UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,MARCH 31, 20222023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 0-49983
Saia, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 48-1229851 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
11465 Johns Creek Parkway, Suite 400 | ||
Johns Creek, GA | 30097 | |
(Address of principal executive offices) | (Zip Code) |
(770) 232-5067
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.001 per share | SAIA | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 26,462,46326,532,778 shares of Common Stock outstanding at October 27, 2022.April 26, 2023.
1
SAIA, INC. AND SUBSIDIARIES
INDEX
PAGE | ||||
ITEM 1: | 3 | |||
3 | ||||
4 | ||||
5 | ||||
| ||||
| ||||
ITEM 2: | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| ||
ITEM 3: |
| |||
ITEM 4: |
| |||
ITEM 1: |
| |||
ITEM 1A: |
| |||
ITEM 2: |
| |||
|
| |||
|
| |||
|
| |||
ITEM 6: |
| |||
| ||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Saia, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||
Assets |
| (in thousands, except share and per share data) |
|
| (in thousands, except share and per share data) |
| ||||||||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 149,825 |
|
| $ | 106,588 |
|
| $ | 166,425 |
|
| $ | 187,390 |
|
Accounts receivable, net |
|
| 335,595 |
|
|
| 276,755 |
|
|
| 294,917 |
|
|
| 290,306 |
|
Prepaid expenses |
|
| 38,635 |
|
|
| 22,525 |
| ||||||||
Income tax receivable |
|
| 11,859 |
|
|
| — |
|
|
| 6,391 |
|
|
| 23,438 |
|
Prepaid expenses and other |
|
| 54,123 |
|
|
| 32,912 |
| ||||||||
Other current assets |
|
| 7,146 |
|
|
| 7,227 |
| ||||||||
Total current assets |
|
| 551,402 |
|
|
| 416,255 |
|
|
| 513,514 |
|
|
| 530,886 |
|
Property and Equipment, at cost |
|
| 2,403,702 |
|
|
| 2,144,528 |
|
|
| 2,602,963 |
|
|
| 2,478,824 |
|
Less: accumulated depreciation |
|
| 964,533 |
|
|
| 864,074 |
|
|
| 1,034,649 |
|
|
| 996,204 |
|
Net property and equipment |
|
| 1,439,169 |
|
|
| 1,280,454 |
|
|
| 1,568,314 |
|
|
| 1,482,620 |
|
Operating Lease Right-of-Use Assets |
|
| 107,456 |
|
|
| 107,781 |
|
|
| 115,484 |
|
|
| 120,455 |
|
Goodwill and Identifiable Intangibles, net |
|
| 18,362 |
|
|
| 19,157 |
|
|
| 17,936 |
|
|
| 18,149 |
|
Other Noncurrent Assets |
|
| 23,935 |
|
|
| 21,603 |
|
|
| 27,551 |
|
|
| 22,600 |
|
Total assets |
| $ | 2,140,324 |
|
| $ | 1,845,250 |
|
| $ | 2,242,799 |
|
| $ | 2,174,710 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable |
| $ | 114,697 |
|
| $ | 114,010 |
|
| $ | 108,362 |
|
| $ | 99,792 |
|
Wages, vacation and employees’ benefits |
|
| 79,193 |
|
|
| 73,109 |
|
|
| 54,706 |
|
|
| 66,684 |
|
Claims and insurance accruals |
|
| 74,799 |
|
|
| 54,717 |
|
|
| 43,276 |
|
|
| 45,481 |
|
Other current liabilities |
|
| 31,116 |
|
|
| 38,551 |
|
|
| 24,479 |
|
|
| 22,684 |
|
Current portion of long-term debt |
|
| 15,914 |
|
|
| 19,396 |
|
|
| 14,452 |
|
|
| 14,519 |
|
Current portion of operating lease liability |
|
| 22,750 |
|
|
| 21,565 |
|
|
| 25,256 |
|
|
| 24,925 |
|
Total current liabilities |
|
| 338,469 |
|
|
| 321,348 |
|
|
| 270,531 |
|
|
| 274,085 |
|
Other Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt, less current portion |
|
| 18,936 |
|
|
| 31,008 |
|
|
| 12,052 |
|
|
| 16,489 |
|
Operating lease liability, less current portion |
|
| 87,388 |
|
|
| 88,409 |
|
|
| 93,649 |
|
|
| 98,581 |
|
Deferred income taxes |
|
| 124,960 |
|
|
| 124,137 |
|
|
| 151,509 |
|
|
| 145,771 |
|
Claims, insurance and other |
|
| 64,089 |
|
|
| 60,015 |
|
|
| 64,118 |
|
|
| 60,443 |
|
Total other liabilities |
|
| 295,373 |
|
|
| 303,569 |
|
|
| 321,328 |
|
|
| 321,284 |
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
| ||||||
Preferred stock, $0.001 par value, 50,000 shares authorized, |
|
| — |
|
|
| — |
|
|
| - |
|
|
| - |
|
Common stock, $0.001 par value, 100,000,000 shares authorized, |
|
| 26 |
|
|
| 26 |
| ||||||||
Common stock, $0.001 par value, 100,000,000 shares authorized, |
|
| 27 |
|
|
| 26 |
| ||||||||
Additional paid-in-capital |
|
| 275,358 |
|
|
| 274,633 |
|
|
| 273,274 |
|
|
| 277,366 |
|
Deferred compensation trust, 70,578 and 94,627 shares of common |
|
| (5,237 | ) |
|
| (4,101 | ) | ||||||||
Deferred compensation trust, 70,812 and 69,982 shares of common |
|
| (5,655 | ) |
|
| (5,248 | ) | ||||||||
Retained earnings |
|
| 1,236,335 |
|
|
| 949,775 |
|
|
| 1,383,294 |
|
|
| 1,307,197 |
|
Total stockholders’ equity |
|
| 1,506,482 |
|
|
| 1,220,333 |
|
|
| 1,650,940 |
|
|
| 1,579,341 |
|
Total liabilities and stockholders’ equity |
| $ | 2,140,324 |
|
| $ | 1,845,250 |
|
| $ | 2,242,799 |
|
| $ | 2,174,710 |
|
See accompanying notes to condensed consolidated financial statements.
3
Saia, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the quarters ended March 31, 2023 and nine months ended September 30, 2022 and 2021
(unaudited)
|
| Third Quarter |
|
| Nine Months |
|
| First Quarter |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
| ||||||||||||||||||
Operating Revenue |
| $ | 729,561 |
|
| $ | 616,216 |
|
| $ | 2,136,331 |
|
| $ | 1,671,623 |
|
| $ | 660,535 |
|
| $ | 661,216 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Salaries, wages and employees' benefits |
|
| 297,247 |
|
|
| 277,087 |
|
|
| 881,762 |
|
|
| 790,310 |
|
|
| 298,956 |
|
|
| 289,463 |
|
Purchased transportation |
|
| 85,452 |
|
|
| 72,193 |
|
|
| 255,519 |
|
|
| 179,705 |
|
|
| 46,727 |
|
|
| 78,248 |
|
Fuel, operating expenses and supplies |
|
| 145,461 |
|
|
| 98,834 |
|
|
| 413,762 |
|
|
| 274,399 |
|
|
| 141,625 |
|
|
| 122,771 |
|
Operating taxes and licenses |
|
| 16,261 |
|
|
| 14,572 |
|
|
| 48,813 |
|
|
| 43,469 |
|
|
| 17,065 |
|
|
| 16,573 |
|
Claims and insurance |
|
| 15,988 |
|
|
| 15,518 |
|
|
| 40,940 |
|
|
| 44,326 |
|
|
| 14,059 |
|
|
| 10,736 |
|
Depreciation and amortization |
|
| 40,682 |
|
|
| 35,742 |
|
|
| 117,578 |
|
|
| 105,773 |
|
|
| 42,880 |
|
|
| 39,952 |
|
Loss (gain) from property disposals, net |
|
| 115 |
|
|
| (3,847 | ) |
|
| 160 |
|
|
| (4,115 | ) | ||||||||
Other operating, net |
|
| 80 |
|
|
| 24 |
| ||||||||||||||||
Total operating expenses |
|
| 601,206 |
|
|
| 510,099 |
|
|
| 1,758,534 |
|
|
| 1,433,867 |
|
|
| 561,392 |
|
|
| 557,767 |
|
Operating Income |
|
| 128,355 |
|
|
| 106,117 |
|
|
| 377,797 |
|
|
| 237,756 |
|
|
| 99,143 |
|
|
| 103,449 |
|
Nonoperating Expenses (Income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Interest expense |
|
| 581 |
|
|
| 777 |
|
|
| 1,941 |
|
|
| 2,463 |
|
|
| 688 |
|
|
| 692 |
|
Other, net |
|
| 68 |
|
|
| 14 |
|
|
| 1,072 |
|
|
| (547 | ) |
|
| (643 | ) |
|
| 235 |
|
Nonoperating expenses, net |
|
| 649 |
|
|
| 791 |
|
|
| 3,013 |
|
|
| 1,916 |
|
|
| 45 |
|
|
| 927 |
|
Income Before Income Taxes |
|
| 127,706 |
|
|
| 105,326 |
|
|
| 374,784 |
|
|
| 235,840 |
|
|
| 99,098 |
|
|
| 102,522 |
|
Income Tax Provision |
|
| 29,815 |
|
|
| 25,617 |
|
|
| 88,224 |
|
|
| 56,366 |
|
|
| 23,001 |
|
|
| 23,098 |
|
Net Income |
| $ | 97,891 |
|
| $ | 79,709 |
|
| $ | 286,560 |
|
| $ | 179,474 |
|
| $ | 76,097 |
|
| $ | 79,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Weighted average common shares outstanding – basic |
|
| 26,539 |
|
|
| 26,334 |
|
|
| 26,506 |
|
|
| 26,317 |
|
|
| 26,600 |
|
|
| 26,391 |
|
Weighted average common shares outstanding – diluted |
|
| 26,676 |
|
|
| 26,713 |
|
|
| 26,663 |
|
|
| 26,699 |
|
|
| 26,702 |
|
|
| 26,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic Earnings Per Share |
| $ | 3.69 |
|
| $ | 3.03 |
|
| $ | 10.81 |
|
| $ | 6.82 |
|
| $ | 2.86 |
|
| $ | 3.01 |
|
Diluted Earnings Per Share |
| $ | 3.67 |
|
| $ | 2.98 |
|
| $ | 10.75 |
|
| $ | 6.72 |
|
| $ | 2.85 |
|
| $ | 2.98 |
|
See accompanying notes to condensed consolidated financial statements.
