EX-99 2 exhibit999302014.htm EXHIBIT Exhibit99 9.30.2014
 
 
Exhibit 99

    

October 23, 2014


Dear Fellow Stockholders of Swift Transportation Company (NYSE: SWFT),

A summary of our key results for the three and nine months ended September 30th is shown below:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
Unaudited
 
($ in millions, except per share data)
Operating Revenue
$
1,074.9

 
$
1,032.1

 
$
992.6

 
$
3,159.2

 
$
3,042.8

 
$
2,928.5

Revenue xFSR1
$
881.8

 
$
833.4

 
$
798.2

 
$
2,575.2

 
$
2,448.1

 
$
2,343.3

 
 
 
 
 
 
 
 
 
 
 
 
Operating Ratio
90.9
%
 
91.8
%
 
92.2
%
 
92.5
%
 
91.6
%
 
91.9
%
Adjusted Operating Ratio2
88.2
%
 
89.3
%
 
89.8
%
 
90.2
%
 
89.1
%
 
89.4
%
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
$
154.0

 
$
144.0

 
$
135.8

 
$
405.2

 
$
437.1

 
$
393.1

Adjusted EBITDA2
$
160.7

 
$
150.8

 
$
137.3

 
$
424.2

 
$
450.4

 
$
420.7

 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS
$
0.35

 
$
0.21

 
$
0.24

 
$
0.72

 
$
0.78

 
$
0.61

Adjusted EPS2
$
0.39

 
$
0.29

 
$
0.23

 
$
0.84

 
$
0.87

 
$
0.70

 
 
 
 
 
 
 
 
 
 
 
 
1Revenue xFSR is operating revenue, excluding fuel surcharge revenue
2 See GAAP to Non-GAAP reconciliation in the schedules following this letter

Quarterly Highlights (discussed in more detail below, including GAAP to non-GAAP reconciliations):

•
Adjusted EPS for the third quarter of 2014 increased 34.5% to $0.39, compared to $0.29 in the third quarter of 2013
•
Consolidated Revenue xFSR for the third quarter of 2014 grew 5.8% year over year
•
Consolidated Average Operational Truck Count increased more than 500 trucks year over year in the third quarter across our various reporting segments
•
Truckload Adjusted Operating Ratio improved 290 basis points year over year in the third quarter to 84.5%
•
Truckload utilization, as measured by loaded miles per tractor per week, improved 2.2% year over year
•
Truckload pricing increases continue to gain momentum, resulting in a 5.1% increase in Revenue xFSR per loaded mile compared to the third quarter of 2013
•
Dedicated Revenue xFSR grew 31.7% from the third quarter of 2013 to the third quarter of 2014 driven by the addition of multiple new customer contracts over the past 12 months
•
Dedicated Adjusted Operating Ratio improved 50 basis points from the second quarter of 2014 to 88.0% as we continue to improve the operational efficiencies within recently awarded business contracts

 
1
            

•
Central Refrigerated Segment ("CRS") Adjusted Operating Ratio improved 30 basis points to 96.0% year over year in the third quarter of 2014
•
Intermodal Revenue xFSR in the third quarter of 2014 grew 4.5% year over year driven by a 12.9% increase in Container on Flat Car (COFC) loads, offset by a reduction in Trailer on Flat Car (TOFC) loads as previously discussed in our second quarter 2014 earnings call
•
Intermodal Adjusted Operating Ratio improved 40 basis points to 97.6% in the quarter compared to 98.0% during the same period last year
•
Logistics won several large customer bids scheduled to begin in the first quarter of 2015
•
Gains on disposal of property and equipment were $11.6 million in the quarter; $2-3 million more than anticipated, due in part to a robust used truck market
•
The effective tax rate in the third quarter 2014 was 32.3%; primarily resulting from tax credits realized in the quarter after months of research and consultation; this increased Adjusted EPS by approximately $0.03 in the third quarter
•
Net Debt was reduced by $56.2 million to $1,397 million during the quarter and our net leverage ratio dropped to 2.37 as of September 30, 2014

We are encouraged with the operational performance our team delivered this quarter. We were able to generate year over year profitability improvement in our Truckload, Intermodal and CRS segments. In our Dedicated Segment, we realized sequential improvement, in-line with our expectations, and continue to target a return to historical profit margins by year end, as we completely absorb the significant number of contract awards this year. Above all, the operational trends we experienced in each segment as the third quarter developed were very positive. Equally impressive was our team's ability to produce these results in our Truckload and CRS segments, in spite of the cost headwind associated with the large driver wage increases previously announced.

As we reported in our press release on September 25th, we are pleased by the driver response to the various initiatives we have implemented over the past several months, all of which have been designed to "Deliver a Better Life" for our drivers and their families. We believe drivers will remain a key focal area for the entire industry as we move into the fourth quarter and 2015 - and one we expect to monitor closely.

With the strong sequential monthly operational trends we experienced in the third quarter, combined with the positive driver response to the aforementioned driver initiatives, the call of our 10% notes on November 15th, and the anticipated growth in our seasonal business, we expect to exceed the current Adjusted EPS consensus estimates for the year. With the tax credits realized sooner than anticipated, our September year to date Adjusted EPS is $0.84; therefore, we now expect the full year Adjusted EPS to be in the range of $1.29 - $1.33. For 2015, we are targeting 10% - 15% operational improvement in our full year Adjusted EPS, as well as $0.18 - $0.19 of year over year per share interest savings due to the refinancing and debt reduction activities in 2014, implying an Adjusted EPS range of approximately $1.62 - $1.72 for the full year 2015, or potential growth in excess of 25% year over year.


Third Quarter Results by Reportable Segment

Truckload Segment

Our Truckload segment consists of one-way movements over irregular routes throughout the United States, Mexico and Canada. This service uses both company and owner-operator tractors with dry van, flatbed and other specialized trailing equipment.

Our Truckload Revenue xFSR for the third quarter of 2014 remained relatively flat at $460.0 million compared to $460.4 million for the same quarter in 2013, which was enabled by our improved utilization, given that these results

 
2
            

were achieved with 7.0% less tractors, on average, year over year. This reduction in fleet was a result of the deliberate shift in equipment from Truckload to Dedicated to facilitate the tremendous growth in the latter segment. For Truckload, our Weekly Revenue xFSR per Tractor increased 7.4% to $3,449 compared to $3,212 in the prior year driven by a 5.1% increase in Revenue xFSR per loaded mile and a 2.2% increase in loaded miles per truck per week.

 
Three Months Ended September 30,
 
2014
 
2013
 
2012
Operating Revenue (1)
$
570.9

 
$
579.5

 
$
564.8

Revenue xFSR(1)(2)
$
460.0

 
$
460.4

 
$
447.5

 
 
 
 
 
 
Operating Ratio
87.5
%
 
90.0
%
 
90.5
%
Adjusted Operating Ratio(3)
84.5
%
 
87.4
%
 
88.0
%
 
 
 
 
 
 
Weekly Revenue xFSR per Tractor
$
3,449

 
$
3,212

 
$
3,174

Total Loaded Miles(4)
254,320

 
267,607

 
266,328

 
 
 
 
 
 
Average Operational Truck Count
10,147

 
10,907

 
10,726

Deadhead Percentage
11.7
%
 
11.5
%
 
10.9
%
1 In millions
2 Revenue xFSR is operating revenue, excluding fuel surcharge revenue
3 See GAAP to Non-GAAP reconciliation in the schedules following this letter
4 Total Loaded Miles presented in thousands

As we announced in our 2014 second quarter letter to stockholders, we implemented various strategies in the third quarter of 2014 to improve our recruitment and retention of drivers, including a significant increase in driver pay combined with more driver friendly initiatives and enhanced driver interaction. As anticipated, our operational truck count decreased sequentially from the second quarter, on average; however, these new strategies enabled us to grow by approximately 300 tractors from the beginning to the end of the third quarter 2014. For the fourth quarter of 2014, we expect to continue to grow, and anticipate our Average Operational Truck count to increase by approximately 200 tractors from the average for the third quarter of 2014.

Our Adjusted Operating Ratio improved 290 basis points to 84.5% compared to 87.4% from the prior year. Our mid-quarter increase in driver wages and purchased transportation costs were a meaningful cost headwind during the quarter, but were more than offset by the increased Revenue xFSR per loaded mile and loaded miles per truck per week discussed above, as well as a reduction in fuel expense, driven by the combination of declining diesel prices, better fuel efficiency, and reduced engine idle time.

Dedicated Segment

Through our Dedicated segment, we devote equipment and offer tailored solutions under long-term contracts with customers. This dedicated business utilizes refrigerated, dry van, flatbed and other specialized trailing equipment.

Dedicated Revenue xFSR grew a notable 31.7% to $197.7 million in the third quarter of 2014 from $150.1 million during the third quarter of 2013. This growth is driven by numerous new contracts that started in the latter half of 2013 and continued through the first nine months of 2014.

