Saia, Inc. — Q3 2021 Form 10-Q
Business and period: Unaudited results for the quarter and nine months ended September 30, 2021, compared with the corresponding 2020 periods. Saia provides LTL transportation across 44 states; more than 97% of revenue comes from LTL freight, with additional truckload, expedited and logistics services.
Financial and operating results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $616.2 million | $481.4 million | $1,671.6 million | $1,345.9 million |
| Operating income | $106.1 million | $55.2 million | $237.8 million | $129.7 million |
| Net income | $79.7 million | $41.5 million | $179.5 million | $98.1 million |
| Diluted EPS | $2.98 | $1.56 | $6.72 | $3.69 |
| Operating ratio | 82.8% | 88.5% | Not stated | Not stated |
| Operating cash flow | Not stated | Not stated | $267.7 million | $239.0 million |
- Q3 revenue increased 28.0%; LTL tonnage per workday rose 11.0%, shipments per workday 2.3%, revenue per hundredweight 14.9%, and revenue per shipment 24.8%.
- Operating income rose 92.2% in Q3; management attributed improvement to higher tonnage, pricing and mix, cost controls and operating efficiencies. A property disposal contributed about 70 basis points to the operating-ratio improvement.
- Cash from operations for the first nine months increased $28.7 million year over year, primarily due to higher profitability, partly offset by working-capital changes. Investing cash outflow was $148.9 million versus $197.5 million, reflecting lower equipment spending amid manufacturing delays.
Financial position and liquidity
- At September 30, 2021, cash and cash equivalents were $121.7 million; total assets $1,789.3 million; and stockholders’ equity $1,144.7 million. Working capital was $112.0 million, compared with $4.4 million at September 30, 2020.
- Total debt was $55.2 million, all reported as finance lease obligations; no revolving-credit borrowings were outstanding. Finance lease debt declined from $71.0 million at December 31, 2020.
- The $300 million revolving facility, due February 2024, had $270.7 million available, subject to covenants; an additional $100 million accordion feature is subject to conditions and lender commitments. Saia reported covenant compliance.
- Operating cash flow was $267.7 million, investing cash outflow $148.9 million and financing cash outflow $18.7 million for the nine months ended September 30, 2021.
Outlook, risks and unusual items
- Management expected 2021 net capital expenditures of approximately $275 million; $148.4 million had been spent through nine months, and $74.8 million of the remaining capital budget was committed.
- Management’s stated priorities were to improve yield and business mix, control costs, raise productivity, expand service geography and maintain service and safety. No earnings or revenue guidance was provided.
- A market-competitive wage increase of approximately 5% took effect in mid-August 2021. Management expected productivity and efficiency gains to offset part of the cost. Renewed liability insurance policies were expected to add approximately $4.3 million of 2021 costs versus 2020.
- Key risks include labor and purchased-transportation availability and cost, fuel and insurance/claims volatility, pricing competition, economic conditions, capacity constraints, COVID-19-related impacts and potential vaccination or testing rules that could affect staffing. Saia reported no significant COVID-related network disruption through the filing date, but said future effects remained uncertain.
- The company recognized a $0.5 million reduction in insurance premium expense in Q3 from a prior policy return premium. A possible additional insurance premium of up to $11.0 million was not accrued at quarter-end based on claims to date. Ordinary-course litigation was disclosed; management did not expect a material adverse effect on financial condition, though a quarter or year’s results could be affected.
Important facts for investors to verify
- Reconcile the revolving-facility letters of credit: the notes state $29.3 million at September 30, while MD&A and the commitments table state $31.1 million.
- Distinguish balance-sheet cash of $121.7 million from cash, cash equivalents and restricted cash of $125.4 million in the cash-flow statement; the latter includes $3.7 million of restricted cash included in accounts receivable.
- Assess whether higher yields and volumes can be sustained against rising wages, fuel, purchased transportation and insurance costs, and confirm delivery of the approximately $275 million 2021 net capital-spending plan.
- Monitor claims and insurance exposure, including the disclosed $99.8 million claims and insurance liability accrual and the possibility of additional policy costs.