4
Saia, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the quarters ended March 31, 2023 and nine months ended September 30, 2022 and 2021
(unaudited)
|
| Common Shares |
|
| Common Stock |
|
| Additional Paid-in Capital |
|
| Deferred Compensation Trust |
|
| Retained Earnings |
|
| Total |
|
| Common Shares |
|
| Common Stock |
|
| Additional Paid-in Capital |
|
| Deferred Compensation Trust |
|
| Retained Earnings |
|
| Total |
| ||||||||||||
|
| (in thousands, except share data) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
| 26,336,589 |
|
| $ | 26 |
|
| $ | 274,633 |
|
| $ | (4,101 | ) |
| $ | 949,775 |
|
| $ | 1,220,333 |
| ||||||||||||||||||||||||
Balance at December 31, 2022 |
|
| 26,464 |
|
| $ | 26 |
|
| $ | 277,366 |
|
| $ | (5,248 | ) |
| $ | 1,307,197 |
|
| $ | 1,579,341 |
| ||||||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 2,056 |
|
|
| — |
|
|
| — |
|
|
| 2,056 |
|
|
| — |
|
|
| — |
|
|
| 2,225 |
|
|
| — |
|
|
| — |
|
|
| 2,225 |
|
Exercise of stock options, less shares withheld for taxes |
|
| 10,992 |
|
|
| — |
|
|
| 907 |
|
|
| — |
|
|
| — |
|
|
| 907 |
|
|
| 21 |
|
|
| — |
|
|
| 2,204 |
|
|
| — |
|
|
| — |
|
|
| 2,204 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 60,821 |
|
|
| — |
|
|
| (11,230 | ) |
|
| — |
|
|
| — |
|
|
| (11,230 | ) |
|
| 48 |
|
|
| 1 |
|
|
| (8,928 | ) |
|
| — |
|
|
| — |
|
|
| (8,927 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 2,445 |
|
|
| (2,445 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 474 |
|
|
| (474 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| (1,066 | ) |
|
| 1,066 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (67 | ) |
|
| 67 |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,424 |
|
|
| 79,424 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76,097 |
|
|
| 76,097 |
|
Balance at March 31, 2022 |
|
| 26,408,402 |
|
| $ | 26 |
|
| $ | 267,745 |
|
| $ | (5,480 | ) |
| $ | 1,029,199 |
|
| $ | 1,291,490 |
| ||||||||||||||||||||||||
Balance at March 31, 2023 |
|
| 26,533 |
|
| $ | 27 |
|
| $ | 273,274 |
|
| $ | (5,655 | ) |
| $ | 1,383,294 |
|
| $ | 1,650,940 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,756 |
|
|
| — |
|
|
| — |
|
|
| 1,756 |
| ||||||||||||||||||||||||
Director deferred share activity |
|
| 2,327 |
|
|
| — |
|
|
| 1,170 |
|
|
| — |
|
|
| — |
|
|
| 1,170 |
| ||||||||||||||||||||||||
Exercise of stock options, less shares withheld for taxes |
|
| 1,007 |
|
|
| — |
|
|
| 101 |
|
|
| — |
|
|
| — |
|
|
| 101 |
| ||||||||||||||||||||||||
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 631 |
|
|
| (631 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| 8 |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 109,245 |
|
|
| 109,245 |
| ||||||||||||||||||||||||
Balance at June 30, 2022 |
|
| 26,411,736 |
|
| $ | 26 |
|
| $ | 271,395 |
|
| $ | (6,103 | ) |
| $ | 1,138,444 |
|
| $ | 1,403,762 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,894 |
|
|
| — |
|
|
| — |
|
|
| 1,894 |
| ||||||||||||||||||||||||
Director deferred share activity |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Exercise of stock options less shares withheld for taxes |
|
| 48,329 |
|
|
| — |
|
|
| 3,408 |
|
|
| — |
|
|
| — |
|
|
| 3,408 |
| ||||||||||||||||||||||||
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 2,398 |
|
|
| — |
|
|
| (473 | ) |
|
| — |
|
|
| — |
|
|
| (473 | ) | ||||||||||||||||||||||||
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| (93 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| (959 | ) |
|
| 959 |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 97,891 |
|
|
| 97,891 |
| ||||||||||||||||||||||||
Balance at September 30, 2022 |
|
| 26,462,463 |
|
| $ | 26 |
|
| $ | 275,358 |
|
| $ | (5,237 | ) |
| $ | 1,236,335 |
|
| $ | 1,506,482 |
|
|
| Common Shares |
|
| Common Stock |
|
| Additional Paid-in Capital |
|
| Deferred Compensation Trust |
|
| Retained Earnings |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance at December 31, 2021 |
|
| 26,337 |
|
| $ | 26 |
|
| $ | 274,633 |
|
| $ | (4,101 | ) |
| $ | 949,775 |
|
| $ | 1,220,333 |
|
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 2,056 |
|
|
| — |
|
|
| — |
|
|
| 2,056 |
|
Exercise of stock options, less shares withheld for taxes |
|
| 10 |
|
|
| — |
|
|
| 907 |
|
|
| — |
|
|
| — |
|
|
| 907 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 61 |
|
|
| — |
|
|
| (11,230 | ) |
|
| — |
|
|
| — |
|
|
| (11,230 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 2,445 |
|
|
| (2,445 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| (1,066 | ) |
|
| 1,066 |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,424 |
|
|
| 79,424 |
|
Balance at March 31, 2022 |
|
| 26,408 |
|
| $ | 26 |
|
| $ | 267,745 |
|
| $ | (5,480 | ) |
| $ | 1,029,199 |
|
| $ | 1,291,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
| Common Shares |
|
| Common Stock |
|
| Additional Paid-in Capital |
|
| Deferred Compensation Trust |
|
| Retained Earnings |
|
| Total |
| ||||||
|
| (in thousands, except share data) |
| |||||||||||||||||||||
Balance at December 31, 2020 |
|
| 26,236,570 |
|
| $ | 26 |
|
| $ | 267,666 |
|
| $ | (2,944 | ) |
| $ | 696,540 |
|
| $ | 961,288 |
|
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,711 |
|
|
| — |
|
|
| — |
|
|
| 1,711 |
|
Exercise of stock options, less shares withheld for taxes |
|
| 46,741 |
|
|
| — |
|
|
| 3,678 |
|
|
| — |
|
|
| — |
|
|
| 3,678 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 50,381 |
|
|
| — |
|
|
| (6,350 | ) |
|
| — |
|
|
| — |
|
|
| (6,350 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 742 |
|
|
| (742 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| (17 | ) |
|
| 17 |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37,291 |
|
|
| 37,291 |
|
Balance at March 31, 2021 |
|
| 26,333,692 |
|
| $ | 26 |
|
| $ | 267,430 |
|
| $ | (3,669 | ) |
| $ | 733,831 |
|
| $ | 997,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,810 |
|
|
| — |
|
|
| — |
|
|
| 1,810 |
|
Director deferred share activity |
|
| 1,404 |
|
|
| — |
|
|
| 1,256 |
|
|
| — |
|
|
| — |
|
|
| 1,256 |
|
Exercise of stock options, less shares withheld for taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 112 |
|
|
| (112 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 62,474 |
|
|
| 62,474 |
|
Balance at June 30, 2021 |
|
| 26,335,096 |
|
| $ | 26 |
|
| $ | 270,608 |
|
| $ | (3,781 | ) |
| $ | 796,305 |
|
| $ | 1,063,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,878 |
|
|
| — |
|
|
| — |
|
|
| 1,878 |
|
Director deferred share activity |
|
| 294 |
|
|
| — |
|
|
| 202 |
|
|
| — |
|
|
| — |
|
|
| 202 |
|
Exercise of stock options less shares withheld for taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 1,199 |
|
|
| — |
|
|
| (221 | ) |
|
| — |
|
|
| — |
|
|
| (221 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 98 |
|
|
| (98 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| 20 |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,709 |
|
|
| 79,709 |
|
Balance at September 30, 2021 |
|
| 26,336,589 |
|
| $ | 26 |
|
| $ | 272,545 |
|
| $ | (3,859 | ) |
| $ | 876,014 |
|
| $ | 1,144,726 |
|
See accompanying notes to condensed consolidated financial statements.
