Swift Transportation Co., Inc.

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Swift Transportation Co., Inc.

2200 S. 75th Avenue
Phoenix, Arizona 85043
U.S.A.
Telephone: (602) 269-9700
Toll Free: (800) 800-2200
Fax: (623) 907-7380
Web site: http://www.swifttrans.com

Public Company
Incorporated: 1966
Employees: 13,000
Sales: $1.26 billion (2000)
stock Exchanges: NASDAQ
Ticker Symbol: SWFT
NAIC: 484121 General Freight Trucking, Long-Distance, Truckload; 48849 Other Support Activities for Road Transportation

Swift Transportation Co., Inc. is the second largest trucking company in the United States, and the largest publicly owned one. The firm operates throughout the United States and in Canada and Mexico, where its 2001 merger with M.S. Carriers, Inc. significantly increased its presence. Swift drivers focus on short- and medium-length routes, averaging 509 miles per run. Major clients of the company include Wal-Mart, Target, Sears, and Volvo. Swift is based in Phoenix, Arizona, but owns or leases more than 35 terminals across the United States.

Beginnings

Swift Transportation got its start in 1966, when brothers Jerry and Ronald Moyes and their father Carl moved to Phoenix, Arizona, from Utah and formed a trucking business, initially with just a single truck. In 1969 they purchased Swift Transportation, a firm that had served the trucking needs of the Swift meat packing company. The firm grew slowly during its first two decades, concentrating on business only in the southwestern United States. Beginning in 1980, deregulation of the trucking industry helped smaller regional operators like Swift better compete in the marketplace, and the company began to see new opportunities for growth.

In 1984 Jerry Moyes became Swift’s president, chairman, and CEO. After his father’s death the following year, he bought out the ownership stakes of his brother and another partner, Randy Knight. Jerry Moyes had been more interested than the others in growing the firm, and his new ownership and CEO status gave him a clear path to seek out other trucking companies to acquire. Swift’s annual revenues at this time stood at approximately $33 million.

In 1988 the company made its first move outside the Southwest when it bought Cooper Motor Lines of South Carolina. The following year Swift also expanded its fleet by nearly a third. The company now employed 1,700, and its revenues had grown to an estimated $85 million. Swift was offering service to the contiguous 48 states, expanding from its previous regional focus, though a sizable portion of its business remained in Arizona and California.

Initial Public Offering: 1990

In the early summer of 1990 Swift stock debuted on the NASDAQ exchange, with revenue from the 1.65 million shares earmarked for retirement of debt. In the fall of 1991 the company purchased the assets of a bankrupt carrier, Arthur H. Fulton, Inc. of Virginia, for $9 million. Fulton owned several hundred trucks and operated terminals in Richmond, Virginia, and in New York City, all of which were taken over by Swift. Fulton’s customer contracts also went to Swift, and these included Anheuser-Busch and Miller Brewing. They were added to Swift’s own growing list, which included Michelin Tire, Target, J.C. Penney, K-Mart, Mervyn’s, Scott Paper, Kimberly Clark, and James River.

The Fulton purchase was part of Swift’s continuing expansion efforts, which also included new terminals in Fontana, California, and Dallas, Texas. This gave the company a total of 11 around the country, with more in the planning stages. In the fall of 1992 Swift issued 1.5 million more shares of stock, 750,000 of which came from Jerry Moyes.

Swift Transportation’s established niche was the short- and medium-haul trucking market. The company’s drivers were averaging 659 miles each direction of a run, which gave them the opportunity to be home with family more frequently than longer-haul truckers, who sometimes were away from home for a week or more. One of the industry’s constant problems was driver turnover—nearly half of new hires typically quit the business within a year—and it was important to treat them well to retain their services. Swift took particular care in this area, emphasizing safety and the comfort of the company’s cabs, which were sleeper models complete with air conditioning, television, and other amenities. Trucks were replaced an average of every 36 months, and wages for drivers could more than double after only a few years with the firm.

Swift preferred to train its own drivers from scratch rather than hire seasoned ones, and the company had founded its own driving school in 1987 for this purpose. One reason for the practice was Swift’s insistence on a maximum speed of 57 miles per hour, which was sometimes balked at by outside drivers that came to the company. Swift trucks were in fact fitted with engine governors that prevented driving at faster speeds. Part of the company’s motivation for this was fuel savings, and part was safety. While the industry average for accident claims stood at about 6 percent of revenues, Swift reported an average of only 2.9 percent.

