SUBJECT TO COMPLETION, DATED JULY 21, 2010

 

Preliminary Prospectus

 

          shares

 

Swift Holdings Corp.

 

 

Class A common stock

 

 

This is an initial public offering of shares of Class A common stock by Swift Holdings Corp. Immediately prior to the consummation of this offering, Swift Corporation, a Nevada corporation, will merge with and into Swift Holdings Corp., with Swift Holdings Corp. surviving as a Delaware corporation.

 

We are selling shares of Class A common stock. We will have two classes of authorized common stock. The rights of holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to two votes per share. Each share of Class B common stock is convertible into one share of Class A common stock at any time and automatically converts into one share of Class A common stock upon the occurence of certain events. The estimated initial public offering price is between $      and $      per share.

 

 

We intend to apply to list our Class A common stock for trading on the                    under the symbol “SWFT”.

 

 

 

We have granted the underwriters an option for a period of 30 days to purchase from us up to        additional shares of Class A common stock at the initial public offering price, less underwriting discounts and commissions.

 

 

Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 16.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

The underwriters expect to deliver the shares of Class A common stock to purchasers on or about          , 2010.

 

 

          , 2010

 

You should rely only on the information contained in this prospectus or in any free writing prospectus that we authorize to be delivered to you. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. If anyone provides you with additional, different, or inconsistent information, you should not rely on it. We and the underwriters are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information in this prospectus is accurate only as of the date on the front cover, regardless of the time of delivery of this prospectus or of any sale thereof of our Class A common stock. Our business, prospects, financial condition, and results of operations may have changed since that date.

 

No action is being taken in any jurisdiction outside the United States to permit a public offering of the Class A common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

 

 

Except as otherwise indicated, information in this prospectus:

 

 

In this prospectus, we refer to our Class A common stock and our Class B common stock together as our “common stock.”

 

In this prospectus, we refer to the following as the “2007 Transactions”: (i) Jerry and Vickie Moyes’ April 7, 2007 contribution of 1,000 shares of common stock of Interstate Equipment Leasing, Inc. (now Interstate Equipment Leasing, LLC), or IEL, constituting all issued and outstanding shares of IEL, to Swift Corporation, in exchange for 10,649,000 shares of Swift Corporation’s common stock, (ii) the May 9, 2007 contribution by Jerry Moyes and various trusts established for the benefit of his family members of 28,792,810 shares of Swift Transportation Co., Inc. common stock, representing 38.3% of the then outstanding common stock of Swift Transportation Co., Inc., in exchange for 64,495,892 shares of Swift Corporation’s common stock, and (iii) Swift Corporation’s May 10, 2007 acquisition of Swift Transportation Co., Inc. by a merger. We refer to Swift Transportation Co., Inc. as our “predecessor” prior to the 2007 Transactions, and to Swift Corporation as our “successor” following the 2007 Transactions.

 

Our audited results of operations include the full year presentation of Swift Corporation as of and for the year ended December 31, 2007. Swift Corporation was formed in 2006 for the purpose of acquiring Swift Transportation Co., Inc., but that acquisition was not completed until May 10, 2007 and, as such, Swift Corporation had nominal activity from January 1, 2007 through May 10, 2007. The results of Swift Transportation Co, Inc. from January 1, 2007 to May 10, 2007 and IEL from January 1, 2007 to April 7, 2007 are not reflected in the audited results of Swift Corporation for the year ended December 31, 2007.

 

However, our unaudited pro forma results of operations for the year ended December 31, 2007 give effect to the 2007 Transactions as if they were effective on January 1, 2007. Unless otherwise noted in this prospectus, the discussion of financial and operating data for the year ended December 31, 2007 included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our unaudited pro forma results of operations. See “Pro Forma Condensed Consolidated Statement of Operations (Unaudited) for the Year Ended December 31, 2007” in Annex A to this prospectus.

 

 

This prospectus contains market data related to our business and industry and forecasts that we obtained from industry publications and surveys and our internal sources. American Trucking Associations, Inc., or the ATA, and Americas Commercial Transportation Research, Co., LLC, or ACT Research, were the primary independent sources of industry and market data. We believe that the ATA and ACT Research data used in this prospectus reflect the most recently available information. Some data and other information also are based on our good faith estimates, which are derived from our review of internal surveys and independent sources.

 

All data provided by the ATA are publicly available, while data provided by ACT Research can be obtained by subscription. We have not paid for the compilation of any market or industry data contained in this prospectus, and such data were not specifically prepared for such use. The market and industry data contained in this prospectus have been included herein with the permission of their respective authors, as necessary.

 

Although we believe that all industry publications and reports cited herein are reliable, neither we nor the underwriters have independently verified the data. Our internal data and estimates are based upon information obtained from our customers, suppliers, trade and business organizations, contacts in the industry in which we operate, and management’s understanding of industry conditions. Although we believe that such information is reliable, we have not had such information verified by independent sources.

 

“Average loaded length of haul” means the average number of miles we drive for our customers from origin to destination of a load and excludes the miles and loads from our intermodal and brokerage operations.

 

“Average tractors available” means the weighted average number of company and owner-operator tractors in our active service fleet that are available to be dispatched to haul customer freight during the relevant period. This includes tractors that are able to be dispatched but have not been assigned to a driver or are otherwise unstaffed.

 

“Brokerage” or “freight brokerage” means the customer loads for which we contract with third-party trucking companies to haul instead of hauling the load using our own equipment. Our use of freight brokerage supplements our capacity and allows us to provide service to our customers on loads that do not fit our preferred lanes.

 

“Class 8 truck” means trucks over 33,000 pounds in gross vehicle weight. Our tractor fleet is comprised of Class 8 trucks.

 

“Core carrier” means a shipper’s preferred truckload carrier. Generally, shippers utilize a core carrier or core carrier group to improve service levels, reduce the complexity involved with managing a large number of carriers, and experience efficiencies created through the level of trust, shipment density, and communication frequency associated with a core carrier.

 

“CSA 2010” means the Federal Motor Carrier Safety Administration’s new Comprehensive Safety Analysis 2010 program that ranks both fleets and individual drivers on seven categories of safety-related data. CSA 2010 will eventually replace the current Safety Status measurement system used by the Federal Motor Carrier Safety Administration.

 

“C-TPAT” means the Customs-Trade Partnership Against Terrorism, a program designed to improve cross-border security between the United States and Canada and the United States and Mexico. Carrier members of the C-TPAT are entitled to shorter border delays and other priorities over non-member carriers.

 

“Deadhead miles” means the miles driven without revenue-generating freight being transported.

 

“Deadhead miles percentage” means the percentage of total miles represented by deadhead miles.

 

“Dedicated contracts” means those contracts in which we have agreed to dedicate certain tractor and trailer capacity for use by a specific customer. Dedicated contracts often have predictable routes and revenue, and frequently replace all or part of a shipper’s private fleet. Dedicated contracts are generally three- to five-year contracts and are priced using a model that analyzes the cost elements, including revenue equipment, insurance, fuel, maintenance, drivers needed, and mileage.

 

“Drayage” means the transport of shipping containers from a dock or port to an intermediate or final destination or the transport of containers or trailers between pickup or delivery locations and a railhead. We generally utilize third parties or directly provide drayage in the pick-up and delivery associated with an intermodal movement or for the pick-up and delivery to and from an ocean shipping port and an inland destination.

 

“Drop yards” means those locations at which we periodically park trailers.

 

 

“For-hire truckload carriers” means a truckload carrier available to shippers for hire.

 

“Intermodal” means the transport of shipping containers or trailers on railroad flat cars before or after a movement by truck from the point of origin to the railhead or from the railhead to the destination. We focus on intermodal service as an alternative to placing additional tractors and drivers in lanes that are significantly longer than our average length of haul or for which rail service otherwise provides competitive service.

“Less-than-truckload carrier” or “LTL carrier” means carriers that pick up and deliver multiple shipments, each typically weighing less than 10,000 pounds, for multiple customers in a single trailer.

 

“Linehaul” means the movement of freight on a designated route between cities and terminals.

 

“Loaded mile” means a mile that is driven for a customer, for which we are compensated.

 

“Owner-operator” means an independent contractor who is utilized through a contract with us to supply one or more tractors and drivers for our use. Our owner-operators are generally compensated on a per-mile basis and must pay their own operating expenses, such as fuel, maintenance, the truck’s physical damage insurance, and driver costs, and must meet our specified standards with respect to safety.

 

“Private fleet” means the tractors and trailers owned or leased by a shipper to transport its own goods.

 

“Private fleet outsourcing” means the decision by shippers using private trucking fleets to outsource all or a portion of their transportation and logistics requirements to for-hire truckload carriers. Some shippers that previously maintained their own private fleets outsource this function to truckload carriers, like us, to reduce operating costs and to focus their resources on their core businesses.

 

“Stop-off pay” means the compensation we receive from customers for interrupting a haul to pick up or unload a portion of the load.

 

“Temperature controlled” means an enclosed, refrigerated trailer, generally used to carry perishable goods.

 

“Trucking revenue” means all revenue generated from our general truckload, dedicated, cross-border, and other trucking operations, and excludes fuel surcharges, income from owner-operator financing, revenue from intermodal, brokerage, and logistics operations, revenue generated by our shop operations, and third-party premium revenue from our captive insurance companies.

 

“Truck tonnage” means the total weight in tons transported by the motor carrier industry for a given period.

 

“Truckload carrier” means a carrier that generally dedicates an entire trailer to one customer from origin to destination.

 

“Weekly trucking revenue per tractor” means the trucking revenue for a given period divided by the number of weeks in the period, then divided by the average tractors available for that period.

 

Prospectus Summary

 

Summary

Our Business

 

Many of our customers are large corporations with extensive operations, geographically distributed locations, and diverse shipping needs. We offer the opportunity for “one-stop-shopping” for their truckload transportation needs through a broad spectrum of services and equipment, including the following:

 

		Approximate
		Percentage of Total
		Operating Revenue
		2009				2006
•  General truckload service , which consists of one-way movements over irregular routes throughout the United States and in Canada through dry van, temperature controlled, flatbed, or specialized trailers, as well as drayage operations, using both company tractors and owner-operator tractors			67.2	%			71.3	%
•  Dedicated truckload service , in which we devote exclusive use of equipment and offer tailored solutions under long-term contracts, generally with higher operating margins and lower driver turnover			18.7	%			22.7	%
•  Cross-border Mexico/U.S. truckload service , through Trans-Mex, Inc. S.A. de C.V., or Trans-Mex, our wholly-owned subsidiary that is one of the largest trucking companies in Mexico with service throughout Mexico and through every major border crossing between the United States and Mexico			2.4	%			1.6	%
•  Rail intermodal service , which involves arranging for rail service for primary freight movement and related drayage service and requires lower tractor investment than general truckload service, making it one of our less asset-intensive services			6.2	%			2.9	%
•  Non-asset based freight brokerage and logistics management services , in which we offer our transportation management expertise and/or arrange for other trucking companies to haul freight that does not fit our network, earning us a revenue share with little investment			1.4	%			0.3	%
•  Other revenue generating services. In addition to the services referenced above, we offer services that include providing tractor leasing arrangements through IEL to owner-operators, underwriting insurance through our wholly-owned captive insurance companies, and repair services through our maintenance and repair shops to our owner-operators and third parties			4.1	%			1.2	%

Source: ATA		Source: ACT Research

	•	North American market leader with broad terminal network and a modern fleet.   The size and scope of our operations afford us significant advantages in a fragmented truckload industry. We operate North America’s

		largest truckload fleet, have 35 major terminals and multiple other locations strategically positioned throughout the United States and Mexico, and offer customers “one-stop-shopping” for a broad spectrum of their truckload transportation needs. Our fleet size offers wide geographic coverage while maintaining the efficiencies associated with significant traffic density within our operating regions. Our terminals are strategically located near key population centers, driver recruiting areas, and cross-border hubs, often in close proximity to our customers. This broad network offers benefits such as in-house maintenance, more frequent equipment inspections, localized driver recruiting, rapid customer response, and personalized marketing efforts. Our size allows us to achieve substantial economies of scale in purchasing items such as tractors, trailers, containers, fuel, and tires where pricing is volume sensitive. We believe our scale also offers additional benefits in brand awareness and access to capital. Additionally, our modern company tractor fleet, with an average age of 2.55 years for our approximately 9,000 linehaul sleeper units, lowers maintenance and repair expense, aids in driver recruitment, and increases asset utilization as compared with an older fleet.