65
Saia, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the ninethree months ended September 30,March 31, 2023 and 2022 and 2021
(unaudited)
|
| Nine Months |
|
| First Quarter |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 286,560 |
|
| $ | 179,474 |
|
| $ | 76,097 |
|
| $ | 79,424 |
|
Noncash items included in net income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 117,578 |
|
|
| 105,773 |
|
|
| 42,880 |
|
|
| 39,952 |
|
Deferred income taxes |
|
| 824 |
|
|
| 5,086 |
|
|
| 5,738 |
|
|
| (2,030 | ) |
Other, net |
|
| 268 |
|
|
| 4,290 |
|
|
| 2,968 |
|
|
| 181 |
|
Changes in operating assets and liabilities, net |
|
| (61,156 | ) |
|
| (26,937 | ) | ||||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||||||||||
Accounts receivable |
|
| (5,276 | ) |
|
| (46,831 | ) | ||||||||
Accounts payable |
|
| 7,008 |
|
|
| 28,118 |
| ||||||||
Change in other assets, liabilities, net |
|
| (10,145 | ) |
|
| (2,853 | ) | ||||||||
Net cash provided by operating activities |
|
| 344,074 |
|
|
| 267,686 |
|
|
| 119,270 |
|
|
| 95,961 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Acquisition of property and equipment |
|
| (279,057 | ) |
|
| (154,884 | ) |
|
| (128,415 | ) |
|
| (46,259 | ) |
Proceeds from disposal of property and equipment |
|
| 1,061 |
|
|
| 6,460 |
|
|
| 360 |
|
|
| 883 |
|
Other |
|
| — |
|
|
| (500 | ) | ||||||||
Net cash used in investing activities |
|
| (277,996 | ) |
|
| (148,924 | ) |
|
| (128,055 | ) |
|
| (45,376 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Repayments of revolving credit agreement |
|
| (1,000 | ) |
|
| (36,410 | ) | ||||||||
Borrowings of revolving credit agreement |
|
| 1,000 |
|
|
| 36,410 |
| ||||||||
Proceeds from stock option exercises |
|
| 4,416 |
|
|
| 3,678 |
|
|
| 2,204 |
|
|
| 907 |
|
Shares withheld for taxes |
|
| (11,703 | ) |
|
| (6,571 | ) |
|
| (8,927 | ) |
|
| (11,230 | ) |
Repayment of finance leases |
|
| (15,554 | ) |
|
| (15,805 | ) |
|
| (4,504 | ) |
|
| (5,525 | ) |
Other financing activity |
|
| (953 | ) |
|
| — |
| ||||||||
Net cash used in financing activities |
|
| (22,841 | ) |
|
| (18,698 | ) |
|
| (12,180 | ) |
|
| (15,848 | ) |
Net Increase in Cash, Cash Equivalents and Restricted Cash (1) |
|
| 43,237 |
|
|
| 100,064 |
| ||||||||
Cash, Cash Equivalents and Restricted Cash, beginning of period (1) |
|
| 106,588 |
|
|
| 25,308 |
| ||||||||
Cash, Cash Equivalents and Restricted Cash, end of period (1) |
| $ | 149,825 |
|
| $ | 125,372 |
| ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| (20,965 | ) |
|
| 34,737 |
| ||||||||
Cash and Cash Equivalents, beginning of period |
|
| 187,390 |
|
|
| 106,588 |
| ||||||||
Cash and Cash Equivalents, end of period |
| $ | 166,425 |
|
| $ | 141,325 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
(1) Cash, cash equivalents and restricted cash at the end of the period includes $3.7 million of restricted cash included in accounts receivable, net on the Condensed Consolidated Balance Sheet ending September 30, 2021.
See accompanying notes to condensed consolidated financial statements.
76
Saia, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Saia, Inc. and its wholly-owned subsidiaries (together, the Company or Saia). All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.
The condensed consolidated financial statements have been prepared by the Company without audit by the independent registered public accounting firm. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, stockholders’ equity and cash flows for the interim periods included herein have been made. These interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information, the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these statements. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. Operating results for the quarter and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2022.2023.
Business
The Company provides national less-than-truckload (LTL) services through a single integrated organization. While more than 9697 percent of its revenue has been derived from transporting LTL shipments across 45 states, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited transportation and logistics services across North America. The Company’s customer base is diversified across numerous industries.
Revenue Recognition
The Company’s revenues are derived primarily from the transportation of freight as it satisfies performance obligations that arise from contracts with its customers. The Company’s performance obligations arise when it receives a bill of lading (“BOL”)(BOL) to transport a customer's commodities at negotiated prices contained in either a transportation services agreement or a publicly disclosed tariff rate. Once a BOL is received and accepted, a legally-enforceable contract is formed whereby the parties are committed to perform and the rights of the parties, shipping terms and conditions, and payment terms have been identified. A customer may submit many BOLs for transportation services at various times throughout a service agreement term but eachEach shipment represents a distinct service that is a separately identified performance obligation.
The typical transit time to complete a shipment is from one to five days. Billing for transportation services normally occurs after completion of the service and payment is generally due within 30 days after the invoice date. The Company recognizes revenue related to the Company’s LTL, non-asset truckload and expedited transportation services over the transit time of the shipment as it moves from origin to destination. Revenue for services is recognizeddestination based on the transit status at the end of each reporting period.
Key estimates included in the recognition and measurement of revenue and related accounts receivable are as follows:
The portion of the gross invoice related to interline transportation services that involve the services of another party, such as another LTL service provider, is not recorded in the Company’s revenues. Revenue from logistics services is recognized as the services are provided.
87
Remaining performance obligations represent the transaction price allocated to future periods for freight services started but not completed at the reporting date. These amounts include the unearned portion of billed and unbilled amounts for freight shipments in transit that the Company expects to recognize as revenue in the period subsequent to the reporting date, which is generally less than one week. The Company has elected to apply the optional exemption in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, as it relates to additional quantitative disclosures pertaining to remaining performance obligations.
Claims and Insurance Accruals
We are regularly subject to claims resulting from bodily injury, property damage, casualty and cargo losses, group healthcare costs, and workers' compensation. The Company has self-insured retention limits generally ranging from $250,000 to $1.0 million per occurrencemaintains a significant amount of insurance coverage with third-party insurance carriers that provides various levels of protection for group healthcare, workers'covered risk exposure, including in the areas of workers’ compensation, casualty and cargo losses and certain property damage and from $2.0 million to $10.0 million for bodily injury and property damage, casualty, cargo loss and damage and group health, with coverage limits, retention amounts and deductible amounts that vary based on policy periods and claim type. Claims and insurance accruals related to auto liability. The Company’s automobile liability insurance policy for the four-year period ended March 1, 2023 provides coverage for a singleworkers’ compensation, bodily injury and property damage, casualty, cargo loss of $8.0 million, an aggregate loss limit of $24.0 million for each policy year, and a $48.0 million aggregate loss limit for the four-year period, subject to risk retention of $2.0 million per occurrence. Under the policy, the Company is required to pay additional amounts of up to $11.5 million if losses paiddamage and group health are established by the insurer are greater than $18.4 million over the four-year policy period. Based on claims occurring since March 1, 2019, no additional amount was accrued as of September 30, 2022. Commencing on August 30, 2023, the Company may elect to commute the policy with respect to the insurer’s entire liability under the policy in which case the Company would be entitled to a return of a portion of the premium paid, up to $18.4 million,management based on the amountestimates of claims paid and the insurer would be released from all liability under the policy for the four-year period ending March 1, 2023. As a result, if the Company elects to commute the policy as to the entire policy term, the Company would be self-insured for $10.0 million per occurrence for the four years ended March 1, 2023. The Company is self-insured for auto liability for the first $10.0 million per occurrence for the one-year period ended March 1, 2019.
The Company also maintains an insurance policy covering the three-year period ending March 1, 2025losses that provides $5.0 million of coverage per occurrence after an occurrence exceeds $10.0 million, subject to an aggregate loss limit of $10.0 million for each policy year, and a $20.0 million aggregate loss limit for the three-year term. Additionally, the Company is required to pay additional amounts of up to $7.5 million if losses paid by the insurer are greater than $1.4 million over the three-year policy period ending March 1, 2025. Based on claims occurring since March 1, 2022, no additional amounts were accrued at September 30, 2022. Under the policy, the Company may elect to commute the policy for the three-year term if losses incurred are less than $1.4 million and the Company does not elect to renew the policy. In the event the Company elects to commute the policy for such period, it will be entitled to a return of a portion of the premium paid, up to $1.1 million, based on the amount of claims paid and the insurer will be released from all liability under the policy in connection with such period. As a result, if the Company elects to commute the policy as to such period, the Company will be self-insuredultimately incur on reported claims and on claims that have been incurred but not yet reported. Accruals are calculated on reported claims based on an evaluation of the nature and severity of the claim, historical loss experience and on legal, economic and other factors. Actuarial analysis is also used in calculating the accruals for the $10.0 million to $15.0 million loss layer per occurrence for the three years ended March 1, 2025. The election to commute the policy cannot be made before June 1, 2024workers’ compensation and must be made prior to December 1, 2025, unless the insurer agrees to extend such date.bodily injury and property damage claims.
(2) Computation of Earnings Per Share
The calculation of basic earnings per common share and diluted earnings per common share was as follows (in thousands, except per share amounts):
|
| Third Quarter |
|
| Nine Months |
|
| First Quarter |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income |
| $ | 97,891 |
|
| $ | 79,709 |
|
| $ | 286,560 |
|
| $ | 179,474 |
|
| $ | 76,097 |
|
| $ | 79,424 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Denominator for basic earnings per share–weighted |
|
| 26,539 |
|
|
| 26,334 |
|
|
| 26,506 |
|
|
| 26,317 |
|
|
| 26,600 |
|
|
| 26,391 |
|
Dilutive effect of share-based awards |
|
| 137 |
|
|
| 379 |
|
|
| 157 |
|
|
| 382 |
|
|
| 102 |
|
|
| 279 |
|
Denominator for diluted earnings per share–adjusted |
|
| 26,676 |
|
|
| 26,713 |
|
|
| 26,663 |
|
|
| 26,699 |
|
|
| 26,702 |
|
|
| 26,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic Earnings Per Share |
| $ | 3.69 |
|
| $ | 3.03 |
|
| $ | 10.81 |
|
| $ | 6.82 |
|
| $ | 2.86 |
| $ | 3.01 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Diluted Earnings Per Share |
| $ | 3.67 |
|
| $ | 2.98 |
|
| $ | 10.75 |
|
| $ | 6.72 |
|
| $ | 2.85 |
| $ | 2.98 |
|
For the quarterquarters ended March 31, 2023 and nine months ended September 30, 2022, options and restricted stock for 43,60229,120 and 27,59815,808 shares of common stock, respectively, were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. For both the quarter
9
and nine months ended September 30, 2021, options and restricted stock for 19,250 shares of common stock were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.
(3) Commitments and Contingencies
The Company pays its pro rata share of the cost of letters of credit outstanding for certain workers’ compensation claims incurred prior to March 1, 2000 that Saia’s former parent maintains for insurance programs. The Company’s pro rata share of these outstanding letters of credit was $1.8 million at September 30, 2022.
The Company is subject to legal proceedings that arise in the ordinary course of its business. Management believes that adequate provisions for the resolution of all contingencies, claims and pending litigation have been made for probable and estimable losses and that the ultimate outcome of these actions will not have a material adverse effect on its financial condition but could have a material adverse effect on the results of operations in a given quarter or annual period.
(4) Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair value as of September 30, 2022March 31, 2023 and December 31, 2021,2022, because of the relatively short maturity of these instruments. Based on the borrowing rates currently available to the Company for debt with similar terms and remaining maturities, the estimated fair value of total debt at September 30, 2022March 31, 2023 and December 31, 20212022 was $34.826.7 million and $50.831.2 million, respectively, based upon level two inputs in the fair value hierarchy. The carrying value of the debt was $34.926.5 million and $50.431.0 million at September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
(5) Debt and Financing Arrangements
At September 30, 2022March 31, 2023 and December 31, 2021,2022, debt consisted of the following (in thousands):
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||
Credit Agreement with Banks, described below |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Finance Leases, described below |
|
| 34,850 |
|
|
| 50,404 |
|
|
| 26,504 |
|
|
| 31,008 |
|
Total debt |
|
| 34,850 |
|
|
| 50,404 |
|
|
| 26,504 |
|
|
| 31,008 |
|
Less: current portion of long-term debt |
|
| 15,914 |
|
|
| 19,396 |
|
|
| 14,452 |
|
|
| 14,519 |
|
Long-term debt, less current portion |
| $ | 18,936 |
|
| $ | 31,008 |
|
| $ | 12,052 |
|
| $ | 16,489 |
|
8
The Company’s liquidity needs arise primarily from capital investment in new equipment, land and structures, information technology and letters of credit required under insurance programs, as well as funding working capital requirements.
The Company is party to a revolving credit agreement with a group of banks that is available to fund capital investments, letters of credit and working capital needs.
Credit Agreement
ThePrior to February 3, 2023, the Company iswas a party to a Sixth Amended and Restated Credit Agreement with itsa banking group (the Amended Credit Agreement), which providesthat provided up to a $300 million revolving line of credit through February 2024. The Amended Credit Agreement also hashad an accordion feature that allowsallowed for an additional $100 million availability, subject to certain conditions and availability of lender commitments. The Amended Credit Agreement provides for aLIBOR rate margin range from 100 basis points to 200 basis points, base rate margins from minus 50 basis points to plus 50 basis points, an unused portion fee from 17.5 basis points to 30 basis points and letter of credit fees from 100 basis points to 200 basis points, in each case based on the Company’s leverage ratio. Under the Amended Credit Agreement, the Company mustwas required to maintain a minimum debt service coverage ratio set at 1.25 to 1.00 and a maximum leverage ratio set at 3.25 to 1.00. The Amended Credit Agreement providesprovided for a pledge by the Company of certain land and structures, accounts receivable and other assets to secure indebtedness under this agreement. The Amended Credit Agreement contained certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default.
On February 3, 2023, the Company entered into a new unsecured credit agreement with a banking group (the 2023 Credit Agreement) and terminated the Amended Credit Agreement. The 2023 Credit Agreement maintains the amount of the previous line of credit of $300 million and extends the term until February 2028. The 2023 Credit Agreement contains an accordion feature that allows the Company to increase the size of the facility by up to $150 million, subject to certain conditions and availability of lender commitments, for a total borrowing capacity of up to $450 million. Under the 2023 Credit Agreement, the Company is subject to a maximum consolidated net lease adjusted leverage ratio of less than 3.50 to 1.00 with the potential to be temporarily increased in the event the Company makes an acquisition that meets certain criteria. The 2023 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default. Under the Amended2023 Credit Agreement, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due.
At September 30,March 31, 2023 and December 31, 2022, the Company had no outstanding borrowings and outstanding letters of credit of $31.2 million under the Amended Credit Agreement. At December 31, 2021, the Company had no outstanding borrowings and outstanding letters of credit of $29.331.2 million, respectively, under the Amended Credit Agreement.these credit agreements. The available portion of the Amended2023 Credit Agreement may be used for general corporate purposes, including capital expenditures, working capital and letter of credit requirements, as needed.
10
Finance Leases
The Company is obligated under finance leases with seven-year original terms covering revenue equipment. Total liabilities recognized under finance leases were $34.926.5 million and $50.431.0 million as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. Amortization of assets held under the finance leases is included in depreciation and amortization expense. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, approximately $64.855.6 million and $85.160.5 million of finance leased assets, net of depreciation, were included in Property and Equipment, respectively. The weighted average interest rates for the finance leases at September 30, 2022March 31, 2023 and December 31, 20212022 were 3.73.8 percent and 3.63.7 percent, respectively.
Principal Maturities of Long-Term Debt
The principal maturities of long-term debt, including interest on finance leases, for the next five years (in thousands) are as follows:
|
| Amount |
|
| Amount |
| ||
2022 |
| $ | 4,229 |
| ||||
2023 |
|
| 15,409 |
|
| $ | 10,629 |
|
2024 |
|
| 10,606 |
|
|
| 10,604 |
|
2025 |
|
| 5,453 |
|
|
| 5,453 |
|
2026 |
|
| 919 |
|
|
| 995 |
|
2027 |
|
| — |
| ||||
Thereafter |
|
| — |
|
|
| — |
|
Total |
|
| 36,616 |
|
|
| 27,681 |
|
Less: Amounts Representing Interest on Finance Leases |
|
| 1,766 |
|
|
| 1,177 |
|
Total |
| $ | 34,850 |
|
| $ | 26,504 |
|
119
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and our 20212022 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. Those consolidated financial statements include additional information about our significant accounting policies, practices and the transactions that underlie our financial results.
Cautionary Note Regarding Forward-Looking Statements
The Securities and Exchange Commission (the SEC) encourages companies to disclose forward-looking information so that investors can better understand the future prospects of a company and make informed investment decisions. This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains these types of statements, which are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “predict,” “believe,” “should” and similar words or expressions are intended to identify forward-looking statements. Investors should not place undue reliance on forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as otherwise required by applicable law. All forward-looking statements reflect the present expectation of future events of our management as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors, risks, uncertainties and assumptions that could cause actual results to differ materially from those described in any forward-looking statements. These factors, risks, uncertainties and assumptions include, but are not limited to, the following:
12
10
These factors and risks are described in Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, as updated by Part II, Item 1A. of this Quarterly Report on Form 10-Q.
As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-Q. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by applicable law.
Executive Overview
The Company’s business is highly correlated to non-service sectors of the general economy. The Company’s strategy is to improve profitability by increasing yield while also increasing volumes to build density in existing geography and to pursue geographic and terminal expansion to promote profitable growth and improve our customer value proposition over time. The Company’s business is labor intensive, capital intensive and service sensitive. The Company looks for opportunities to improve safety, cost effectiveness and asset utilization (primarily tractors and trailers). Pricing initiatives have had a positive impact on yield and profitability. The Company continues to execute targeted sales and marketing programs along with initiatives to align costs with volumes and improve customer satisfaction. Technology continues to be an important investment that isas the Company works toward improving customer experience, operational efficiencies and Companycompany image.
ThirdFirst Quarter Overview
The Company’s operating revenue increaseddecreased by 18.40.1 percent in the thirdfirst quarter of 20222023 compared to the same period in 2021.2022. The increasedecrease resulted primarily from increasesdecreases in shipments and tonnage, partially offset by increased revenue per shipment and fuel surcharge revenue.shipment.
Consolidated operating income was $128.4$99.1 million for the thirdfirst quarter of 20222023 compared to $106.1$103.4 million for the thirdfirst quarter of 2021.2022. In the thirdfirst quarter of 2022,2023, LTL shipments were down 2.57.1 percent per workday and LTL tonnage was down 0.45.5 percent per workday compared to the prior year quarter. Diluted earnings per share were $3.67$2.85 in the thirdfirst quarter of 2022,2023 compared to diluted earnings per share of $2.98 in the prior year quarter. The operating ratio (operating expenses divided by operating revenue) was 82.485.0 percent in the thirdfirst quarter of 20222023 compared to 82.884.4 percent in the thirdfirst quarter of 2021. The improved operating ratio compared to prior year is due to the Company’s continued focus on pricing initiatives, cost control and operating efficiencies in addition to the impact of our fuel surcharge program. Additionally, a real estate gain resulted in a benefit of 70 basis points in the third quarter of 2021 operating ratio.2022.
1311
The Company generated $344.1$119.3 million in net cash provided by operating activities in the first ninethree months of 20222023 compared with $267.7$96.0 million in the same period last year. The increase is primarily due to increased profitability partially offset by a change in working capital primarily driven by increases in accounts receivable compared to priorthe same period last year. The Company’s net cash used in investing activities was $278.0$128.1 million during the first ninethree months of 20222023 compared to $148.9$45.4 million in the first ninethree months of 2021,2022, primarily as a result of increased capital expenditures related to real estate and revenue equipment acquisitions in the first ninethree months of 2022.2023. The Company’s net cash used in financing activities was $22.8$12.2 million in the first ninethree months of 20222023 compared to $18.7$15.8 million during the same period last year. This change was primarily due to equity based compensation shares withheld for taxes partially offset by increased proceeds from stock option exercises during the first nine months of 2022, compared to the first nine months of 2021. The Company had no outstanding borrowings under its revolving credit agreement, total outstanding letters of credit of $33.0 million and a cash and cash equivalents balance of $149.8$166.4 million at September 30, 2022.March 31, 2023. The Company also had $34.9$26.5 million in obligations under finance leases at September 30, 2022.March 31, 2023. At September 30, 2022,March 31, 2023, the Company had $268.8 million in availability under the revolving credit facility. The revolving credit facility also has an accordion feature that allows for an additional $100$150 million availability, subject to certain conditions and availability of lender commitments. The Company was in compliance with the debt covenants under its revolving credit agreement at September 30, 2022.March 31, 2023.
General
The following Management’s Discussion and Analysis describes the principal factors affecting the results of operations, liquidity and capital resources, as well as the critical accounting policies and estimates of Saia, Inc. and its wholly-owned subsidiaries (together, the Company or Saia).
Saia is a transportation company headquartered in Johns Creek, Georgia that provides national less-than-truckload (LTL) services through a single integrated organization. While more than 9697 percent of revenue is historically derived from transporting LTL shipments across 45 states, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited transportation and logistics services across North America.