 
3
            


For the third quarter of 2014, as expected, the Adjusted Operating Ratio in our Dedicated segment increased 170 basis points over the third quarter 2013 to 88.0%, but improved 50 basis points sequentially from the second quarter 2014. The year over year increase was driven primarily by start up costs associated with the various fleets that began in the second and third quarters of 2014. As discussed last quarter, we expect the profitability in our Dedicated segment to continue to improve as the recently started locations achieve normal operations, which we anticipate will return our Adjusted Operating Ratio to the historical range of 86% to 87% by the end of the year, as growth normalizes.

 
Three Months Ended September 30,
 
2014
 
2013
 
2012
Operating Revenue (1)
$
238.0

 
$
184.6

 
$
182.8

Revenue xFSR(1)(2)
$
197.7

 
$
150.1

 
$
149.9

 
 
 
 
 
 
Operating Ratio
90.0
%
 
88.9
%
 
90.7
%
Adjusted Operating Ratio(3)
88.0
%
 
86.3
%
 
88.6
%
 
 
 
 
 
 
Weekly Revenue xFSR per Tractor
$
3,154

 
$
3,326

 
$
3,336

Average Operational Truck Count
4,769

 
3,434

 
3,419

 
 
 
 
 
 
1 In millions
2 Revenue xFSR is operating revenue, excluding fuel surcharge revenue
3 See GAAP to Non-GAAP reconciliation in the schedules following this letter

The addition of the new accounts discussed above drove our average operational truck count to 4,769 for the third quarter of 2014, an increase of 38.9% year over year. For the fourth quarter of 2014, we expect our Dedicated segment Average Operational Truck Count to be relatively flat as we focus our efforts and resources on meeting the fourth quarter seasonal demand in the Truckload segment.


Central Refrigerated Segment (CRS)

Our CRS segment represents shipments for customers that require temperature-controlled trailers. These shipments include one-way movements over irregular routes and dedicated truck operations.

CRS Revenue xFSR for the third quarter of 2014 decreased 12.5% to $80.6 million compared to $92.0 million for the same quarter in 2013, primarily driven by an 11.6% reduction in our average operational truck count year over year. Weekly Revenue xFSR per Tractor decreased 1.0% to $3,510. This decrease was a result of a reduction in loaded miles per truck per week of 5.5% due primarily to the increased pressures in the driver market, but partially offset by an increase of 4.8% in Revenue xFSR per loaded mile.

We believe the initiatives we implemented during the third quarter of 2014, including increased support of our drivers and a large driver pay increase in our over the road fleets, are yielding the desired results in our turnover and other operating metrics. Our loaded miles per truck per week in our CRS over the road business improved more than 5% within the quarter. Our company driver turnover in this segment improved more than 15 percentage points in the third quarter of 2014 compared to the second quarter of 2014. Additionally, we have implemented various specific recruiting initiatives which should enable us to grow this fleet going forward. We are excited about the team we have in place, and are encouraged by the recent trends we have experienced in this segment.

 
4
            


 
Three Months Ended September 30,
 
2014
 
2013
 
2012
 
 
 
 
 
 
Operating Revenue (1)
$
100.4

 
$
115.3

 
$
104.0

Revenue xFSR(1)(2)
$
80.6

 
$
92.0

 
$
80.2

 
 
 
 
 
 
Operating Ratio
96.8
%
 
97.0
%
 
95.7
%
Adjusted Operating Ratio(3)
96.0
%
 
96.3
%
 
94.4
%
 
 
 
 
 
 
Weekly Revenue xFSR per Tractor
$
3,510

 
$
3,544

 
$
3,359

Average Operational Truck Count
1,747

 
1,976

 
1,817

Deadhead Percentage
15.9
%
 
13.4
%
 
12.4
%
 
 
 
 
 
 
1 In millions
2 Revenue xFSR is operating revenue, excluding fuel surcharge revenue
3 See GAAP to Non-GAAP reconciliation in the schedules following this letter

Our Adjusted Operating Ratio in our CRS segment improved 30 basis points to 96.0% in the third quarter 2014 from 96.3% in the third quarter 2013. This improvement was driven by higher Revenue xFSR per loaded mile and better fuel efficiencies, partially offset by higher driver wages and the operational metrics discussed above. The gain on sale of the redundant CRS facilities was not specifically recorded in the CRS segment and, therefore, was not a driver of the Operating Ratio performance in the third quarter.


Intermodal Segment

Our Intermodal segment includes revenue generated by freight moving over the rail in our containers and other trailing equipment, combined with revenue for drayage to transport loads between the railheads and customer locations.

Intermodal Revenue xFSR grew by 4.5% in the third quarter of 2014 compared to the same period in the prior year, driven by a 6.1% increase in Load Counts. COFC loads grew 12.9% year over year in the third quarter 2014, and this growth could have been larger were it not for the need to stage containers in preparation for the start of a large new customer contract in September. Loads for our TOFC business decreased 38.5% in the third quarter of 2014 compared to the same period in the prior year as we continued to utilize our freight selection tools to haul the most profitable freight. This shift in mix, combined with improved turns on our containers and other operational efficiencies, drove a 40 basis point improvement in our Adjusted Operating Ratio to 97.6% in the third quarter of 2014 compared to 98.0% during the same period last year.

Revenue xFSR per load decreased slightly to $1,810 in the third quarter of 2014 from $1,836 in the same period of 2013 due to the mix shift between COFC and TOFC as well as higher COFC growth in the East which has a shorter length of haul.


 
5
            

 
Three Months Ended September 30,
 
2014
 
2013
 
2012
 
 
 
 
 
 
Operating Revenue (1)
$
100.0

 
$
96.5

 
$
91.7

Revenue xFSR(1)(2)
$
80.1

 
$
76.7

 
$
72.3

 
 
 
 
 
 
Operating Ratio
98.1
%
 
98.4
%
 
102.4
%
Adjusted Operating Ratio(3)
97.6
%
 
98.0
%
 
103.1
%
 
 
 
 
 
 
Load Counts
44,275
 
41,747
 
39,762
Average Container Counts
8,778
 
8,717
 
7,403
 
 
 
 
 
 
1 In millions
2 Revenue xFSR is operating revenue, excluding fuel surcharge revenue
3 See GAAP to Non-GAAP reconciliation in the schedules following this letter

Our average container count grew by 61 containers to 8,778 as we added approximately 200 containers in the latter half of the quarter. We are continuing to add containers and expect our fourth quarter 2014 Average Container Count to be approximately 9,100.

Other Non-Reportable Segments

Our other non-reportable segments include our logistics and brokerage services, and our subsidiaries offering support services to customers and owner-operators, including shop maintenance, equipment leasing and insurance. Also captured here is the intangible amortization related to the 2007 going-private transaction.

In the third quarter of 2014, combined revenues from the aforementioned services increased $16.1 million compared to the same period of 2013 due to growth in our logistics business, increased services to owner-operators and an increase in intercompany leasing between our IEL subsidiary and our Truckload and Dedicated segments.

The $2.6 million operating loss in the third quarter of 2014 in the other non-reportable segments was primarily related to an impairment of $2.3 million on certain software rendered obsolete in the quarter. We expect revenue and operating income in the other non-reportable segments to increase in the fourth quarter of 2014 due to seasonal project business, similar to prior years.


Third Quarter Consolidated Operating Expenses

The table below highlights some of our cost categories for the third quarter of 2014, compared to the third quarter of 2013 and the second quarter of 2014, showing each as a percent of Revenue xFSR. Fuel surcharge revenue can be volatile and is primarily dependent upon the cost of fuel and not specifically related to our non-fuel operational expenses. Therefore, we believe that Revenue xFSR is a better measure for analyzing our expenses and operating metrics.

Salaries, wages and benefits increased $19.8 million to $240.0 million during the third quarter of 2014, compared to $220.2 million for the third quarter of 2013 due primarily to increases in driver pay and workers compensation expense. Sequentially, salaries, wages and benefits increased $1.9 million during the third quarter of 2014 compared

 
6
            

to the second quarter of 2014 primarily due to the driver wage increase mentioned above, partially offset by a reduction in workers compensation expense.

Third quarter year over year Operating Supplies and Expenses increased $3.3 million due to increased hiring and legal and professional fees, partially offset by reduced equipment maintenance expenses. Sequentially, operating supplies and expenses increased $4.4 million to $88.5 million during the third quarter of 2014, compared to $84.1 million for the second quarter of 2014 driven primarily by increased driver recruiting expenses.

Insurance and claims expense increased sequentially $4.4 million to $37.7 million for the third quarter of 2014, compared to $33.3 million in the second quarter of 2014. As a percent of Revenue xFSR, insurance and claims expense increased to 4.3% in the third quarter of 2014 compared to 3.8% in the second quarter of 2014 which is consistent with the guidance given last quarter. Third quarter insurance and claims expense as a percent of Revenue xFSR was also consistent on a year over year basis. For the full year, we continue to expect our insurance and claims expense as a percent of Revenue xFSR to be approximately 4.3%, which is in-line with the full year 2013 experience.