	•	High quality customer service and extensive suite of services.   Our intense focus on customer satisfaction contributed to 20 “carrier of the year” or similar awards in 2009 and has helped us establish a strong platform for cross-selling our other services. Our strong and diversified customer base, ranging from Fortune 500 companies to local shippers, has a wide variety of shipping needs, including general and specialized truckload, imports and exports, regional distribution, high-service dedicated operations, rail intermodal service, and surge capacity through fleet flexibility and brokerage and logistics operations. We believe customers continue to seek fewer transportation providers that offer a broader range of services to streamline their transportation management functions. For example, ten of our top fifteen customers used at least four of our services in the three months ended March 31, 2010. Our top fifteen customers by revenue in 2009 included Coors, Costco, Dollar Tree, Georgia-Pacific, Home Depot, Kimberly-Clark, Lowes, Menlo Logistics, Procter & Gamble, Quaker Oats, Ryder Logistics, Sears, Target, and Wal-Mart. We believe the breadth of our services helps diversify our customer base and provides us with a competitive advantage, especially for customers with multiple needs and international shipments.
	•	Strong and growing owner-operator business.   We supplement our company tractors with tractors provided by owner-operators, who operate their own tractors and are responsible for most ownership and operating expenses. We believe that owner-operators provide significant advantages that primarily arise from the entrepreneurial motivation of business ownership. Our owner-operators tend to be more experienced, have lower turnover, have fewer accidents per million miles, and produce higher weekly trucking revenue per tractor than our average company drivers. In 2009, our owner-operator tractors drove on average 34% more miles per week than our company tractors.
	•	Leader in driver and owner-operator development.   Driver recruiting and retention historically have been significant challenges for truckload carriers. To address these challenges, we employ nationwide recruiting efforts through our terminal network, operate five driver training schools, maintain an active and successful owner-operator development program, provide drivers modern tractors, and employ numerous driver satisfaction policies. We believe our extensive recruiting and training efforts will become increasingly advantageous to us in periods of economic growth when employment alternatives are more plentiful and also when new regulatory requirements begin to affect the size or effective capacity of the industry-wide driver pool.
	•	Experienced management aligned with corporate success.   Our management team has a proven track record of growth and cost control. The improvements we have made to our operations since going private have positioned us to benefit from the expected improvement in the freight environment. Management focuses on disciplined execution and financial performance by measuring our progress through a combination of Adjusted EBITDA growth, revenue growth, Adjusted Operating Ratio, and return on capital. We align management’s priorities with our own through equity option awards and an annual senior management incentive program linked to Adjusted EBITDA.

	•	Profitable revenue growth.   To increase freight volumes and yield, we intend to further penetrate our existing customer base, cross-sell our services, and pursue new customer opportunities. Our superior customer service and extensive suite of truckload services continue to contribute to recent new business wins from customers such as Costco, Procter & Gamble, Caterpillar, and Home Depot. In addition, we are further enhancing our sophisticated freight selection management tools to allocate our equipment to more profitable loads and complementary lanes. As freight volumes increase, we intend to prioritize the following areas for growth:

	—	Rail intermodal and port operations.   Our growing rail intermodal presence allows us to better serve customers in longer haul lanes and reduce our investment in fixed assets. Since its inception in 2005, we have grown our rail intermodal business by adding approximately 4,300 containers, and we have ordered an additional 1,000 containers for delivery between August 2010 and June 2011. We have intermodal agreements with all major U.S. railroads and recently negotiated more favorable terms with our largest intermodal provider, which has helped increase our volumes through more competitive pricing. We also expanded our presence in the short-haul drayage business at the ports of Los Angeles and Long Beach in 2008 and are evaluating additional port opportunities.
	—	Dedicated services and private fleet outsourcing.   The size and scale of our fleet and terminal network allow us to provide the equipment availability and high service levels required for dedicated contracts. Dedicated contracts often are used for high-service and high-priority freight, sometimes to replace private fleets previously operated by customers. Dedicated operations generally produce higher margins and lower driver turnover than our general truckload operations. We believe these opportunities will increase in times of scarce capacity in the truckload industry.
	—	Cross-border Mexico-U.S. freight.   The combination of our U.S., cross-border, customs brokerage, and Mexican operations enables us to provide efficient door-to-door service between the United States and Mexico. We believe our sophisticated load security measures, as well as our Department of Homeland Security, or DHS, status as a C-TPAT carrier, allow us to offer more efficient service than most competitors and afford us substantial advantages with major international shippers.
	—	Freight brokerage and third-party logistics.   We believe we have a substantial opportunity to continue to increase our non-asset based freight brokerage and third-party logistics services. We believe many customers increasingly seek transportation companies that offer both asset-based and non-asset based services to gain additional certainty that safe, secure, and timely truckload service will be available on demand and to reward asset-based carriers for investing in fleet assets. We intend to continue growing our transportation management and freight brokerage capability to build market share with customers, earn marginal revenue on more loads, and preserve our assets for the most attractive lanes and loads.

	•	Increase asset productivity and return on capital.   We believe we have a substantial opportunity to improve the productivity and yield of our existing assets through the following measures:

	—	increasing the percentage of our fleet provided by owner-operators, who generally produce higher weekly trucking revenue per tractor than our company drivers;
	—	increasing company tractor utilization through measures such as equipment pools, relays, and team drivers;

	—	capitalizing on a stronger freight market to increase average trucking revenue per mile by using sophisticated freight selection and network management tools to upgrade our freight mix and reduce deadhead miles;
	—	maintaining discipline regarding the timing and extent of company tractor fleet growth based on availability of high-quality freight; and
	—	rationalizing unproductive assets as necessary, thereby improving our return on capital.

	•	Continue to focus on efficiency and cost control.   We intend to continue to implement the Lean Six Sigma, accountability, and discipline measures that helped us improve our Adjusted Operating Ratio in 2009 and in the first quarter of 2010. We presently have ongoing efforts in the following areas that we expect will yield benefits in future periods:

	—	managing the flow of our tractor capacity through our network to balance freight flows and reduce deadhead miles;
	—	improving processes and resource allocation throughout our customer-facing functions to increase operational efficiencies while endeavoring to improve customer service;
	—	streamlining driver recruiting and training procedures to reduce attrition costs; and
	—	reducing waste in shop methods and procedures and in other administrative processes.

	•	Pursue selected acquisitions.   In addition to expanding our company tractor fleet through organic growth, and to take advantage of opportunities to add complementary operations, we expect to pursue selected acquisitions. We operate in a highly fragmented and consolidating industry where we believe the size and scope of our operations afford us significant competitive advantages. Acquisitions can provide us an opportunity to expand our fleet with customer revenue and drivers already in place. In our history, we have completed twelve acquisitions, most of which were immediately integrated into our existing business. Given our size in relation to most competitors, we expect most future acquisitions to be integrated quickly. As with our prior acquisitions, our goal is for any future acquisitions to be accretive to our earnings within two full calendar quarters.

Summary Risk Factors

 

Investing in our Class A common stock is subject to numerous risks, including those that generally are associated with our industry. You should consider carefully the risks and uncertainties summarized below, the risks described under “Risk Factors,” the other information contained in this prospectus, and our consolidated financial statements and the related notes before you decide whether to purchase our Class A common stock.

 

	•	Our business is subject to general economic and business factors affecting the truckload industry such as fluctuations in the price or availability of fuel, increased prices for new revenue equipment, volatility in the used equipment market, increases in driver compensation, or difficulty in attracting or retaining drivers or owner-operators that are largely beyond our control, any of which could have a material adverse effect on our operating results.
	•	We have several major customers, the loss of one or more of which could have a material adverse effect on our business.
	•	We may not be able to sustain the cost savings realized as part of our recent cost reduction initiatives.
	•	We may not be successful in achieving our strategy of growing revenues. We also have a recent history of net losses. We can make no assurances that we will achieve profitability, or if we do, that we will be able to sustain profitability in the future.
	•	We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future regulations could have a material adverse effect on our operations and profitability.
	•	We self-insure a significant portion of our claims exposure, which could significantly increase the volatility of, and decrease the amount of, our earnings.
	•	We engage in transactions with other businesses controlled by Mr. Moyes and the interests of Mr. Moyes could conflict with the interests of other stockholders.
	•	Mr. Moyes and certain of his affiliates will hold Class B shares which have greater voting rights than Class A shares and will have the power to direct and control our company as a result of their stock holdings.
	•	We have significant ongoing capital requirements that could harm our financial condition, results of operations, and cash flows if we are unable to generate sufficient cash from operations, or obtain financing on favorable terms.
	•	Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations under our new senior secured credit facility and our senior secured notes, and our debt agreements contain restrictions that limit our flexibility in operating our business.

 

These risks and the other risks described under “Risk Factors” could have a material adverse effect on our business, financial condition, and results of operations.

 

Our Corporate Profile and Executive Offices

 

Swift was founded by our Chief Executive Officer, Mr. Moyes, and his family in 1966. Swift Transportation became a public company in 1990, and its stock traded on the NASDAQ stock market under the symbol “SWFT” until May 10, 2007, when a company controlled by Mr. Moyes completed the 2007 Transactions, which resulted in its becoming a private company. Our principal executive offices are located at 2200 South 75th Avenue, Phoenix, Arizona 85043, and our telephone number at that address is (602) 269-9700. Our website is located at www.swifttrans.com. The information on our website is not part of this prospectus.

		senior secured credit facility. The balance of the existing senior secured credit facility will be refinanced by borrowings under our new senior secured credit facility, which we will enter into in connection with this offering. The remaining net proceeds will be used for general corporate purposes. See “Use of Proceeds.”
Risk factors		You should carefully consider the information set forth under “Risk Factors” together with all of the other information set forth in this prospectus before deciding to invest in shares of our Class A common stock.
Proposed listing symbol		“SWFT”

 