Our business is highly correlated to non-service sectors of the general economy. Our business also is impacted by a number of other factors as discussed under “Forward“Cautionary Note Regarding Forward Looking Statements” and Part II, Item 1A. “Risk Factors.” The key factors that affect our operating results are the volumes of shipments transported through our network, as measured by our average daily shipments and tonnage; the prices we obtain for our services, as measured by revenue per hundredweight (a measure of yield) and revenue per shipment; our ability to manage our cost structure for capital expenditures and operating expenses such as salaries, wages and benefits; purchased transportation; claims and insurance expense; fuel and maintenance; and our ability to match operating costs to shifting volume levels.
1412
Results of Operations
Saia, Inc. and Subsidiaries
Selected Results of Operations and Operating Statistics
For the quarters ended September 30,March 31, 2023 and 2022 and 2021
(unaudited)
|
|
|
|
|
| Percent |
|
|
|
|
|
|
| Percent |
|
| ||||||||||
|
|
|
|
|
| Variance |
|
|
|
|
|
|
| Variance |
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| '22 v. '21 |
|
|
| 2023 |
|
| 2022 |
|
| '23 v. '22 |
|
| ||||||
|
| (in thousands, except ratios, workdays, revenue per hundredweight, revenue per shipment and length of haul) |
| (in thousands, except ratios, workdays, revenue per hundredweight, revenue per shipment and length of haul) | ||||||||||||||||||||||
Operating Revenue |
| $ | 729,561 |
|
| $ | 616,216 |
|
|
| 18.4 |
| % |
| $ | 660,535 |
|
| $ | 661,216 |
|
|
| (0.1 | ) | % |
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Salaries, wages and employees’ benefits |
|
| 297,247 |
|
|
| 277,087 |
|
|
| 7.3 |
|
|
|
| 298,956 |
|
|
| 289,463 |
|
|
| 3.3 |
|
|
Purchased transportation |
|
| 85,452 |
|
|
| 72,193 |
|
|
| 18.4 |
|
|
|
| 46,727 |
|
|
| 78,248 |
|
|
| (40.3 | ) |
|
Fuel and other operating expenses |
|
| 172,829 |
|
|
| 150,104 |
|
|
| 15.1 |
|
| |||||||||||||
Depreciation and amortization |
|
| 40,682 |
|
|
| 35,742 |
|
|
| 13.8 |
|
|
|
| 42,880 |
|
|
| 39,952 |
|
|
| 7.3 |
|
|
Fuel and other operating expenses |
|
| 177,825 |
|
|
| 125,077 |
|
|
| 42.2 |
|
| |||||||||||||
Operating Income |
|
| 128,355 |
|
|
| 106,117 |
|
|
| 21.0 |
|
|
|
| 99,143 |
|
|
| 103,449 |
|
|
| (4.2 | ) |
|
Operating Ratio |
|
| 82.4 | % |
|
| 82.8 | % |
|
|
|
|
|
| 85.0 | % |
|
| 84.4 | % |
|
|
|
| ||
Nonoperating Expense |
|
| 649 |
|
|
| 791 |
|
|
| (18.0 | ) |
|
|
| 45 |
|
|
| 927 |
|
|
| (95.1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Working Capital (as of September 30, 2022 and 2021) |
|
| 212,933 |
|
|
| 111,988 |
|
|
|
|
| ||||||||||||||
Working Capital (as of March 31, 2023 and 2022) |
|
| 242,983 |
|
|
| 171,545 |
|
|
|
|
| ||||||||||||||
Cash Flows provided by Operating Activities (year to date) |
|
| 344,074 |
|
|
| 267,686 |
|
|
|
|
|
| 119,270 |
|
|
| 95,961 |
|
|
|
| ||||
Net Acquisitions of Property and Equipment (year to date) |
|
| 277,996 |
|
|
| 148,424 |
|
|
|
|
|
|
| 128,055 |
|
|
| 45,376 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Saia Motor Freight Operating Statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Workdays |
|
| 64 |
|
|
| 64 |
|
|
| - |
|
|
|
| 64 |
|
|
| 64 |
|
|
|
|
| |
LTL Tonnage |
|
| 1,397 |
|
|
| 1,402 |
|
|
| (0.4 | ) |
|
|
| 1,311 |
|
|
| 1,387 |
|
|
| (5.5 | ) |
|
LTL Shipments |
|
| 1,954 |
|
|
| 2,004 |
|
|
| (2.5 | ) |
|
|
| 1,822 |
|
|
| 1,962 |
|
|
| (7.1 | ) |
|
LTL Revenue per hundredweight |
| $ | 25.10 |
|
| $ | 21.36 |
|
|
| 17.5 |
|
|
| $ | 24.63 |
|
| $ | 23.29 |
|
|
| 5.8 |
|
|
LTL Revenue per shipment |
| $ | 359.04 |
|
| $ | 299.02 |
|
|
| 20.1 |
|
|
| $ | 354.37 |
|
| $ | 329.30 |
|
|
| 7.6 |
|
|
LTL Pounds per shipment |
|
| 1,431 |
|
|
| 1,400 |
|
|
| 2.2 |
|
|
|
| 1,439 |
|
|
| 1,414 |
|
|
| 1.8 |
|
|
LTL Length of haul |
|
| 897 |
|
|
| 915 |
|
|
| (2.0 | ) |
|
|
| 892 |
|
|
| 915 |
|
|
| (2.5 | ) |
|
Quarter and nine months ended September 30, 2022March 31, 2023 compared to quarter and nine months ended September 30, 2021March 31, 2022
Revenue and volume
Consolidated revenue for the quarter ended September 30, 2022 increased 18.4March 31, 2023 decreased 0.1 percent to $729.6$660.5 million primarily as a result of decreases in shipments and tonnage, partially offset by increased revenue per shipmentshipment. For the first quarter of 2023, Saia’s LTL tonnage was down 5.5 percent to 1.3 million tons, and fuel surcharge revenue. Saia’s revenueLTL shipments decreased 7.1 percent to 1.8 million shipments. Revenue per shipment increased 20.17.6 percent to $359.04$354.37 per shipment for the thirdfirst quarter of 20222023 as a result of changes in business mix and pricing actions. OurIn spite of overall volume declines, our service initiatives, including our network expansion, continue to allow us to support our improved pricing. For the thirdfirst quarter of 2022, Saia’s LTL tonnage per workday was down 0.4 percent to 1.4 million tons, and LTL shipments per workday decreased 2.5 percent to 2.0 million shipments. Our organic network expansion continues to positively impact customer experience, as well as overall volume metrics. For the third quarter of 2022,2023, approximately 75 to 80 percent of Saia’sthe Company’s operating revenue was subject to specific customer price negotiations that occur throughout the year. The remaining 20 to 25 percent of operating revenue was subject to a general rate increase which is based on market conditions.increase. For these customers subject to a general rate increase, on January 24, 2022 and January 18, 2021, Saia implemented 7.56.5 and 5.97.5 percent general rate increases on January 30, 2023 and January 24, 2022, respectively. Competitive factors, customer turnover and mix changes impact the extent to which customer rate increases are retained over time.
Operating revenue includes fuel surcharge revenue recognized from the Company’s fuel surcharge program, which is designed to reduce the Company’s exposure to fluctuations in diesel fuel prices by adjusting total freight charges to account for changes in the price of diesel fuel. The Company’s fuel surcharge is generally based on the average national price for diesel fuel (as estimatedpublished by the United States Energy Information Administration) and is typically reset weekly. Fuel surcharges are widely accepted in the industry and are a significant component of revenue and pricing. Fuel surcharges are an integral part of customer contract negotiations, but represent only one portion of overall customer price negotiations, as customers may negotiate increases in base rates instead of increases in fuel surcharges or vice versa.negotiations. Fuel surcharge revenue as a percentage of operating revenue increased to 20.517.8 percent for the quarter ended September 30, 2022March 31, 2023 compared to 13.916.8 percent for the quarter ended September 30, 2021,March 31, 2022, as a result of pricing structures, changes in mix and increases in the average cost of fuel.
15
For the nine months ended September 30, 2022, operating revenues were $2.1 billion, up 27.8 percent from $1.7 billiondiesel fuel for the nine months ended September 30, 2021. This increase is primarily due to increased revenue per shipment, fuel surcharge revenue and tonnage during the first nine months of 2022quarter compared to the comparable period lastprior year. Fuel surcharge revenue as a percentage of operating revenue increased to 19.8 percent for the nine months ended September 30, 2022 compared to 13.8 percent for the nine months ended September 30, 2021, as a result of increases in the cost of fuel.
13
Operating expenses and margin
Consolidated operating income was $128.4$99.1 million in the thirdfirst quarter of 20222023 compared to $106.1$103.4 million in the prior year quarter. Overall, the increasedecrease in consolidated operating income was the result of improved pricing actions, the impact of our fuel surcharge programslightly decreased revenue and business mix managementincreases in operating expenses, partially offset by a decrease in purchased transportation expense during the thirdfirst quarter of 2022. These actions in 2022, along with continued focus on cost controls and operational efficiencies drove improvement during the quarter.2023. The thirdfirst quarter of 20222023 operating ratio (operating expenses divided by operating revenue) was 82.485.0 percent compared to 82.884.4 percent for the same period in 2021. A real estate gain resulted in a benefit of 70 basis points in the third quarter of 2021 operating ratio.2022.