 
 
 
 
YOY
 
 
 
 
 
QOQ
Q3'14
 
Q3'13
 
Variance1
($ in millions)
Q3'14
 
Q2'14
 
Variance1
$
1,074.9

 
$
1,032.1

 
4.1
 %
Total Revenue
$
1,074.9

 
$
1,075.9

 
-0.1
 %
$
(193.1
)
 
$
(198.7
)
 
-2.8
 %
Less: Fuel Surcharge Revenue
$
(193.1
)
 
$
(199.6
)
 
-3.3
 %
$
881.8

 
$
833.4

 
5.8
 %
Revenue xFSR
$
881.8

 
$
876.3

 
0.6
 %
 
 
 
 
 
 
 
 
 
 
 
$
240.0

 
$
220.2

 
-9.0
 %
Salaries, Wages & Benefits
$
240.0

 
$
238.1

 
-0.8
 %
27.2
%
 
26.4
%
 
-80 bps

% of Revenue xFSR
27.2
%
 
27.2
%
 
—

 
 
 
 
 
 
 
 
 
 
 
$
88.5

 
$
85.2

 
-3.9
 %
Operating Supplies & Expenses
$
88.5

 
$
84.1

 
-5.2
 %
10.0
%
 
10.2
%
 
20 bps

% of Revenue xFSR
10.0
%
 
9.6
%
 
-40 bps

 
 
 
 
 
 
 
 
 
 
 
$
37.7

 
$
35.1

 
-7.4
 %
Insurance & Claims
$
37.7

 
$
33.3

 
-13.2
 %
4.3
%
 
4.2
%
 
-10 bps

% of Revenue xFSR
4.3
%
 
3.8
%
 
-50 bps

 
 
 
 
 
 
 
 
 
 
 
$
7.3

 
$
6.7

 
-9.0
 %
Communications & Utilities
$
7.3

 
$
7.7

 
5.2
 %
0.8
%
 
0.8
%
 
—

% of Revenue xFSR
0.8
%
 
0.9
%
 
10 bps

 
 
 
 
 
 
 
 
 
 
 
$
17.9

 
$
18.6

 
3.8
 %
Operating Taxes & Licenses
$
17.9

 
$
17.9

 
—
 %
2.0
%
 
2.2
%
 
20 bps

% of Revenue xFSR
2.0
%
 
2.0
%
 
—

 
 
 
 
 
 
 
 
 
 
 
1 Positive numbers represent favorable variances, negative numbers represent unfavorable variances

Fuel Expense

Q3'14
 
Q3'13
($ in millions)
Q3'14
 
Q2'14
$
149.1

 
$
160.6

Fuel Expense
$
149.1

 
$
153.7

13.9
%
 
15.6
%
% of Total Revenue
13.9
%
 
14.3
%


 
7
            

Fuel expense for the third quarter of 2014 was $149.1 million, representing a decrease of $11.5 million from the third quarter of 2013. The decrease was a result of a variety of factors, including declining fuel prices, improved fuel efficiency, and a reduction in the number of miles driven by company drivers.

Purchased Transportation

Purchased transportation includes payments to owner-operators, railroads and other third parties we use for intermodal drayage and other brokered business.

Q3'14
 
Q3'13
 
($ in millions)
Q3'14
 
Q2'14
 
$
328.1

 
$
318.3

 
Purchased Transportation
$
328.1

 
$
340.2

 
30.5
%
 
30.8
%
 
% of Total Revenue
30.5
%
 
31.6
%
 

Purchased transportation increased $9.8 million year over year, primarily resulting from an increase in intermodal volume and an increase in miles driven by owner-operators, partially offset by a reduction in third party dray.

Sequentially, purchased transportation decreased $12.1 million associated with reductions in the number of miles driven by owner-operators, fuel reimbursements to third parties, and third party dray movements, as well as a reduction in loads brokered through our logistics division due to a large customer's temporary production slow down during the third quarter.

Rental Expense and Depreciation & Amortization of Property and Equipment

Due to fluctuations in the number of tractors leased versus owned, we combine our rental expense with depreciation and amortization of property and equipment for analytical purposes.

Q3'14
 
Q3'13
($ in millions)
Q3'14
 
Q2'14
$
59.7

 
$
46.3

Rental Expense
$
59.7

 
$
56.1

6.8
%
 
5.6
%
% of Revenue xFSR
6.8
%
 
6.4
%
 
 
 
 
 
 
 
$
54.4

 
$
58.3

Depreciation & Amortization of Property and Equipment
$
54.4

 
$
54.8

6.2
%
 
7.0
%
% of Revenue xFSR
6.2
%
 
6.3
%
 
 
 
 
 
 
 
$
114.0

 
$
104.5

Combined Rental Expense and Depreciation
$
114.0

 
$
110.9

12.9
%
 
12.5
%
% of Revenue xFSR
12.9
%
 
12.7
%

As noted in the table above, combined rental and depreciation expense in the third quarter of 2014 increased $9.5 million to $114.0 million from the third quarter of 2013. This increase is primarily due to an increase in the number of tractors and trailers in the fleet, higher equipment replacement costs, and an increase in the amount of leased equipment.

Impairment

In the third quarter of 2014, we recorded an impairment of $2.3 million related to certain software that we rendered obsolete.


 
8
            

Gain on Disposal of Property and Equipment

The gain on disposal of property and equipment in the third quarter of 2014 was $11.6 million, which was $2-3 million higher than anticipated due to excellent execution by our newly formed retail equipment sales team. As discussed last quarter, we expected gain on disposal of property and equipment to be $10-12 million in the second half of 2014. We anticipated this to be heavier in the third quarter due to the sale of the redundant CRS facilities and the type of equipment scheduled for disposal in the third quarter before tapering off in the fourth quarter. We are still expecting gain on disposal of property and equipment to be $2-4 million in the fourth quarter of 2014.

Income Taxes

The income tax provision in accordance with GAAP for the third quarter of 2014 was $23.9 million, resulting in an effective tax rate of 32.3%, which is 620 basis points lower than anticipated primarily due to certain prior year federal income tax credits realized during the quarter, which were originally expected to occur in the fourth quarter of 2014. This opportunity was identified in 2013 and after significant research and consultation, the work was successfully completed in the third quarter 2014. Due to the discontinuation of these credits in 2014, future tax benefits will not be realized. Therefore, our effective tax rate is expected to return to approximately 38.5% in the fourth quarter and beyond.

Interest Expense

Interest expense, comprised of debt interest expense, the amortization of deferred financing costs and original issue discount and excluding derivative interest expense on our interest rate swaps, decreased by $4.2 million in the third quarter of 2014 to $20.4 million, compared with $24.6 million for the third quarter of 2013. The decrease was largely due to lower debt balances, our open market purchases of our Senior Secured 2nd Lien Notes between March and August of this year, and our new credit facility which we entered into in June 2014 that contains more favorable interest rates and terms.

Debt Balances

 
 
June 30, 2014
 
 
Q3 2014
 
September 30, 2014
($ in millions)
 
Actuals
 
 
Changes
 
Actuals
Unrestricted Cash
 
$
73.5

 
 
$
(3.2
)
 
$
70.3

 
 
 
 
 
 
 
 
A/R Securitization ($325mm / $375 mm)(b)
 
$
319.0

 
 
$
(4.0
)
 
$
315.0

Revolver ($450mm)
 
$
99.0

 
 
$
(17.0
)
 
$
82.0

Term Loan A (a)
 
$
50.0

 
 
$
—

 
$
50.0

Term Loan B (a)
 
$
399.0

 
 
$
(1.0
)
 
$
398.0

Senior Secured 2nd Lien Notes (a)
 
$
460.8

 
 
$
(32.7
)
 
$
428.1

Capital Leases & Other Debt
 
$
198.9

 
 
$
(4.7
)
 
$
194.2

Total Debt
 
$
1,526.7

 
 
$
(59.4
)
 
$
1,467.3

 
 
 
 
 
 
 
 
Net Debt
 
$
1,453.2

 
 
$
(56.2
)
 
$
1,397.0

 
 
 
 
 
 
 
 
(a) Amounts presented represent face value
(b) Previous $325 million A/R securitization facility was expanded on September 26, 2014 to $375 million



 
9
            

During the third quarter of 2014, we made net payments of $17.0 million on our revolver, and $1.0 million on our new Term Loan B. We also repurchased and canceled $32.7 million of our 10% Senior Secured 2nd Lien Notes in the open market and reduced our unrestricted cash by $3.2 million. Additionally, we decreased our capital leases and other debt by $4.7 million and our A/R Securitization by $4.0 million. Combined, these activities resulted in Net Debt of $1,397.0 million as of September 30, 2014, which reflects a reduction of $56.2 million during the third quarter 2014.
Our leverage ratio as of September 30, 2014 improved to 2.37 compared to 2.51 as of June 30, 2014. This improvement was the result of both year over year EBITDA growth and sequential debt reduction during the third quarter of 2014.
        