A Focus on Customer Satisfaction in the Early 1990s

The company also concentrated on offering premium service to its clients, with computerized onboard tracking systems enabling it to locate shipments instantly, and extra equipment maintained on standby to handle last-minute jobs for important customers. Swift located its terminals near its most important clients as well, and often assigned administrative employees to a single account to make sure that these customers had their needs met in full.

Swift’s growth was rapid during the early 1990s. By 1992 revenues had jumped to a record $233.4 million, with earnings of $9.8 million. In the winter of 1993 another acquisition took place, that of West’s Best Freight System, Inc. of Lewiston, Idaho. The stock trade deal was worth $3.8 million, and gave Swift an additional 105 tractor units and 321 trailers. A terminal facility owned by West’s Best was acquired separately for $800,000. Swift’s planned acquisition of Vernon Milling Co. Inc.’s trucking division, based in South Carolina, was scrapped at the same time because of difficulties in integrating the two firms.

During the summer of 1993 Swift was reincorporated in Nevada from Delaware to take advantage of the desert state’s more favorable tax laws. The company maintained a headquarters site in Sparks, Nevada, but continued to be run out of Phoenix. The year 1994 saw Swift add two more trucking firms to its stable. The largest of these was Missouri-Nebraska Express (MNX) of St. Joseph, Missouri. The $41 million deal gave Swift more than 530 additional tractor units and 1,800 trailers. The company also purchased East-West Transportation, Inc. of Decatur, Alabama, for $11 million. East-West owned 157 tractors and 250 trailers, and counted International Paper Co. and Georgia-Pacific Co. as customers. Swift was now attracting attention on Wall Street, and its stock price soared to $44 during the fall of the year. Forbes magazine named the firm one of the 200 best small companies in the United States for the second year running.

Expansion of Phoenix Headquarters and Further Acquisitions: The Mid-1990s and Beyond

In 1995 Swift started construction of a $16 million, 80-acre terminal and headquarters facility in Phoenix. The site would house Swift’s administrative offices, facilities for training and truck maintenance, a convenience store and restaurant, and space for drivers to shower and rest. The following year Swift acquired the dry freight division of Colorado-based Navajo Shippers, Inc. for $7.3 million. The deal brought the company Navajo’s terminal in Pueblo, Colorado, and 428 trailer vans. Leases on 258 tractors were also taken over. At the same time Swift won a contract from Volvo Cars of North America, Inc. to transport all of its new vehicles on the West Coast to locations in Florida and New Jersey. Swift also was becoming involved in “intermodal” transport, which consisted of partial shipment by rail. The company ran a train between Los Angeles and Portland, Oregon, once a week, which shipped specialized containers that could be offloaded and then trucked to their final destination.

Late in 1996 Swift announced a secondary stock offering of a total of 3.5 million shares, one million of which came from Jerry Moyes. This followed additional growth in the share price, which had increased nearly 75 percent in value in a year’s time. After the sale Moyes would still own some 30 percent of the company’s stock, with another 15 percent held by a family trust. Soon after this another acquisition was announced, that of a portion of the assets of the bankrupt Direct Transit, Inc. of South Dakota. Direct had earlier been in line for acquisition by leading U.S. trucker Schneider National, but the latter had backed out of the deal prior to completion. Also during 1997, Jerry Moyes and his brother Ronald provided financing for the management-led buyout of Central Freight Lines, a deal that did not involve Swift itself.

Company Perspectives:

Swift seeks to provide premium service with commensurate rates, rather than compete primarily on the basis of price. The principal elements of Swift’s premium service include: regional terminals to facilitate single and multiple pick-ups and deliveries and maintain local contact with customers; well-maintained, late model equipment; a fully-integrated computer system to monitor shipment status and variations from schedule; an onboard communications system that enables the Company to dispatch and monitor traffic; timely deliveries; and extra equipment to respond promptly to customers’ varying requirements .

In the summer of 1997 the U.S. Equal Employment Opportunity Commission (EEOC) filed suit against Swift on behalf of a number of women who it claimed had been discriminated against by the company in its training programs. Cited was Swift’s practice of using only female instructors to train women drivers. Since there were few of the former, the number of women who could be trained was restricted, and women interested in working for the company allegedly were forced to endure long waits before they could begin the process. Ironically, the Swift same-sex training program had been created in response to concerns that pairing female trainees with male instructors was leaving the company open to sexual harassment complaints. The suit was settled in 1999, with Swift agreeing to pay $530,000 and change its policy to permit coed training. Another EEOC suit regarding six female driver/managers who had been paid less than their male counterparts was settled some time after this for $450,000 in back pay and damages.

