Saia, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing was signed February 25, 2020. Saia is a single-segment LTL carrier operating in 43 states; more than 97% of revenue comes from LTL transportation.
Financial performance
| Metric | FY 2019 | FY 2018 | Change |
|---|---|---|---|
| Operating revenue | $1,786.7 million | $1,653.8 million | +8.0% |
| Operating income | $152.6 million | $141.2 million | +8.1% |
| Net income | $113.7 million | $105.0 million | +8.3% |
| Diluted EPS | $4.30 | $3.99 | +7.8% |
| Operating ratio | 91.5% | 91.5% | Unchanged |
| Cash from operations | $272.9 million | $256.4 million | +6.4% |
| Net cash used in investing | $281.0 million | $222.6 million | Higher investment outflow |
- LTL shipments increased 4.3% per workday, while tonnage increased 0.4%. Revenue per hundredweight rose 7.4% to $18.05, reflecting pricing actions and longer average hauls; weight per shipment declined 3.8%.
- Operating expenses rose 8.0% to $1,634.1 million. Higher wages and benefits, depreciation, fuel and purchased transportation, and Northeast expansion costs offset revenue and yield gains.
- Capital expenditures were approximately $287 million, including equipment acquired through finance leases. Net property and equipment reached $1,052.6 million, up from $893.1 million.
- At year-end, total debt was $136.4 million, including $90.5 million of finance lease obligations. Cash was $0.2 million; revolving-credit availability was $228.0 million, subject to covenants. Working capital was negative $8.9 million.
Fourth-quarter comparison
For the three months ended December 31, 2019, revenue was $443.1 million versus $406.8 million in Q4 2018. Operating income declined to $27.4 million from $33.3 million, and net income declined to $21.4 million from $25.4 million. Diluted EPS was $0.81 versus $0.97. Thus, annual growth accompanied weaker year-over-year Q4 earnings.
Material changes, outlook and unusual items
- Saia continued expanding in the Northeast, having opened 18 terminals in the region since starting the initiative in 2017. Management planned further Northeast openings and investment in existing markets.
- A 5.9% general rate increase took effect February 18, 2019; another 5.9% increase took effect February 3, 2020 for customers representing approximately 20%–25% of revenue. Most revenue remains subject to individual customer pricing negotiations.
- Management projected approximately $250 million of 2020 net capital expenditures, inclusive of equipment acquired using finance leases. It expected market wage increases in 2020; the July 2019 wage increase was estimated to cost approximately $32 million annually, partly offset by productivity gains.
- The 2019 credit agreement increased the revolving facility from $250 million to $300 million, extended maturity to February 2024, and permits a further $100 million subject to lender approval. Saia reported compliance with its debt covenants at year-end.
- Adoption of the new lease accounting standard in 2019 added approximately $74 million of right-of-use assets and $76 million of lease liabilities at transition, with no material effect on results or cash flows.
- Saia commuted the first 12 months of its auto-liability policy in August 2019, becoming self-insured for the first $10 million per occurrence for that period. It received a $5.2 million premium return and recognized a $1.4 million reduction in 2019 insurance expense. The policy also permits an additional premium of up to $11 million under specified loss conditions.
- Management cited economic uncertainty, competition and pricing pressure, driver and purchased-transportation availability and cost, fuel, insurance claims, and execution of Northeast expansion as key uncertainties. The filing provides no specific earnings or revenue guidance.
Key investor verification points
- Assess whether Northeast expansion can generate sufficient volume and returns to cover terminal, equipment, staffing and other start-up costs.
- Track the contrast between annual growth and Q4 declines in operating income, net income and diluted EPS, including whether pricing and yield offset cost inflation.
- Review capital spending, operating cash generation, low cash balances, revolving-credit usage, lease commitments and covenant headroom.
- Monitor self-insured claims estimates and auto-liability exposure, including the effects of policy commutation, claim severity and possible additional premiums.
- Evaluate labor, fuel, purchased-transportation, regulatory, weather, trade and economic risks, and the assumptions underlying management’s expected productivity offsets.
KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. Its critical audit matter was the estimation of self-insured workers’ compensation and bodily-injury claim liabilities.