Subsequent to the end of the third quarter 2014, we issued a notice of redemption to the holders of our 10% Senior Secured 2nd Lien Notes notifying them of our intention to redeem the notes in full on November 15, 2014, at a price of 105% of face value, plus accrued and unpaid interest, pursuant to the terms of the indenture governing the notes. At that time, we anticipate utilizing the remaining $450.0 million of our delayed-draw Term Loan A to fund the majority of the redemption costs. Based on the notes outstanding at September 30, 2014, the total redemption price plus accrued interest to the redemption date will be approximately $471 million and is expected to result in a loss on extinguishment of approximately $27 million, comprised of $21 million for call premiums, and $6 million for the write-off of remaining unamortized debt issuance costs.


Cash Flow and Capital Expenditures

During the nine months ending September 30, 2014, we generated $292.8 million of cash from operations compared with $355.9 million during the same period of 2013. The decrease in cash flows from operations was primarily related to a $38.9 million increase in cash tax payments as we have now fully utilized all net operating losses from prior periods. For the nine months ending September 30, 2014 our capital expenditures were $211.1 million, partially offset by proceeds from the sale of property and equipment of $116.7 million. This compares to $237.0 million of capital expenditures and $75.8 million of proceeds from the sale of property and equipment in the nine months ending September 30, 2013. Cash used in financing activities for the nine months ending September 30, 2014 was $208.3 million, compared to $82.4 million for the same period in 2013, primarily driven by the voluntary repayments of our debt.


 
10
            

Capital expenditures in the fourth quarter are anticipated to be in the range of $85 - $95 million, offset by anticipated proceeds from sale of property and equipment of approximately $10 million, bringing total capital expenditures for the year in the range of $296 - $306 million and proceeds from the sale of property and equipment to approximately $127 million.

Summary

We are encouraged by the results our team was able to achieve during the third quarter, and are cautiously optimistic about the road ahead. We would like to thank all of our hard-working employees, as well as our loyal customers and stockholders, for their continued support of Swift.



Conference Call Q&A Session

Swift Transportation's management team will host a Q&A session at 11:00 a.m. Eastern Daylight Time on Friday, October 24th to answer questions about the Company’s third quarter financial results. Please email your questions to Investor_Relations@swifttrans.com prior to 7:00 p.m. Eastern Daylight Time on Thursday, October 23rd.

Participants may access the call using the following dial-in numbers:

U.S./Canada: (800) 480-8614
International/Local: (706) 501-7951
Conference ID: 19287907

The live webcast, letter to stockholders, transcript of the Q&A, and the replay of the earnings Q&A session can be accessed via our investor relations website at investor.swifttrans.com.

IR Contact:
Jason Bates
Vice President of Finance &
Investor Relations Officer
623.907.7335

Forward Looking Statements & Use of Non-GAAP Measures

This letter contains statements that may constitute forward-looking statements, which are based on information currently available, usually identified by words such as "anticipates," "believes," "estimates", "plans,” "projects," "expects," “hopes,” “intends,” “will,” “could,” “should,” “may,” or similar expressions which speak only as of the date the statement was made. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning: trends and expectations relating to our operations, Revenue xFSR, expenses, other revenue, pricing, our effective tax rate, profitability and related metrics; the benefits of our driver recruitment and retention initiatives and the expected benefits of other strategic initiatives we are implementing; trends in the Adjusted Operating Ratio in the Dedicated segment; expected reduction in Net Debt in the remainder of 2014;

 
11
            

projected Adjusted EPS for the fourth quarter of 2014 and full year 2015, including components thereof; the timing and level of fleet size and equipment and container count; the timing and level of changes in Truckload and Dedicated tractor count; expected insurance claims expense as a percentage of Revenue xFSR; levels and components of, and expected gains from the disposition of property and equipment in the remainder of 2014; our intentions to draw on our term loan and redeem our remaining 10.00% senior secured second priority notes and the estimated charges resulting therefrom; and estimated capital expenditures for the remainder of 2014. Such forward-looking statements are inherently uncertain, and are based upon the current beliefs, assumptions and expectations of Company management and current market conditions, which are subject to significant risks and uncertainties as set forth in the Risk Factor section of our Annual Report Form 10-K for the year ended December 31, 2013. As to the Company’s business and financial performance, the following factors, among others, could cause actual results to differ materially from those in forward-looking statements: any future recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries in which we have a significant concentration of customers; increasing competition from trucking, rail, intermodal, and brokerage competitors; a significant reduction in, or termination of, our trucking services by a key customer; a significant reduction in, or termination of, our trucking services by a key customer; the amount and velocity of changes in fuel prices and our ability to recover fuel prices through our fuel surcharge program; volatility in the price or availability of fuel; increases in new equipment prices or replacement costs; the regulatory environment in which we operate, including existing regulations and changes in existing regulations, or violations by us of existing or future regulations; our Compliance Safety Accountability safety rating; increases in driver compensation to the extent not offset by increases in freight rates and difficulties in driver recruitment and retention; changes in rules or legislation by the National Labor Relations Board or Congress and/or union organizing efforts; potential volatility or decrease in the amount of earnings as a result of our claims exposure through our captive insurance companies; risks relating to our captive insurance companies; uncertainties associated with our operations in Mexico; our ability to attract and maintain relationships with owner-operators; the possible re-classification of our owner-operators as employees; our ability to retain or replace key personnel; conflicts of interest or potential litigation that may arise from other businesses owned by Jerry Moyes, including pledges of Swift stock and guarantees related to other businesses by Jerry Moyes; our dependence on third parties for intermodal and brokerage business; our ability to sustain cost savings realized as part of recent cost reduction initiatives; potential failure in computer or communications systems; our ability to execute or integrate any future acquisitions successfully; seasonal factors such as harsh weather conditions that increase operating costs; goodwill impairment; the potential impact of the significant number of shares of our common stock that is outstanding; our intention to not pay dividends; our significant ongoing capital requirements; our level of indebtedness and our ability to service our outstanding indebtedness, including compliance with our indebtedness covenants, and the impact such indebtedness may have on the way we operate our business; the significant amount of our stock and related control over the Company by Jerry Moyes; and restrictions contained in our debt agreements. You should understand that many important factors, in addition to those listed above and in our filings with the SEC, could impact us financially. As a result of these and other factors, actual results may differ from those set forth in the forward-looking statements and the prices of the Company's securities may fluctuate dramatically. The Company makes no commitment, and disclaims any duty, to update or revise any forward-looking statements to reflect future events, new information or changes in these expectations. In addition to our GAAP results, this Letter to Stockholders also includes certain non-GAAP financial measures as defined by the SEC. The calculation of each measure, including reconciliation to the most closely related GAAP measure and the reasons management believes each non-GAAP measure is useful, are included in the attached schedules.


 
12
            

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(Unaudited)
 
(Amounts in thousands, except per share data)
Operating revenue
$
1,074,880

 
$
1,032,127

 
$
3,159,224

 
$
3,042,806

Operating expenses:
 
 
 
 
 
 
 
Salaries, wages and employee benefits
240,005

 
220,156

 
707,464

 
670,493

Operating supplies and expenses
88,459

 
85,204

 
253,361

 
236,267

Fuel
149,099

 
160,561

 
458,798

 
489,563

Purchased transportation
328,112

 
318,321

 
987,530

 
918,594

Rental expense
59,655

 
46,262

 
167,509

 
129,881

Insurance and claims
37,673

 
35,110

 
113,442

 
100,245

Depreciation and amortization of property and equipment
54,369

 
58,254

 
165,335

 
170,004

Amortization of Intangibles
4,204

 
4,204

 
12,611

 
12,611

Impairments
2,308

 
—

 
2,308

 
—

Gain on disposal of property and equipment
(11,628
)
 
(5,619
)
 
(23,099
)
 
(13,610
)
Communication and utilities
7,321

 
6,679

 
22,207

 
19,145

Operating taxes and licenses
17,892

 
18,575

 
54,155

 
55,209

Total operating expenses
977,469

 
947,707

 
2,921,621

 
2,788,402

Operating income
97,411

 
84,420

 
237,603

 
254,404

Other (income) expenses:
 
 
 
 
 
 
 
Interest expense
20,372

 
24,595

 
65,050

 
75,719

Derivative interest expense
1,756

 
1,465

 
5,027

 
2,559

Interest income
(777
)
 
(604
)
 
(2,235
)
 
(1,741
)
Merger and acquisition expense
—

 
4,331

 
—

 
4,331

Loss on debt extinguishment
2,854

 
496

 
12,757

 
5,540

Gain on sale of real property
—

 
(798
)
 
—

 
(6,876
)
Other
(842
)
 
(1,174
)
 
(2,416
)
 
(3,058
)
Total other (income) expenses, net
23,363

 
28,311

 
78,183

 
76,474

Income before income taxes
74,048

 
56,109

 
159,420

 
177,930

Income tax expense
23,890

 
26,156

 
56,759

 
67,806

Net income
$
50,158

 
$
29,953

 
$
102,661

 
$
110,124

Basic earnings per share
$
0.35

 
$
0.21

 
$
0.73

 
$
0.79

Diluted earnings per share
$
0.35

 
$
0.21

 
$
0.72

 
$
0.78

Shares used in per share calculations
 
 
 
