Saia, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; unaudited. Saia provides less-than-truckload (LTL), non-asset truckload, expedited and logistics services. Results include the Robart companies, acquired July 2, 2012, so the prior-year comparison does not include them.
Financial performance and condition
Amounts below are in millions, except per-share data and operating statistics.
| Metric | Q1 2013 / March 31, 2013 | Comparable period / December 31, 2012 |
|---|---|---|
| Operating revenue | $273.8 | $268.7; up 1.9% |
| Operating income | $14.5 | $11.0; up 31.5% |
| Operating ratio | 94.7% | 95.9% |
| Net income | $9.2 | $5.5 |
| Diluted EPS | $0.55 | $0.34 |
| Cash from operations | $7.0 | $24.0 |
| Cash and cash equivalents | $0.4 | $0.3 |
| Working capital | $12.4 | $6.2 at March 31, 2012 |
| Total debt, carrying value | $58.7 | $60.7 |
LTL revenue per hundredweight rose 5.4% to $14.18, while LTL tonnage per workday fell 2.1% and shipments per workday fell 3.5%. Fuel surcharge revenue was 17.4% of revenue versus 17.5% a year earlier. Operating cash flow declined primarily because of working-capital fluctuations. Investing activities used $6.0 million, versus $39.2 million in Q1 2012; the prior-year outlay was primarily for revenue equipment. Financing activities used $0.9 million, compared with $13.9 million provided in the prior-year quarter.
Material changes and management commentary
- Management attributed revenue growth mainly to yield management. Higher yield and ongoing cost optimization improved operating income and the operating ratio despite lower LTL volumes.
- Purchased transportation expense decreased $2.5 million, primarily from network optimization and more in-house miles. Salaries, wages and benefits increased $5.2 million, largely reflecting wage increases and higher headcount. Lower cargo claims contributed to lower claims and insurance expense.
- Q1 2013 diluted EPS included approximately $0.06 from $1.0 million of tax credits enacted in 2013 retroactive to 2012. The effective tax rate was 30.0%, versus 39.7%.
- Management expects approximately $90 million of net capital expenditures in 2013, with about $80 million committed as of March 31. A July 1, 2013 wage and salary increase is estimated to add $13 million annually, partially offset by expected productivity and efficiency gains.
Liquidity, debt, risks and contingencies
At March 31, Saia reported $8.0 million outstanding on its revolving credit facility and $50.7 million of senior notes. The revolving facility provides up to $150 million, subject to borrowing-base and covenant requirements, and expires in November 2016. The filing reports $82.8 million of available line of credit and says the company was in compliance with debt covenants. Letters of credit are reported as $60.8 million in the overview and commercial-commitments table, but as $59.1 million outstanding under the revolving facility; investors should reconcile these disclosures.
Management said liquidity needs are expected to be met through operating cash flow and facility availability, subject to borrowing-base and covenant conditions. Risks include economic weakness, pricing pressure, customer credit, driver and fuel availability, regulatory changes, self-insurance claim volatility, and execution of cost and revenue initiatives. The company retains obligations relating to Jevic claims and certain tax matters; it also disclosed $1.3 million of unrecognized tax benefits and $1.4 million of related accrued interest and penalties. Management stated that ordinary-course claims and litigation are provided for when probable and are not expected to materially affect financial position, though results in a quarter or year could be materially affected. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the $60.8 million and $59.1 million letter-of-credit disclosures and confirm actual borrowing availability under the borrowing base.
- Assess whether pricing and yield gains can continue to offset declining LTL tonnage and shipments, including the effects of customer mix and competition.
- Track cash conversion and working capital after the sharp year-over-year decline in operating cash flow, alongside the planned $90 million capital program.
- Evaluate the earnings contribution from the retroactive tax credits and the expected ongoing cost of the July 2013 wage increase.
- Review the maturity and repayment schedule for senior notes, lease commitments, and exposure from self-insurance and legacy Jevic obligations.