Business context and reporting period
Saia, Inc. filed this Form 10-K for the fiscal year ended December 31, 2011. Saia is an asset-based less-than-truckload carrier operating in 34 states, with selected guaranteed, expedited and truckload services. The filing reports full-year results and unaudited quarterly data, including the fourth quarter.
Financial performance and liquidity
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $1,030.2 million | $902.7 million |
| Operating income | $28.1 million | $12.1 million |
| Operating ratio | 97.3% | 98.7% |
| Net income | $11.4 million | $2.0 million |
| Diluted EPS | $0.70 | $0.12 |
| Cash from operating activities | $58.2 million | $23.4 million |
| Net capital expenditures | $67.9 million | $3.3 million |
| Cash and cash equivalents at year-end | $1.3 million | $29.0 million |
| Total debt at year-end | $72.9 million | $90.0 million |
Revenue rose 14.1%; LTL tonnage increased 3.5%, LTL shipments 1.4%, and LTL revenue per hundredweight 10.0% to $12.93. Pricing actions and higher fuel surcharge contributed to stronger yield. Operating ratio improved by 1.4 percentage points, equivalent to a 2.7% operating margin in 2011. Net income and diluted EPS reflect continuing operations; the sold Jevic business had no income in 2011 or 2010.
Full-year operating cash flow was $58.2 million, including $1.1 million used by discontinued operations; cash flow from continuing operations was $59.3 million. Investing cash outflow was $67.9 million, mainly for revenue equipment, and financing cash outflow was $18.0 million, primarily debt repayment. Working capital fell to $18.5 million from $47.7 million, mainly due to reduced cash following increased capital spending.
At year-end Saia had no revolver borrowings, $49.7 million of letters of credit outstanding and a $150 million revolving facility subject to a borrowing base and covenants. The facility matures in November 2016; reported availability was approximately $100.3 million. The company said it was in compliance with debt covenants. Its senior-note debt is fixed-rate; total debt was $72.9 million, with $22.1 million due in 2012.
Fourth-quarter results
For the three months ended December 31, 2011, revenue was $253.0 million, operating income $6.2 million and net income $2.5 million; diluted EPS was $0.15. The comparable 2010 quarter reported revenue of $224.4 million, operating income of $1.8 million, net income of $0.7 million and diluted EPS of $0.04.
Material changes versus the prior comparable period
- Full-year operating income more than doubled from $12.1 million to $28.1 million, while net income increased from $2.0 million to $11.4 million.
- Fuel, operating expenses and supplies increased to $293.5 million from $233.8 million; management attributed $48.7 million of the increase to higher fuel costs from increased mileage and fuel prices. Claims and insurance expense rose to $32.1 million from $21.9 million, reflecting unfavorable self-insurance claims trends and greater accident severity.
- Cash from operations increased, but capital spending rose sharply as Saia resumed more normal equipment replacement after deferrals in prior years. Debt declined by $17.1 million and cash balances fell by $27.7 million.
- The November 2011 credit amendment increased revolver commitments from $120 million to $150 million, extended maturity to November 2016, and revised pricing and fees. A separate note amendment removed the adjusted leverage ratio from its covenants. Amendment fees of $1.0 million were recorded in the fourth quarter.
Outlook, risks and unusual items
Management said the timing and strength of the 2012 economic recovery remained uncertain. Priorities included improving yield, building shipment density, targeted sales, productivity, asset utilization and safety. Planned 2012 net capital expenditures were approximately $80.4 million, of which $44.3 million was committed at year-end. The company expected its December 2011 2.5% wage increase to cost approximately $10 million annually.
Material risks include economic and freight-demand weakness, competitive pricing, fuel and driver costs and availability, self-insurance claims volatility, regulatory changes, capital requirements and covenant compliance. Saia does not hedge fuel prices; fuel surcharges may not fully offset rapid price moves or competitive pressures. The company had $64.5 million of operating lease commitments and $47.5 million of 2012 purchase obligations, including capital expenditure commitments. It also retained indemnification obligations relating to pre-sale Jevic claims and certain tax liabilities; management said ordinary-course proceedings were not expected to materially affect consolidated financial position, though they could affect results in a period.
Saia had no outstanding dividends, and current debt agreements prohibit dividend payments. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. A California labor-code action was dismissed with prejudice in December 2011 following settlement; no class had been certified.
Investor verification priorities
- Confirm that yield and pricing gains are being retained, and compare future LTL tonnage, shipments and revenue per hundredweight.
- Track whether rising fuel, labor, maintenance and claims costs offset revenue growth and operating-ratio improvement.
- Assess cash generation against the approximately $80.4 million 2012 capital plan, scheduled debt payments and the low year-end cash balance.
- Review actual revolver availability under the borrowing base, letters of credit and continuing covenant requirements.
- Monitor self-insurance reserve development, Jevic-related indemnities and the timing and scale of committed capital expenditures.