Swift Transportation is raising the ante in its initial public offering to $1 billion as the truckload business gains traction.
That’s a $300 million increase in the IPO valuation from $700 million target in July. Even that was the largest IPO in trucking since Union Pacific spun off Overnite Transportation — now UPS Freight — for $610 million in 2003.
Swift expects net proceeds of $888 million from the IPO, which it will use to pay down some $2.3 billion in debt. The bolstered IPO is a sign of confidence in the market and investor demand at Swift and in the truckload industry on Wall Street.
Is Swift really worth $300 million more than it was five months ago? The latest financial data underscores why the Phoenix-based company might think so.
The nation’s largest truckload carrier increased revenue 14.9 percent year-over-year in the third quarter to $758.3 million, narrowing its net loss to little more than $1 million on a 79.4 percent surge in operating income to $82.1 million.
Financial documents filed Nov. 30 with the Securities and Exchange Commission show a steady increase in revenue over the first three quarters of the year to a total of approximately $2.2 billion. Swift had $2.6 billion in revenue last year and $2.8 billion in the 12 months ending Sept. 30, 2010.
Its prospectus gives Wall Street, competitors and potential investors the clearest insight yet into how the trucking company has fared since founder Jerry Moyes took it private in a $2.5 billion buyout in 2007.
Swift’s total revenue rose 15.7 percent from the first through the third quarter, propelled by the wave of inventory restocking and corporate spending that revived many carriers in the spring and ran through late summer.
In that same period, Swift’s operating profit rose more than 250 percent. In the first nine months of 2010, Swift’s pretax profit was 95.6 percent higher than in the same period of 2009, near the end of the recession. That indicates Swift, although still losing money, gained ground as it emerged from the recession.
“Our management team has implemented strategic initiatives that have concentrated on rebuilding our owner-operator program, expanding our faster growing and less asset-intensive services, refocusing our customer service efforts, and implementing accountability and cost discipline throughout our operations,” the company said in the Nov. 30 preliminary prospectus for its IPO.
“As a result of these initiatives, during the recent economic recession, amidst industrywide declining tonnage and pricing levels, our operating income increased from $114.9 million in 2008 to $132 million in 2009, despite a $384.2 million, or 14.3 percent, reduction in operating revenue, excluding fuel surcharges,” it said.
For the first nine months of 2010, Swift earned a $166.5 million operating profit.
Swift’s bottom line net loss narrowed to $1 million in the quarter, from $23.1 million in the second quarter and $53 million in the first. Last year, the company lost a massive $435.6 million, largely from a $324.8 million deferred tax bill incurred as the company changed its tax status back to subchapter C. Absent that tax payment, its net loss would have been reduced to $110.8 million, compared with a $146.6 million net loss in 2008.
Swift also improved its weekly trucking revenue per tractor and boosted operating margins from 3.5 percent in the first quarter to 10.8 percent in the third quarter.
Like many truckers, Swift is cutting back its length of haul to pursue regional truckload freight and expanding its use of intermodal rail. “Our short- and medium-haul regional operating model contributes to higher revenue per mile and takes advantage of shipping trends toward regional distribution,” the company said. Its average length of haul is now about 500 miles.
Increasing its intermodal business complements that strategy by pushing long-haul truckload freight onto rail. Intermodal accounted for 6.2 percent of its revenue last year, compared with 2.9 percent in 2006. Starting in 2005, Swift began adding containers to its fleet, and now has about 4,800 containers with 900 more on order for delivery through June 2011. “Our current plan is to add between 1,000 and 1,400 intermodal containers per year between 2011 and 2015,” the company said.
That would give Swift more than 12,000 containers, still a far cry from the 43,000 pieces of intermodal equipment at intermodal trucker J.B. Hunt Transport Services, but a big step toward the company being a more multimodal transport operator.
The carrier also is contracting more owner-operators. Independent drivers represented 16.5 percent of its fleet at the end of 2006, but that figure swelled to 24.1 percent by Sept. 30 this year. “We intend to continue to expand our revenue from these operations to improve our overall returns on capital,” Swift said.
Its eventual target: Expanding revenue 10 percent a year over the next several years, as the economy regains strength, both by drawing more business from existing customers and through acquisitions.
“We expect to pursue selected acquisitions,” the carrier said.
Contact William B. Cassidy at firstname.lastname@example.org.