Business context and reporting period
Saia, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2021. The company provides less-than-truckload (LTL) transportation services across 44 states; LTL accounts for more than 97% of revenue, with additional truckload, expedited and logistics services.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Operating revenue | $571.3 million | $418.1 million | $1,055.4 million | $864.5 million |
| Operating income | $82.9 million | $35.7 million | $131.6 million | $74.5 million |
| Net income | $62.5 million | $28.5 million | $99.8 million | $56.6 million |
| Diluted EPS | $2.34 | $1.07 | $3.74 | $2.13 |
Margins and operating trends: Q2 operating ratio was 85.5%, improved from 91.5% (lower is better). LTL tonnage per workday increased 23.1%, shipments per workday 15.3%, revenue per hundredweight 10.5%, and revenue per shipment 17.9%. Fuel surcharge revenue was 14.4% of Q2 revenue, up from 10.6%.
Cash flow: Six-month operating cash flow was $140.1 million versus $148.2 million. Investing cash outflow was $100.0 million versus $142.7 million, reflecting lower capital spending amid equipment-manufacturing delays. Financing cash outflow was $12.6 million, compared with $23.5 million of inflow in the prior-year period.
Balance sheet and liquidity at June 30, 2021: Cash was $52.9 million; current assets were $353.9 million and current liabilities $284.9 million. Total debt was $61.0 million, consisting of finance leases; there were no revolver borrowings. The company reported $270.7 million of revolver availability, subject to covenants, and was in compliance with its debt covenants. Finance lease obligations carried a 3.5% weighted-average rate. Stockholders’ equity was $1,063.2 million.
Material changes versus prior comparable periods
- Q2 revenue rose 36.6% and operating income rose 132.4% year over year; six-month revenue increased 22.1% and operating income 76.8%. Management attributed much of the comparison to COVID-19-related weakness in the 2020 periods, alongside higher 2021 volumes, pricing, cost controls and operational efficiencies.
- Q2 purchased transportation expense rose 136.6%, primarily due to demand surges, internal capacity constraints and higher purchased-mile rates. Salaries, wages and benefits increased 19.8%; fuel and other operating expenses increased 24.9%.
- Cash from operations declined despite higher earnings, principally due to working-capital changes, including higher receivables. Cash increased to $52.9 million from $25.3 million at year-end 2020, while finance lease debt declined from $71.0 million to $61.0 million.
Outlook, risks and unusual items
- Management expected approximately $275 million of 2021 net capital expenditures; $100.0 million had been spent in the first half, and approximately $118.1 million of the remaining budget was committed at June 30.
- Effective mid-August 2021, the company planned an approximately 3% salary and wage increase for employees other than executives, with anticipated partial offsets from productivity and efficiency gains. Liability insurance renewals were expected to increase 2021 costs by $4.3 million versus 2020.
- Pricing initiatives included a 5.9% general rate increase implemented January 18, 2021 for customers representing approximately 20%–25% of revenue. Most revenue remained subject to customer-specific negotiations.
- Management reported no significant COVID-19-related disruption to LTL network operations through the filing date, but said the pandemic’s future operational and financial effects remained uncertain.
- The company recognized a $0.5 million reduction in Q2 insurance premium expense related to a policy return premium. It could owe up to $11.0 million of additional premium if specified claims thresholds are exceeded; no such amount was accrued at June 30.
- Claims and insurance liabilities totaled $95.8 million. Management said ordinary-course legal matters were provided for when probable and estimable; outcomes could materially affect a particular quarter or year, though management did not expect a material adverse effect on financial condition.
- Key risks include economic and freight-volume weakness, pricing competition, driver and purchased-transportation availability and costs, fuel, insurance and claims volatility, capacity constraints, regulatory changes, cyber or technology disruptions, and COVID-19-related uncertainty.
Most important facts for investors to verify
- Whether volume, pricing and the improved operating ratio persist as comparisons normalize from the COVID-affected 2020 period.
- Whether driver availability, wage increases, purchased transportation and fuel costs pressure margins, and how effectively fuel surcharges offset fuel-price changes.
- Execution and timing of the $275 million capital-spending plan, including equipment availability and its effect on cash generation.
- Revolver availability and covenant compliance, finance lease repayments, and working-capital movements—particularly accounts receivable.
- Developments in claims, insurance renewals and the potential additional premium; also monitor the $95.8 million claims accrual and pending legal matters.