Summary Historical Consolidated Financial and Other Data

		Successor																						Predecessor
		Three																						January 1,
		Months																						2007
		Ended								Year Ended									Year Ended					through
		March 31,								December 31,									December 31,					May 10,				Year Ended December 31,
(Dollars in thousands, except per share data)		2010				2009				2009				2008					2007(1)					2007				2006				2005
		(Unaudited)
Consolidated statement of operations data:
Operating revenue:
Trucking revenue		$	503,507			$	509,320			$	2,062,296			$	2,443,271				$	1,674,835				$	876,042			$	2,585,590			$	2,722,648
Fuel surcharge revenue			88,816				52,986				275,373				719,617					344,946					147,507				462,529				391,942
Other revenue			62,507				52,450				233,684				236,922					160,512					51,174				124,671				82,865
Total operating revenue			654,830				614,756				2,571,353				3,399,810					2,180,293					1,074,723				3,172,790				3,197,455
Operating expenses:
Salaries, wages, and employee benefits			177,803				189,377				728,784				892,691					611,811					364,690				899,286				1,008,833
Operating supplies and expenses			47,830				56,723				209,945				271,951					187,873					119,833				268,658				286,261
Fuel expense			106,082				85,868				385,513				768,693					474,825					223,579				632,824				610,919
Purchased transportation			175,702				135,753				620,312				741,240					435,421					196,258				586,252				583,380
Rental expense			18,903				20,391				79,833				76,900					51,703					20,089				50,937				57,669
Insurance and claims			20,207				25,481				81,332				141,949					69,699					58,358				153,728				156,525
Depreciation and amortization(2)			65,497				66,956				253,531				275,832					187,043					82,949				222,376				199,777
Impairments(3)			1,274				515				515				24,529					256,305					—				27,595				6,377
(Gain) loss on disposal of property and equipment			(1,448	)			(19	)			(2,244	)			(6,466	)				(397	)				130				(186	)			(942	)
Communication and utilities			6,422				7,091				24,595				29,644					18,625					10,473				28,579				30,920
Operating taxes and licenses			13,365				14,381				57,236				67,911					42,076					24,021				59,010				69,676
Total operating expenses			631,637				602,517				2,439,352				3,284,874					2,334,984					1,100,380				2,929,059				3,009,395
Operating income (loss)			23,193				12,239				132,001				114,936					(154,691	)				(25,657	)			243,731				188,060
Other (income) expenses:
Interest expense(4)			62,596				47,702				200,512				222,177					171,115					9,454				26,870				29,946
Derivative interest expense (income)(5)			23,714				7,549				55,634				18,699					13,233					(177	)			(1,134	)			(3,314	)
Interest income			(220	)			(428	)			(1,814	)			(3,506	)				(6,602	)				(1,364	)			(2,007	)			(1,713	)
Other(4)			(371	)			675				(13,336	)			12,753					(1,933	)				1,429				(1,272	)			(1,209	)
Total other (income) expenses			85,719				55,498				240,996				250,123					175,813					9,342				22,457				23,710
Income (loss) before income taxes			(62,526	)			(43,259	)			(108,995	)			(135,187	)				(330,504	)				(34,999	)			221,274				164,350
Income tax (benefit) expense			(9,525	)			301				326,650				11,368					(234,316	)				(4,577	)			80,219				63,223

		Successor																						Predecessor
		Three																						January 1,
		Months																						2007
		Ended								Year Ended									Year Ended					through
		March 31,								December 31,									December 31,					May 10,				Year Ended December 31,
(Dollars in thousands, except per share data)		2010				2009				2009				2008					2007(1)					2007				2006				2005
		(Unaudited)
Net income (loss)		$	(53,001	)		$	(43,560	)		$	(435,645	)		$	(146,555	)			$	(96,188	)			$	(30,422	)		$	141,055			$	101,127
Basic income (loss) per common share		$	(0.71	)		$	(0.58	)		$	(5.80	)		$	(1.95	)			$	(1.94	)			$	(0.40	)		$	1.89			$	1.39
Diluted income (loss) per common share		$	(0.71	)		$	(0.58	)		$	(5.80	)		$	(1.95	)			$	(1.94	)			$	(0.40	)		$	1.86			$	1.37
Weighted average shares used in computing basic income (loss) per common share (in thousands)			75,146				75,146				75,146				75,146					49,521					75,159				74,584				72,540
Weighted average shares used in computing diluted income (loss) per common share (in thousands)			75,146				75,146				75,146				75,146					49,521					75,159				75,841				73,823
Pro forma C corporation data (unaudited):(6)
Historical loss before income taxes			N/A			$	(43,259	)		$	(108,995	)		$	(135,187	)			$	(330,504	)				N/A				N/A				N/A
Pro forma provision (benefit) for income taxes			N/A				2,259				5,693				(26,573	)				(19,166	)				N/A				N/A				N/A
Pro forma net loss			N/A			$	(45,518	)		$	(114,688	)		$	(108,614	)			$	(311,338	)				N/A				N/A				N/A
Pro forma loss per share:
Basic			N/A			$	(0.61	)		$	(1.53	)		$	(1.45	)			$	(6.29	)				N/A				N/A				N/A
Diluted			N/A			$	(0.61	)		$	(1.53	)		$	(1.45	)			$	(6.29	)				N/A				N/A				N/A
Consolidated balance sheet data (at end of period):
Cash and cash equivalents (excl. restricted cash)			87,327				56,806				115,862				57,916					78,826					81,134				47,858				13,098
Net property and equipment			1,327,210				1,516,994				1,364,545				1,583,296					1,588,102					1,478,808				1,513,592				1,630,469
Total assets			2,638,739				2,594,965				2,513,874				2,648,507					2,928,632					2,124,293				2,110,648				2,218,530
Debt:
Securitization of accounts receivable(4)			150,000				—				—				—					200,000					160,000				180,000				245,000
Long-term debt and obligations under capital leases (incl. current)(4)			2,382,181				2,515,335				2,466,934				2,494,455					2,427,253					200,000				200,000				365,786
Stockholders’ equity (deficit)			(818,354	)			(498,831	)			(865,781	)			(444,193	)				(297,547	)				1,007,904				1,014,223				870,044
Consolidated statement of cash flows data:
Net cash flows from operating activities			15,107				7,376				115,335				119,740					128,646					85,149				365,430				362,548
Net cash flows used in investing activities			(35,131	)			(6,661	)			(1,127	)			(118,517	)				(1,612,314	)				(43,854	)			(114,203	)			(380,007	)
Net cash flows from (used in) financing activities, net of the effect of exchange rate changes			(8,511	)			(1,825	)			(56,262	)			(22,133	)				1,562,494					(8,019	)			(216,467	)			2,312
Other financial data:
Adjusted EBITDA (unaudited)(7)			90,335				79,035				405,860				409,598					291,597					109,687				498,601				407,820
Adjusted Operating Ratio (unaudited)(8)			94.4%				97.7%				93.9%				94.5%					94.4%					97.4%				90.4%				92.6%
Total cash capital expenditures			17,155				12,551				71,265				327,725					215,159					80,517				219,666				544,650
Net cash capital expenditures			12,471				10,170				1,492				136,574					175,351					52,676				139,216				386,780
Operating statistics (unaudited):
Weekly trucking revenue per tractor		$	2,711			$	2,541			$	2,660			$	2,916				$	2,903				$	2,790			$	3,011			$	3,004
Deadhead miles %			12.2%				13.6%				13.2%				13.6%					13.0%					13.2%				12.2%				12.1%
Average tractors available			14,443				15,589				14,869				16,024					17,192					16,816				16,466				17,383
Average loaded length of haul (miles)			438				451				442				469					483					492				522				534
Total tractors (end of period):
Company-operated			12,489				13,695				12,440				13,786					16,017					14,847				14,977				14,465
Owner-operator			3,731				3,575				3,585				3,560					3,221					2,961				2,950				3,466
Trailers (end of period)			49,436				49,284				49,215				49,695					49,879					48,959				50,013				51,997

(1)		Our audited results of operations include the full year presentation of Swift Corporation as of and for the year ended December 31, 2007. Swift Corporation was formed in 2006 for the purpose of acquiring Swift Transportation, but that acquisition was not completed until May 10, 2007 as part of the 2007 Transactions, and, as such, Swift Corporation had nominal activity from January 1, 2007 through May 10, 2007. The results of Swift Transportation from January 1, 2007 to May 10, 2007 and IEL from January 1, 2007 to

		April 7, 2007 are not reflected in the audited results of Swift Corporation for the year ended December 31, 2007. These financial results include the impact of the 2007 Transactions.
(2)		During the three months ended March 31, 2010, we recorded $7.4 million of incremental depreciation expense related to our revised estimates regarding salvage value and useful lives for approximately 7,000 dry van trailers that we decided to scrap during the quarter. During the three months ended March 31, 2010 and 2009, we incurred non-cash amortization expense of $5.2 million and $5.7 million, respectively, relating to a step up in basis of certain intangible assets recognized in connection with the 2007 Transactions. For the years ended December 31, 2009, 2008, and 2007, we incurred amortization expense of $22.0 million, $24.2 million, and $16.8 million, respectively, relating to a step up in basis of certain intangible assets recognized in connection with the 2007 Transactions.
(3)		During the three months ended March 31, 2010, revenue equipment with a carrying amount of $3.6 million was written down to its fair value of $2.3 million, resulting in an impairment charge of $1.3 million, which was included in impairments in the consolidated statement of operations for the three months ended March 31, 2010. During the three months ended March 31, 2009, non-operating real estate properties held and used with a carrying amount of $2.1 million were written down to their fair value of $1.6 million, resulting in an impairment charge of $0.5 million. For the year ended December 31, 2008, we incurred $24.5 million in pre-tax impairment charges comprised of a $17.0 million impairment of goodwill relating to our Mexico freight transportation reporting unit, and impairment charges totaling $7.5 million on tractors, trailers, and several non-operating real estate properties and other assets. For the year ended December 31, 2007, we recorded a goodwill impairment of $238.0 million pre-tax related to our U.S. freight transportation reporting unit and trailer impairment of $18.3 million pre-tax. The results for the year ended December 31, 2006 included pre-tax charges of $9.2 million related to the impairment of certain trailers, Mexico real property and equipment, and $18.4 million for the write-off of a note receivable and other outstanding amounts related to our sale of our auto haul business in April 2005. For the year ended December 31, 2005, we incurred a pre-tax impairment charge of $6.4 million related to certain trailers.
(4)		Effective January 1, 2010, we adopted ASU No. 2009-16 “ Accounting For Transfers of Financial Assets, ” or ASU No. 2009-16, under which we were required to account for our accounts receivable securitization agreement, or our 2008 RSA, as a secured borrowing on our balance sheet as opposed to a sale, with our 2008 RSA program fees characterized as interest expense. From March 27, 2008 through December 31, 2009, our 2008 RSA has been accounted for as a true sale in accordance with generally accepted accounting principles, or GAAP. Therefore, as of December 31, 2009 and 2008, such accounts receivable and associated obligation are not reflected in our consolidated balance sheets. For periods prior to March 27, 2008, and again beginning January 1, 2010, accounts receivable and associated obligation are recorded on our balance sheet. Long-term debt excludes securitization amounts outstanding for each period. For the three months ended March 31, 2010, total program fees recorded as interest expense were $1.1 million.
		Prior to the change in GAAP, program fees were recorded under “Other income and expenses” under “Other.” For the three months ended March 31, 2009, total program fees included in “Other” were $1.1 million. For the years ended December 31, 2009 and 2008, program fees from our 2008 RSA totaling $5.0 million and $7.3 million, respectively, were recorded in “Other.”
(5)		Derivative interest expense for the three months ended March 31, 2010 and 2009 is related to our interest rate swaps with notional amounts of $1.14 billion and $1.20 billion, respectively. Derivative interest expense increased during the three months ended March 31, 2010 over the same period in 2009 as a result of the decrease in three month London Interbank Offered Rate, or LIBOR, the underlying index for the swaps. Additionally, we de-designated the remaining swaps and discontinued hedge accounting effective October 1, 2009 as a result of the second amendment to our existing senior secured credit facility, after which the entire mark-to-market adjustment was recorded in our statement of operations as opposed to being recorded in equity as a component of other comprehensive income under the prior cash flow hedge accounting treatment. Derivative interest expense for the years ended December 31, 2009, 2008, and 2007 is related to our interest rate swaps with notional amounts of $1.14 billion, $1.22 billion, and $1.34 billion, respectively.
(6)		From May 11, 2007 until October 10, 2009, we had elected to be taxed under the Internal Revenue Code of 1986, as amended from time to time, or the Internal Revenue Code, as a subchapter S corporation. A subchapter S corporation passes through essentially all taxable earnings and losses to its stockholders and does not pay federal income taxes at the corporate level. Historical income taxes during this time consist mainly of state income taxes in certain states that do not recognize subchapter S corporations, and an income tax provision or benefit was recorded for certain of our subsidiaries, including our Mexican subsidiaries and our sole domestic captive insurance company at the time, which were not eligible to be treated as qualified subchapter S corporations. In October 2009, we elected to be taxed as a subchapter C corporation. For comparative purposes, we have included a pro forma (provision) benefit for income taxes assuming we had been taxed as a subchapter C corporation in all periods when our subchapter S corporation election was in effect. The pro forma effective tax rate for 2009 of 5.2% differs from the expected federal tax benefit of 35% primarily as a result of income recognized for tax purposes on the partial cancellation of the stockholder loan, which reduced the tax benefit rate by 32.6%. In 2008, the pro forma effective tax rate was reduced by 8.8% for stockholder distributions and 4.4% for non-deductible goodwill impairment charges, which resulted in a 19.7% effective tax rate. In 2007, the pro forma effective tax rate of 5.8% resulted primarily from a non-deductible goodwill impairment charge, which reduced the rate by 25.1%.
(7)		We use the term “Adjusted EBITDA” throughout this prospectus. Adjusted EBITDA, as we define this term, is not presented in accordance with GAAP. We use Adjusted EBITDA as a supplement to our GAAP results in evaluating certain aspects of our business, as described below.
		We define Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest and derivative interest expense, including other fees and charges associated with indebtedness, net of interest income, (iii) income taxes, (iv) non-cash impairments, (v) non-cash equity compensation expense, (vi) other unusual non-cash items, and (vii) excludable transaction costs.
		Our board of directors and executive management team focus on Adjusted EBITDA as a key measure of our performance, for business planning, and for incentive compensation purposes. Adjusted EBITDA assists us in comparing our performance over various reporting

