Saia, Inc. — Q1 2019 Form 10-Q
Business context and period. Unaudited results for the quarter ended March 31, 2019, compared with Q1 2018. Saia primarily provides less-than-truckload (LTL) transportation services across 42 states, alongside truckload, expedited and logistics services.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Operating revenue | $410.6 million | $392.8 million; up 4.5% |
| Operating income | $28.6 million | $27.6 million; up 3.8% |
| Operating ratio | 93.0% | 93.0% |
| Net income | $22.3 million | $21.1 million |
| Diluted EPS | $0.85 | $0.80 |
| Operating cash flow | $30.4 million | $35.5 million |
| Net cash used in investing | $56.5 million | $46.8 million |
LTL revenue per hundredweight increased 10.6% to $17.61. LTL tonnage per workday fell 3.5% and shipments per workday fell 0.1%, with winter weather and market conditions cited as factors. The effective tax rate was 19.3%, versus 20.2% a year earlier.
At March 31, cash was $31,000. Working capital was $29.6 million, compared with $47.3 million at March 31, 2018. Total debt, including finance leases, was $148.9 million; operating lease liabilities were $75.4 million. The company reported $173.3 million of revolver availability and compliance with debt covenants.
Material changes and management commentary
- Revenue growth primarily reflected pricing actions and higher fuel surcharges, partly offset by one fewer workday. Higher yield supported operating income, while wages, depreciation and geographic-expansion costs weighed on results.
- Operating cash flow declined mainly due to working-capital fluctuations. Investing outflows increased with the timing of equipment, technology and real-estate spending; increased net revolver borrowing helped fund capital expenditures.
- Effective January 1, 2019, adoption of the new lease accounting standard added approximately $77 million of operating lease assets and liabilities. This accounting change affects balance-sheet comparisons with periods before adoption.
- On February 5, Saia amended and extended its revolving credit agreement: capacity rose from $250 million to $300 million, maturity moved to February 2024, and pricing margins were reduced. The facility includes a $100 million accordion feature subject to bank approval.
Outlook, risks and contingencies
- Management forecast 2019 net capital expenditures of approximately $275–$300 million, including equipment acquired through finance leases; $151.8 million of the remaining capital budget was committed at quarter-end.
- Management expected a 2019 effective tax rate of approximately 23.5%. No specific earnings or revenue guidance was provided.
- The company continued initiatives to increase yield, reduce costs, improve productivity and expand service geography into the Northeast. It cited economic uncertainty, competitive pricing, labor and driver availability, fuel, self-insurance costs, weather and execution of expansion initiatives as risks.
- Claims and insurance liabilities totaled $75.6 million. Management said legal matters were not expected to materially affect financial condition, though outcomes could materially affect results in a particular quarter or year. No additional premium was accrued under the auto-liability policy; up to $11.0 million could be payable if paid losses exceed the specified threshold over the policy term.
- Management reported disclosure controls were effective and no material changes to internal control over financial reporting during the quarter. The filing reported no material changes to the risk factors from the 2018 Form 10-K.
Important facts for investors to verify
- Reconcile the reported $173.3 million of revolver availability with borrowings and outstanding letters of credit: the filing cites $26.1 million of letters of credit in one section and $27.9 million in another.
- Track LTL tonnage and shipment trends, pricing and yield retention, and whether pricing offsets wage, fuel, depreciation and expansion costs.
- Monitor execution and funding of the $275–$300 million capital plan, cash generation and borrowing needs.
- Assess the development of self-insurance claims and the potential auto-policy premium or return-premium outcomes.
- Separate the effect of lease-accounting adoption from underlying changes in assets, liabilities and operating performance.