Saia, Inc. — Q1 2023 Form 10-Q
Reporting period: Quarter ended March 31, 2023. Saia provides primarily less-than-truckload (LTL) freight services across 45 states, with additional truckload, expedited transportation and logistics services. Amounts below are U.S. dollars; financial statement figures are in millions unless noted.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Operating revenue | $660.5 | $661.2 | (0.1%) |
| Operating income | $99.1 | $103.4 | (4.2%) |
| Operating ratio | 85.0% | 84.4% | 0.6 percentage points higher |
| Net income | $76.1 | $79.4 | (4.2%) |
| Diluted EPS | $2.85 | $2.98 | (4.4%) |
| Cash from operating activities | $119.3 | $96.0 | +$23.3 |
- Margins and costs: Operating margin was approximately 15.0%, versus 15.6% a year earlier. Salaries and benefits rose 3.3%; fuel and other operating expenses rose 15.1%; depreciation and amortization rose 7.3%. Purchased transportation fell 40.3%, partly offsetting these increases.
- Cash and investment: Cash was $166.4 at March 31, 2023, down from $187.4 at year-end 2022. Capital spending, net of asset-sale proceeds, was $128.1, versus $45.4 in Q1 2022. Operating cash flow less net capital spending was approximately negative $8.8.
- Debt and liquidity: Finance lease debt was $26.5, down from $31.0 at December 31, 2022; there were no revolving-credit borrowings. The company reported $268.8 of revolver availability and $243.0 of working capital at March 31, 2023. It reported compliance with credit covenants.
- Balance sheet: Total assets were $2,242.8 and stockholders’ equity was $1,650.9 at March 31, 2023. Current assets were $513.5 and current liabilities were $270.5.
Operating trends and material changes
- LTL tonnage declined 5.5% and shipments declined 7.1%. Revenue per shipment increased 7.6% to $354.37, supported by pricing actions and business mix; revenue per hundredweight rose 5.8% to $24.63.
- Management attributed the near-flat revenue to lower shipments and tonnage, partly offset by higher revenue per shipment. Operating income fell as revenue softened and operating costs increased, despite the sharp decline in purchased transportation.
- Salary and benefit costs increased by $9.5 million, primarily reflecting headcount for network expansion and a July 2022 wage increase. Fuel, operating expenses and supplies increased by $18.9 million, reflecting vehicle maintenance, IT support and costs for 13 facilities opened since Q1 2022. Claims and insurance expense rose $3.3 million, primarily due to higher claims activity.
- Fuel surcharge revenue was 17.8% of operating revenue, versus 16.8% in Q1 2022. The company implemented a 6.5% general rate increase on January 30, 2023, applicable to customers representing approximately 20%–25% of revenue; most remaining revenue is subject to individual customer negotiations.
Outlook, risks and contingencies
- Saia expects 2023 net capital expenditures to exceed $400 million, subject to market conditions; approximately $244.6 million of the remaining 2023 capital budget was committed at March 31.
- Management plans to pursue pricing and yield management, build density in current markets, expand its geographic and terminal network, and control costs and match resources to volumes. It cautioned that the outlook depends on economic conditions, inflation, labor availability, diesel prices, supply-chain constraints and competitive actions; it provided no specific revenue or earnings guidance.
- On February 3, 2023, Saia replaced its secured credit agreement with an unsecured $300 million revolving facility maturing in February 2028, with an accordion option of up to $150 million subject to conditions.
- Management said ordinary-course legal matters were provided for where losses were probable and estimable, and did not expect their ultimate resolution to materially affect financial condition; an individual period’s results could be materially affected. Accrued claims and insurance liabilities were $93.5 million. Accrued uncertain tax positions and related interest and penalties were approximately $4.5 million combined.
- Principal risks include economic and volume weakness, pricing pressure, labor and fuel costs, insurance and claims, network expansion execution, equipment and facility availability, technology and cybersecurity disruptions, regulatory changes, and litigation. The filing reported no material changes to the prior annual report’s risk factors.
Important facts for investors to verify
- Reconcile the reported letters of credit: the MD&A cites $33.0 million outstanding, while the debt note cites $31.2 million under the credit agreement.
- Track whether pricing and revenue per shipment can offset continued shipment and tonnage declines without further operating-ratio deterioration.
- Assess the returns and funding needs associated with the planned 2023 capital expenditure program, including committed purchases and expansion investments.
- Monitor claims and insurance costs, labor availability and expense, and execution of the expanded terminal network.
- Review the full credit agreement and annual-report risk disclosures for covenant terms, contingencies and risks not detailed in this summary.