Saia, Inc. — FY 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014. This is an annual filing, not a standalone fourth-quarter report; quarterly figures are included below. Saia provides less-than-truckload (LTL), truckload, expedited and logistics services across the United States.
Financial performance
| Metric | FY 2014 | FY 2013 | Change |
|---|---|---|---|
| Operating revenue | $1,272.3 million | $1,139.1 million | +11.7% |
| Operating income | $85.7 million | $74.4 million | +15.2% |
| Net income | $52.0 million | $43.6 million | +19.2% |
| Diluted earnings per share | $2.04 | $1.73 | +$0.31 |
| Operating ratio | 93.3% | 93.5% | Improved 0.2 percentage points |
| Operating cash flow | $102.2 million | $101.3 million | +$0.9 million |
| Net cash used in investing | $94.8 million | $122.0 million | $27.2 million less cash used |
LTL tonnage rose 6.3% to 3.9 million tons and LTL shipments rose 6.2% to 6.6 million. LTL revenue per hundredweight, a yield measure, increased 4.4% to $14.96. Operating revenue included fuel surcharges equal to 16.6% of revenue, versus 16.8% in 2013.
For the fourth quarter, revenue was $309.6 million versus $279.7 million; operating income was $20.6 million versus $14.7 million; and net income was $13.6 million versus $8.1 million. Diluted EPS was $0.53 versus $0.32.
Balance sheet, liquidity and capital
- At year-end, cash was $4.4 million, working capital was $59.2 million, total assets were $686.4 million and stockholders’ equity was $366.9 million.
- Total debt was $83.0 million, up from $76.9 million in 2013; the filing attributes the increase in part to $16.6 million of revenue equipment financed through capital leases. Revolver borrowings were $45.0 million, down from $48.3 million.
- The $200 million revolving facility expires in June 2018. Availability was $107.7 million at year-end, subject to the borrowing base and debt covenants. Outstanding letters of credit under the facility were $47.3 million.
- Net capital expenditures were $111.6 million in 2014, including equipment acquired through capital leases. Management projected approximately $125 million of net capital expenditures for 2015. The company reported compliance with debt covenants at year-end.
- Cash dividends have not been paid, and current debt agreements prohibit dividend payments.
Changes, outlook and risks
- Revenue and operating income growth reflected pricing and business-mix actions, higher tonnage, and cost initiatives. The operating ratio improved modestly despite inflationary costs.
- Costs increased notably: purchased transportation rose 36.5% to $99.6 million, mainly from higher demand, customer service needs and industry driver shortages. Claims and insurance expense rose to $37.6 million from $25.5 million; management cited higher accident severity. Salaries, wages and benefits increased 11.7%, reflecting wage increases, higher volume and headcount, and healthcare costs.
- Management emphasized yield management, density growth in existing markets, service quality, safety and productivity. No specific earnings or revenue forecast was provided. A 4.9% general rate increase took effect January 5, 2015 for customers representing approximately 25% of revenue; the fuel surcharge program was revised effective February 2, 2015. Management expected market-competitive wage increases in 2015.
- Saia acquired asset-light logistics provider LinkEx on February 2, 2015 for approximately $25 million, subject in part to profit targets. This subsequent event was intended to expand asset-light services.
- Key risks include economic and freight-volume weakness, competitive pricing, availability and cost of drivers and purchased transportation, fuel-price volatility (Saia does not hedge fuel), accident and self-insurance claims, capital needs and covenant restrictions, and regulatory changes involving driver hours, emissions, safety and food transportation. The company also cited cyber and technology disruption, customer concentration in logistics operations, weather and litigation risks.
- Ordinary-course legal proceedings were reserved for where losses were probable and estimable. Management stated that outcomes were not expected to materially affect financial condition, but could materially affect results in a particular quarter or year. The filing reports unrecognized tax benefits of approximately $1.2 million and accrued interest and penalties of $1.3 million.
- KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.
Investor verification priorities
- Check whether pricing and yield gains persist as customer negotiations, fuel surcharges and competitive conditions change.
- Track LTL shipment and tonnage growth against wage, purchased-transportation and claims-cost inflation, especially accident severity.
- Assess execution of the $125 million 2015 capital plan, cash generation, capital-lease obligations and revolver availability under borrowing-base and covenant terms.
- Review LinkEx’s purchase terms, profit-target conditions, integration progress and customer concentration.
- Monitor driver availability, fuel-surcharge recovery, regulatory developments and the company’s self-insured claims exposure.