SWIFT TRANSPORTATION CO INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0–18605

SWIFT TRANSPORTATION CO., INC.

(Exact name of registrant as specified in its charter)


Nevada		86-0666860
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

2200 South 75th Avenue
Phoenix, AZ 85043
(602) 269-9700
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive office)

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 the filing requirements for at least the past 90 days. YES x NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date (May 12, 2003)

Common stock, $.001 par value: 83,069,128 shares

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Earnings
		Condensed Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEMS 1, 2, 3, 4 and 5. Not applicable
	ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
EX-99.1
EX-99.2
EX-99.3


		Page
		Number

PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002		3-4
	Condensed Consolidated Statements of Earnings (unaudited) for the Three Month Periods Ended March 31, 2003 and 2002		5
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Month Periods Ended March 31, 2003 and 2002		6-7
	Notes to Condensed Consolidated Financial Statements		8-11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12-18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		18
Item 4.	Controls and Procedures		18
PART II
OTHER INFORMATION
Items 1, 2, 3, 4 and 5.	Not applicable
Item 6.	Exhibits and Reports on Form 8-K		19

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets
(In thousands, except share data)


			March 31,		December 31,
			2003		2002

			(unaudited)
Assets
Current assets:
	Cash		$	10,003	$	7,930
	Accounts receivable, net			267,774		272,545
	Equipment sales receivable			946		11,100
	Inventories and supplies			13,290		16,031
	Prepaid taxes, licenses and insurance			26,338		19,021
	Assets held for sale			4,872		8,274
	Deferred income taxes			520		2,262

		Total current assets		323,743		337,163

Property and equipment, at cost:
	Revenue and service equipment			1,475,274		1,476,183
	Land			48,594		47,855
	Facilities and improvements			250,588		213,421
	Furniture and office equipment			71,088		70,315

		Total property and equipment		1,845,544		1,807,774
	Less accumulated depreciation and amortization			573,826		548,937

		Net property and equipment		1,271,718		1,258,837

Investment in Transplace				3,852		4,282
Notes receivable from Trans-Mex				12,977		11,649
Deferred legal fees				14,773		16,892
Other assets				16,612		16,759
Goodwill				8,900		8,900

			$	1,652,575	$	1,654,482

See accompanying notes to condensed consolidated financial statements.

Continued

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets
(In thousands, except share data)


					March 31,			December 31,
					2003			2002

					(unaudited)
				Liabilities and Stockholders’ Equity
Current liabilities:
		Accounts payable			$	54,313		$	53,192
		Accrued liabilities				61,610			52,161
		Current portion of claims accruals				66,648			83,188
		Current portion of long-term debt				3,428			3,389
		Current portion of obligations under capital leases				32,736			45,832
		Securitization of accounts receivable				157,000			169,000

				Total current liabilities		375,735			406,762

Borrowings under revolving credit agreement						167,400			136,400
Long-term debt, less current portion						6,271			9,387
Obligations under capital leases						33,005			37,683
Claims accruals, less current portion						76,416			65,011
Deferred income taxes						224,550			223,514
Fair value of interest rate swaps						9,847			9,947
Stockholders’ equity:
	Preferred stock, par value $.001 per share
			Authorized 1,000,000 shares; none issued
	Common stock, par value $.001 per share
			Authorized 200,000,000 shares; 90,367,841 and 90,182,273 shares issued at March 31, 2003 and December 31, 2002, respectively			90			90
	Additional paid-in capital					274,042			272,099
	Retained earnings					592,377			583,480
	Treasury stock, at cost (7,338,077 and 6,237,077 shares at March 31, 2003 and December 31, 2002, respectively)					(107,158	)		(89,891	)

				Total stockholders’ equity		759,351			765,778

Commitments and contingencies
					$	1,652,575		$	1,654,482

See accompanying notes to condensed consolidated financial statements.

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Condensed Consolidated Statements of Earnings
(unaudited)
(In thousands, except share data)


			Three months ended March 31,

			2003			2002

Operating revenue			$	551,303		$	475,780
Operating expenses:
	Salaries, wages and employee benefits			204,395			180,905
	Operating supplies and expenses			58,139			41,652
	Fuel			84,710			54,316
	Purchased transportation			91,254			83,738
	Rental expense			20,665			22,194
	Insurance and claims			22,490			19,380
	Depreciation and amortization			34,354			36,717
	Communication and utilities			6,940			7,171
	Operating taxes and licenses			10,011			11,955

		Total operating expenses		532,958			458,028

Operating income				18,345			17,752
Other (income) expenses:
	Interest expense			3,932			2,307
	Interest income			(158	)		(287	)
	Other			224			407

		Other (income) expenses, net		3,998			2,427

Earnings before income taxes				14,347			15,325
Income taxes				5,450			5,915

Net earnings			$	8,897		$	9,410

Basic earnings per share			$	.11		$	.11

Diluted earnings per share			$	.10		$	.11

See accompanying notes to condensed consolidated financial statements.

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)


					Three Months Ended March 31,

					2003			2002

Cash flows from operating activities:
	Net earnings				$	8,897		$	9,410
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization				34,181			36,646
		Deferred income taxes				2,778			5,915
		Provision for losses on accounts receivable				1,943			2,629
		Amortization of deferred compensation				353			209
		Fair market value of interest rate swaps				(100	)		(1,357	)
		Amortization of deferred legal fees				2,119
		Increase (decrease) in cash resulting from changes in:
			Accounts receivable			3,361			(30,019	)
			Inventories and supplies			2,741			(682	)
			Prepaid expenses			(7,317	)		(4,613	)
			Other assets			275			7,891
			Accounts payable, accrued liabilities and claims accruals			5,435			9,605

				Net cash provided by operating activities		54,666			35,634

Cash flows from investing activities:
	Proceeds from sale of property and equipment					7,576			22,074
	Capital expenditures					(55,669	)		(65,683	)
	Proceeds from sale of assets held for sale					3,760
	Repayment of note receivable					270			1,000
	Notes receivable					(1,328	)		(11,604	)
	Payments received on equipment sale receivables					10,327			2,107

				Net cash used in investing activities		(35,064	)		(52,106	)

See accompanying notes to condensed consolidated financial statements.

