Saia, Inc. — Q1 2016 Form 10-Q
Business and period: Saia provides less-than-truckload, non-asset truckload, expedited and logistics services across the United States. This unaudited filing covers the quarter ended March 31, 2016, compared with Q1 2015; balance-sheet comparisons are with December 31, 2015.
Financial results
| Metric | Q1 2016 | Q1 2015 | Change |
|---|---|---|---|
| Operating revenue | $289.9 million | $293.0 million | Down 1.1% |
| Operating income | $17.6 million | $21.2 million | Down 17.2% |
| Operating ratio | 93.9% | 92.8% | Up 1.1 percentage points |
| Net income | $10.6 million | $12.6 million | Down 16.1% |
| Diluted EPS | $0.42 | $0.49 | Down $0.07 |
| Cash provided by operations | $16.3 million | $26.2 million | Down $9.9 million |
| Cash used in investing | $53.6 million | $52.9 million | Higher use of $0.8 million |
| Cash provided by financing | $37.4 million | $22.5 million | Up $14.9 million |
Revenue per LTL hundredweight rose 2.1% to $15.49; LTL tonnage fell 1.8%, while shipments increased 0.7%. Management separately reported shipments and tonnage per workday down 0.8% and 3.4%, respectively. Fuel surcharge revenue declined to 8.7% of revenue from 12.6%, primarily due to lower fuel prices.
Liquidity, debt and investment
- At March 31, cash was $0.2 million and working capital was $24.9 million, down from $29.5 million at March 31, 2015.
- Total debt was $116.4 million, versus $69.0 million at December 31, 2015. This included $53.4 million drawn on the revolving facility, $14.3 million of senior notes and $48.8 million of capital leases.
- The $250 million revolving facility expires in March 2020. Reported undrawn availability was $158.7 million, subject to debt covenants. The company said it was in covenant compliance at quarter-end.
- Operating cash flow was more than offset by property and equipment purchases: acquisition of property and equipment was $54.0 million. Management projected approximately $140 million of net capital expenditures for 2016, with $32.6 million of remaining capital spending committed as of March 31.
- Total assets were $795.7 million and stockholders’ equity was $438.8 million at March 31, 2016.
Changes, outlook and risks
- Lower tonnage and fuel surcharges reduced revenue. Higher rates/yield partly offset the decline. Profitability was pressured by declining tonnage, wage costs, and increased accident frequency and severity; lower fuel and purchased transportation costs provided offsets.
- Salary, wage and benefits expense rose $12.5 million, reflecting an additional workday, the July 2015 4% wage increase, higher driver utilization and healthcare costs. Management estimated the July 2015 compensation increase would add about $16 million annually and anticipated further market-competitive wage increases in 2016.
- Claims and insurance expense increased $3.2 million year over year, primarily due to accident claims. The company is self-insured, with retention limits generally ranging from $250,000 to $2 million per claim; management noted claims costs can be volatile.
- No numerical earnings or revenue guidance was provided. Management said it would continue efforts to improve yield, reduce costs, productivity and safety, and adjust resources to volume. The business remains sensitive to economic conditions and competitive pricing.
- Legal proceedings arise in the ordinary course. Management said provisions were made for probable and estimable losses and did not expect the ultimate outcome to materially affect financial condition, though results in a particular period could be materially affected. Risk factors were reported as unchanged from the 2015 Form 10-K.
- Other risks identified include economic downturns, customer and pricing pressures, driver and equipment availability, fuel and insurance costs, regulatory changes, debt covenant compliance, weather, labor, cyber risk and acquisition integration.
Important facts for investors to verify
- Reconcile the filing’s different reported letters-of-credit amounts: $37.9 million in the credit-facility discussion versus $39.7 million in the MD&A and commitments table.
- Assess whether yield gains and cost initiatives can offset weak tonnage, wage inflation and accident-claim volatility.
- Review the funding and execution of the projected $140 million 2016 net capital program, including the $32.6 million committed balance and increased debt.
- Monitor revolving-credit availability, covenant headroom and scheduled debt and lease payments; reported availability is conditional on covenant compliance.
- Consider working-capital movements and the lower Q1 operating cash flow when evaluating liquidity and investment capacity.