Saia, Inc. — Q3 2013 Form 10-Q
Business and period: Saia provides less-than-truckload, non-asset truckload, expedited and logistics services across the United States. This unaudited report covers the quarter and nine months ended September 30, 2013; comparisons are with the corresponding 2012 periods unless noted. Amounts below are in millions except per-share data.
Financial performance
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Operating revenue | $293.1 | $278.0 | $859.4 | $834.3 |
| Operating income | $21.9 | $16.4 | $59.7 | $48.7 |
| Net income | $12.9 | $9.3 | $35.6 | $26.6 |
| Diluted EPS | $0.51 | $0.37 | $1.41 | $1.07 |
| Operating ratio | 92.5% | 94.1% | Not stated | Not stated |
- Q3 revenue rose 5.4%, and operating income rose 33.6%. Management attributed the revenue increase mainly to yield management and one additional workday. LTL tonnage per workday declined 0.1%; LTL revenue per hundredweight increased 3.8% to $14.54.
- For the first nine months, revenue increased 3.0% and operating income increased to $59.7 million from $48.7 million. Higher yield was partly offset by lower tonnage.
- Q3 operating ratio improved 1.6 percentage points. Salary and benefit expense, depreciation, and claims costs increased; cost-optimization initiatives and higher yield supported operating performance. Interest expense was lower year over year.
Cash flow, financial position and debt
- Nine-month operating cash flow was $67.6 million, down from $77.4 million, mainly because of working-capital changes despite higher net income. Investing cash outflow was $97.7 million, primarily for property and equipment; financing cash inflow was $33.9 million.
- Cash was $4.1 million at September 30, 2013. Working capital was $25.9 million, compared with $7.1 million at September 30, 2012.
- Total debt was $91.5 million, versus $60.7 million at December 31, 2012. The company reported $51.9 million borrowed on its revolver and $39.6 million of senior notes. It said it was in compliance with debt covenants.
- The amended revolving facility provides commitments of up to $200 million, expires in June 2018 and includes a potential $40 million accordion subject to lender approval. The filing reports $59.1 million in outstanding letters of credit in its financing discussion; its contractual-obligations table lists $60.7 million. Reported available line of credit is $89.0 million, subject to covenants and borrowing-base conditions.
- Projected 2013 net capital expenditures were approximately $115 million, with approximately $19 million of the remaining budget committed at quarter-end. Management said operating cash flow and facility availability should meet short-term liquidity needs, subject to borrowing-base and covenant requirements.
Outlook, risks and notable items
- Management emphasized yield growth, targeted sales, cost control, productivity, safety and service, while noting uncertainty about the timing and strength of economic recovery and competitive pricing pressures. No specific earnings or revenue guidance was provided.
- The July 2013 general rate increase was 5.9% for customers comprising approximately 30% of operating revenue. A roughly 3% employee wage and salary increase took effect July 1, with an estimated annual cost of approximately $13 million; management expects productivity and efficiency gains to partly offset it. The remaining half of the 401(k) match suspension was scheduled for reinstatement December 1, 2013.
- Key risks include economic weakness, competition and pricing, customer credit, driver and fuel availability and cost, self-insurance and claims volatility, regulation, labor relations, debt covenant compliance, and execution of improvement initiatives. Fuel surcharges mitigate but may not fully offset fuel-price changes.
- Management said ordinary-course legal matters were not expected to materially adversely affect consolidated financial position, but could materially affect results in a quarter or year. Saia also remains subject to specified indemnity obligations related to the 2006 Jevic sale and certain pre-2000 claims supported by Yellow guarantees.
- The company completed a three-for-two stock split in June 2013; historical share and EPS data in the filing were retroactively adjusted. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Reconcile the $59.1 million versus $60.7 million letters-of-credit disclosures and confirm usable revolver availability under the borrowing base and covenants.
- Track cash conversion and working-capital movements, particularly accounts receivable, alongside the elevated capital spending plan.
- Assess whether yield increases can persist if LTL tonnage remains weak, and whether productivity offsets the annual wage-cost increase.
- Review self-insurance, Jevic indemnity and other legal exposures, including potential effects on period-to-period claims expense.