 
 
 
 
Basic
141,557

 
140,327

 
141,282

 
140,004

Diluted
143,322

 
142,315

 
143,338

 
141,942




 
13
            


ADJUSTED EPS RECONCILIATION (UNAUDITED) (a)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014, 2013 AND 2012
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Diluted earnings per share
$
0.35

 
$
0.21

 
$
0.24

 
$
0.72

 
$
0.78

 
$
0.61

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
0.17

 
0.18

 
0.11

 
0.40

 
0.48

 
0.24

Income before income taxes
0.52

 
0.39

 
0.35

 
1.11

 
1.25

 
0.85

Non-cash impairments (b)
0.02

 
—

 
—

 
0.02

 
—

 
0.01

Loss on debt extinguishment (c)
0.02

 
—

 
—

 
0.09

 
0.04

 
0.16

Amortization of certain intangibles (d)
0.03

 
0.03

 
0.03

 
0.08

 
0.08

 
0.08

Amortization of unrealized losses on interest rate swaps (e)
—

 
—

 
—

 
—

 
—

 
0.04

Acceleration of non-cash equity compensation (f)
—

 
0.01

 
—

 
—

 
0.01

 
—

Excludable transaction costs (g)
—

 
0.03

 
—

 
—

 
0.03

 
—

Adjusted income before income taxes
0.58

 
0.47

 
0.38

 
1.30

 
1.42

 
1.14

   Provision for income tax expense at effective rate
0.19

 
0.18

 
0.15

 
0.46

 
0.55

 
0.44

Adjusted EPS
$
0.39

 
$
0.29

 
$
0.23

 
$
0.84

 
$
0.87

 
$
0.70


(a)
We define Adjusted EPS as (1) income (loss) before income taxes plus (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 statement of income in a given period, and (vi) the amortization of previous losses recorded in accumulated other comprehensive income (loss) (“OCI”) related to the interest rate swaps we terminated upon our IPO and refinancing transactions in December 2010; (2) reduced by income taxes; (3) divided by weighted average diluted shares outstanding. 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 result in large variations. Therefore, we began using our GAAP effective tax rate for our Adjusted EPS calculation beginning in 2013. We believe the presentation of financial results excluding the impact of the items noted above provides a consistent basis for comparing our results from period to period and to those of our peers due to the non-comparable nature of the intangibles from our going-private transaction, the historical volatility of the interest rate derivative agreements and the non-operating nature of the impairment charges, transaction costs and other adjustment items. Adjusted EPS is not presented in accordance with GAAP and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. The numbers reflected in the above table are calculated on a per share basis and may not foot due to rounding.

(b)
During the third quarter of 2014, certain operational software with a carrying amount of $2.3 million was replaced and written off, resulting in a pre-tax impairment charge of $2.3 million. In the first quarter of 2012, real property with a carrying amount of $1.7 million was written down to its fair value of $0.6 million, resulting in a pre-tax impairment charge of $1.1 million.

(c)
On June 9, 2014, the Company entered into a Third Amended and Restated Credit Agreement ("2014 Agreement"). The 2014 Agreement replaced the then-existing first lien term loan B-1 and B-2 tranches with outstanding principal balances of $229.0 million and $370.9 million, respectively, at closing under the Second Amended and Restated Credit Agreement ("2013 Agreement"), with a $500.0 million face value delayed-draw first lien term loan A tranche maturing June 2019, of which $50.0 million was drawn upon closing, and a $400.0 million face value first lien term loan B tranche maturing June 2021. Additionally, the 2014 Agreement included a $450.0 million revolving credit line maturing June 2019, $164 million of which was drawn upon closing, replacing the previous $400.0 million revolving credit line maturing September 2016. The replacement of the 2013 Agreement and the previous revolver resulted in a loss on debt extinguishment of $5.2 million in the second quarter of 2014, representing the write-off of the unamortized original issue discount and deferred financing fees associated with the 2013 Agreement and the previous revolver. Additionally, during the third quarter of 2014, the Company repurchased in open market transactions at an average price of 107.27%, $32.7 million principal amount of its Senior Second Priority Secured Notes with cash on hand. The company paid total proceeds of $35.8 million, which included the principal amount, the premium and the accrued interest. These amounts and the related write-off of the unamortized original issue discount resulted in a loss on debt extinguishment of $2.9 million in the third quarter of 2014. Further, in April 2014 and March 2014, the Company repurchased in open market transactions at an average price of 110.50%, $39.2 million principal amount of its Senior Second Priority Secured Notes with cash on hand. The Company paid total proceeds of $44.7 million, which included the principal amount, the premium and the accrued interest. These amounts and the related write-off of the unamortized original issue discount resulted in a loss on debt extinguishment of $4.7 million in the first two quarters of 2014.

In association with the acquisition of Central, on August 6, 2013, certain outstanding Central debt was paid-in full and extinguished, resulting in a loss on debt extinguishment of $0.5 million, representing the write-off of the remaining unamortized deferred financing fees. Additionally, on March 7, 2013, the Company entered into the 2013 Agreement. The 2013 Agreement replaced the then-existing first lien term loan B-1 and B-2 tranches under the Amended and Restated Credit Agreement (“2012 Agreement”) entered into on March 6, 2012, with outstanding principal balances of $152.0 million and $508.0 million, respectively, with new first lien term loan B-1 and B-2 tranches with face values of $250.0 million and $410.0 million, respectively. The replacement of the 2012 Agreement resulted in a loss on debt extinguishment of $5.0 million in the first quarter of 2013, representing the write-off of the unamortized original issue discount and deferred financing fees associated with the 2012 Agreement.

On May 21, 2012, the Company completed the call of its remaining $15.2 million face value 12.50% fixed rate notes due May 15, 2017, at a price of 106.25% of face value pursuant to the terms of the indenture governing the notes, resulting in a loss on debt extinguishment of $1.3 million, representing the call premium

 
14
            

and write-off of the remaining unamortized deferred financing fees. The Company entered into the 2012 Agreement on March 6, 2012, which replaced the then-existing, remaining $874 million face value first lien term loan, maturing in December 2016, resulting in a loss on debt extinguishment of $20.9 million in the first quarter of 2012 representing the write-off of the unamortized original issue discount and deferred financing fees associated with the original term loan.

(d)
Amortization of certain intangibles reflects the non-cash amortization expense relating to certain intangible assets identified in the 2007 going-private transaction through which Swift Corporationn acquired Swift Transportation Co.

(e)
Amortization of unrealized losses on interest rate swaps reflects the non-cash amortization expense of $0.4 million and $5.1 million for the three and nine months ended September 30, 2012 included in derivative interest expense in the consolidated statements of income and is comprised of previous losses recorded in accumulated OCI 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.

(f)
In the third quarter of 2013, Central incurred a $0.9 million one-time non-cash equity compensation expense for certain stock options that accelerated upon the closing of the acquisition of Central.

(g)
As a result of the acquisition of Central, both Swift and Central incurred certain transactional related expenses, including financial advisory and other professional fees related to the Acquisition, totaling approximately $4.3 million for the three and nine months ended September 30, 2013.


 
15
            


ADJUSTED OPERATING INCOME AND OPERATING RATIO RECONCILIATION (UNAUDITED) (a)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014, 2013 AND 2012

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(Amounts in thousands)
Operating revenue
$
1,074,880

 
$
1,032,127

 
$
992,624

 
$
3,159,224

 
$
3,042,806

 
$
2,928,525

Less: Fuel surcharge revenue
193,051

 
198,746

 
194,459

 
584,059

 
594,727

 
585,265

Revenue xFSR
881,829

 
833,381

 
798,165

 
2,575,165

 
2,448,079

 
2,343,260

Operating expense
977,469

 
947,707

 
915,434

 
2,921,621

 
2,788,402

 
2,692,713

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
(193,051
)
 
(198,746
)
 
(194,459
)
 
(584,059
)
 
(594,727
)
 
(585,265
)
Amortization of certain intangibles (b)
(3,912
)
 
(3,912
)
 
(3,912
)
 
(11,736
)
 
(11,736
)
 
(11,846
)
Non-cash impairments (c)
(2,308
)
 
—

 
—

 
(2,308
)
 
—

 
(1,065
)
Acceleration of non-cash equity compensation (d)
—

 
(887
)
 
—

 
—

 
(887
)
 
—

Adjusted operating expense
778,198

 
744,162

 
717,063

 
2,323,518

 
2,181,052

 
2,094,537

Adjusted operating income
$
103,631

 
$
89,219

 
$
81,102

 
$
251,647

 
$
267,027

 
$
248,723

Operating Ratio
90.9
%
 
91.8
%
 
92.2
%
 
92.5
%
 
91.6
%
 
91.9
%
Adjusted Operating Ratio
88.2
%
 
89.3
%
 
89.8
%
 
90.2
%
 
89.1
%
 
89.4
%

(a)
We define Adjusted Operating Ratio as (a) total operating expenses, less (i) fuel surcharges, (ii) amortization of the intangibles from our 2007 going-private transaction, (iii) non-cash impairment charges, (iv) other special non-cash items, and (v) excludable transaction costs, as a percentage of (b) total revenue excluding fuel surcharge revenue (Revenue xFSR). We believe fuel surcharge is sometimes volatile and eliminating the impact of this source of revenue (by netting fuel surcharge revenue against fuel expense) affords a more consistent basis for comparing our results of operations. We also believe excluding impairments, non-comparable nature of the intangibles from our going-private transaction and other special items enhances the comparability of our performance from period to period. Adjusted Operating Ratio is not a recognized measure under GAAP. Adjusted Operating Ratio should be considered in addition to, not as a substitute for, or superior to, measures of financial performance in accordance with GAAP.