Continued

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)


				Three Months Ended March 31,

				2003			2002

Cash flows from financing activities:
	Repayments of long-term debt				(20,851	)		(19,043	)
	Borrowings under line of credit				50,800			75,500
	Repayments of borrowings under line of credit				(19,800	)		(56,000	)
	Change in borrowings under accounts receivable securitization				(12,000	)		2,000
	Purchases of treasury stock				(17,267	)
	Proceeds from issuance of common stock under stock option plans				1,589			5,125

			Net cash provided by (used in) financing activities		(17,529	)		7,582

Net increase (decrease) in cash					2,073			(8,890	)
Cash at beginning of period					7,930			14,151

Cash at end of period				$	10,003		$	5,261

Supplemental disclosure of cash flow information:
	Cash paid during the period for:
		Interest		$	4,103		$	3,919
		Income taxes		$	8,857
Supplemental schedule of noncash investing and financing activities:
	Equipment sales receivables			$	706		$	14,552

See accompanying notes to condensed consolidated financial statements.

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1. Basis of Presentation

The condensed consolidated financial statements include the accounts of Swift Transportation Co., Inc., a Nevada holding company, and its wholly-owned subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated.

The financial statements have been prepared without audit and in accordance with generally accepted accounting principles, pursuant to rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments, which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year.

Note 2. Stock Compensation Plans

The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its Employee Stock Purchase Plan. The compensation cost that has been charged against income for its Fixed Stock Option Plans was $353,000 and $209,000 for the three months ended March 31, 2003 and 2002, respectively.

Had compensation cost for the Company’s four stock-based compensation plans been determined consistent with FASB Statement No. 123 (“SFAS No. 123”), the Company’s net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:


		Three Months			Three Months
		Ended			Ended
		March 31,			March 31,
		2003			2002

Net earnings (in thousands)	As Reported	$	8,897		$	9,410
	Add: Compensation expense, using intrinsic method, net of tax		219			129
	Deduct: Compensation expense, using fair value method, net of tax		(943	)		(521	)

	Pro forma	$	8,173		$	9,018

SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)


Basic earnings per share	As Reported	$	.11	$	.11

	Pro forma	$	.10	$	.10

Diluted earnings per share	As Reported	$	.10	$	.11

	Pro forma	$	.10	$	.10

Pro forma net earnings reflect only options granted in 1995 through March 31, 2003. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options’ vesting period and compensation cost for options granted prior to January 1, 1995 is not considered under SFAS No. 123.

The Company has a number of stock options under various plans. Options granted by M.S. Carriers have generally been granted with an exercise price equal to the market price on the grant date and expire on the tenth anniversary of the grant date. The options granted to M.S. Carriers employees vested on June 29, 2001. Options granted by Swift to employees have been granted with an exercise price equal to 85 percent of the market price on the grant date and expire on the tenth anniversary of the grant date. The majority of options granted by Swift to employees vest 20 percent per year beginning on the fifth anniversary of the grant date. Options granted to Swift non-employee directors have been granted with an exercise price equal to 85 percent of the market price on the grant date, vest on the grant date and expire on the sixth anniversary of the grant date.

As of March 31, 2003, the Company is authorized to grant an additional 4.3 million shares.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three months ended March 31, 2003 and 2002:


	Three Months Ended	Three Months Ended
	March 31,	March 31,
	2003	2002

Dividend yield

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Note 1.		Basis of Presentation

		The condensed consolidated financial statements include the accounts of Swift Transportation Co., Inc., a Nevada holding company, and its wholly-owned subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated.

		The financial statements have been prepared without audit and in accordance with generally accepted accounting principles, pursuant to rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments, which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year.

Note 2.		Stock Compensation Plans

		The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its Employee Stock Purchase Plan. The compensation cost that has been charged against income for its Fixed Stock Option Plans was $353,000 and $209,000 for the three months ended March 31, 2003 and 2002, respectively.

		Had compensation cost for the Company’s four stock-based compensation plans been determined consistent with FASB Statement No. 123 (“SFAS No. 123”), the Company’s net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:

		Pro forma net earnings reflect only options granted in 1995 through March 31, 2003. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options’ vesting period and compensation cost for options granted prior to January 1, 1995 is not considered under SFAS No. 123.

		The Company has a number of stock options under various plans. Options granted by M.S. Carriers have generally been granted with an exercise price equal to the market price on the grant date and expire on the tenth anniversary of the grant date. The options granted to M.S. Carriers employees vested on June 29, 2001. Options granted by Swift to employees have been granted with an exercise price equal to 85 percent of the market price on the grant date and expire on the tenth anniversary of the grant date. The majority of options granted by Swift to employees vest 20 percent per year beginning on the fifth anniversary of the grant date. Options granted to Swift non-employee directors have been granted with an exercise price equal to 85 percent of the market price on the grant date, vest on the grant date and expire on the sixth anniversary of the grant date.

		As of March 31, 2003, the Company is authorized to grant an additional 4.3 million shares.

		The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three months ended March 31, 2003 and 2002: