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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 MARCH 31, 2022

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 26,408,402 shares of Common Stock outstanding at April 29, 2022.

 

 


 

 

SAIA, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

PAGE

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

ITEM 1:

Financial Statements

 

3

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the quarters ended March 31, 2022 and 2021

 

4

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the quarters ended March 31, 2022 and 2021

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

ITEM 2:

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

12

 

 

 

 

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

 

19

 

 

 

 

ITEM 4:

Controls and Procedures

 

20

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

ITEM 1:

Legal Proceedings

 

21

 

 

 

 

ITEM 1A:

Risk Factors

 

21

 

 

 

 

ITEM 2:

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

 

 

 

 

ITEM 3:

Defaults Upon Senior Securities

 

21

 

 

 

 

ITEM 4:

Mine Safety Disclosures

 

21

 

 

 

 

ITEM 5:

Other Information

 

21

 

 

 

 

ITEM 6:

Exhibits

 

22

 

 

 

 

Signature

 

23

 

 

 

 

 

2


 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

Saia, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets

 

(in thousands, except share and per share data)

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,325

 

 

$

106,588

 

Accounts receivable, net

 

 

322,343

 

 

 

276,755

 

Prepaid expenses and other

 

 

46,998

 

 

 

32,912

 

Total current assets

 

 

510,666

 

 

 

416,255

 

Property and Equipment, at cost

 

 

2,162,492

 

 

 

2,144,528

 

Less: accumulated depreciation

 

 

890,927

 

 

 

864,074

 

Net property and equipment

 

 

1,271,565

 

 

 

1,280,454

 

Operating Lease Right-of-Use Assets

 

 

103,892

 

 

 

107,781

 

Goodwill and Identifiable Intangibles, net

 

 

18,866

 

 

 

19,157

 

Other Noncurrent Assets

 

 

27,360

 

 

 

21,603

 

Total assets

 

$

1,932,349

 

 

$

1,845,250

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

130,163

 

 

$

114,010

 

Wages, vacation and employees’ benefits

 

 

62,125

 

 

 

73,109

 

Claims and insurance accruals

 

 

44,853

 

 

 

54,717

 

Other current liabilities

 

 

61,618

 

 

 

38,551

 

Current portion of long-term debt

 

 

18,373

 

 

 

19,396

 

Current portion of operating lease liability

 

 

21,989

 

 

 

21,565

 

Total current liabilities

 

 

339,121

 

 

 

321,348

 

Other Liabilities:

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

26,506

 

 

 

31,008

 

Operating lease liability, less current portion

 

 

84,062

 

 

 

88,409

 

Deferred income taxes

 

 

122,106

 

 

 

124,137

 

Claims, insurance and other

 

 

69,064

 

 

 

60,015

 

Total other liabilities

 

 

301,738

 

 

 

303,569

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 50,000 shares authorized,

     none issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized,

     26,408,402 and 26,336,589 shares issued and outstanding at

     March 31, 2022 and December 31, 2021, respectively

 

 

26

 

 

 

26

 

Additional paid-in-capital

 

 

267,745

 

 

 

274,633

 

Deferred compensation trust, 80,174 and 94,627 shares of common

     stock at cost at March 31, 2022 and December 31, 2021, respectively

 

 

(5,480

)

 

 

(4,101

)

Retained earnings

 

 

1,029,199

 

 

 

949,775

 

Total stockholders’ equity

 

 

1,291,490

 

 

 

1,220,333

 

Total liabilities and stockholders’ equity

 

$

1,932,349

 

 

$

1,845,250

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


 

 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the quarters ended March 31, 2022 and 2021

(unaudited)

 

 

 

First Quarter

 

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share data)

 

Operating Revenue

 

$

661,216

 

 

$

484,074

 

Operating Expenses:

 

 

 

 

 

 

 

 

Salaries, wages and employees' benefits

 

 

289,463

 

 

 

244,437

 

Purchased transportation

 

 

78,248

 

 

 

45,031

 

Fuel, operating expenses and supplies

 

 

122,771

 

 

 

84,901

 

Operating taxes and licenses

 

 

16,573

 

 

 

14,338

 

Claims and insurance

 

 

10,736

 

 

 

11,480

 

Depreciation and amortization

 

 

39,952

 

 

 

35,372

 

Loss (gain) from property disposals, net

 

 

24

 

 

 

(199

)

Total operating expenses

 

 

557,767

 

 

 

435,360

 

Operating Income

 

 

103,449

 

 

 

48,714

 

Nonoperating Expenses (Income):

 

 

 

 

 

 

 

 

Interest expense

 

 

692

 

 

 

852

 

Other, net

 

 

235

 

 

 

(131

)

Nonoperating expenses, net

 

 

927

 

 

 

721

 

Income Before Income Taxes

 

 

102,522

 

 

 

47,993

 

Income Tax Provision

 

 

23,098

 

 

 

10,702

 

Net Income

 

$

79,424

 

 

$

37,291

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

26,391

 

 

 

26,285

 

Weighted average common shares outstanding – diluted

 

 

26,670

 

 

 

26,671

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

3.01

 

 

$

1.42

 

Diluted Earnings Per Share

 

$

2.98

 

 

$

1.40

 

 

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, 2022 and 2021

(unaudited)

 

 

 

Common Shares

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Deferred Compensation Trust

 

 

Retained Earnings

 

 

Total

 

 

 

(in thousands, except share data)

 

Balance at December 31, 2021

 

 

26,336,589

 

 

$

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

 

 

10,992

 

 

 

 

 

 

907

 

 

 

 

 

 

 

 

 

907

 

Shares issued for long-term incentive awards, net of shares withheld for taxes

 

 

60,821

 

 

 

 

 

 

(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

 

 

26,408,402

 

 

$

26

 

 

$

267,745

 

 

$

(5,480

)

 

$

1,029,199

 

 

$

1,291,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2022 and 2021

(unaudited)

 

 

 

First Quarter

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

79,424

 

 

$

37,291

 

Noncash items included in net income:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

39,952

 

 

 

35,372

 

Deferred income taxes

 

 

(2,030

)

 

 

1,327

 

Other, net

 

 

181

 

 

 

2,365

 

Changes in operating assets and liabilities, net

 

 

(21,566

)

 

 

(15,384

)

Net cash provided by operating activities

 

 

95,961

 

 

 

60,971

 

Investing Activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(46,259

)

 

 

(25,568

)

Proceeds from disposal of property and equipment

 

 

883

 

 

 

180

 

Net cash used in investing activities

 

 

(45,376

)

 

 

(25,388

)

Financing Activities:

 

 

 

 

 

 

 

 

Repayments of revolving credit agreement

 

 

 

 

 

(7,713

)

Borrowings of revolving credit agreement

 

 

 

 

 

7,713

 

Proceeds from stock option exercises

 

 

907

 

 

 

3,678

 

Shares withheld for taxes

 

 

(11,230

)

 

 

(6,350

)

Repayment of finance leases

 

 

(5,525

)

 

 

(4,959

)

Net cash used in financing activities

 

 

(15,848

)

 

 

(7,631

)

Net Increase in Cash and Cash Equivalents

 

 

34,737

 

 

 

27,952

 

Cash and Cash Equivalents, beginning of period

 

 

106,588

 

 

 

25,308

 

Cash and Cash Equivalents, end of period

 

$

141,325

 

 

$

53,260

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

 

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.  Operating results for the quarter ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2022.

Business

The Company provides national less-than-truckload (LTL) services through a single integrated organization.  While more than 97 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 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”) 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 each 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 services over the transit time of the shipment as it moves from origin to destination. Revenue for services is recognized based on 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:

 

Revenue associated with shipments in transit is recognized ratably over transit time; and

 

Adjustments to revenue for billing adjustments and collectability.

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.