(b)
Includes the items discussed in note (d) to the Adjusted EPS Reconciliation schedule.

(c)
Includes the items discussed in note (b) to the Adjusted EPS Reconciliation schedule.

(d)
Includes the items discussed in note (f) to the Adjusted EPS Reconciliation schedule.


 
16
            


ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
AND AMORTIZATION (UNAUDITED) (a)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014, 2013 AND 2012

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(Amounts in thousands)
Net income
$
50,158

 
$
29,953

 
$
33,656

 
$
102,661

 
$
110,124

 
$
85,403

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization of property and equipment
54,369

 
58,254

 
53,994

 
165,335

 
170,004

 
164,354

Amortization of intangibles
4,204

 
4,204

 
4,203

 
12,611

 
12,611

 
12,721

Interest expense
20,372

 
24,595

 
29,102

 
65,050

 
75,719

 
93,530

Derivative interest expense
1,756

 
1,465

 
448

 
5,027

 
2,559

 
5,101

Interest income
(777
)
 
(604
)
 
(679
)
 
(2,235
)
 
(1,741
)
 
(1,548
)
Income tax expense
23,890

 
26,156

 
15,086

 
56,759

 
67,806

 
33,573

Earnings before interest, taxes, depreciation and amortization (EBITDA)
$
153,972

 
$
144,023

 
$
135,810

 
$
405,208

 
$
437,082

 
$
393,134

Non-cash equity compensation (b)
1,539

 
1,967

 
1,459

 
3,892

 
3,465

 
4,315

Loss on debt extinguishment (c)
2,854

 
496

 
—

 
12,757

 
5,540

 
22,219

Non-cash impairments (d)
2,308

 
—

 
—

 
2,308

 
—

 
1,065

Excludable transaction costs (e)
—

 
4,331

 
—

 
—

 
4,331

 
—

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)
$
160,673

 
$
150,817

 
$
137,269

 
$
424,165

 
$
450,418

 
$
420,733


(a)
We define Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest and derivative interest expense, including other fees and charges associated with indebtedness, net of interest income, (iii) income taxes, (iv) non-cash equity compensation expense, (v) non-cash impairments, (vi) other special non-cash items, and (vii) excludable transaction costs. We believe that Adjusted EBITDA is a relevant measure for estimating the cash generated by our operations that would be available to cover capital expenditures, taxes, interest and other investments and that it enhances an investor’s understanding of our financial performance. We use Adjusted EBITDA for business planning purposes and in measuring our performance relative to that of our competitors. Our method of computing Adjusted EBITDA is consistent with that used in our senior secured credit agreement for covenant compliance purposes and may differ from similarly titled measures of other companies. Adjusted EBITDA is not a recognized measure under GAAP. Adjusted EBITDA should be considered in addition to, not as a substitute for or superior to, net income, cash flow from operations, operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows as a measure of liquidity.
 
(b)
Represents recurring non-cash equity compensation expense, 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.

(c)
Includes the items discussed in note (c) to the Adjusted EPS Reconciliation schedule.

(d)
Includes the items discussed in note (b) to the Adjusted EPS Reconciliation schedule.

(e)
Includes the items discussed in note (g) to the Adjusted EPS Reconciliation schedule.
  



 
17
            


FINANCIAL INFORMATION BY SEGMENT (UNAUDITED) (a)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014, 2013 AND 2012

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
 
(Amounts in thousands)
 
 Operating revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Truckload
$
570,931

 
$
579,494

 
$
564,802

 
$
1,699,469

 
$
1,727,813

 
$
1,691,242

 
Dedicated
238,025

 
184,550

 
182,843

 
654,776

 
546,427

 
536,255

 
Central Refrigerated
100,448

 
115,339

 
104,042

 
314,122

 
332,979

 
309,203

 
Intermodal
99,962

 
96,478

 
91,745

 
292,186

 
270,736

 
251,537

 
Subtotal
1,009,366

 
975,861

 
943,432

 
2,960,553

 
2,877,955

 
2,788,237

 
Nonreportable segments (b)
80,122

 
63,982

 
65,123

 
239,279

 
207,954

 
194,371

 
Intersegment eliminations
(14,608
)
 
(7,716
)
 
(15,931
)
 
(40,608
)
 
(43,103
)
 
(54,083
)
 
       Consolidated operating revenue
$
1,074,880

 
$
1,032,127

 
$
992,624

 
$
3,159,224

 
$
3,042,806

 
$
2,928,525

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Operating income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
Truckload
$
71,186

 
$
58,053

 
$
53,818

 
$
172,689

 
$
165,070

 
$
168,366

 
Dedicated
23,692

 
20,508

 
17,082

 
56,334

 
63,725

 
50,104

 
Central Refrigerated
3,238

 
3,422

 
4,516

 
9,320

 
13,803

 
14,671

 
Intermodal
1,934

 
1,531

 
(2,238
)
(c)
513

 
715

 
(5,903
)
(c)
Subtotal
100,050

 
83,514

 
73,178

 
238,856

 
243,313

 
227,238

 
Nonreportable segments (b)
(2,639
)
 
906

 
4,012

 
(1,253
)
 
11,091

 
8,574

 
       Consolidated operating
         income
$
97,411

 
$
84,420

 
$
77,190

 
$
237,603

 
$
254,404

 
$
235,812

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Operating Ratio:
 
 
 
 
 
 
 
 
 
 
 
 
Truckload
87.5
%
 
90.0
%
 
90.5
%
 
89.8
%
 
90.4
%
 
90.0
%
 
Dedicated
90.0
%
 
88.9
%
 
90.7
%
 
91.4
%
 
88.3
%
 
90.7
%
 
Central Refrigerated
96.8
%
 
97.0
%
 
95.7
%
 
97.0
%
 
95.9
%
 
95.3
%
 
Intermodal
98.1
%
 
98.4
%
 
102.4
%
(c)
99.8
%
 
99.7
%
 
102.3
%
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Ratio (d):
 
 
 
 
 
 
 
 
 
 
 
 
Truckload
84.5
%
 
87.4
%
 
88.0
%
 
87.3
%
 
88.0
%
 
87.4
%
 
Dedicated
88.0
%
 
86.3
%
 
88.6
%
 
89.5
%
 
85.6
%
 
88.6
%
 
Central Refrigerated
96.0
%
 
96.3
%
 
94.4
%
 
96.3
%
 
94.7
%
 
93.8
%
 
Intermodal
97.6
%
 
98.0
%
 
103.1
%
(c)
99.8
%
 
99.7
%
 
103.0
%
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 

(a)
In the first quarter of 2014, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its lines of businesses following the integration of Central Refrigerated. In association with the operational reorganization, the operations of Central Refrigerated's Trailer on Flat Car ("TOFC") business are reported within the Company's Intermodal segment, and the operations of Central Refrigerated'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.

(b)
Our nonreportable segments are comprised of our freight brokerage and logistics management services, financing subsidiaries, insurance and shop activities.

(c)
During 2012, our Intermodal reportable segment incurred an increase in its insurance and claims expense primarily related to one claim associated with a drayage accident, which increased the Intermodal Operating Ratio and Adjusted Operating Ratio by approximately 760 basis points and 970 basis points, respectively, for the three months ended September 30, 2012 and 400 basis points and 510 basis points, respectively, for the nine months ended September 30, 2012.

(d)
See our reconciliation of Adjusted Operating Ratio by Segment at the schedule titled “Adjusted Operating Income and Operating Ratio Reconciliation by Segment”.