Driving for Swift, while hard work, was lucrative, with first-year drivers earning $30,000 and more experienced ones pulling down $45,000 to as much as $95,000. Owner-operators employed by the company could earn even more, though they were also responsible for the maintenance costs of their trucks. Because of Swift’s rapid turnover of tractors, used ones were readily available for drivers who wanted to go this route.

In 1998 new $7 million terminals were announced for Atlanta and Salt Lake City, the latter of which would replace a smaller facility. Planned construction of a new terminal in southeastern Idaho was abandoned, however, with an existing site in Ogden, Utah, expanded instead. Swift continued to increase its use of Amtrak’s “Roadrailer” service during this time as well. The year 1998 also saw the company raise its mandated speed limit to 60 mph for single drivers, 62 mph for teams, and 65 for owner/operators.

In March 2000 a joint venture involving six of the top public trucking companies was announced. Transplace.com was an online service that facilitated cooperative purchasing of supplies, coordinated shipping among carriers to combine loads, and performed other logistics services. It was expected to create substantial savings through a reduction in costs resulting from the pooling of resources among the firms.

After a three-year abstention from acquisitions, 2000 saw Swift purchase 49 percent of a Mexican carrier, Trans-Mex, Inc. S.A. de C.V. The company planned to acquire the remainder of the firm by the year 2004, when U.S. laws restricting ownership of Mexican companies were to change. Swift also bought the van division of Cardinal Freight Carriers, Inc. and purchased land in Tacoma, Washington, for a new $8.5 million terminal to be located there.

In late 2000 Swift announced plans to merge with M.S. Carriers, Inc. of Memphis. M.S. was only slightly smaller than Swift, and the combined companies, to be headed by Jerry Moyes, would be the largest publicly traded trucking firm in the United States, trailing only the private Schneider National in size. The $383 million stock swap deal was completed the following summer, making Swift a $2 billion-plus company. Swift issued an additional 1.2 million shares to help finance the acquisition. M.S., formed by Michael Starnes in 1978, brought Swift an additional 3,200 tractors and 14,300 trailers, which when combined with Swift’s equipment would yield a total of 15,000 tractors and 45,000 trailers. M.S. concentrated on shipping in the eastern United States, Canada, and Mexico, where it owned half of the largest trucking company, Transportes EASO. The two firms, whose CEOs had known one another for ten years, complemented each other well, and both Moyes and Starnes were supporters of Swift’s continuing plans for expansion.

After 35 years in business, Swift Transportation had grown from a single truck into the largest public trucking company in the United States. Its network of regional terminals, its contracts with a string of top companies, and its emphasis on quality and service put it in the driver’s seat as a premium provider of truckload service, and its prospects looked good for a continued run of success in the field.

Principal Subsidiaries

Swift Transportation Co., Inc.; Swift Leasing Co., Inc.; Common Market Distributing Co., Inc.; Sparks Finance Co., Inc.; Cooper Motor Lines, Inc.; Common Market Equipment Co., Inc.; Swift Transportation Co. of Virginia, Inc.; Swift of Texas Co., Inc.; Swift Logistics Co., Inc.; Swift Transportation Corporation; Swift Receivables Corporation; M.S. Carriers, Inc.

Principal Competitors

Schneider National, Inc.; J.B. Hunt Transport Services, Inc.; Knight Transportation; Covenant Transport, Inc.; U.S. Xpress Enterprises, Inc.; Werner Enterprises, Inc.

Key Dates:

1966:: Carl, Jerry, and Ronald Moyes start a trucking company in Phoenix, Arizona.
1969:: Trucking operations of meat packing firm Swift are acquired.
1985:: Jerry Moyes buys out his partners.
1988:: Cooper Motor Lines is acquired.
1990:: Swift goes public.
1991:: The company purchases the assets of Arthur H. Fulton, Inc.
1993:: West’s Best Freight System is acquired; company is reincorporated in Nevada.
1994:: Trucking companies MNX and East-West Transportation are purchased.
1996:: The dry freight division of Navajo Shippers, Inc. is bought.
1997:: The assets of Direct Transit, Inc. are acquired.
2000:: Swift and five other truckers form online logistics firm Transplace.com; company buys a 49 percent stake in Trans-Mex, Inc. of Mexico.
2001:: A merger with M.S. Carriers, Inc. makes Swift the largest publicly owned trucking firm in the United States.