		periods on a consistent basis because it removes from our operating results the impact of items that, in our opinion, do not reflect our core operating performance. Our method of computing Adjusted EBITDA is consistent with that used in our debt covenants and also is routinely reviewed by management for that purpose. For a reconciliation of our Adjusted EBITDA to our net income (loss), the most directly related GAAP measure, please see the table below.
		Our Chief Executive Officer, who is our chief operating decision-maker, and our compensation committee, traditionally have used Adjusted EBITDA thresholds in setting performance goals for our employees, including senior management. Such performance goals serve to incentivize management to improve profitability and thereby increase long-term stockholder value. For more information on the use of Adjusted EBITDA by our board of directors’ compensation committee, see “Executive Compensation — Compensation Discussion and Analysis.”
		As a result, the annual bonuses for certain members of our management typically are based at least in part on Adjusted EBITDA. At the same time, some or all of these executives have responsibility for monitoring our financial results generally, including the items included as adjustments in calculating Adjusted EBITDA (subject ultimately to review by our board of directors in the context of the board’s review of our quarterly financial statements). While many of the adjustments (for example, transaction costs and our existing senior secured credit facility fees) involve mathematical application of items reflected in our financial statements, others (such as determining whether a non-cash item is unusual) involve a degree of judgment and discretion. While we believe that all of these adjustments are appropriate, and although the quarterly calculations are subject to review by our board of directors in the context of the board’s review of our quarterly financial statements and certification by our Chief Financial Officer in a compliance certificate provided to the lenders under our existing senior secured credit facility, this discretion may be viewed as an additional limitation on the use of Adjusted EBITDA as an analytical tool.
		We believe our presentation of Adjusted EBITDA is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance.
		Adjusted EBITDA is not a substitute for net income (loss), income (loss) from continuing operations, cash flows from operating activities, operating margin, or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that, in our opinion, do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance.
		Because of these limitations, Adjusted EBITDA should not be considered a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business. Our management compensates for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA supplementally.

		Successor																					Predecessor
		Three																					January 1,
		Months																Year					2007
		Ended																Ended					through				Year Ended
		March 31,								Year Ended December 31,								December 31,					May 10,				December 31,
(Dollars in thousands)		2010				2009				2009				2008				2007					2007				2006				2005
		(Unaudited)
Net income (loss)		$	(53,001	)		$	(43,560	)		$	(435,645	)		$	(146,555	)		$	(96,188	)			$	(30,422	)		$	141,055			$	101,127
Adjusted for:
Depreciation and amortization			65,497				66,956				253,531				275,832				187,043					82,949				222,376				199,777
Interest expense			62,596				47,702				200,512				222,177				171,115					9,454				26,870				29,946
Derivative interest expense (income)			23,714				7,549				55,634				18,699				13,233					(177	)			(1,134	)			(3,314	)
Interest income			(220	)			(428	)			(1,814	)			(3,506	)			(6,602	)				(1,364	)			(2,007	)			(1,713	)
Income tax expense (benefit)			(9,525	)			301				326,650				11,368				(234,316	)				(4,577	)			80,219				63,223
EBITDA		$	89,061			$	78,520			$	398,868			$	378,015			$	34,285				$	55,863			$	467,379			$	389,046
Non-cash impairments(a)			1,274				515				515				24,529				256,305					—				27,595				6,377
Non-cash equity comp			—				—				—				—				—					12,501				3,627				12,397
Other unusual non-cash items(b)			—				—				—				—				—					2,418				—				—
Excludable transaction costs(c)			—				—				6,477				7,054				1,007					38,905				—				—
Adjusted EBITDA		$	90,335			$	79,035			$	405,860			$	409,598			$	291,597				$	109,687			$	498,601			$	407,820

	(a)	Non-cash impairments include the items discussed in note (3) above.
	(b)	For the period January 1, 2007 through May 10, 2007, we incurred a $2.4 million pre-tax impairment of a note receivable recorded in non-operating other (income) expense.

	•	for the year ended December 31, 2009, we incurred $4.2 million of pre-tax transaction costs in the third and fourth quarters of 2009 related to an amendment to our existing senior secured credit facility and the concurrent senior secured notes amendments, and $2.3 million of pre-tax transaction costs during the third quarter of 2009 related to our cancelled bond offering;

	•	for the year ended December 31, 2008, we incurred $7.1 million of pre-tax expense associated with the closing of our 2008 RSA on July 30, 2008, and financial advisory fees associated with an amendment to our existing senior secured credit facility;
	•	for the year ended December 31, 2007, we incurred $1.0 million in pre-tax transaction costs related to our going private transaction; and
	•	for the period January 1, 2007 to May 10, 2007, our predecessor incurred $16.4 million related to change-in-control payments made to former executive officers and $22.5 million for financial investment advisory, legal, and accounting fees, all of which resulted from the 2007 Transactions.

(8)		We use the term “Adjusted Operating Ratio” throughout this prospectus. Adjusted Operating Ratio, as we define this term, is not presented in accordance with GAAP. We use Adjusted Operating Ratio as a supplement to our GAAP results in evaluating certain aspects of our business, as described below.
		We define Adjusted Operating Ratio as (a) total operating expenses, less (i) fuel surcharges, (ii) non-cash impairment charges, (iii) other unusual items, and (iv) excludable transaction costs, as a percentage of (b) total revenue excluding fuel surcharge revenue.
		Our board of directors and executive management team also focus on Adjusted Operating Ratio as a key indicator of our performance from period to period. We believe fuel surcharge is sometimes volatile and eliminating the impact of this source of revenue (by netting fuel surcharge revenue against fuel expense) affords a more consistent basis for comparing our results of operations. We also believe excluding impairments and other unusual items enhances the comparability of our performance from period to period. For a reconciliation of our Adjusted Operating Ratio to our operating ratio, please see the table below.
		We believe our presentation of Adjusted Operating Ratio is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance.
		Adjusted Operating Ratio is not a substitute for operating margin or any other measure derived solely from GAAP measures. There are limitations to using non-GAAP measures such as Adjusted Operating Ratio. Although we believe that Adjusted Operating Ratio can make an evaluation of our operating performance more consistent because it removes items that, in our opinion, do not reflect our core operations, other companies in our industry may define Adjusted Operating Ratio differently than we do. As a result, it may be difficult to use Adjusted Operating Ratio or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance.
		A reconciliation of our Adjusted Operating Ratio for each of the periods indicated is as follows:

		Successor																						Predecessor
		Three Months																	Year					January 1, 2007
		Ended																	Ended					through				Year Ended
		March 31,								Year Ended December 31,									December 31,					May 10,				December 31,
(Dollars in thousands)		2010				2009				2009				2008					2007					2007				2006				2005
Total GAAP operating revenue		$	654,830			$	614,756			$	2,571,353			$	3,399,810				$	2,180,293				$	1,074,723			$	3,172,790			$	3,197,455
Less:
Fuel surcharge revenue			(88,816	)			(52,986	)			(275,373	)			(719,617	)				(344,946	)				(147,507	)			(462,529	)			(391,942	)
Operating revenue, net of fuel surcharge revenue			566,014				561,770				2,295,980				2,680,193					1,835,347					927,216				2,710,261				2,805,513
Total GAAP operating expense			631,637				602,517				2,439,352				3,284,874					2,334,984					1,100,380				2,929,059				3,009,395
Adjusted for:
Fuel surcharge revenue			(88,816	)			(52,986	)			(275,373	)			(719,617	)				(344,946	)				(147,507	)			(462,529	)			(391,942	)
Excludable transaction costs(a)			—				—				(6,477	)			(7,054	)				(1,007	)				(38,905	)			—				—
Non-cash impairments(b)			(1,274	)			(515	)			(515	)			(24,529	)				(256,305	)				—				(27,595	)			(6,377	)
Other unusual items(c)			(7,382	)			—				—				—					—					—				9,952				—
Acceleration of noncash stock options(d)			—				—				—				—					—					(11,125	)			—				(12,397	)
Adjusted operating expense		$	534,165			$	549,016			$	2,156,987			$	2,533,674				$	1,732,726				$	902,843			$	2,448,887			$	2,598,679
Adjusted Operating Ratio(e)			94.4%				97.7%				93.9%				94.5%					94.4%					97.4%				90.4%				92.6%
Actual operating ratio			96.5%				98.0%				94.9%				96.6%					107.1%					102.4%				92.3%				94.1%

	(a)	Excludable transaction costs include the following:

	•	for the year ended December 31, 2009, we incurred $4.2 million of pre-tax transaction costs in the third and fourth quarters of 2009 related to an amendment to our existing senior secured credit facility and the concurrent senior secured notes amendments, and $2.3 million of pre-tax transaction costs during the third quarter of 2009 related to our cancelled bond offering;
	•	for the year ended December 31, 2008, we incurred $7.1 million of pre-tax expense associated with the closing of our 2008 RSA on July 30, 2008, and financial advisory fees associated with an amendment to our existing senior secured credit facility;
	•	for the year ended December 31, 2007, we incurred $1.0 million in pre-tax transaction costs related to our going private transaction; and
	•	for the period January 1, 2007 to May 10, 2007, our predecessor incurred $16.4 million related to change-in-control payments made to former executive officers and $22.5 million for financial investment advisory, legal, and accounting fees, all of which resulted from the 2007 Transactions.

	(b)	Non-cash impairments include items discussed in note (3) above.

	(c)	Other unusual items included the following:

	•	for the year ended December 31, 2006, we recognized a $4.8 million and $5.2 million pre-tax benefit for the change in our discretionary match to our 401(k) profit sharing plan and a gain from the settlement of litigation, respectively; and
	•	in the first quarter of 2010, we incurred $7.4 million of incremental depreciation expense during the 2010 quarter reflecting management’s revised estimates regarding salvage value and useful lives for approximately 7,000 dry van trailers, which management decided to scrap.

	(d)	Acceleration of non-cash stock options includes the following:

	•	for the period January 1, 2007 to May 10, 2007, we incurred $11.1 million related to the acceleration of stock incentive awards as a result of the 2007 Transactions; and
	•	for the year ended December 31, 2005, we incurred a $12.4 million pre-tax expense to accelerate the vesting period of 7.3 million stock options.

 

 

 

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, before making an investment decision. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, results of operations, or financial condition could be materially and adversely affected. In such an event, the trading price of our Class A common stock could decline and you could lose part or all of your investment.

 

Risks Related to Our Business and Industry

 

Our business is subject to general economic and business factors affecting the truckload industry that are largely beyond our control, any of which could have a material adverse effect on our operating results.