7


 

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

Effective March 1, 2018, the Company entered into a new automobile liability insurance policy with a three-year term. Generally, the Company is responsible for the risk retention amount per occurrence of $2.0 million under the policy.  Thereafter, the policy provides insurance 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 36-month term originally ended March 1, 2021.  Under the policy, the Company could elect to commute the policy with respect to the first 12 months of the policy term and concurrently extend the policy for an additional one-year period if paid losses in the first 12 months of the policy were less than $5.2 million.  In August 2019, the Company elected to commute the policy for such period. As a result, the Company received a return of $5.2 million of the premium paid (the maximum return premium available), based on the amount of claims paid and the insurer was released from all liability in connection with claims occurring in such 12-month period.  The Company is now self-insured for the first $10 million per occurrence with respect to such 12-month period and the policy was extended for one additional year to March 1, 2022.  The Company recognized the remaining $0.3 million of the return premium as a reduction in insurance premium expense in the first quarter of 2022.  Effective March 1, 2022, the Company extended the policy term for one additional year to March 1, 2023. Additionally, the Company is required to pay an additional premium of up to $11.0 million if losses paid by the insurer are greater than $17.5 million over the four-year policy period ending March 1, 2023.  Based on claims occurring since March 1, 2019, no such additional premium was accrued at March 31, 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 $17.5 million, based on the amount of claims paid and the insurer would be released from all liability under the policy 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 million per occurrence for the five years ended March 1, 2023.

Effective March 1, 2022, the Company entered into an additional automobile liability insurance policy with a three-year term that is applicable when an occurrence exceeds $10 million. Thereafter, the policy provides insurance coverage for a single loss of an additional $5.0 million, 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 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 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 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 million to $15 million loss layer per occurrence for the three years ended March 1, 2025.  The decision whether to commute the policy can not be made before June 1, 2024 and must be made prior to December 1, 2025, unless the insurer agrees to extend such date. Additionally, the Company is required to pay an additional premium 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 such additional premium was accrued at March 31, 2022.

 

8


 

 

(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):

 

 

 

First Quarter

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

 

 

Net income

 

$

79,424

 

 

$

37,291

 

Denominator:

 

 

 

 

 

 

 

 

Denominator for basic earnings per share–weighted

     average common shares

 

 

26,391

 

 

 

26,285

 

Dilutive effect of share-based awards

 

 

279

 

 

 

386

 

Denominator for diluted earnings per share–adjusted

     weighted average common shares

 

 

26,670

 

 

 

26,671

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

3.01

 

 

$

1.42

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$

2.98

 

 

$

1.40

 

 

For the quarter ended March 31, 2022, options and restricted stock for 15,808 shares of common stock were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.  For the quarter ended March 31, 2021 options and restricted stock for 20,164 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 March 31, 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 March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021 was $44.8 million and $50.8 million, respectively, based upon level two in the fair value hierarchy.  The carrying value of the debt was $44.9 million and $50.4 million at March 31, 2022 and December 31, 2021, respectively.

(5) Debt and Financing Arrangements

At March 31, 2022 and December 31, 2021, debt consisted of the following (in thousands):

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Credit Agreement with Banks, described below

 

$

 

 

$

 

Finance Leases, described below

 

 

44,879

 

 

 

50,404

 

Total debt

 

 

44,879

 

 

 

50,404

 

Less: current portion of long-term debt

 

 

18,373

 

 

 

19,396

 

Long-term debt, less current portion

 

$

26,506

 

 

$

31,008

 

 

9


 

 

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 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 a LIBOR 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 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 receivable 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 March 31, 2022, the Company had no outstanding borrowings and outstanding letters of credit of $32.0 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.

Finance Leases

The Company is obligated under finance leases with seven-year original terms covering revenue equipment.  Total liabilities recognized under finance leases were $44.9 million and $50.4 million as of March 31, 2022 and December 31, 2021, respectively.  Amortization of assets held under the finance leases is included in depreciation and amortization expense. As of March 31, 2022 and December 31, 2021, approximately $78.4 million and $85.1 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 March 31, 2022 and December 31, 2021 were 3.6 percent and 3.6 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

 

2022

 

$

14,997

 

2023

 

 

15,409

 

2024

 

 

10,606

 

2025

 

 

5,453

 

2026

 

 

919

 

Thereafter

 

 

