Saia, Inc. — 2012 Second-Quarter Form 10-Q
Business and period: Saia provides regional and interregional less-than-truckload (LTL) freight services and selected national, time-definite and truckload services. This unaudited filing covers the quarter and six months ended June 30, 2012; comparisons are with the corresponding 2011 periods unless noted.
Financial performance
| Metric | Q2 2012 | Q2 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Operating revenue | $287.5m | $265.9m | $556.2m | $508.9m |
| Operating income | $21.2m | $8.3m | $32.2m | $12.3m |
| Net income | $11.9m | $3.4m | $17.4m | $4.1m |
| Diluted EPS | $0.72 | $0.21 | $1.06 | $0.25 |
| Operating ratio | 92.6% | 96.9% | Not clearly stated | Not clearly stated |
- Second-quarter revenue increased 8.1%; management attributed growth to improved yield from pricing actions and higher tonnage. LTL tonnage rose 1.1%, while LTL shipments declined 2.1%. LTL revenue per hundredweight increased 7.1% to $13.71.
- For the first six months, revenue rose 9.3%. Operating income increased substantially in both periods. The company cited pricing, cost optimization and lower claims expense as contributors to the second-quarter improvement.
- Second-quarter salaries, wages and benefits increased $9.6m, while purchased transportation fell $3.6m and claims and insurance expense fell $1.7m. Depreciation and amortization rose $3.1m, primarily reflecting equipment and technology investment.
- Interest expense was $2.2m in Q2 and $4.2m for the first half, down from $3.0m and $6.0m, respectively, in 2011. Effective tax rates were 37.6% for Q2 and 38.3% for the first half.
Cash flow, liquidity and debt
- First-half cash from operating activities was $50.3m, versus $10.7m in 2011. Capital expenditures and other net property and equipment purchases used $69.3m, versus $20.6m. Financing provided $18.5m, compared with $8.4m used in the prior-year period. Cash declined $0.5m to $0.8m.
- At June 30, 2012, working capital was $9.8m, down from $39.7m at June 30, 2011. Current assets were $151.7m and current liabilities $141.9m.
- Total debt carrying value was $90.7m, comprising $28.9m drawn on the revolving facility and $61.8m in long-term notes. The $150m revolving facility expires in November 2016 and is subject to a borrowing base and covenants. The company reported $65.4m available under the facility and said it was in compliance with debt covenants.
- Outstanding letters of credit are reported as $55.6m in the MD&A and $57.3m in the contractual commitments table. The filing does not explain the difference.
Outlook, risks and notable items
- No specific earnings or revenue forecast is provided. Management said economic recovery remained uncertain and identified economic conditions, competitive pricing, capacity, fuel, labor availability, insurance claims and execution of improvement initiatives as factors affecting results.
- Management continued to emphasize yield improvement, cost control, productivity, safety and building shipment density. A 6.9% general rate increase for customers representing about 30% of revenue took effect July 9, 2012.
- Wage and salary increases of approximately 3% took effect July 1, 2012. The company estimated an annual cost impact of about $13m, expected to be partly offset by productivity and efficiency gains.
- Projected 2012 net capital expenditures were approximately $80m; $8.1m of the remaining capital budget was committed at June 30.
- On July 2, 2012, Saia acquired Robart Transportation and RL Services Group for $7.8m plus a performance-based earnout, expanding its truckload brokerage and logistics services.
- Ordinary-course legal matters were not expected to materially affect financial position, but could materially affect results in a period. The company also retained certain obligations related to claims and tax matters from the 2006 Jevic sale. Self-insurance estimates and claims costs can be volatile.
Important facts for investors to verify
- Whether higher pricing and yield can be sustained amid shipment declines, competition and uncertain economic conditions.
- How the July 2012 pay increases affect margins and whether productivity gains offset the estimated annual $13m cost.
- Capital spending, cash generation and borrowing-base availability under the revolving facility, including the reported letters-of-credit difference.
- The financial contribution and earnout terms of the Robart acquisition, which occurred after quarter-end.
- Potential variability in self-insurance claims, Jevic-related obligations and other legal or tax contingencies.