 

Our business is dependent on a number of factors that may have a negative impact on our results of operations, many of which are beyond our control. We believe that some of the most significant of these factors are economic changes that affect supply and demand in transportation markets, such as:

 

 

The risks associated with these factors are heightened when the U.S. economy is weakened. Some of the principal risks during such times are as follows:

 

 

Economic conditions that decrease shipping demand or increase the supply of tractors and trailers can exert downward pressure on rates and equipment utilization, thereby decreasing asset productivity. As a result of depressed freight volumes and excess truckload capacity in our industry, we have experienced lower miles per unit, freight rates, and freight volumes in recent periods, all of which have negatively impacted our results. Although the ATA’s seasonally adjusted for-hire truck tonnage index has shown improvement since the end of 2009, we cannot predict when or if the truckload market will return to a period of sustained growth. A prolonged recession or general economic instability could result in further declines in our results of operations, which declines may be material.

 

We also are subject to cost increases outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, increases in fuel prices, driver wages, interest rates, taxes, tolls, license and registration fees, insurance, revenue equipment, and healthcare for our employees.

 

In addition, events outside our control, such as strikes or other work stoppages at our facilities or at customer, port, border, or other shipping locations, or actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state, or heightened security requirements could lead to reduced economic demand, reduced availability of credit, or temporary closing of the shipping locations or U.S. borders. Such events or enhanced security measures in

connection with such events could impair our operating efficiency and productivity and result in higher operating costs.

 

We operate in the highly competitive and fragmented truckload industry, and our business and results of operations may suffer if we are unable to adequately address downward pricing and other competitive pressures.

 

We compete with many truckload carriers and, to a lesser extent, with less-than-truckload carriers, railroads, and third-party logistics, brokerage, freight forwarding, and other transportation companies. Additionally, some of our customers may utilize their own private fleets rather than outsourcing loads to us. Some of our competitors may have greater access to equipment, a wider range of services, greater capital resources, less indebtedness, or other competitive advantages. Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include the following:

 

 

We have several major customers, the loss of one or more of which could have a material adverse effect on our business.

 

A significant portion of our revenue is generated from a number of major customers, the loss of one or more of which could have a material adverse effect on our business. For the year ended December 31, 2009, our top 25 customers, based on revenue, accounted for approximately 54% of our revenue; our top 10 customers, approximately 37% of our revenue; our top 5 customers, approximately 27% of our revenue; and our largest customer, Wal-Mart and its subsidiaries, accounted for 10.2% of our revenue. A substantial portion of our freight is from customers in the retail sales industry. As such, our volumes are largely dependent on consumer spending and retail sales, and our results may be more susceptible to trends in unemployment and retail sales than carriers that do not have this concentration.

 

Economic conditions and capital markets may adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our results of operations and financial condition and our ability to comply with the covenants in our debt agreements and accounts receivable securitization agreements, especially if they were to delay or default on payments to us. Generally, we do not

have contractual relationships that guarantee any minimum volumes with our customers, and we cannot assure you that our customer relationships will continue as presently in effect. Our dedicated business is generally subject to longer term written contracts than our non-dedicated business; however, certain of these contracts contain cancellation clauses and there is no assurance any of our customers, including our dedicated customers, will continue to utilize our services, renew our existing contracts, or continue at the same volume levels. A reduction in or termination of our services by one or more of our major customers, including our dedicated customers, could have a material adverse effect on our business and operating results.

 

We may not be able to sustain the cost savings realized as part of our recent cost reduction initiatives.

 

Since the first quarter of 2008, we have implemented over $250 million of annualized cost savings, many of which we expect to result in ongoing savings. The cost savings entail several elements, including reducing our tractor fleet by 17.2%, improving fuel efficiency, improving our tractor to non-driver ratio, suspending bonuses and 401(k) matching, streamlining maintenance and administrative functions, improving safety and claims management, and limiting discretionary expenses. We may not be able to sustain all, or any part of, these cost savings on an annual basis in the future, particularly those related to headcount, compensation, and employee benefits, if an economic recovery increases competition for employees and expenses relating to driving more miles.

 

We may not be successful in achieving our strategy of growing our revenue.

 

Our current goals include increasing revenue in excess of 10% over the next several years, including by growing our current service offerings. While we currently believe we can achieve these stated goals through the implementation of various business strategies, there can be no assurance that we will be able to effectively and successfully implement such strategies and realize our stated goals. Our goals may be negatively affected by a failure to further penetrate our existing customer base, cross-sell our service offerings, pursue new customer opportunities, manage the operations and expenses of new or growing service offerings, or otherwise achieve growth of our service offerings. Further, we may not achieve profitability from our new service offerings. There is no assurance that successful execution of our business strategies will result in us achieving our current business goals.

 

We have a recent history of net losses.

 

For the years ended December 31, 2007, 2008, and 2009, we incurred net losses of $96.2 million (net of a tax benefit of $230.2 million to eliminate our deferred tax liabilities upon conversion to a subchapter S corporation), $146.6 million, and $435.6 million (including $324.8 million to recognize deferred income taxes upon our election to be taxed as a subchapter C corporation), respectively. Achieving profitability depends upon numerous factors, including our ability to increase our trucking revenue per tractor, expand our overall volume, and control expenses. We might not achieve profitability or, if we do, we may not be able to sustain or increase profitability in the future.

 

Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments, and surcharge collection may increase our costs of operation, which could materially and adversely affect our profitability.

 

Fuel is one of our largest operating expenses. Diesel fuel prices fluctuate greatly due to factors beyond our control, such as political events, terrorist activities, armed conflicts, depreciation of the dollar against other currencies, and hurricanes and other natural or man-made disasters, such as the recent oil spill in the Gulf of Mexico, each of which may lead to an increase in the cost of fuel. Fuel prices also are affected by the rising demand in developing countries, including China, and could be adversely impacted by the use of crude oil and oil reserves for other purposes and diminished drilling activity. Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain. Because our operations are dependent upon diesel fuel, significant diesel fuel cost increases, shortages, or supply disruptions could materially and adversely affect our results of operations and financial condition.

Fuel also is subject to regional pricing differences and often costs more on the West Coast and in the Northeast, where we have significant operations. Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges, have an adverse effect on our operations and profitability. We obtain some protection against fuel cost increases by maintaining a fuel-efficient fleet and a compensatory fuel surcharge program. We have fuel surcharge programs in place with a majority of our customers, which have helped us offset the majority of the negative impact of rising fuel prices associated with loaded or billed miles. However, we also incur fuel costs that cannot be recovered even with respect to customers with which we maintain fuel surcharge programs, such as those associated with empty miles, deadhead miles, or the time when our engines are idling. Because our fuel surcharge recovery lags behind changes in fuel prices, our fuel surcharge recovery may not capture the increased costs we pay for fuel, especially when prices are rising, leading to fluctuations in our levels of reimbursement; and our levels of reimbursement have fluctuated in the past. Further, during periods of low freight volumes, shippers can use their negotiating leverage to impose less compensatory fuel surcharge policies. There can be no assurance that such fuel surcharges can be maintained indefinitely or will be sufficiently effective.

 

We have not used derivatives to mitigate volatility in our fuel costs, but periodically evaluate their possible use. We have contracted with some of our fuel suppliers to buy fuel at a fixed price or within banded pricing for a specific period, usually not exceeding twelve months, to mitigate the impact of rising fuel costs. However, these purchase commitments only cover a small portion of our fuel consumption and, accordingly, our results of operations could be negatively impacted by fuel price fluctuations.

 

Increased prices for new revenue equipment, design changes of new engines, volatility in the used equipment sales market, and the failure of manufacturers to meet their sale or trade-back obligations to us could adversely affect our financial condition, results of operations, and profitability.

 

We have experienced higher prices for new tractors over the past few years. The resale value of the tractors and the residual values under arrangements we have with manufacturers have not increased to the same extent. In addition, the engines used in tractors manufactured in 2010 and after are subject to more stringent emissions control regulations issued by the Environmental Protection Agency, or EPA. Compliance with such regulations has increased the cost of the tractors, and resale prices or residual values may not increase to the same extent. Accordingly, our equipment costs, including depreciation expense per tractor, are expected to increase in future periods. As with any engine redesign, there is a risk that the newly designed 2010 diesel engines will have unforeseen problems. Additionally, we have not operated many of the new 2010 diesel engines, so we cannot be certain how they will operate.

 

Many engine manufacturers are using selective catalytic reduction, or SCR, equipment to comply with the EPA’s 2010 diesel engine emissions standards. SCR equipment requires a separate urea-based liquid known as diesel exhaust fluid, which is stored in a separate tank on the truck. If the new tractors we purchase are equipped with SCR technology and require us to use diesel exhaust fluid, we will be exposed to additional costs associated with the price and availability of diesel exhaust fluid, the weight of the diesel exhaust fluid tank and SCR system, and additional maintenance costs associated with the SCR system. Additionally, we may need to train our drivers to use the new SCR equipment. Problems relating to the new 2010 engines or increased costs associated with the new 2010 engines resulting from regulatory requirements or otherwise could adversely impact our business.

 

A depressed market for used equipment could require us to trade our revenue equipment at depressed values or to record losses on disposal or impairments of the carrying values of our revenue equipment that is not protected by residual value arrangements. Used equipment prices are subject to substantial fluctuations based on freight demand, supply of used trucks, availability of financing, the presence of buyers for export to countries such as Russia and Brazil, and commodity prices for scrap metal. We took impairment charges related to the value of certain tractors and trailers in 2007, 2008, and the first quarter of 2010. If there is another deterioration of resale prices, it could have a material adverse effect on our business and operating results. Trades at depressed values and decreases in proceeds under equipment disposals and impairments of the carrying values of our revenue equipment could adversely affect our results of operations and financial condition.

We lease or finance certain revenue equipment under leases that are structured with balloon payments at the end of the lease or finance term equal to the value we have contracted to receive from the respective equipment manufacturers upon sale or trade back to the manufacturers. To the extent we do not purchase new equipment that triggers the trade back obligation, or the manufacturers of the equipment do not pay the contracted value at the end of the lease term, we could be exposed to losses for the amount by which the balloon payments owed to the respective lease or finance companies exceed the proceeds we are able to generate in open market sales of the equipment. In addition, if we purchase equipment subject to a buy-back agreement and the manufacturer refuses to honor the agreement or we are unable to replace equipment at a reasonable price, we may be forced to sell such equipment at a loss.

 

We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future regulations could have a material adverse effect on our operations and profitability.

 

We operate in the United States throughout the 48 contiguous states pursuant to operating authority granted by the U.S. Department of Transportation, or DOT, in Mexico pursuant to operating authority granted by Secretarìa de Communiciones y Transportes, and in various Canadian provinces pursuant to operating authority granted by the Ministries of Transportation and Communications in such provinces. Our company drivers and owner-operators also must comply with the safety and fitness regulations of the DOT, including those relating to drug and alcohol testing and hours-of-service. Such matters as weight and equipment dimensions also are subject to government regulations. We also may become subject to new or more restrictive regulations relating to fuel emissions, drivers’ hours-of-service, ergonomics, on-board reporting of operations, collective bargaining, security at ports, and other matters affecting safety or operating methods. The DOT is currently engaged in a rulemaking proceeding regarding drivers’ hours-of-service, and the result could negatively impact utilization of our equipment. Other agencies, such as the EPA and the DHS, also regulate our equipment, operations, and drivers. Future laws and regulations may be more stringent, require changes in our operating practices, influence the demand for transportation services, or require us to incur significant additional costs. Higher costs incurred by us or by our suppliers who pass the costs onto us through higher prices could adversely affect our results of operations.

 

In the aftermath of the September 11, 2001 terrorist attacks, federal, state, and municipal authorities implemented and continue to implement various security measures, including checkpoints and travel restrictions on large trucks. The Transportation Security Administration, or TSA, has adopted regulations that require determination by the TSA that each driver who applies for or renews his license for carrying hazardous materials is not a security threat. This could reduce the pool of qualified drivers, which could require us to increase driver compensation, limit fleet growth, or let trucks sit idle. These regulations also could complicate the matching of available equipment with hazardous material shipments, thereby increasing our response time and our deadhead miles on customer orders. As a result, it is possible that we may fail to meet the needs of our customers or may incur increased expenses to do so. These security measures could negatively impact our operating results.

