Saia, Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. This is an annual filing; fourth-quarter figures below are unaudited. Saia is primarily a less-than-truckload carrier operating across 39 states, with complementary non-asset truckload, expedited and logistics services.
Financial performance
| Metric | FY2017 | FY2016 | Change |
|---|---|---|---|
| Operating revenue | $1,378.5 million | $1,218.5 million | +13.1% |
| Operating income | $94.7 million | $79.1 million | +19.7% |
| Operating ratio | 93.1% | 93.5% | Improved 0.4 percentage points |
| Net income | $91.2 million | $48.0 million | +89.8% |
| Diluted EPS | $3.49 | $1.87 | +86.6% |
| Cash from operations | $157.8 million | $146.4 million | +$11.4 million |
FY2017 results include a provisional $34 million income-tax benefit from the Tax Cuts and Jobs Act and a $1.7 million excess stock-compensation tax benefit. Management’s non-GAAP adjusted diluted EPS, excluding the Tax Act effect, was $2.19, versus reported GAAP EPS of $3.49. The 2017 effective tax rate was negative 1.5%, compared with 35.9% in 2016.
Growth reflected higher shipment volume, tonnage, fuel surcharges and pricing, including a 4.9% general rate increase effective July 17, 2017. LTL tonnage rose 4.8%, shipments rose 5.2%, and revenue per hundredweight increased 8.0%. Fuel surcharge revenue rose to 11.5% of revenue from 9.7%.
Fourth-quarter snapshot
For the three months ended December 31, 2017, revenue was $353.3 million, operating income was $22.9 million and net income was $47.8 million; diluted EPS was $1.82. Fourth-quarter 2016 revenue was $300.2 million, operating income $17.2 million, net income $10.3 million and diluted EPS $0.40. The unusually large 2017 quarterly net income reflects the tax benefit; operating income provides a clearer view of operating performance.
Cash, debt and liquidity
Cash from operations was $157.8 million; net cash used in investing was $181.5 million, principally for property, equipment and technology. Reported 2017 net capital expenditures, including equipment acquired through capital leases, were approximately $217 million. Cash and cash equivalents were $4.7 million at year-end, and working capital was $36.4 million.
Total debt, including capital leases, was $132.9 million, compared with $73.8 million in 2016. This included $43.0 million drawn on a $250 million revolving facility and $89.9 million of capital-lease obligations. Remaining revolving-facility availability was $173.1 million; the facility expires in March 2020. Saia paid off its remaining $7.1 million of senior notes in December and reported compliance with debt covenants. The credit agreement prohibits cash dividends.
Changes, outlook and risks
- Operating income increased 19.7% and the operating ratio improved despite higher labor, fuel, purchased-transportation and depreciation costs. Claims and insurance expense declined $2.5 million, partly offsetting those pressures.
- Saia opened six terminals in Pennsylvania, Maryland and New Jersey in 2017 and planned to add Northeast markets at a similar pace in 2018. Expansion costs, competition and the time needed to build profitable freight density are material execution risks.
- Management projected approximately $265 million of 2018 net capital expenditures, including capital-lease equipment, to fund fleet replacement and growth. It expected a 2018 effective tax rate of 24%–26% and anticipated further market-competitive wage increases. The July 2017 wage increase was expected to cost about $16 million annually, partly offset by productivity gains.
- Management emphasized yield management, density growth, cost control, safety, service and capacity alignment. It gave no specific revenue or earnings forecast; results remain exposed to economic conditions, pricing competition, driver and purchased-transportation availability, fuel, weather, insurance claims and expansion execution.
- Other notable items: the 2017 hurricanes affected revenue; the company uses self-insurance retentions of up to $2 million per claim and reported $75.5 million of claims, insurance and other liabilities. Ordinary-course litigation was not expected to materially affect financial condition, though it could affect results in a period. The 2018 adoption of revenue-recognition rules was expected to increase reported revenue and purchased-transportation expense through gross presentation of non-asset truckload activity, without an equivalent change in underlying economics.
Key facts for investors to verify
- Separate recurring operating performance from the $34 million Tax Act benefit and other tax items; compare adjusted EPS with GAAP results.
- Track whether Northeast expansion produces sufficient volume, pricing and operating leverage to justify planned investment.
- Assess 2018 capital spending, cash generation, fleet financing, revolving-credit availability and covenant headroom together.
- Monitor labor, purchased-transportation, fuel and insurance/claims costs, including the effect of driver availability and claim severity.
- Account for the revenue-recognition presentation change when comparing reported revenue and purchased-transportation expense across periods.