Salaries, wages and employees’ benefits increased $20.2$9.5 million in the thirdfirst quarter of 20222023 compared to the thirdfirst quarter of 2021.2022. This change was primarily driven by increased headcount required to support ongoing business growthnetwork expansion efforts, offset by a decrease in variable labor costs and network expansion.a decrease in incentive compensation. In addition, in July 2022 the Company implemented a salary and wage increase of approximately 4.3 percent. Purchased transportation increased $13.3decreased $31.5 million in the thirdfirst quarter of 2023 compared to the first quarter of 2022 compared to the third quarter of 2021 primarily due to higher rates for purchased miles, partially offset by a decrease in purchasedpurchase transportation volumemiles compared to the same period in the 2021.2022, in addition to a decrease in cost per mile for purchased transportation. Fuel, operating expenses and supplies increased by $46.6$18.9 million compared to the first quarter of 2022 largely due to increased diesel fuelvehicle maintenance costs, duringinvestments in information technology network support and an increase in facility costs due to the quarter.opening of 13 new facilities since the first quarter of 2022. Claims and insurance expense in the first quarter of 2023 was $0.5$3.3 million higher than the thirdfirst quarter of 20212022 primarily due to higher claims activity. Depreciation and amortization expense increased $4.9$2.9 million in the thirdfirst quarter of 20222023 compared to the same period in 20212022 primarily due to ongoing investments in revenue equipment, real estate and technology investments in late 2021 and throughout 2022.technology.
For the nine months ended September 30, 2022, consolidated operating income was $377.8 million, up 58.9 percent compared to $237.8 million for the nine months ended September 30, 2021. This increase was largely due to pricing actions, improved fuel surcharge revenue and increased tonnage.
Salaries, wages and benefits increased $91.5 million during the first nine months of 2022 compared to the same period last year largely due to salary and wage increases that were effective in August of 2021 and July of 2022, and increases in overall headcount over the past twelve months. Purchased transportation increased $75.8 million for the first nine months of 2022 compared to the same period last year primarily due to higher rates for purchased miles during the first nine months of 2022 in addition to linehaul capacity expansion to support growth and customer service requirements. Fuel, operating expenses and supplies increased $139.4 million during the first nine months of 2022 compared to the same period last year largely due to higher fuel costs resulting from increases in the price per gallon of diesel and volume increases during the first nine months of 2022. During the first nine months of 2022, claims and insurance expense was $3.4 million lower than the same period last year primarily due to lower claims activity. Depreciation and amortization expense increased $11.8 million during the first nine months of 2022 compared to the same period in 2021 primarily due to revenue equipment, real estate and technology investments in late 2021 and throughout 2022.
Other
Interest expense in the thirdfirst quarter of 20222023 was lower than the same period in 20212022 as the Company continued to pay down finance lease obligations.
The effective tax rate was 23.323.2 percent and 24.322.5 percent for the quarters ended September 30,March 31, 2023 and 2022, and 2021, respectively. The decreaseincrease in the thirdfirst quarter effective tax rate in 20222023 is primarily due to the impacta result of tax creditsstock compensation activity and limitations on related to alternative fuels enacted during the third quarter of 2022. For the nine months ended September 30, 2022 and September 30, 2021, the effective tax rates were 23.5 percent and 23.9 percent, respectively. For the nine months ended September 30, 2022 approximately $102.1 million in cash tax payments were made compared to $58.7 million in the nine months ended September 30, 2021.deductions.
Net income was $97.9$76.1 million, or $3.67$2.85 per diluted share, in the thirdfirst quarter of 20222023 compared to net income of $79.7$79.4 million, or $2.98 per diluted share, in the thirdfirst quarter of 2021. Net income was $286.6 million, or $10.75 per diluted share, for the first nine months of 2022 compared to net income of $179.5 million, or $6.72 per diluted share, for the first nine months of 2021.
Working capital/capital expenditures
Working capital at September 30, 2022 was $212.9 million, an increase from $112.0 million at September 30, 2021.
16
Current assets at September 30, 2022 increased by $100.8 million as compared to September 30, 2021 which includes an increase in cash and cash equivalents of $28.1 million and an increase in accounts receivable of $39.7 million. Current liabilities decreased by $0.2 million at September 30, 2022 compared to September 30, 2021 largely due to a decrease in accounts payable.2022.
Cash flows provided by operating activities were $344.1 million for the nine months ended September 30, 2022 versus $267.7 million for the nine months ended September 30, 2021. The increase is primarily due to increased profitability, partially offset by a change in working capital compared to the prior year. For the nine months ended September 30, 2022, net cash used in investing activities was $278.0 million compared to $148.9 million in the same period last year, a $129.1 million increase. This increase resulted from increased capital expenditures related to real estate and revenue equipment acquisitions as the Company continues to expand its footprint and add density in markets. The Company currently expects that net capital expenditures in 2022 will be approximately $500 million. For the nine months ended September 30, 2022, net cash used in financing activities was $22.8 million compared to $18.7 million during the same period last year, as a result of equity based compensation shares withheld for taxes, partially offset by increased proceeds from stock option exercises during the first nine months of 2022 compared to the same period in 2021.
Outlook
Our business remains highly correlated to non-service sectors of the general economy and competitive pricing pressures, as well as the success of Company-specific improvement initiatives. Our outlook for 20222023 is dependent on a number of external factors, including geopolitical developments,strength of the economy, inflation, labor availability, diesel fuel prices and supply chain constraints. The potential impact of these factors on our operations, financial performance and financial condition, as well as the impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. We are continuing initiatives to improve and enhance customer service in an effort to support our ongoing pricing and business mix optimization, while seeking to control costs and improve productivity. Planned revenue initiatives include building density in our current geography, targeted marketing initiatives to grow revenue in more profitable areas, further expanding our geographic and terminal network, as well as pricing and yield management. On January 30, 2023 and January 24, 2022 and January 18, 2021, Saia implemented a6.5 and 7.5 and 5.9 percent general rate increase,increases, respectively, for customers comprising approximately 20 to 25 percent of Saia’s operating revenue. The success of cost improvementthese revenue initiatives is impacted by what proves to be the cost and availability of drivers, dock workers and other employees and purchased transportation, fuel, self-insurance claims and insurance expense, regulatory changes, successful expansion of our service geography throughout the United States, the COVID-19 pandemicunderlying economic trends, competitor initiatives and other factors discussed under “Forward-Looking“Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A. “Risk Factors.”
If we build market share, including through our geographic and terminal expansion, we expect there to be numerous operating leverage cost benefits. Conversely, should the economy continue to soften, we plan to match resources and capacity to shifting volume levels to lessen unfavorable operating leverage. The success of cost improvement initiatives is impacted by a number of factors, including the cost and availability of drivers, dock workers and personnel, and purchased transportation, diesel fuel and insurance costs and inflation.
See “Forward-Looking“Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” for a more complete discussion of potential risks and uncertainties that could materially adversely affect our future performance.financial condition, results of operations, cash flows and prospects.
Financial Condition, Liquidity and Capital Resources
The Company’s liquidity needs arise primarily from capital investment in new equipment, land and structures, information technology and letters of credit required under insurance programs, as well as funding working capital requirements.
The Company is partyWorking capital/capital expenditures
14
Working capital at March 31, 2023 was $243.0 million, an increase from $171.5 million at March 31, 2022.
Current assets at March 31, 2023 increased by $2.8 million as compared to March 31, 2022, driven by an increase in cash and cash equivalents of $25.1 million and an increase in income tax receivables of $6.4 million, partially offset by a decrease in accounts receivable of $27.4 million. Current liabilities decreased by $68.6 million at March 31, 2023 compared to March 31, 2022 largely due to a revolving credit agreement with a group of banks that is available to fund capital investments, letters of credit and working capital needs.
Credit Agreement
The Company is a party to a Sixth Amended and Restated Credit Agreement with its banking group (the Amended Credit Agreement), which provides up to a $300 million revolving line of credit through February 2024. The Amended Credit Agreement also has an accordion feature that allows for an additional $100 million availability, subject to certain conditions and availability of lender commitments. The Amended Credit Agreement provides for aLIBOR rate margin range from 100 basis points to 200 basis points, base rate margins from minus 50 basis points to plus 50 basis points, an unused portion fee from 17.5 basis points to 30 basis points and letter of credit fees from 100 basis points to 200 basis points,decrease in each case based on the Company’s leverage ratio. Under the Amended Credit Agreement, the Company must maintain a minimum debt service coverage ratio set at 1.25 to 1.00 and a maximum leverage ratio set at 3.25 to 1.00. The Amended Credit Agreement provides for a pledge by the Company of certain land and structures, accounts receivablepayable and other assets to secure indebtedness under this agreement. The Amended Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default. Under the Amended Credit Agreement, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due.
At September 30, 2022, the Company had no outstanding borrowings and outstanding letters of credit of $31.2 million under the Amended Credit Agreement. At December 31, 2021, the Company had no outstanding borrowings and outstanding letters of credit of $29.3 million under the Amended Credit Agreement. The available portion of the Amended Credit Agreement may be used for general corporate purposes, including capital expenditures, working capital and letter of credit requirements as needed.
17
Finance Leases
The Company is obligated under finance leases with seven-year original terms covering revenue equipment. Total liabilities recognized under finance leases were $34.9 million and $50.4 million as of September 30, 2022 and December 31, 2021, respectively. Amortization of assets held under the finance leases is included in depreciation and amortization expense. The weighted average interest rates for the finance leases at September 30, 2022 and December 31, 2021 were 3.7 percent and 3.6 percent, respectively.current liabilities.
Cash Flowsflows provided by operating activities were $119.3 million for the three months ended March 31, 2023 versus $96.0 million for the three months ended March 31, 2022. The increase is primarily due to a change in working capital compared to the prior year. For the three months ended March 31, 2023, net cash used in investing activities was $128.1 million compared to $45.4 million in the same period last year, an $82.7 million increase. This increase resulted from increased capital expenditures related to real estate and Expendituresrevenue equipment acquisitions as the Company continues to expand its footprint and add density in markets. For the three months ended March 31, 2023, net cash used in financing activities was $12.2 million compared to $15.8 million during the same period last year, as a result of less equity based compensation shares withheld for taxes during the first three months of 2023 compared to the same period in 2022 in addition to higher proceeds from stock option exercises during 2023.