 

The new CSA 2010 initiative of the Federal Motor Carrier Safety Administration, or FMCSA, introduces a new enforcement and compliance model, which implements driver standards in addition to our current standards. Under the new regulations, the methodology for determining a carrier’s DOT safety rating will be expanded to include the on-road safety performance of the carrier’s drivers. The new regulations are scheduled to be implemented in the second half of 2010, and enforcement is scheduled to begin in 2011. These implementation and enforcement dates have already been delayed and may be subject to further change. As a result of these new regulations, including the expanded methodology for determining a carrier’s DOT safety rating, there may be an adverse effect on our DOT safety rating. We currently have a satisfactory DOT rating, which is the highest available rating. A conditional or unsatisfactory DOT safety rating could adversely affect our business because some of our customer contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory rating could negatively impact or restrict our operations. In addition, there is a possibility that a drop to conditional status could affect our ability to self-insure for personal injury and property damage relating to the transportation of freight, which could cause our insurance costs to increase. Finally, proposed FMCSA rules and practices followed by regulators may require us to install electronic on-

board recorders in our tractors if we receive an adverse change in our safety results or safety rating. Such installation could cause an increase in driver turnover, adverse information in litigation, cost increases, and decreased asset utilization.

 

In addition, our operations are subject to various environmental laws and regulations dealing with the transportation, storage, presence, use, disposal, and handling of hazardous materials, discharge of wastewater and storm water, and with waste oil and fuel storage tanks. Our truck terminals often are located in industrial areas where groundwater or other forms of environmental contamination could occur. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. Certain of our facilities have waste oil or fuel storage tanks and fueling islands. A small percentage of our freight consists of low-grade hazardous substances, which subjects us to a wide array of regulations. Although we have instituted programs to monitor and control environmental risks and promote compliance with applicable environmental laws and regulations, if we are involved in a spill or other accident involving hazardous substances, if there are releases of hazardous substances we transport, if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable laws or regulations, we could be subject to cleanup costs and liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a material adverse effect on our business and operating results. Additionally, if we fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

 

EPA regulations limiting exhaust emissions became more restrictive in 2010. On May 21, 2010, President Obama signed an executive memorandum directing the National Highway Traffic Safety Administration, or NHTSA, and the EPA to develop new, stricter fuel efficiency standards for heavy trucks, beginning in 2014. In December 2008, California adopted new performance requirements for diesel trucks, with targets to be met between 2011 and 2023, and California also has adopted aerodynamics requirements for certain trailers. These regulations, as well as proposed regulations or legislation related to climate change that potentially impose restrictions, caps, taxes, or other controls on emissions of greenhouse gas, could adversely affect our operations and financial results. In addition, increasing efforts to control emissions of greenhouse gases are likely to have an impact on us. The EPA has announced a finding relating to greenhouse gas emissions that may result in promulgation of greenhouse gas emission limits. Federal and state lawmakers also are considering a variety of climate-change proposals. Compliance with such regulations could increase the cost of new tractors and trailers, impair equipment productivity, and increase operating expenses. These effects, combined with the uncertainty as to the operating results that will be produced by the newly designed diesel engines and the residual values of these vehicles, could increase our costs or otherwise adversely affect our business or operations.

 

In order to reduce exhaust emissions, some states and municipalities have begun to restrict the locations and amount of time where diesel-powered tractors, such as ours, may idle. These restrictions could force us to alter our drivers’ behavior, purchase on-board power units that do not require the engine to idle, or face a decrease in productivity.

 

From time to time, various federal, state, or local taxes are increased, including taxes on fuels. We cannot predict whether, or in what form, any such increase applicable to us will be enacted, but such an increase could adversely affect our profitability.

 

CSA 2010, increases in driver compensation, or other difficulties in attracting and retaining qualified drivers could adversely affect our profitability and ability to maintain or grow our fleet.

 

Under CSA 2010, drivers and fleets will be evaluated and ranked based on certain safety-related standards. As a result, certain current and potential drivers may no longer be eligible to drive for us, our fleet could be ranked poorly as compared to our peer firms, and our safety rating could be adversely impacted. We recruit and retain a substantial number of first-time drivers, and these drivers may have a higher likelihood of creating adverse safety events under CSA 2010. A reduction in eligible drivers or a poor fleet ranking may result in difficulty attracting and retaining qualified drivers, and could cause our customers to direct their

business away from us and to carriers with higher fleet rankings, which would adversely affect our results of operations.

 

Additionally, like many truckload carriers, from time to time we have experienced difficulty in attracting and retaining sufficient numbers of qualified drivers, including owner-operators, and such shortages may recur in the future. Because of the intense competition for drivers, we may face difficulty maintaining or increasing our number of drivers. Due in part to the economic recession, we reduced our driver pay in 2009. The compensation we offer our drivers and owner-operators is subject to market conditions and we may find it necessary to increase driver and owner-operator compensation in future periods, which will be more likely to the extent that economic conditions improve. In addition, like most in our industry, we suffer from a high turnover rate of drivers, especially in the first 90 days of employment. Our high turnover rate requires us to continually recruit a substantial number of drivers in order to operate existing revenue equipment. If we are unable to continue to attract and retain a sufficient number of drivers, we could be required to adjust our compensation packages, or operate with fewer trucks and face difficulty meeting shipper demands, all of which could adversely affect our profitability and ability to maintain our size or grow.

 

We self-insure a significant portion of our claims exposure, which could significantly increase the volatility of, and decrease the amount of, our earnings.

 

We self-insure a significant portion of our claims exposure and related expenses related to cargo loss, employee medical expense, bodily injury, workers’ compensation, and property damage and maintain insurance with licensed insurance companies above our limits of self-insurance. Our substantial self-insured retention of $10.0 million for bodily injury and property damage per occurrence and up to $5.0 million per occurrence for workers’ compensation claims can make our insurance and claims expense higher or more volatile. Additionally, with respect to our third-party insurance, we face the risks of increasing premiums and collateral requirements and the risk of carriers or underwriters leaving the trucking sector, which may materially affect our insurance costs or make insurance in excess of our self-insured retention more difficult to find, as well as increase our collateral requirements.

 

We accrue the costs of the uninsured portion of pending claims based on estimates derived from our evaluation of the nature and severity of individual claims and an estimate of future claims development based upon historical claims development trends. Actual settlement of the self-insured claim liabilities could differ from our estimates due to a number of uncertainties, including evaluation of severity, legal costs, and claims that have been incurred but not reported. Due to our high self-insured amounts, we have significant exposure to fluctuations in the number and severity of claims and the risk of being required to accrue or pay additional amounts if our estimates are revised or the claims ultimately prove to be more severe than originally assessed. Although we endeavor to limit our exposure arising with respect to such claims, we also may have exposure if carrier subcontractors under our brokerage operations are inadequately insured for any accident.

 

Our liability coverage has a maximum aggregate limit of $150.0 million per year. If any claim were to exceed our aggregate coverage limit, we would bear the excess, in addition to our other self-insured amounts. Although we believe our aggregate insurance limits are sufficient to cover reasonably expected claims, it is possible that one or more claims could exceed those limits. Our insurance and claims expense could increase, or we could find it necessary to raise our self-insured retention or decrease our aggregate coverage limits when our policies are renewed or replaced. Our operating results and financial condition may be adversely affected if these expenses increase, we experience a claim in excess of our coverage limits, we experience a claim for which we do not have coverage, or we have to increase our reserves.

 

Insuring risk through our wholly-owned captive insurance companies could adversely impact our operations.

 

We insure a significant portion of our risk through our wholly-owned captive insurance companies, Mohave Transportation Insurance Company, or Mohave, and Red Rock Risk Retention Group, Inc., or Red Rock. In addition to insuring portions of our own risk, Mohave insures certain owner-operators in exchange for an insurance premium paid by the owner-operator to Mohave. The insurance and reinsurance markets are

subject to market pressures. Our captive insurance companies’ abilities or needs to access the reinsurance markets may involve the retention of additional risk, which could expose us to volatility in claims expenses. Additionally, an increase in the number or severity of claims for which we insure could adversely impact our results of operations.

 

To comply with certain state insurance regulatory requirements, cash and cash equivalents must be paid to Red Rock and Mohave as capital investments and insurance premiums to be restricted as collateral for anticipated losses. Such restricted cash is used for payment of insured claims. In the future, we may continue to insure our automobile liability risk through our captive insurance subsidiaries, which will cause the required amount of our restricted cash, as recorded on our balance sheet, or other collateral, such as letters of credit, to rise. Significant future increases in the amount of collateral required by third-party insurance carriers and regulators would reduce our liquidity and could adversely affect our results of operations and capital resources.

 

Our wholly-owned captive insurance companies are subject to substantial government regulation.

 

State authorities regulate our insurance subsidiaries in the states in which they do business. These regulations generally provide protection to policy holders rather than stockholders. The nature and extent of these regulations typically involve items such as: approval of premium rates for insurance, standards of solvency and minimum amounts of statutory capital surplus that must be maintained, limitations on types and amounts of investments, regulation of dividend payments and other transactions between affiliates, regulation of reinsurance, regulation of underwriting and marketing practices, approval of policy forms, methods of accounting, and filing of annual and other reports with respect to financial condition and other matters. These regulations may increase our costs of regulatory compliance, limit our ability to change premiums, restrict our ability to access cash held in our captive insurance companies, and otherwise impede our ability to take actions we deem advisable.

 

We are subject to certain risks arising from doing business in Mexico.

 

We have a growing operation in Mexico, including through our wholly-owned subsidiary, Trans-Mex. As a result, we are subject to risks of doing business internationally, including fluctuations in foreign currencies, changes in the economic strength of Mexico, difficulties in enforcing contractual obligations and intellectual property rights, burdens of complying with a wide variety of international and U.S. export and import laws, and social, political, and economic instability. In addition, if we are unable to maintain our C-TPAT status, we may have significant border delays, which could cause our Mexican operations to be less efficient than those of competitor truckload carriers also operating in Mexico that obtain or continue to maintain C-TPAT status. We also face additional risks associated with our foreign operations, including restrictive trade policies and imposition of duties, taxes, or government royalties imposed by the Mexican government, to the extent not preempted by the terms of North American Free Trade Agreement. Factors that substantially affect the operations of our business in Mexico may have a material adverse effect on our overall operating results.

 

Our use of owner-operators to provide a portion of our tractor fleet exposes us to different risks than our competitors who employ a larger percentage of company drivers.

 

We provide financing to certain of our owner-operators purchasing tractors from us. If we are unable to provide such financing in the future, due to liquidity constraints or other restrictions, we may experience a decrease in the number of owner-operators available to us. Further, if owner-operators operating the tractors we finance default under or otherwise terminate the financing arrangement and we are unable to find a replacement owner-operator, we may incur losses on amounts owed to us with respect to the tractor in addition to any losses we may incur as a result of idling the tractor.

 

During times of increased economic activity, we face heightened competition for owner-operators from other carriers. To the extent our turnover increases, if we cannot attract sufficient owner-operators, or it becomes economically difficult for owner-operators to survive, we may not achieve our goal of increasing the percentage of our fleet provided by owner-operators.

Pursuant to our owner-operator fuel reimbursement program, we absorb all increases in fuel costs above a certain level to protect our owner-operators from additional increases in fuel prices with respect to certain of our owner-operators. A significant increase or rapid fluctuation in fuel prices could significantly increase our purchased transportation costs due to reimbursement rates under our fuel reimbursement program becoming higher than the benefits to us under our fuel surcharge programs with our customers.

 

Our lease contracts with our owner-operators are governed by the federal leasing regulations, which impose specific requirements on us and our owner-operators. In the past, we have been the subject of lawsuits, alleging the violation of leasing obligations or failure to follow the contractual terms. It is possible that we could be subjected to similar lawsuits in the future, which could result in liability.

 

If our owner-operators are deemed by regulators or judicial process to be employees, our business and results of operations could be adversely affected.