 
18
            

OPERATING STATISTICS (UNAUDITED) (a)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014, 2013 AND 2012
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Operating Statistics by Segment:
 
 
 
 
 
 
 
 
 
 
 
Truckload:
 
 
 
 
 
 
 
 
 
 
 
Weekly revenue xFSR per tractor
$
3,449

 
$
3,212

 
$
3,174

 
$
3,376

 
$
3,222

 
$
3,124

Total loaded miles (b)
254,320

 
267,607

 
266,328

 
768,329

 
804,287

 
797,783

Deadhead miles percentage
11.7
%
 
11.5
%
 
10.9
%
 
11.7
%
 
11.3
%
 
11.0
%
Average tractors available for dispatch:
 
 
 
 
 
 
 
 
 
 
 
Company
6,811

 
7,552

 
7,327

 
6,928

 
7,593

 
7,536

Owner-Operator
3,336

 
3,355

 
3,399

 
3,409

 
3,311

 
3,368

Total
10,147

 
10,907

 
10,726

 
10,337

 
10,904

 
10,904

 
 
 
 
 
 
 
 
 
 
 
 
Dedicated:
 
 
 
 
 
 
 
 
 
 
 
Weekly revenue xFSR per tractor
$
3,154

 
$
3,326

 
$
3,336

 
$
3,173

 
$
3,369

 
$
3,354

Average tractors available for dispatch:
 
 
 
 
 
 
 
 
 
 
 
Company
3,786

 
2,771

 
2,773

 
3,532

 
2,730

 
2,676

Owner-Operator
983

 
663

 
646

 
815

 
646

 
660

Total
4,769

 
3,434

 
3,419

 
4,347

 
3,376

 
3,335

 
 
 
 
 
 
 
 
 
 
 
 
Central Refrigerated:
 
 
 
 
 
 
 
 
 
 
 
Weekly revenue xFSR per tractor
$
3,510

 
$
3,544

 
$
3,359

 
$
3,429

 
$
3,416

 
$
3,355

Total loaded miles (b)
40,105

 
48,003

 
46,619

 
125,799

 
144,342

 
139,359

Deadhead miles percentage
15.9
%
 
13.4
%
 
12.4
%
 
15.0
%
 
12.6
%
 
12.3
%
Average tractors available for dispatch:
 
 
 
 
 
 
 
 
 
 
 
Company
1,071

 
1,012

 
932

 
1,062

 
1,017

 
943

Owner-Operator
676

 
964

 
885

 
814

 
939

 
857

Total
1,747

 
1,976

 
1,817

 
1,876

 
1,956

 
1,800

 
 
 
 
 
 
 
 
 
 
 
 
Intermodal:
 
 
 
 
 
 
 
 
 
 
 
Average tractors available for dispatch:
 
 
 
 
 
 
 
 
 
 
 
Company
461

 
329

 
305

 
416

 
308

 
302

Owner-Operator
79

 
48

 
1

 
73

 
32

 
1

Total
540

 
377

 
306

 
489

 
340

 
303

Load Count
44,275

 
41,747

 
39,762

 
126,282

 
116,510

 
109,397

Average Container Count
8,778

 
8,717

 
7,403

 
8,737

 
8,717

 
6,736

 
 
 
 
 
 
 
 
 
 
 
 
(a)
In the first quarter of 2014, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its lines of businesses following the integration of Central Refrigerated. In association with the operational reorganization, the operations of Central Refrigerated's Trailer on Flat Car ("TOFC") business are reported within the Company's Intermodal segment, and the operations of Central Refrigerated'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.

(b)
Total loaded miles presented in thousands.


 
19
            

 
As of
 
September 30, 2014
 
December 31, 2013
 
September 30, 2013
Consolidated Total Equipment:
 
 
 
 
 
Tractors:
 
 
 
 
 
Company
 
 
 
 
 
Owned
5,452
 
6,081
 
6,609

Leased – capital leases
2,081
 
1,851
 
2,143

Leased – operating leases
6,160
 
4,834
 
4,589

Total company tractors
13,693
 
12,766
 
13,341

Owner-operator
 
 
 
 
 
Financed through the Company
4,260
 
4,473
 
4,144

Other
748
 
722
 
896

Total owner-operator tractors
5,008
 
5,195
 
5,040

Total tractors
18,701
 
17,961
 
18,381

Trailers
60,262
 
57,310
 
57,467

Containers
8,900
 
8,717
 
8,717



 
20
            

ADJUSTED OPERATING INCOME AND OPERATING RATIO
RECONCILIATION BY SEGMENT (UNAUDITED) (a)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014, 2013 AND 2012

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(Amounts in thousands)
Truckload:
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
$
570,931

 
$
579,494

 
$
564,802

 
$
1,699,469

 
$
1,727,813

 
$
1,691,242

Less: Fuel surcharge revenue
110,917

 
119,088

 
117,344

 
338,979

 
357,571

 
358,269

Revenue xFSR
460,014

 
460,406

 
447,458

 
1,360,490

 
1,370,242

 
1,332,973

Operating expense
499,745

 
521,441

 
510,984

 
1,526,780

 
1,562,743

 
1,522,876

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
(110,917
)
 
(119,088
)
 
(117,344
)
 
(338,979
)
 
(357,571
)
 
(358,269
)
Adjusted operating expense
388,828

 
402,353

 
393,640

 
1,187,801

 
1,205,172

 
1,164,607

Adjusted operating income
$
71,186

 
$
58,053

 
$
53,818

 
$
172,689

 
$
165,070

 
$
168,366

Adjusted Operating Ratio
84.5
%
 
87.4
%
 
88.0
%
 
87.3
%
 
88.0
%
 
87.4
%
Operating Ratio
87.5
%
 
90.0
%
 
90.5
%
 
89.8
%
 
90.4
%
 
90.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Dedicated:
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
$
238,025

 
$
184,550

 
$
182,843

 
$
654,776

 
$
546,427

 
$
536,255

Less: Fuel surcharge revenue
40,326

 
34,424

 
32,953

 
116,635

 
102,855

 
98,499

Revenue xFSR
197,699

 
150,126

 
149,890

 
538,141

 
443,572

 
437,756

Operating expense
214,333

 
164,042

 
165,761

 
598,442

 
482,702

 
486,151

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
(40,326
)
 
(34,424
)
 
(32,953
)
 
(116,635
)
 
(102,855
)
 
(98,499
)
Adjusted operating expense
174,007

 
129,618

 
132,808

 
481,807

 
379,847

 
387,652

Adjusted operating income
$
23,692

 
$
20,508

 
$
17,082

 
$
56,334

 
$
63,725

 
$
50,104

Adjusted Operating Ratio
88.0
%
 
86.3
%
 
88.6
%
 
89.5
%
 
85.6
%
 
88.6
%
Operating Ratio
90.0
%
 
88.9
%
 
90.7
%
 
91.4
%
 
88.3
%
 
90.7
%
 
 
 
 
 
 
 
 
 
 
 
 
Central Refrigerated:
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
$
100,448

 
$
115,339

 
$
104,042

 
$
314,122

 
$
332,979

 
$
309,203

Less: Fuel surcharge revenue
19,872

 
23,300

 
23,827

 
63,990

 
72,312

 
72,774

Revenue xFSR
80,576

 
92,039

 
80,215

 
250,132

 
260,667

 
236,429

Operating expense
97,210

 
111,917

 
99,526

 
304,802

 
319,176

 
294,532

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
(19,872
)
 
(23,300
)
 
(23,827
)
 
(63,990
)
 
(72,312
)
 
(72,774
)
Adjusted operating expense
77,338

 
88,617

 
75,699

 
240,812

 
246,864

 
221,758

Adjusted operating income
$
3,238

 
$
3,422

 
$
4,516

 
$
9,320

 
$
13,803

 
$
14,671

Adjusted Operating Ratio
96.0
%
 
96.3
%
 
94.4
%
 
96.3
%
 
94.7
%
 
93.8
%
Operating Ratio
96.8
%
 
97.0
%
 
95.7
%
 
97.0
%
 
95.9
%
 
95.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Intermodal:
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
$
99,962

 
$
96,478

 
$
91,745

 
$
292,186

 
$
270,736

 
$
251,537

Less: Fuel surcharge revenue
19,833

 
19,825

 
19,397

 
58,301

 
56,650

 
53,292

Revenue xFSR
80,129

 
76,653

 
72,348

 
233,885

 
214,086

 
198,245

Operating expense
98,028

 
94,947

 
93,983

 
291,673

 
270,021

 
257,440

Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Fuel surcharge revenue
(19,833
)
 
(19,825
)
 
(19,397
)
 
(58,301
)
 
(56,650
)
 
(53,292
)
Adjusted operating expense
78,195

 
75,122

 
74,586

 
233,372

 
213,371

 
204,148

Adjusted operating income (loss)
$
1,934

 
$
1,531

 
$
(2,238
)
 
$
513

 
$
715

 
$
(5,903
)
Adjusted Operating Ratio
97.6
%
 
98.0
%
 
103.1
%
 
99.8
%
 
99.7
%
 
103.0
%
Operating Ratio
98.1
%
 
98.4
%
 
102.4
%
 
99.8
%
 
99.7
%
 
102.3
%

 
21
            

(a)
In the first quarter of 2014, the Company reorganized its reportable segments to reflect management’s revised reporting structure of its lines of businesses following the integration of Central Refrigerated. In association with the operational reorganization, the operations of Central Refrigerated's Trailer on Flat Car ("TOFC") business are reported within the Company's Intermodal segment, and the operations of Central Refrigerated'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.