The Company has historically generated cash flows from operations to fund a large portion of its capital expenditure requirements. Cash flows from operating activities were $382.6 million for the year ended December 31, 2021, while net cash used in investing activities was $277.8 million. Cash flows provided by operating activities were $344.1 million for the nine months ended September 30, 2022, $76.4 million higher than the first nine months of the prior year. The increase in operating cash flows is primarily due to increased profitability, partially offset by a change in working capital, largely increases in accounts receivable compared to the prior year. The timing of capital expenditures can largely be managed around the seasonal working capital requirements of the Company. The Company believes it has significantadequate sources of capital to meet short-term liquidity needs through its cash on hand, operating cash flows and availability under the Amended Credit Agreement. At September 30, 2022, the Company had $268.8 million in availability under the Amended Credit Agreement. The Company was in compliance with its debt covenants at September 30, 2022.credit agreement, discussed below. Future operating cash flows are primarily dependent upon the Company’s profitability and its ability to manage its working capital requirements, primarily accounts receivable, accounts payable and wage and benefit accruals.
Net capital expenditures pertain primarily to investments in tractors and trailers and other revenue equipment, information technology, land and structures. ProjectedThe Company currently expects that net capital expenditures for 2022 are expectedin 2023 will be in excess of $400 million, subject to be approximately $500 million, which represents an increase from 2021 net capital expendituresongoing evaluation of $277.3 million.market conditions. Projected 20222023 capital expenditures include a normal replacement cyclecycles of revenue equipment and technology investment forinvestments in technology. In addition, the Company plans to add revenue equipment and real estate investments to support our operations and purchases of real estate.growth initiatives. Net capital expenditures were $278.0$128.1 million in the first ninethree months of 2022.2023. Approximately $189.0$244.6 million of the 20222023 remaining capital budget was committed as of September 30, 2022.March 31, 2023.
Credit Agreement
We are regularlyPrior to February 3, 2023, the Company was party to a Sixth Amended and Restated Credit Agreement (the Amended Credit Agreement) with a banking group that provided up to a $300 million revolving line of credit through February 2024. The Amended Credit Agreement also had an accordion feature that allowed for an additional $100 million availability, subject to claims resulting from bodily injury, property damage, casualtycertain conditions and cargo losses, group healthcare costs, and workers' compensation.availability of lender commitments. The Company has self-insured retention limits generally ranging from $250,000 to $1.0 million per occurrence for group healthcare, workers' compensation, casualty and cargo losses and certain property damage and from $2.0 million to $10.0 million for bodily injury and property damage related to auto liability. The Company’s automobile liability insurance policy for the four-year period ended March 1, 2023 provides coverageAmended Credit Agreement provided for a single losspledge by the Company of $8.0certain land and structures, accounts receivable and other assets to secure indebtedness under the Amended Credit Agreement.
On February 3, 2023, the Company entered into a new unsecured credit agreement with a banking group (the 2023 Credit Agreement) and terminated the Amended Credit Agreement. The 2023 Credit Agreement maintains the amount of the previous line of credit of $300 million and extends the term until February 2028. The 2023 Credit Agreement contains an aggregate loss limitaccordion feature that allows the Company to increase the size of $24.0the facility by up to $150 million, for each policy year, and a $48.0 million aggregate loss limit for the four-year period, subject to risk retentioncertain conditions and availability of $2.0 million per occurrence.lender commitments, for a total borrowing capacity of up to $450 million. Under the policy,2023 Credit Agreement, the Company is requiredsubject to pay additionala maximum consolidated net lease adjusted leverage ratio of less than 3.50 to 1.00 with the potential to be temporarily increased in the event the Company makes an acquisition that meets certain criteria. The 2023 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default. Under the 2023 Credit Agreement, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due. The Company was in compliance with its debt covenants at March 31, 2023.
At March 31, 2023 and December 31, 2022, the Company had no outstanding borrowings and outstanding letters of up to $11.5credit of $31.2 million, if losses paid by the insurer are greater than $18.4 million over the four-year policy period. Based on claims occurring sincerespectively, under these credit agreements. At March 1, 2019, no additional amount was accrued as of September 30, 2022. Commencing on August 30,31, 2023, the Company may elect to commute the policy with respect to the insurer’s entire liabilityhad $268.8 million in availability under the policy in which case the Company would be entitled to a return of a2023 Credit Agreement. The available portion of the premium paid, up to $18.4 million, based on the amount2023 Credit Agreement may be used for general corporate purposes, including capital expenditures, working capital and letter of claims paid and the insurer would be released from all liability under the policy for the four-year period ending March 1, 2023. As a result, if the Company elects to commute the policycredit requirements, as to the entire policy term, the Company would be self-insured for $10.0 million per occurrence for the four years ended March 1, 2023. The Company is self-insured for auto liability for the first $10.0 million per occurrence for the one-year period ended March 1, 2019.needed.
Finance Leases
The Company also maintains an insurance policyis obligated under finance leases with seven-year original terms covering revenue equipment. Total liabilities recognized under finance leases were $26.5 million and $31.0 million as of March 31, 2023 and December 31, 2022, respectively. Amortization of assets held under the three-year period ending March 1, 2025 that provides $5.0 million of coverage per occurrence after an occurrence exceeds $10.0 million, subject to an aggregate loss limit of $10.0 million for each policy year,finance leases is included in depreciation and a $20.0 million aggregate loss limitamortization expense. The weighted average interest rates for the three-year term. Additionally, the Company is required to pay additional amounts of up to $7.5 million if losses paid by the insurer are greater than $1.4 million over the three-year policy period endingfinance leases at March 1, 2025. Based on claims occurring since March 1,31, 2023 and December 31, 2022 no additional amounts were accrued at September 30, 2022. Under the policy, the Company may elect to commute the policy for the three-year term if losses incurred are less than $1.4 million3.8 percent and the Company does not elect to renew the policy. In the event the Company elects to commute the policy for such period, it will be entitled to a return of a portion of the premium paid, up to $1.1 million, based on the amount of claims paid and the insurer will be released from all liability under the policy in connection with such period. As a result, if the Company elects to commute the policy as to such period, the Company will be self-insured for the $10.0 million to $15.0 million loss layer per occurrence for the three years ended March 1, 2025. The election to commute the policy cannot be made before June 1, 2024 and must be made prior to December 1, 2025, unless the insurer agrees to extend such date.3.7 percent, respectively.
1815
Contractual Obligations
Contractual obligations for the Company are comprised of lease agreements, purchase obligations and long-term debt obligations related to any outstanding balance under the Company’s revolving line of credit. Contractual obligations for operating leases at September 30, 2022March 31, 2023 totaled $120.7$138.2 million, including operating leases with original maturities of less than one year, which are not recorded in our consolidated balance sheet in accordance with U.S. generally accepted accounting principles. Additionally, in April 2021, the Company committed to an additional terminal lease estimated to commence in 2023 of approximately $57 million with a lease term of 15 years with annual rent ranging from $3.1 million to $4.6 million. Annual rental payments under this lease are not included in the contractual obligations for operating leases at September 30, 2022. Contractual obligations in the form of finance leases were $36.6$27.7 million at September 30, 2022,March 31, 2023, which includes both principal and interest amounts. For the remainder of 2022, $2.12023, $1.4 million of interest payments are anticipated based on borrowings and commitments outstanding at September 30, 2022.March 31, 2023. See Note 5 to the accompanying unaudited condensed consolidated financial statements in this Current Report on Form 10-Q. Purchase obligations at September 30, 2022March 31, 2023 were $198.7$246.0 million, including commitments of $196.5$244.6 million for capital expenditures. As of September 30, 2022,March 31, 2023, the revolving line of credit had no outstanding principal balance.
Other commercial commitments of the Company typically include letters of credit and surety bonds required for collateral towards insurance agreements and amounts outstanding under the revolving line of credit. As of September 30, 2022March 31, 2023 the Company had total outstanding letters of credit of $33.0 million and $74.1$55.8 million in surety bonds. Additionally at September 30, 2022,March 31, 2023, the Company had $268.8 million available under its revolving credit facility, subject to existing debt covenants.
The Company has accrued approximately $3.9$4.1 million for uncertain tax positions and $0.4 million for interest and penalties related to the uncertain tax positions as of September 30, 2022.March 31, 2023. At September 30, 2022,March 31, 2023, the Company has accrued $127.8$93.5 million for claims and insurance liabilities.
Critical Accounting Policies and Estimates
There have been no significant changes to the application of the critical accounting policies and estimates contained in our Annual Report on Form 10-K atfor the year ended December 31, 2021.2022. The reader should refer to the Notes to our Consolidated Financial Statements in our 20212022 Annual Report on Form 10-K for a full disclosure of all critical accounting policies and estimates.estimates of amounts recorded in certain assets, liabilities, revenue and expenses.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of market risks including the effects of interest rates and diesel fuel prices. The detail of the Company’s debt structure is more fully described in Note 5 “Debt and Financing Arrangements” of the Notes to Consolidated Financial Statements set forthaccompanying unaudited condensed financial statements in the Company’s Annual Report onthis Form 10-K for the year ended December 31, 2021.10-Q. To help mitigate our risk to rising diesel fuel prices, the Company has implemented aan established fuel surcharge program. This program is well established within the industry and customer acceptance of fuel surcharges remains high. Since the amount of fuel surcharge is based on average national diesel prices (as estimated by the United States Energy Information Administration) and is typically reset weekly, exposure of the Company to fuel price volatility is significantly reduced. However, the fuel surcharge may not fully offset fuel price fluctuations during periods of rapid increases or decreases in the price of fuel and is also subject to overall competitive pricing negotiations.