 

Tax and other regulatory authorities have in the past sought to assert that owner-operators in the trucking industry are employees rather than independent contractors. Proposed federal legislation would make it easier to reclassify owner-operators as employees. Some states have put initiatives in place to increase their revenues from items such as unemployment, workers’ compensation, and income taxes, and a reclassification of owner-operators as employees would help states with this initiative. Further, class actions and other lawsuits have been filed against us and others in our industry seeking to reclassify owner-operators as employees for a variety of purposes, including workers’ compensation and health care coverage. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If our owner-operators are determined to be our employees, we would incur additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor, employment, and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.

 

We are dependent on certain personnel that are of key importance to the management of our business and operations.

 

Our success depends on the continuing services of our founder, current owner, and Chief Executive Officer, Mr. Moyes. We currently do not have an employment agreement with Mr. Moyes. We believe that Mr. Moyes possesses valuable knowledge about the trucking industry and that his knowledge and relationships with our key customers and vendors would be very difficult to replicate.

 

In addition, many of our other executive officers are of key importance to the management of our business and operations, including our President, Richard Stocking, and our Chief Financial Officer, Virginia Henkels. We currently do not have employment agreements with any of our management. Our future success depends on our ability to retain our executive officers and other capable managers. Any unplanned turnover or our failure to develop an adequate succession plan for our leadership positions could deplete our institutional knowledge base and erode our competitive advantage. Although we believe we could replace key personnel given adequate prior notice, the unexpected departure of key executive officers could cause substantial disruption to our business and operations. In addition, even if we are able to continue to retain and recruit talented personnel, we may not be able to do so without incurring substantial costs.

 

We engage in transactions with other businesses controlled by Mr. Moyes, our Chief Executive Officer and current owner, and the interests of Mr. Moyes could conflict with the interests of our other stockholders. In addition, Mr. Moyes may pledge or borrow against a portion of his Class B common stock, which may also cause his interests to conflict with the interests of our other stockholders.

 

We engage in multiple transactions with related parties, some of which will continue after this offering. These transactions include providing and receiving freight services and facility leases with entities owned by Mr. Moyes and certain members of his family, the provision of air transportation services from an entity owned by Mr. Moyes and certain members of his family, and the acquisition of approximately 100 trailers from an entity owned by Mr. Moyes and certain members of his family in 2009. Because certain entities controlled by Mr. Moyes and certain members of his family operate in the transportation industry, Mr. Moyes’

ownership may create conflicts of interest or require judgments that are disadvantageous to you in the event we compete for the same freight or other business opportunities. As a result, Mr. Moyes may have interests that conflict with yours. We have adopted a policy relating to prior approval of related party transactions and our amended and restated certificate of incorporation contains provisions that specifically relate to prior approval for transactions with Mr. Moyes, the Moyes Affiliates, and any Moyes affiliated entities. However, we cannot assure you that the policy or these provisions will be successful in eliminating conflicts of interests. See “Certain Relationships and Related Party Transactions” and “Description of Capital Stock — Affiliate Transactions.”

 

Our amended and restated certificate of incorporation also provides that in the event that any of our officers or directors is also an officer or director or employee of an entity owned by or affiliated with Mr. Moyes or any of the Moyes Affiliates and acquires knowledge of a potential transaction or other corporate opportunity not involving the truck transportation industry or involving refrigerated transportation or less-than-truckload transportation, then, subject to certain exceptions, we shall not be entitled to such transaction or corporate opportunity and you should have no expectancy that such transaction or corporate opportunity will be available to us. See “Certain Relationships and Related Party Transactions” and “Description of Capital Stock — Corporate Opportunity.”

 

In the past, in order to fund the operations of or otherwise provide financing for some of Mr. Moyes’ other businesses, Mr. Moyes pledged substantially all of his ownership interest in our predecessor company and it is possible that the needs of these businesses in the future may cause him to sell or pledge shares of our Class B common stock. Such sales or pledges, or the perception that they may occur, may have an adverse effect on the price of our Class A common stock and may create conflicts of interests for Mr. Moyes. Although our board of directors has limited the right of employees or directors to pledge more than 20% of their family holdings to secure margin loans pursuant to our securities trading policy, we cannot assure you that the current board policy will not be changed under circumstances deemed by the board to be appropriate.

 

Mr. Moyes, our Chief Executive Officer, has substantial ownership interests in several other businesses, which may expose Mr. Moyes and us to significant lawsuits or liabilities.

 

Mr. Moyes is the principal owner of, and serves as chairman of the board of directors of Central Refrigerated Services, Inc., a temperature controlled truckload carrier, Central Freight Lines, Inc., an LTL carrier, SME Industries, Inc., a steel erection and fabrication company, Southwest Premier Properties, a real estate management company, and other business endeavors and investments in a variety of industries. Although Mr. Moyes devotes the substantial majority of his time to his role as Chief Executive Officer of Swift Corporation, the breadth of Mr. Moyes’ other interests may place competing demands on his time and attention. In addition, in one instance of litigation arising from another business owned by Mr. Moyes, Swift was named as a defendant even though Swift was not a party to the transactions that were the subject of the litigation. It is possible that litigation relating to other businesses owned by Mr. Moyes in the future may result in Swift being named as a defendant and, even if such claims are without merit, that we will be required to incur the expense of defending such matters.

 

We depend on third parties, particularly in our intermodal and brokerage businesses, and service instability from these providers could increase our operating costs and reduce our ability to offer intermodal and brokerage services, which could adversely affect our revenue, results of operations, and customer relationships.

 

Our intermodal business utilizes railroads and some third-party drayage carriers to transport freight for our customers. In most markets, rail service is limited to a few railroads or even a single railroad. Any reduction in service by the railroads with which we have or in the future may have relationships is likely to increase the cost of the rail-based services we provide and reduce the reliability, timeliness, and overall attractiveness of our rail-based services. Furthermore, railroads increase shipping rates as market conditions permit. Price increases could result in higher costs to our customers and reduce or eliminate our ability to offer intermodal services. In addition, we may not be able to negotiate additional contracts with railroads to

expand our capacity, add additional routes, or obtain multiple providers, which could limit our ability to provide this service.

 

Our brokerage business is dependent upon the services of third-party capacity providers, including other truckload carriers. These third-party providers seek other freight opportunities and may require increased compensation in times of improved freight demand or tight trucking capacity. Our inability to secure the services of these third parties, or increases in the prices we must pay to secure such services, could have an adverse effect on our operations and profitability.

 

We are dependent on computer and communications systems, and a systems failure could cause a significant disruption to our business.

 

Our business depends on the efficient and uninterrupted operation of our computer and communications hardware systems and infrastructure. We currently maintain our computer system at our Phoenix, Arizona headquarters, along with computer equipment at each of our terminals. Our operations and those of our technology and communications service providers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, terrorist attacks, Internet failures, computer viruses, and other events beyond our control. Although we attempt to reduce the risk of disruption to our business operations should a disaster occur through redundant computer systems and networks and backup systems from an alternative location in Phoenix, this alternative location is subject to some of the same interruptions as may affect our Phoenix headquarters. In the event of a significant system failure, our business could experience significant disruption, which could impact our results of operations.

 

Efforts by labor unions could divert management attention and have a material adverse effect on our operating results.

 

Although our only collective bargaining agreement exists at our Mexican subsidiary, Trans-Mex, we always face the risk that our employees could attempt to organize a union. To the extent our owner-operators were re-classified as employees, the magnitude of this risk would increase. Congress or one or more states could approve legislation significantly affecting our businesses and our relationship with our employees, such as the proposed federal legislation referred to as the Employee Free Choice Act, which would substantially liberalize the procedures for union organization. Any attempt to organize by our employees could result in increased legal and other associated costs. In addition, if we entered into a collective bargaining agreement, the terms could negatively affect our costs, efficiency, and ability to generate acceptable returns on the affected operations.

 

We may not be able to execute or integrate future acquisitions successfully, which could cause our business and future prospects to suffer.

 

Historically, a key component of our growth strategy has been to pursue acquisitions of complementary businesses. Although we currently do not have any acquisition plans, we expect to consider acquisitions from time to time in the future. If we succeed in consummating future acquisitions, our business, financial condition, and results of operations, or your investment in our Class A common stock, may be negatively affected because:

 

 

 

Seasonality and the impact of weather and other catastrophic events affect our operations and profitability.

 

Our tractor productivity decreases during the winter season because inclement weather impedes operations and some shippers reduce their shipments after the winter holiday season. At the same time, operating expenses increase and fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency, increased claims, and higher equipment repair expenditures. We also may suffer from weather-related or other events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes, and explosions. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy our assets, or adversely affect the business or financial condition of our customers, any of which could harm our results or make our results more volatile.

 

Our total assets include goodwill and other indefinite-lived intangibles. If we determine that these items have become impaired in the future, net income could be materially and adversely affected.

 

As of March 31, 2010, we have recorded goodwill of $253.3 million and certain indefinite-lived intangible assets of $181.0 million primarily as a result of the 2007 Transactions. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. In accordance with Financial Accounting Standards Board Accounting Standards Codification, Topic 350, “Intangibles — Goodwill and Other,” or Topic 350, we test goodwill and indefinite-lived intangible assets for potential impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Any excess in carrying value over the estimated fair value is charged to our results of operations. Our evaluation in 2009 produced no indication of impairment of our goodwill or indefinite-lived intangible assets. Based on the results of our evaluation in 2008, we recorded a non-cash impairment charge of $17.0 million related to the decline in fair value of our Mexico freight transportation reporting unit resulting from the deterioration in truckload industry conditions as compared with the estimates and assumptions used in our original valuation projections used at the time of the partial acquisition of Swift Transportation in 2007. Based on the results of our evaluation in the fourth quarter of 2007, we recorded a non-cash impairment charge of $238.0 million related to the decline in fair value of our U.S. freight transportation reporting unit resulting from the deterioration in truckload industry conditions as compared with the estimates and assumptions used in our original valuation projections used at the time of the partial acquisition of Swift Transportation. We may never realize the full value of our intangible assets. Any future determination requiring the write-off of a significant portion of intangible assets would have an adverse effect on our financial condition and results of operations.

 

As a public company, we will be required to meet periodic reporting requirements under the Securities and Exchange Commission, or the SEC, rules and regulations. Complying with federal securities laws as a public company is expensive, and we will incur significant time and expense enhancing, documenting, testing, and certifying our internal control over financial reporting. Any deficiencies in our financial reporting or internal controls could adversely affect our business and the trading price of our Class A common stock.

 

As a publicly traded company following completion of this offering, we will be required to file periodic reports containing our financial statements with the SEC within a specified time following the completion of quarterly and annual periods. Since our going-private transaction in 2007, we have not been required to comply with SEC requirements for large accelerated filers to have our financial statements completed and reviewed or audited within a shortened specified time, although we have been preparing such documents as part of our disclosure obligations to purchasers of our senior secured notes. We may experience difficulty in meeting the SEC’s reporting requirements. Any failure by us to file our periodic reports with the SEC in a timely manner could harm our reputation and reduce the trading price of our Class A common stock.

As a public company, we will incur significant legal, accounting, insurance, and other expenses. Compliance with other rules of the SEC and the rules of the stock exchange on which the Class A common stock is listed will increase our legal and financial compliance costs and make some activities more time-consuming and costly. Furthermore, once we become a public company, SEC rules require that our Chief Executive Officer and Chief Financial Officer periodically certify the existence and effectiveness of our internal controls over financial reporting. Our independent registered public accounting firm will be required, beginning with our Annual Report on Form 10-K for our fiscal year ending on December 31, 2011, to attest to our assessment of our internal controls over financial reporting. This process will require significant documentation of policies, procedures, and systems, review of that documentation by our internal accounting staff and our outside auditors, and testing of our internal controls over financial reporting by our internal accounting staff and our outside independent registered public accounting firm. This process will involve considerable time and expense, may strain our internal resources, and have an adverse impact on our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter.