 
22
            


CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
(In thousands, except share data)
 
September 30, 2014
 
December 31, 2013
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
70,296

 
$
59,178

Restricted cash
51,511

 
50,833

Restricted investments, held to maturity, amortized cost
25,091

 
25,814

Accounts receivable, net
454,188

 
418,436

Equipment sales receivable
878

 
368

Income tax refund receivable
5,340

 
23,704

Inventories and supplies
20,736

 
18,430

Assets held for sale
5,752

 
19,268

Prepaid taxes, licenses, insurance and other
58,647

 
63,958

Deferred income taxes
42,281

 
46,833

Current portion of notes receivable
9,144

 
7,210

Total current assets
743,864

 
734,032

Property and equipment, at cost:
 
 
 
Revenue and service equipment
1,983,177

 
1,942,423

Land
117,183

 
117,929

Facilities and improvements
267,484

 
248,724

Furniture and office equipment
62,739

 
61,396

Total property and equipment
2,430,583

 
2,370,472

Less: accumulated depreciation and amortization
946,640

 
922,665

Net property and equipment
1,483,943

 
1,447,807

Other assets
47,038

 
57,166

Intangible assets, net
304,136

 
316,747

Goodwill
253,256

 
253,256

Total assets
$
2,832,237

 
$
2,809,008

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
165,734

 
$
118,014

Accrued liabilities
120,018

 
110,745

Current portion of claims accruals
82,809

 
75,469

Current portion of long-term debt and obligations under capital leases (a)
76,138

 
75,056

Fair value of guarantees
—

 
366

Current portion of fair value of interest rate swaps
7,815

 
4,718

Total current liabilities
452,514

 
384,368

Revolving line of credit
82,000

 
17,000

Long-term debt and obligations under capital leases (a)
988,724

 
1,246,764

Claims accruals, less current portion
143,254

 
118,582

Fair value of interest rate swaps, less current portion
—

 
7,050

Deferred income taxes
448,240

 
484,200

Securitization of accounts receivable
315,000

 
264,000

Other liabilities
21

 
3,457

Total liabilities
2,429,753

 
2,525,421

Stockholders' equity:
 
 
 
Class A common stock
906

 
883

Class B common stock
510

 
525

Additional paid-in capital
772,908

 
759,408

Accumulated deficit
(368,508
)
 
(471,169
)
Accumulated other comprehensive loss
(3,434
)
 
(6,162
)
Noncontrolling interests
102

 
102

Total stockholders' equity
402,484

 
283,587

Total liabilities and stockholders' equity
$
2,832,237

 
$
2,809,008


 
23
            

Notes to Selected Consolidated Balance Sheet Data:

(a)
On June 9, 2014, the Company entered into a Third Amended and Restated Credit Agreement ("2014 Agreement"). The 2014 Agreement replaced the then-existing first lien term loan B-1 and B-2 tranches with outstanding principal balances of $229.0 million and $370.9 million, respectively, at closing under the Second Amended and Restated Credit Agreement ("2013 Agreement"), with a $500.0 million face value delayed-draw first lien term loan A tranche maturing June 2019, of which $50.0 million was drawn upon closing, and a $400.0 million face value first lien term loan B tranche maturing June 2021. Additionally, the 2014 Agreement included a $450.0 million revolving credit line maturing June 2019, $164 million of which was drawn upon closing, replacing the previous $400.0 million revolving credit line maturing September 2016. The replacement of the 2013 Agreement and the previous revolver resulted in a loss on debt extinguishment of $5.2 million in the second quarter of 2014, representing the write-off of the unamortized original issue discount and deferred financing fees associated with the 2013 Agreement and the previous revolver. Additionally, during the third quarter of 2014, the Company repurchased in open market transactions at an average price of 107.27%, $32.7 million principal amount of its Senior Second Priority Secured Notes with cash on hand. The Company paid total proceeds of $35.8 million, which included the principal amount, the premium and the accrued interest. These amounts and the related write-off of the unamortized original issue discount reulted in a loss on debt extinguishment of $2.9 million in the third quarter of 2014. Further, in April and March 2014, the Company repurchased in open market transactions at an average price of 110.50%, $39.2 million principal amount of its Senior Second Priority Secured Notes with cash on hand. The Company paid total proceeds of $44.7 million, which included the principal amount, the premium and the accrued interest. These amounts and the related write-off of the unamortized original issue discount resulted in a loss on debt extinguishment of $4.7 million in first two quarters of 2014.

Total debt and capital lease obligations as of September 30, 2014 includes $50.0 million net carrying value of delayed-draw first lien term loan A tranche, $397.0 million net carrying value of the first lien term loan B tranche, $423.6 million net carrying value of senior second priority secured notes, and $194.2 million of other secured indebtedness and capital lease obligations. Total debt and capital lease obligations as of December 31, 2013 includes $229.0 million net carrying value of the first lien term loan B-1 tranche, $410.0 million net carrying value of the first lien term loan B-2 tranche, $493.8 million net carrying value of senior second priority secured notes, and $189.1 million of other secured indebtedness and capital lease obligations.


 
24
            


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(In thousands)
 
Nine Months Ended September 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income
$
102,661

 
$
110,124

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property, equipment and intangibles
177,946

 
182,615

Amortization of debt issuance costs, original issue discount, and losses on terminated swaps
7,794

 
5,107

Gain on disposal of property and equipment less write-off of totaled tractors
(21,784
)
 
(12,902
)
Gain on sale of real property
—

 
(6,876
)
Impairments
2,308

 
—

Equity losses of investee
—

 
228

Deferred income taxes
(33,120
)
 
64,695

Provision for allowance for losses on accounts receivable
2,041

 
872

Non-cash equity compensation
3,892

 
3,465

Loss on debt extinguishment
12,757

 
5,540

Income effect of mark-to-market adjustment of interest rate swaps
(74
)
 
654

Interest on Central shareholder loan, pre-acquisition
—

 
(53
)
Increase (decrease) in cash resulting from changes in:
 
 
 
Accounts receivable
(37,793
)
 
(18,939
)
Inventories and supplies
(2,307
)
 
(629
)
Prepaid expenses and other current assets
23,711

 
(23,946
)
Other assets
6,014

 
6,976

Accounts payable, accrued and other liabilities
48,767

 
38,932

Net cash provided by operating activities
292,813

 
355,863

Cash flows from investing activities:
 
 
 
(Increase) decrease in restricted cash
(678
)
 
1,302

Change in restricted investments
364

 
(1,900
)
Proceeds from sale of property and equipment
116,672

 
75,812

Capital expenditures
(211,113
)
 
(236,990
)
Payments received on notes receivable
3,759

 
2,775

Expenditures on assets held for sale
(2,900
)
 
(17,442
)
Payments received on assets held for sale
20,089

 
47,365

Payments received on equipment sale receivables
368

 
1,266

Acquisition of Central Refrigerated, net of debt repayment
—

 
(147,822
)
Net cash used in investing activities
(73,439
)
 
(275,634
)
Cash flows from financing activities:
 
 
 
Repayment of long-term debt and capital leases
(772,088
)
 
(199,490
)
Net borrowings on revolving line of credit
65,000

 
59,469

Borrowings under accounts receivable securitization
100,000

 
180,000

Repayment of accounts receivable securitization
(49,000
)
 
(124,000
)
Proceeds from long-term debt
450,000

 
26,268

Payment of deferred loan costs
(11,784
)
 
(2,183
)
Distribution to Central stockholders, pre-acquisition
—

 
(2,499
)
Issuance of Central stockholders' loan receivable, pre-acquisition
—

 
(30,000
)
Proceeds from exercise of stock options and shares issued under employee stock purchase plan
7,587

 
10,422

Income tax benefit from exercise of stock options
2,029

 
(383
)
Net cash used in financing activities
(208,256
)
 
(82,396
)
Increase (decrease) in cash and cash equivalents
11,118

 
(2,167
)
Cash and cash equivalents at beginning of period
59,178

 
53,596

Cash and cash equivalents at end of period
$
70,296

 
$
51,429

 
 
 
 

 
25
            

 
 
 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
59,809

 
$
67,833

Income taxes
$
59,501

 
$
20,602

 
 
 
 
Supplemental schedule of:
 
 
 
Non-cash investing activities:
 
 
 
Equipment sales receivables
$
878

 
$
696

Equipment purchase accrual
$
40,379

 
$
39,369

Notes receivable from sale of assets
$
4,524

 
$
5,855

Non-cash financing activities:
 
 
 
Capital lease additions
$
64,351

 
$
85,094

Accrued deferred loan costs
$
280

 
$
—

Insurance premium note payable
$
37

 
$
3,324

Non-cash distribution to Central stockholders in satisfaction of stockholders' loans receivable, pre-acquisition
$
—

 
$
22,315

Non-cash exercise of Central stock options in exchange for stockholders' loans receivable, pre-acquisition
$
—

 
$
3,415

Cancellation of Central stockholders' loans receivable at closing of acquisition
$
—

 
$
33,295




 
26