The following table provides information about the Company’s third-party financial instruments as of September 30, 2022.March 31, 2023. The table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. The fair value of the fixed rate debt (in millions) was estimated based upon level two inputs in the fair value hierarchy. The fair value of finance leases is based on current market interest rates for similar types of financial instruments.
|
| Expected maturity date |
|
| 2022 |
| ||||||||||||||||||||||||||
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
|
| Fair Value |
| ||||||||
Fixed rate debt |
| $ | 3.9 |
|
| $ | 14.5 |
|
| $ | 10.2 |
|
| $ | 5.4 |
|
| $ | 0.9 |
|
| $ | - |
|
| $ | 34.9 |
|
| $ | 34.8 |
|
Average interest rate |
|
| 3.7 | % |
|
| 3.7 | % |
|
| 3.7 | % |
|
| 3.7 | % |
|
| 3.7 | % |
|
| - |
|
|
|
|
|
|
|
19
|
| Expected maturity date |
|
| 2023 |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
|
| Fair Value |
| ||||||||
Fixed rate debt |
| $ | 10.0 |
|
| $ | 10.2 |
|
| $ | 5.3 |
|
| $ | 1.0 |
|
| $ | - |
|
| $ | - |
|
| $ | 26.5 |
|
| $ | 26.7 |
|
Average interest rate |
|
| 3.6 | % |
|
| 3.9 | % |
|
| 4.2 | % |
|
| 3.5 | % |
|
| - |
|
|
| - |
|
|
| 3.8 | % |
|
|
|
Item 4. Controls and Procedures
Quarterly Controls Evaluation and Related CEO and CFO Certifications
As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company conducted an evaluation of the effectiveness of the design and operation of its “disclosure controls and procedures” (Disclosure Controls). The Disclosure Controls evaluation was performed under the supervision and with the participation of management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
Based upon the controls evaluation, the Company’s CEO and CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Disclosure Controls are effective to ensure that information the Company is required to disclose in reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
During the period covered by this Quarterly Report on Form 10-Q, there were no changes in internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.
16
Attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q are certifications of the CEO and the CFO, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications.
Definition of Disclosure Controls
Disclosure Controls are controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported timely. Disclosure Controls are also designed to ensure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. The Company’s Disclosure Controls include components of its internal control over financial reporting which consists of control processes designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.
Limitations on the Effectiveness of Controls
The Company’s management, including the CEO and CFO, does not expect that its Disclosure Controls or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
2017
PART II. OTHER INFORMATION
Item 1. Legal Proceedings — For a description of all material pending legal proceedings, see Note 3 “Commitments and Contingencies” of the accompanying unaudited condensed consolidated financial statements.
Item 1A. Risk Factors—Risk Factors are described In addition to the other information included in this report and in our other reports and statements that we file with the SEC, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” of the Company’s"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by2022, which could materially affect our business, financial condition and/or operating results. The risks discussed in our Annual Report on Form 10-K are not the risk factor set forth below. Other than the risk factor set forth below, which revises, among other things, the duration, layers, thresholdsonly risks facing us. Additional risks and applicable amounts payable under the Company’s automobile liability insurance, thereuncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
There have been no other material changes fromto the risk factors disclosedidentified in the Company’sPart I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021. The risk factor below replaces in its entirety the risk factor found under “Business and Operational Risks” originally filed with the same title.
Ongoing insurance and claims expenses could significantly reduce and cause volatility in our earnings.
We are regularly subject to claims resulting from bodily injury, property damage, casualty and cargo losses, group healthcare costs, and workers' compensation. The Company has self-insured retention limits generally ranging from $250,000 to $1.0 million per occurrence for group healthcare, workers' compensation, casualty and cargo losses and certain property damage and from $2.0 million to $10.0 million for bodily injury and property damage related to auto liability. We also maintain insurance with licensed insurance companies above these self-insured retention limits. In recent years the trucking business has experienced significant increases in the cost of liability insurance, in the size of jury verdicts in personal injury cases arising from trucking accidents and in the cost of settling such claims. If the number or severity of future claims continues to increase, claim expenses might exceed historical levels or could exceed the amounts of our insurance coverage or the amount of our reserves for self-insured claims, which would adversely affect our financial condition, results of operations, liquidity and cash flows.
The Company is dependent on a limited number of third party insurance companies to provide insurance coverage in excess of its self-insured retention amounts. Recently, several insurance companies have completely stopped offering coverage to trucking companies or have significantly reduced the amount of coverage they offer or have significantly raised premiums as a result of increases in the severity of automobile liability claims and sharply higher costs of settlements and verdicts. To the extent that the third party insurance companies propose increases to their premiums for coverage of commercial trucking claims, the Company may decide to pay such increased premiums or increase its financial exposure on an aggregate or per occurrence basis, including by increasing the amount of its self-insured retention or reducing the amount of total coverage. This trend could adversely affect our ability to obtain suitable insurance coverage, could significantly increase our cost for obtaining such coverage, or could subject us to significant liabilities for which no insurance coverage is in place, which would adversely affect our financial condition, results of operations, liquidity and cash flows. Additionally, as the number of third party insurance companies willing to provide insurance coverage to trucking companies decreases, the risk of failure of one of these companies increases. In the event of the failure of one of the insurance companies, the Company may be faced with a situation where the insurance company may not be able to fund a catastrophic loss.
Our self-insured retention limits can make our insurance and claims expense higher and/or more volatile. We accrue for the costs of the uninsured portion of pending claims based on the nature and severity of individual claims and historical claims development trends. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. This, along with legal expenses associated with claims, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates.
The Company’s automobile liability insurance policy for the four-year period ended March 1, 2023 provides coverage for a single loss of $8.0 million, an aggregate loss limit of $24.0 million for each policy year, and a $48.0 million aggregate loss limit for the four-year period, subject to risk retention of $2.0 million per occurrence. Under the policy, the Company is required to pay additional amounts of up to $11.5 million if losses paid by the insurer are greater than $18.4 million over the four-year policy period. Commencing on August 30, 2023, the Company may elect to commute the policy with respect to the insurer’s entire liability under the policy in which case the Company would be entitled to a return of a portion of the premium paid, up to $18.4 million, based on the amount of claims paid and the insurer would be released from all liability under the policy for the four-year period ending March 1, 2023. As a result, if the Company elects to commute the policy as to the entire policy term, the Company would be self-insured for $10.0 million per occurrence for the four years ended March 1, 2023. The Company is self-insured for auto liability for the first $10.0 million per occurrence for the one-year period ended March 1, 2019.
The Company also maintains an insurance policy covering the three-year period ending March 1, 2025 that provides $5.0 million of coverage per occurrence after an occurrence exceeds $10.0 million, subject to an aggregate loss limit of $10.0 million for each policy year, and a $20.0 million aggregate loss limit for the three-year term. Additionally, the Company is required to pay additional amounts of up to $7.5 million if losses paid by the insurer are greater than $1.4 million over the three-year policy period ending March 1, 2025. Under the policy, the Company may elect to commute the policy for the three-year term if losses incurred are less than $1.4 million and the Company does not elect to renew the policy. In the event the Company elects to commute the policy for such period, it
21
will be entitled to a return of a portion of the premium paid, up to $1.1 million, based on the amount of claims paid and the insurer will be released from all liability under the policy in connection with such period. As a result, if the Company elects to commute the policy as to such period, the Company will be self-insured for the $10.0 million to $15.0 million loss layer per occurrence for the three years ended March 1, 2025.
To the extent the Company incurs one or more significant claims not covered by insurance, either because the claims are within our self-insured layer or because they exceed our total insurance coverage, our financial condition, results of operation, and liquidity could be materially and adversely affected.
Furthermore, insurance companies, as well as certain states, require collateral in the form of letters of credit or surety bonds for the estimated exposure of claims within our self-insured retentions. Their estimates of our future exposure as well as external market conditions could influence the amount and costs of additional letters of credit required under our insurance programs and thereby reduce capital available for future growth or adversely affect our financial condition, results of operations, liquidity and cash flows. In addition, insurance companies are increasingly encouraging or requiring trucking companies to increase the level of technology and safety measures used in their fleet, which could increase the costs of our fleet in order to obtain acceptable coverage or avoid rate hikes.2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds —
Issuer Purchases of Equity Securities |
| ||||||||||||||||||
Period |
| (a) Total |
|
|
| (b) Average |
|
|
| (c) Total Number |
|
|
| (d) Maximum |
| ||||
July 1, 2022 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
July 31, 2022 |
|
| — |
| (2) |
| $ | — |
| (2) |
|
| — |
|
|
| $ | — |
|
August 1, 2022 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
August 31, 2022 |
|
| — |
| (3) |
| $ | — |
| (3) |
|
| — |
|
|
|
| — |
|
September 1, 2022 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
September 30, 2022 |
|
| 450 |
| (4) |
| $ | 206.53 |
| (4) |
|
| — |
|
|
|
| — |
|
Total |
|
| 450 |
|
|
|
|
|
|
|
| — |
|
|
|
|
|
Issuer Purchases of Equity Securities | |||||||||||
Period |
| (a) Total |
|
| (b) Average |
|
| (c) Total Number |
|
| (d) Maximum |
January 1, 2023 through |
|
|
|
|
|
|
|
|
|
|
|
January 31, 2023 |
| — | (2) |
| $— | (2) |
| — |
|
| $— |
February 1, 2023 through |
|
|
|
|
|
|
|
|
|
|
|
February 28, 2023 |
| 1,000 | (3) |
| $273.00 | (3) |
| — |
|
| — |
March 1, 2023 through |
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
| 720 | (4) |
| $279.56 | (4) |
| — |
|
| — |
Total |
| 1,720 |
|
|
|
|
| — |
|
|
|
(1) | Shares purchased by the Saia, Inc. Executive Capital Accumulation Plan were open market purchases. For more information on the Saia, Inc. Executive Capital Accumulation Plan, see the Registration Statement on Form S-8 (No. 333-155805) filed on December 1, 2008. | |
(2) | The Saia, Inc. Executive Capital Accumulation Plan sold | |
(3) | The Saia, Inc. Executive Capital Accumulation Plan sold | |
(4) | The Saia, Inc. Executive Capital Accumulation Plan had no sales of Saia stock during the period of |
Item 3. Defaults Upon Senior Securities—None
Item 4. Mine Safety Disclosures—None
Item 5. Other Information—None
2218
Item 6. Exhibits
Exhibit | |||
Number | Description of Exhibit | ||
3.1 | |||
3.2 | |||
3.3 | |||
3.4 | |||
3.5 | |||
3.6 | |||
31.1 | Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-15(e). | ||
31.2 | Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-15(e). | ||
32.1 | |||
32.2 | |||
101 | The following financial information from Saia, Inc.’s Quarterly Report on Form 10-Q for the quarter ended | ||
104 | The cover page from Saia’s Quarterly Report on Form 10-Q for the quarter ended |
2319
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SAIA, INC. | |||
Date: | /s/ Douglas L. Col | ||
Douglas L. Col | |||
Executive Vice President and Chief Financial Officer | |||
2420