SAIA, INC. — Q3 2011 Form 10-Q Summary
Business context and reporting period
Saia provides regional and interregional less-than-truckload (LTL) freight services, selected longer-haul LTL, and related transportation services. This unaudited filing covers the quarter and nine months ended September 30, 2011, compared with the same periods in 2010.
Financial and operating performance
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Operating revenue | $268.3 million | $234.7 million | $777.2 million | $678.2 million |
| Operating income | $9.6 million | $6.5 million | $22.0 million | $10.3 million |
| Net income | $4.8 million | $2.5 million | $8.9 million | $1.3 million |
| Diluted EPS | $0.30 | $0.16 | $0.55 | $0.08 |
| Operating ratio | 96.4% | 97.2% | Not stated | Not stated |
- Q3 revenue rose 14.3%; management attributed growth to pricing actions, higher fuel surcharges and increased tonnage. Nine-month revenue rose 14.6%.
- Q3 LTL tonnage increased 2.6%, while LTL shipments were flat. LTL revenue per hundredweight increased 11.6% to $13.14.
- Q3 operating expenses increased 13.4% to $258.7 million. Salaries and benefits rose 8.2%; fuel and other operating expenses rose 24.1%, reflecting higher mileage and fuel prices and increased fleet maintenance. Claims and insurance costs also increased.
- For the first nine months, operating cash flow was $34.7 million, versus $19.5 million. Investing cash outflow was $51.8 million, principally for revenue equipment, versus $1.2 million. Financing cash outflow was $8.4 million, primarily reflecting debt repayment.
- Cash was $3.5 million at September 30, down from $29.0 million at December 31, 2010. Working capital was $27.4 million; the filing compares this with $50.7 million at September 30, 2010.
- Total debt carrying value was $81.4 million, including $19.6 million current and $61.8 million long-term, versus $90.0 million at December 31, 2010. No revolver borrowings were outstanding; letters of credit were $49.7 million. The filing reports $70.3 million of available line of credit, subject to borrowing-base and covenant requirements.
Material changes, outlook and risks
- Revenue and profitability improved year over year, with the operating ratio improving by 0.8 percentage points. Management said 2010 pricing initiatives continued to benefit yield and profitability.
- Saia implemented a 6.9% general rate increase on August 22, 2011, covering customers representing approximately 30% of revenue. The company said retention of increases depends on competition, customer turnover and mix.
- Management cited uncertainty about the timing and strength of economic recovery and ongoing competitive pricing pressures. It plans to pursue yield, productivity, cost control, safety and asset-utilization initiatives; no earnings or revenue guidance is provided.
- A 2.5% wage increase for specified employee groups was announced for December 1, 2011. Management estimated its annual cost at approximately $10 million. Half of the previously suspended 401(k) match was reinstated effective April 1, 2011.
- Projected 2011 net capital expenditures were approximately $65 million; $8.3 million was committed at September 30. The revolver matures January 28, 2013. Management reported compliance with debt covenants and believed available cash and credit could meet short-term liquidity needs.
- Risks include economic downturns, pricing and fuel-surcharge exposure, driver and fuel availability, self-insurance claim volatility, regulation, labor relations, debt covenant compliance and execution of improvement initiatives. Management said risk factors were not materially changed from the 2010 Form 10-K.
- A proposed $0.8 million settlement in California labor litigation remained recorded as a liability, although the court again denied preliminary approval in August 2011. Saia also remains responsible for specified indemnity obligations relating to the 2006 Jevic sale; the filing does not quantify total potential exposure.
Most important facts for investors to verify
- Whether pricing and fuel surcharges can continue to outpace cost inflation and support improved operating margins.
- Actual 2011 capital expenditures and the effect of equipment investment on cash, liquidity and operating capacity.
- The cost and operational impact of the announced wage increase and other labor-cost changes.
- Available revolver capacity after borrowing-base limits, outstanding letters of credit and covenant requirements.
- Developments in the California labor case and the company’s remaining Jevic-related indemnity exposure.