Saia, Inc. — FY 2012 Form 10-K
Business and reporting period. Saia is a U.S. transportation company focused primarily on less-than-truckload (LTL) freight, with truckload, expedited and logistics services. This annual report covers the year ended December 31, 2012; quarterly figures below identify the fourth quarter. Saia acquired Robart Transportation and RL Services in July 2012, later rebranding them Saia TL Plus and Saia Logistics Services.
Financial performance and liquidity
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Operating revenue | $1,098.7 million | $1,030.2 million |
| Operating income | $58.7 million | $28.1 million |
| Net income | $32.0 million | $11.4 million |
| Diluted earnings per share | $1.94 | $0.70 |
| Operating ratio | 94.7% | 97.3% |
| Cash provided by operating activities | $100.7 million | $58.2 million |
| Net capital expenditures | $82.8 million | $67.9 million |
| Total debt at year-end | $60.7 million | $72.9 million |
Continuing-operations operating cash flow was $101.6 million in 2012; consolidated cash flow included a $0.9 million use from discontinued operations. Cash used in investing activities was $90.4 million, including equipment purchases and the Robart acquisition. Year-end cash was $0.3 million, working capital was $2.9 million, and stockholders’ equity was $254.5 million. The $150 million revolving facility had $10.0 million borrowed and $49.1 million of letters of credit outstanding; reported availability was $90.9 million, subject to borrowing-base and covenant conditions. Saia reported compliance with debt covenants. The current portion of long-term debt was $22.1 million.
Fourth-quarter 2012 revenue was $264.4 million, operating income $10.1 million, net income $5.4 million and diluted EPS $0.33, compared with $253.0 million, $6.2 million, $2.5 million and $0.15, respectively, in fourth-quarter 2011.
Changes and operating drivers
- Revenue rose 6.6% year over year, primarily from pricing and mix actions. LTL revenue per hundredweight increased 6.9% to $13.82, while LTL tonnage declined 0.2% and LTL shipments declined 3.0%.
- Operating income more than doubled and the operating ratio improved by 2.6 percentage points. Management attributed the improvement to higher yield, business-mix actions, fuel surcharges and cost initiatives.
- Purchased transportation expense fell 14.5%, partly reflecting network optimization and more in-house miles. Claims and insurance expense decreased $7.4 million, which management linked mainly to lower accident severity.
- Depreciation and amortization increased 28.7% to $48.0 million, largely due to recent equipment and technology investment. Salaries, wages and benefits increased 6.4%, including wage increases and restored incentives.
- Fuel surcharges were 17.3% of revenue, versus 16.7% in 2011. The 2011 comparison also benefited from approximately $1.0 million of alternative-fuel tax credits that were absent in 2012.
Outlook, risks and unusual items
- Management cited continuing uncertainty about economic recovery and competitive pricing. Priorities include improving yield, building density in existing markets, controlling costs, improving productivity and service, and aligning capacity with volumes.
- Management projected 2013 net capital expenditures of approximately $90 million, with about $41 million committed at year-end 2012. The July 2012 wage increase was expected to add about $13 million annually, partially offset by productivity and efficiency gains.
- The Robart acquisition involved $7.9 million cash consideration and contingent consideration tied to 2013 performance, capped at $1.3 million. The filing reports $9.1 million fair value of total consideration transferred. Investors should distinguish this amount from the acquisition’s net cash outlay.
- Key risks include economic weakness and pricing pressure; fuel costs and the limits of surcharge recovery; driver and purchased-transportation availability; safety, insurance and claims volatility; regulation and emissions requirements; capital intensity; and acquisition integration. Saia does not hedge fuel-price risk.
- Debt agreements restrict dividends, which Saia has not paid, and impose financial covenants. Contractual obligations totaled $170.2 million, including $42.2 million of purchase obligations, of which $41 million related to capital expenditures. Litigation and claims arise in the ordinary course; management said probable losses were provided for, while adverse outcomes could affect results in a particular period.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also reported effective disclosure controls and internal controls.
Important facts for investors to verify
- Whether pricing and mix gains can persist despite declining LTL shipment volume, and how much reported yield improvement reflects base rates versus fuel surcharges.
- Whether the operating-margin improvement and lower claims costs are sustainable, and the sensitivity of earnings to self-insured claims and accident severity.
- Liquidity after planned 2013 capital spending and scheduled $22.1 million debt principal payments, including borrowing-base availability, letters of credit and covenant headroom.
- Robart’s operating contribution, integration progress and any earnout payment, along with the expected returns on equipment and technology investment.
- The filing states that approximately $1.0 million of 2012 alternative-fuel tax credits was expected to be recognized in first-quarter 2013; verify recognition and any resulting effect on tax expense.