 

During the course of our testing, we may identify deficiencies that would have to be remediated to satisfy the SEC rules for certification of our internal controls over financial reporting. As a consequence, we may have to disclose in periodic reports we file with the SEC material weaknesses in our system of internal controls. The existence of a material weakness would preclude management from concluding that our internal controls over financial reporting are effective and would preclude our independent auditors from issuing an unqualified opinion that our internal controls over financial reporting are effective. In addition, disclosures of this type in our SEC reports could cause investors to lose confidence in our financial reporting and may negatively affect the trading price of our Class A common stock. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our disclosure controls and procedures or internal controls over financial reporting, it may negatively impact our business, results of operations, and reputation.

 

We are subject to certain non-competition and non-solicitation restrictions in our non-asset based logistics business that could impair our growth opportunities in that operation.

 

In December 2009, we disposed of our note receivable and ownership interest in Transplace, Inc., or Transplace, a third-party logistics provider, for approximately $4 million. As part of the sale, we agreed not to solicit approximately thirty then-existing Transplace customers for certain single-source third-party logistics services or solicit business from any parties where a majority of the revenue expected from the business is from transportation management personnel and systems transaction fees, subject to certain exceptions. The term of the non-competition clause runs until December 2011 or, with respect to Transplace’s then-existing customers, until the earlier of December 2011 or until Transplace’s contract with the customer expires. Further, we agreed not to purchase or license transportation management software for the purpose of competing with Transplace until December 2011, subject to certain exceptions. There also were mutual non-solicitation protections given with respect to Transplace and our employees as part of the transaction. The terms of these non-competition and non-solicitation restrictions vary, with the longest extending until December 2011. These restrictions could limit the growth opportunities of our non-asset based logistics operations.

 

Risks Related to this Offering

 

Our Class A common stock has no prior public market and could trade at prices below the initial public offering price.

 

There has not been a public trading market for shares of our Class A common stock prior to this offering. An active trading market may not develop or be sustained after this offering. The initial public offering price for our Class A common stock sold in this offering will be determined by negotiations among us and representatives of the underwriters. This price may not be indicative of the price at which our Class A common stock will trade after this offering, and our Class A common stock could trade below the initial public offering price.

Our stock price may be volatile, and you may be unable to sell your shares at or above the initial public offering price.

 

The market price of our Class A common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk Factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived by investors to be comparable to us.

 

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, systemic, political, and market conditions, such as recessions, interest rate changes, or international currency fluctuations, may negatively affect the market price of our Class A common stock.

 

In the past, many companies that have experienced volatility in the market price of their stock have become subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.

 

In addition, we expect that the trading price for our Class A common stock will be affected by research or reports that industry or financial analysts publish about us or our business.

 

Our stock price could decline due to the large number of outstanding shares of our common stock eligible for future sale.

 

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our Class A common stock to decline. These sales also could make it more difficult for us to sell equity or equity related securities in the future at a time and price that we deem appropriate.

 

Upon completion of this offering, we will have           outstanding shares of Class A common stock, assuming no exercise of the underwriters’ over-allotment option and no exercise of options outstanding as of the date of this prospectus and 75,145,892 outstanding shares of Class B common stock, which are convertible into an equal number of Class A common stock. Of the outstanding shares, all of the shares sold in this offering, plus any additional shares sold upon exercise of the underwriters’ over-allotment option, will be freely tradable, except that any shares purchased by “affiliates” (as that term is defined in Rule 144 under the Securities Act), only may be sold in compliance with the limitations described in the section entitled “Shares Eligible For Future Sale — Rule 144.” Taking into consideration the effect of the lock-up agreements described below and the provisions of Rule 144 and Rule 701 under the Securities Act, the remaining shares of our common stock will be available for sale in the public market as follows:

 

 

We, our directors, executive officers, and the Moyes Affiliates have entered into lock-up agreements in connection with this offering. The lock-up agreements expire 180 days after the date of this prospectus, subject to extension upon the occurrence of specified events. Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC may in their sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements.

 

All of our outstanding common stock is currently held by Mr. Moyes and the Moyes Affiliates on an aggregate basis. If such holders cause a large number of securities to be sold in the public market, the sales could reduce the trading price of our Class A common stock. These sales also could impede our ability to raise future capital. Upon completion of this offering, Mr. Moyes and the Moyes Affiliates will be entitled to rights with respect to the registration of such shares under the Securities Act. See the information under the

heading “Shares Eligible For Future Sale” for a more detailed description of the shares that will be available for future sales upon completion of this offering.

 

In addition, upon the closing of this offering, we will have an aggregate of up to 10,000,000 shares of Class A common stock reserved for future issuances under our equity incentive plan. Immediately following this offering, we intend to file a registration statement registering under the Securities Act with respect to the shares of Class A common stock reserved for issuance in respect of incentive awards to our officers and certain of our employees. Issuances of Class A common stock to our directors, executive officers, and employees pursuant to the exercise of stock options under our employee benefits arrangements will dilute your interest in us.

 

Because our estimated initial public offering price is substantially higher than the adjusted net tangible book value per share of our outstanding common stock following this offering, new investors will incur immediate and substantial dilution.

 

The assumed initial public offering price of $     , which is the midpoint of the price range set forth on the cover page of this prospectus, is substantially higher than the adjusted net tangible book value per share of our common stock based on the total value of our tangible assets less our total liabilities divided by our shares of common stock outstanding immediately following this offering. Therefore, if you purchase Class A common stock in this offering, you will experience immediate and substantial dilution of approximately $      per share, the difference between the price you pay for our Class A common stock and its adjusted net tangible book value after completion of the offering. To the extent outstanding options and warrants to purchase our capital stock are exercised, there will be further dilution.

 

We currently do not intend to pay dividends on our Class A common stock or Class B common stock.

 

We currently do not anticipate paying cash dividends on our Class A common stock or Class B common stock. We anticipate that we will retain all of our future earnings, if any, for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends and other distributions in cash, stock, or property by Swift in the future will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial condition and results of operations, contractual restrictions, including restrictive covenants contained in a new post-offering senior secured credit facility and the indentures governing our outstanding senior secured notes, capital requirements, and other factors.

 

Risks Related to Our Capital Structure

 

We have significant ongoing capital requirements that could harm our financial condition, results of operations, and cash flows if we are unable to generate sufficient cash from operations, or obtain financing on favorable terms.

 

The truckload industry is capital intensive. Historically, we have depended on cash from operations, borrowings from banks and finance companies, issuance of notes, and leases to expand the size of our terminal network and revenue equipment fleet and to upgrade our revenue equipment. We expect that capital expenditures to replace and upgrade our revenue equipment will increase from their low levels in 2009 to maintain or lower our current average company tractor age, to upgrade our trailer fleet that has increased in age over our historical average age, and as justified by increased freight volumes, to expand our company tractor fleet, tractors we lease to owner-operators, and our intermodal containers. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

 

There continues to be concern over the stability of the credit markets. If the credit markets weaken, our business, financial results, and results of operations could be materially and adversely affected, especially if consumer confidence declines and domestic spending decreases. If the credit markets erode, we may not be able to access our current sources of credit and our lenders may not have the capital to fund those sources. We may need to incur additional indebtedness or issue debt or equity securities in the future to refinance existing

debt, fund working capital requirements, make investments, or for general corporate purposes. As a result of contractions in the credit market, as well as other economic trends in the credit market, we may not be able to secure financing for future activities on satisfactory terms, or at all.

 

If we are unable to generate sufficient cash from operations, obtain sufficient financing on favorable terms in the future, or maintain compliance with financial and other covenants in our financing agreements in the future, we may face liquidity constraints or be forced to enter into less favorable financing arrangements or operate our revenue equipment for longer periods of time, any of which could reduce our profitability. Additionally, such events could impact our ability to provide services to our customers and may materially and adversely affect our business, financial results, current operations, results of operations, and potential investments.

 

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations under our new senior secured credit facility and our senior secured notes.

 

As of March 31, 2010, on a pro forma basis after giving effect to the offering and use of proceeds, our total indebtedness outstanding would have been approximately $           and our total stockholders’ equity would have been $          . Our high degree of leverage could have important consequences, including:

 

 

Our Chief Executive Officer and the Moyes Affiliates control a large portion of our stock and have substantial control over us, which could limit other stockholders’ ability to influence the outcome of key transactions, including changes of control.

 

Following this offering, our Chief Executive Officer, Mr. Moyes, and the Moyes Affiliates will beneficially own approximately      % of our outstanding common stock including 100% of our Class B common stock. On all matters with respect to which our stockholders have a right to vote, including the election of directors, the holders of our Class A common stock are entitled to one vote per share, and the holders of our Class B common stock are entitled to two votes per share. All outstanding shares of Class B common stock are owned by Mr. Moyes and the Moyes Affiliates and are convertible to Class A common stock on a one-for-one basis at the election of the holders thereof or automatically upon transfer to someone other than a Permitted Holder, as defined in the section entitled “Certain Relationships and Related Party Transactions.” Giving effect to the completion of this offering, this voting structure will give Mr. Moyes and

the Moyes Affiliates approximately      % of the voting power of all of our outstanding stock. Furthermore, due to our dual class structure, Mr. Moyes and the Moyes Affiliates will continue to be able to control all matters submitted to our stockholders for approval even if they come to own less than 50% of the total outstanding shares of our common stock. This significant concentration of share ownership may adversely affect the trading price for our Class A common stock because investors may perceive disadvantages in owning stock in companies with controlling stockholders. Also, these stockholders will be able to exert significant influence over our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations, or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation, or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other stockholders.

 

Because Mr. Moyes and the Moyes Affiliates will control a majority of the voting power of our common stock, we qualify as a “controlled company” as defined by the exchange on which we intend to list the shares of Class A common stock, and, as such, we may elect not to comply with certain corporate governance requirements of such stock exchange. Following the completion of this offering, we do not intend to utilize these exemptions, but may choose to do so in the future.

 

The concentration of ownership of our capital stock with insiders upon the completion of this offering will limit your ability to influence corporate matters.

 

In addition to the significant ownership by Mr. Moyes and the Moyes Affiliates, we anticipate that our executive officers and directors together will beneficially own approximately      % of our Class A common stock outstanding after this offering. This significant concentration of share ownership may adversely affect the trading price for our Class A common stock because investors may perceive disadvantages in owning stock in companies with controlling stockholders. Also, these stockholders, acting together, will be able to exert significant influence over our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations, or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation, or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other stockholders.

 

Our debt agreements contain restrictions that limit our flexibility in operating our business.

 

Our new senior secured credit facility and the indentures governing our outstanding senior secured notes contain various covenants that limit our ability to engage in specified types of transactions, which limit our and our subsidiaries’ ability to, among other things:

 

 

 

A breach of any of these covenants could result in a default under one or more of these agreements, including as a result of cross default provisions, and, in the case of our $300.0 million revolving line of credit under our existing senior secured credit facility and our 2008 RSA, permit the lenders to cease making loans to us. Upon the occurrence of an event of default under our new senior secured credit facility, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable and terminate all commitments to extend further credit. Such actions by those lenders could cause cross defaults under our other indebtedness. If we were unable to repay those amounts, the lenders under our new senior secured credit facility could proceed against the collateral granted to them to secure that indebtedness. If the lenders under our new senior secured credit facility were to accelerate the repayment of borrowings, we might not have sufficient assets to repay all amounts borrowed thereunder as well as our senior secured notes. In addition, our 2008 RSA includes certain restrictive covenants and cross default provisions with respect to our new senior secured credit facility and indentures governing our senior secured notes. Failure to comply with these covenants and provisions may jeopardize our ability to continue to sell receivables under the facility and could negatively impact our liquidity.

 

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

 

Important factors that could cause actual results to differ materially from our expectations (“cautionary statements”) are disclosed under “Risk Factors” and elsewhere in this prospectus. All forward-looking statements in this prospectus and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. The factors that we believe could affect our results include, but are not limited to: