistent with that used in our debt covenants, specifically our leverage ratio, and is also routinely reviewed by management for that purpose. Also, as a result of the Central Acquisition described in Note 1 to the consolidated financial statements, the Adjusted EBITDA reconciliation reflects the combination of the entities as if the acquisition was effective on January 1, 2010.    
(2)
Non-cash impairments (pre-tax) included:
2014 — $2.3 million related to the replacement and write-off of certain operations software;
2012 — $2.3 million lost deposit on fuel technology and related equipment because a supplier ceased operations and $1.1 million for impaired real property; and
2010 — Revenue equipment with a carrying amount $3.6 million that was written down to its fair value of $2.3 million.
(3)
Non-cash equity compensation expense is presented on a pre-tax basis. In accordance with the terms of our senior credit agreement, this expense is added back in the calculation of Adjusted EBITDA for covenant compliance purposes. In addition to the recurring non-cash equity compensation, in the third quarter of 2013, Central incurred a $0.9 million one-time non-cash equity compensation charge for certain options that accelerated upon the closing of the Central Acquisition. In 2010, we incurred a $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.
(4)
For 2012 through 2014, refer to the "Loss on Debt Extinguishment" discussion under "Consolidated Operating Expense," below. Loss on debt extinguishment in 2010 represents the write-off of unamortized original issue discount and deferred financing

29


fees associated with the senior secured credit facility and previous senior secured second-priority fixed and floating rate notes, which were paid off, along with the remaining interest rate swaps, in conjunction with our IPO and refinancing transactions on December 21, 2010.
(5)
Excludable transaction costs for the year ended December 31, 2013 were a result of the Central Acquisition, in which Swift and Central incurred financial advisory, severance and other professional fees associated with the transaction.
(6)
We own a minority interest and hold a secured promissory note from Swift Power Services, LLC, which failed to make its first scheduled principal payment and quarterly interest payment to us on December 31, 2012. This was due to a decline in its financial performance, primarily resulting from a legal dispute with its former owners and its primary customer. This caused us to evaluate the secured promissory note due from Swift Power Services, LLC, for impairment. In the fourth quarter of 2012, we recorded a $6.0 million charge in "Impairments of non-operating assets" in the consolidated income statement.
Adjusted Operating Ratio — We define Adjusted Operating Ratio as (a) Adjusted operating expense as percentage of (b) Revenue xFSR. Adjusted operating expense in (a) is comprised of total operating expenses; less (i) fuel surcharges; (ii) amortization of intangibles from the 2007 Transactions; (iii) non-cash impairment charges; (iv) other special non-cash items, and (v) excludable transaction costs.
The following table is a GAAP to non-GAAP reconciliation for Adjusted Operating Ratio:
 
2014
 
2013
 
2012
 
2011
 
2010
 
(Dollars in thousands)
Operating revenue
$
4,298,724

 
$
4,118,195

 
$
3,976,085

 
$
3,778,963

 
$
3,300,543

Less:
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
763,333

 
791,481

 
794,514

 
750,203

 
490,259

Revenue xFSR
3,535,391

 
3,326,714

 
3,181,571

 
3,028,760

 
2,810,284

Operating expense
3,928,654

 
3,761,236

 
3,624,269

 
3,456,927

 
3,046,261

Adjusted for:
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
(763,333
)
 
(791,481
)
 
(794,514
)
 
(750,203
)
 
(490,259
)
Amortization of certain intangibles (2)
(15,648
)
 
(15,648
)
 
(15,758
)
 
(17,092
)
 
(19,305
)
Non-cash impairments (3)
(2,308
)
 

 
(3,387
)
 

 
(1,274
)
Other special non-cash items (4)

 

 

 

 
(7,382
)
Acceleration of non-cash stock options (5)

 
(887
)
 

 

 
(22,605
)
Adjusted operating expense
$
3,147,365

 
$
2,953,220

 
$
2,810,610

 
$
2,689,632

 
$
2,505,436

Operating Ratio
91.4
%
 
91.3
%
 
91.2
%
 
91.5
%
 
92.3
%
Adjusted Operating Ratio (1)
89.0
%
 
88.8
%
 
88.3
%
 
88.8
%
 
89.2
%
____________
(1)
We net fuel surcharge revenue against fuel expense in the calculation of our Adjusted Operating Ratio, thereby excluding fuel surcharge revenue from total revenue in the denominator. Because fuel surcharge revenue is so volatile, we believe excluding it provides for more transparency and comparability. Additionally, we believe that comparability of our performance is improved by excluding impairments, non-comparable intangibles from the 2007 Transactions and other special items. Also, as a result of the Central Acquisition described in Note 1 to the consolidated financial statements, the Adjusted Operating Ratio reconciliation reflects the combination of the entities as if the acquisition was effective on January 1, 2010.
(2)
"Amortization of certain intangibles" specifically reflects the non-cash amortization expense relating to certain intangible assets identified in the 2007 Transactions through which Swift Corporation acquired Swift Transportation Co.
(3)
Refer to footnote (2) to the Adjusted EBITDA reconciliation for a description of items in "Non-cash impairments."
(4)
In the first quarter of 2010, management scrapped approximately 7,000 dry van trailers. As a result of this, we incurred $7.4 million of incremental depreciation expense, reflecting management’s revised estimates regarding salvage value and useful lives of the trailers.
(5)
In the third quarter of 2013, Central incurred a $0.9 million one-time non-cash equity compensation charge for certain options that accelerated upon the closing of the Central Acquisition. In 2010, we incurred a $22.6 million one-time non-cash equity compensation charge representing certain stock options that vested upon our IPO.
Adjusted EPS — We define Adjusted EPS as (a) adjusted income (loss) before income taxes reduced by (b) income taxes; the net of which is divided by (c) weighted average diluted shares outstanding. Adjusted income (loss) before income taxes in is equal to income (loss) before income taxes less the sum of (i) amortization of the intangibles from our 2007 going-private transaction; (ii) non-cash impairments; (iii) other special non-cash items (iv) excludable transaction costs; (v) the mark-to-market adjustment on our interest rate swaps that is recognized in the consolidated income statements; and (vi) the amortization of previous losses recorded in AOCI related to interest rate swaps we terminated upon our IPO and refinancing transactions in December 2010.

30


Our chief operating decision-makers and our compensation committee use Adjusted EPS thresholds in setting performance goals for our employees, including senior management. As a result, the annual bonuses for certain members of our management will be based at least in part on Adjusted EPS. At the same time, some or all of these executives have responsibility for monitoring our financial results generally, including the items included as adjustments in calculating Adjusted EPS (subject ultimately to review by our board of directors in the context of the board’s review of our quarterly financial statements). While many of the adjustments (for example, transaction costs and our previous senior secured credit facility fees) involve mathematical application of items reflected in our financial statements, others (such as determining whether a non-cash item is special) involve a degree of judgment and discretion. While we believe that all of these adjustments are appropriate, and although the quarterly calculations are subject to review by our board of directors in the context of the board’s review of our quarterly financial statements, this discretion may be viewed as an additional limitation on the use of Adjusted EPS as an analytical tool.
The following table is a GAAP to non-GAAP reconciliation for Adjusted EPS:
 
2014
 
2013
 
2012
 
2011
 
2010
Diluted earnings (loss) per share
$
1.12

 
$
1.09

 
$
1.00

 
$
0.74

 
$
(1.84
)
Adjusted for:
 
 
 
 
 
 
 
 
 
Income tax expense (benefit)
0.62

 
0.71

 
0.44

 
0.42

 
(0.68
)
Income (loss) before income taxes
1.75

 
1.80

 
1.44

 
1.15

 
(2.52
)
Non-cash impairments (2)
0.02

 

 
0.02

 

 
0.02

Non-cash impairments of non-operating assets (3)

 

 
0.04

 

 

Acceleration of non-cash stock options (4)

 
0.01

 

 

 
0.36

Loss on debt extinguishment (5)
0.28

 
0.04

 
0.16

 

 
1.51

Other special non-cash items (6)

 

 

 

 
0.12

Excludable transaction costs (7)

 
0.03

 

 

 

Mark-to-market adjustment of interest rate swaps (8)

 
0.01

 

 

 
0.39

Amortization of unrealized losses on interest rate swaps (9)

 

 
0.04

 
0.11

 

Amortization of certain intangibles (10)
0.11

 
0.11

 
0.11

 
0.12

 
0.30

Adjusted income before income taxes
2.15

 
2.00

 
1.82

 
1.38

 
0.17

Provision for income tax expense at statutory rate (11)
0.77

 
0.77

 
0.71

 
0.54

 
0.07

Adjusted EPS (1)
$
1.38

 
$
1.23

 
$
1.11

 
$
0.84

 
$
0.10

____________
(1)
The numbers reflected in the Adjusted EPS table are calculated on a per share basis and may not foot due to rounding. In calculating diluted shares outstanding for the purposes of Adjusted EPS, the dilutive effect of outstanding stock options is only included for the period following our IPO when a market price was available to assess the dilutive effect of such options. Also, as a result of the Central Acquisition described in Note 1 to the consolidated financial statements, the Adjusted EPS reconciliation reflects the combination of the entities as if the acquisition was effective on January 1, 2010.
(2)
Refer to footnote (2) to the Adjusted EBITDA reconciliation for a description of items in "Non-cash impairments."
(3)
Refer to footnote (6) to the Adjusted EBITDA reconciliation for a description of items in "Non-cash impairments of non-operating assets."
(4)
Refer to footnote (5) to the Adjusted Operating Ratio reconciliation for a description of items in "Acceleration of non-cash stock options."
(5)
Refer to footnote (4) to the Adjusted EBITDA reconciliation for a description of items in "Loss on debt extinguishment."
(6)
Refer to footnote (4) to the Adjusted Operating Ratio reconciliation for a description of items in "Other special non-cash items."
(7)
Refer to footnote (5) to the Adjusted EBITDA reconciliation for a description of items in "Excludable transaction costs."
(8)
Mark-to-market adjustment of interest rate swaps reflects the portion of the change in fair value of these financial instruments that was recorded in earnings in each period indicated and excludes the portion recorded in AOCI under cash flow hedge accounting.
(9)
Amortization of unrealized losses on interest rate swaps reflects the non-cash amortization expense of $5.1 million and $15.1 million for the years ended December 31, 2012 and 2011, respectively, included in derivative interest expense in the consolidated income statements. Non-cash amortization expense is comprised of previous losses recorded in AOCI related to the interest rate swaps we terminated upon our IPO and concurrent refinancing transactions in December 2010. Such losses were incurred in prior periods when hedge accounting applied to the swaps and were expensed in relation to the hedged interest payments through the original maturity of the swaps in August 2012.
(10)
Refer to footnote (2) to the Adjusted Operating Ratio reconciliation for a description of items in "Amortization of certain intangibles."

31


(11)
For all periods through 2012, we used a normalized tax rate of 39% in our Adjusted EPS calculation due to the amortization of deferred tax assets related to our pre-IPO interest rate swap amortization and other items that we knew would cause fluctuations in our GAAP effective tax rate. Beginning in 2013, these items no longer resulted in large variations in our GAAP effective tax rate, and we began using our GAAP expected effective tax rate for our Adjusted EPS calculation.
Results of Operations — Segment Review
During 2014, we operated four reportable segments: Truckload, Dedicated, Central Refrigerated and Intermodal. The descriptions of the operations of these reportable segments are described in Note 27 to the consolidated financial statements. In the first quarter of 2014, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its lines of business following the integration of Central. In association with the operational reorganization, the operations of Central's TOFC business are reported within the Company's Intermodal segment and the operations of Central's logistics business, third-party leasing, and other services provided to owner-operators are reported in the Company's other non-reportable segment. All prior period historical results related to the above noted segment reorganization have been retrospectively recast.
Consolidating tables for operating revenue and operating income are as follows:
 
2014
 
2013
 
2012
Operating revenue:
(Dollars in thousands)
Truckload
$
2,301,010

 
53.5
 %
 
$
2,313,035

 
56.2
 %
 
$
2,282,342

 
57.4
 %
Dedicated
892,078

 
20.8
 %
 
738,929

 
17.9
 %
 
724,405

 
18.2
 %
Central Refrigerated
417,980

 
9.7
 %
 
452,531

 
11.0
 %
 
415,733

 
11.5
 %
Intermodal
401,577

 
9.3
 %
 
376,075

 
9.1
 %
 
355,494

 
8.9
 %
Subtotal
4,012,645

 
93.3
 %
 
3,880,570

 
94.2
 %
 
3,777,974

 
95.0
 %
Non-reportable segments
342,969

 
8.0
 %
 
287,853

 
7.0
 %
 
268,821

 
6.8
 %
Intersegment eliminations
(56,890
)
 
(1.3
)%
 
(50,228
)
 
(1.2
)%
 
(70,710
)
 
(1.8
)%
Consolidated operating revenue
$
4,298,724

 
100.0
 %
 
$
4,118,195

 
100.0
 %
 
$
3,976,085

 
100.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2012
Operating income:
(Dollars in thousands)
Truckload
$
258,072

 
69.7
 %
 
$
225,963

 
63.3
 %
 
$
246,005

 
69.9
 %
Dedicated
75,794

 
20.5
 %
 
83,520

 
23.4
 %
 
74,026

 
21.0
 %
Central Refrigerated
14,035

 
3.8
 %
 
17,682

 
5.0
 %
 
21,334

 
6.1
 %
Intermodal (1)
8,298

 
2.2
 %
 
5,619

 
1.6
 %
 
(6,486
)
 
(1.8
)%
Subtotal
356,199

 
96.3
 %
 
332,784

 
93.2
 %
 
334,879

 
95.2
 %
Non-reportable segments
13,871

 
3.7
 %
 
24,175

 
6.8
 %
 
16,937

 
4.8
 %
Consolidated operating income
$
370,070

 
100.0
 %
 
$
356,959

 
100.0
 %
 
$
351,816

 
100.0
 %
____________
(1)
During 2012, Intermodal incurred an increase in insurance and claims expense, primarily related to one claim associated with a drayage accident, which increased the Intermodal Operating Ratio by approximately 300 basis points.
Our chief operating decision makers monitor the GAAP results of our reporting segments, as supplemented by certain non-GAAP information. Refer to "Non-GAAP Financial Measures" above for more details. Additionally, we use a number of primary indicators to monitor our revenue and expense performance and efficiency.
Weekly Trucking Revenue xFSR per Tractor (monitored monthly) — This is our primary measure of productivity for our Truckload, Dedicated and Central Refrigerated segments. Weekly trucking Revenue xFSR per tractor is affected by the following factors, which are typically monitored daily:
loaded miles (miles driven when hauling freight);
fleet size (because available loads are spread over available tractors);
rates received for our services; and
network balance (number of loads accepted, compared to available trucks, by market).
We strive to increase our revenue per tractor by improving freight rates with customers, hauling more loads with existing equipment, effectively moving freight within our network, maintaining our tractors, and recruiting and retaining drivers and owner-operators.


32


Deadhead Miles Percentage (monitored daily) — This is calculated by dividing the number of unpaid miles by the total number of miles driven. We monitor deadhead miles percentage in Truckload and Central Refrigerated, as we strive to reduce our number of deadhead miles within these segments. By balancing our freight flows and planning consecutive loads with shorter distances between the drop-off and pick-up locations, we are able to reduce the percentage of deadhead miles driven to allow for more revenue-generating miles during our drivers’ hours-of-service. This also enables us to reduce wage, fuel and other costs associated with deadhead miles.
Average Tractors Available for Dispatch (monitored daily)— We use this measure for all of our reportable segments. It includes tractors driven by company drivers as well as owner-operator units. This measure changes based on our ability to adjust our fleet size in response to changes in demand.
Adjusted Operating Ratio (monitored monthly) — We consider this ratio an important measure of our operating profitability for each of our reportable segments. We define and reconcile Adjusted Operating Ratio under "Non-GAAP Financial Measures," above. GAAP Operating Ratio is operating expenses as a percentage of revenue, or the inverse of operating margin, and produces an indication of operating efficiency. It is widely used in our industry as an assessment of management’s effectiveness in controlling all categories of operating expenses.
Load Count and Average Container Count (monitored daily) — Within Intermodal, we monitor our load count and average container count. These metrics allow us to measure our utilization of our container fleet.
Truckload
 
2014
 
2013
 
2012
 
(Dollars and miles in thousands)
Operating revenue
$
2,301,010

 
$
2,313,035

 
$
2,282,342