 

Total

 

 

47,384

 

Less: Amounts Representing Interest on Finance Leases

 

 

2,505

 

Total

 

$

44,879

 

 

10


 

 

 

(6) COVID-19

 

The Company continues to monitor the progression of the COVID-19 pandemic, further government response, and development of treatments and vaccines and their potential effect on our short-term and long-term financial results and liquidity.  These events could have an impact in future periods on certain estimates used in the preparation of our 2022 financial results.  Local, state and national governments have designated transportation as an essential service.  The Company has made a variety of efforts to ensure the ongoing availability of Saia’s transportation services, while instituting actions and policies to help keep employees and customers safe. 

 

The Company has considered the impact of COVID-19 on its estimates and assumptions and determined that there were no material adverse impacts on the Company’s financial position.  Given the uncertainty surrounding the duration of the pandemic, it is possible that these assumptions and estimates may materially change in the future. 

 

 

 

11


 

 

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 2021 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.  Those consolidated financial statements include additional information about our significant accounting policies, practices and the transactions that underlie our financial results.

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:

 

general economic conditions including downturns or inflationary periods in the business cycle;

 

operation within a highly competitive industry and the adverse impact from downward pricing pressures, including in connection with fuel surcharges, and other factors;

 

industry-wide external factors largely out of our control;

 

cost and availability of qualified drivers, dock workers and other employees, purchased transportation and fuel;

 

inflationary increases in operating expenses and corresponding reductions of profitability;

 

claims expenses and other expense volatility, including for personal injury, cargo loss and damage, workers’ compensation, employment and group health plan claims;

 

cost and availability of insurance coverage, including the possibility the Company may be required to pay additional premiums, assume additional liability under its auto liability policies or be unable to obtain insurance coverage;

 

failure to successfully execute the strategy to expand our service geography;

 

costs and liabilities from the disruption in or failure of our technology or equipment essential to our operations, including as a result of cyber incidents, security breaches, malware or ransomware attacks;

 

failure to keep pace with technological developments;

 

labor relations, including the adverse impact should a portion of our workforce become unionized;

 

cost, availability and resale value of real property and revenue equipment;

 

supply chain disruption and delays on new equipment delivery;

 

capacity and highway infrastructure constraints;

 

risks arising from international business operations and relationships;

 

seasonal factors, harsh weather and disasters caused by climate change;

 

economic declines in the geographic regions or industries in which our customers operate;

 

the creditworthiness of our customers and their ability to pay for services;

 

our need for capital and uncertainty of the credit markets;

 

the possibility of defaults under our debt agreements, including violation of financial covenants;

 

failure to operate and grow acquired businesses in a manner that support the value allocated to acquired businesses;

 

dependence on key employees;

12


 

 

 

employee turnover from changes to compensation and benefits or market factors;

 

increased costs of healthcare benefits;

 

damage to our reputation from adverse publicity, including from the use of or impact from social media;

 

failure to make future acquisitions or to achieve acquisition synergies;

 

the effect of litigation and class action lawsuits arising from the operation of our business, including the possibility of claims or judgments in excess of our insurance coverages or that result in increases in the cost of insurance coverage or that preclude us from obtaining adequate insurance coverage in the future;

 

the potential of higher corporate taxes and new regulations, including with respect to climate change, employment and labor law, healthcare and securities regulation;

 

the effect of governmental regulations, including hours of service and licensing compliance for drivers, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, regulations of the Food and Drug Administration and Homeland Security, and healthcare and environmental regulations;

 

unforeseen costs from new and existing data privacy laws;

 

changes in accounting and financial standards or practices;

 

widespread outbreak of an illness or any other communicable disease, including the COVID-19 pandemic, or any other health crisis or business disruptions and higher costs that may arise from the COVID-19 pandemic in the future, including governmental regulations requiring that employees be vaccinated or be tested regularly for COVID-19 before reporting to work;

 

increasing investor and customer sensitivity to social and sustainability issues, including climate change;

 

provisions in our governing documents and Delaware law that may have anti-takeover effects;

 

issuances of equity that would dilute stock ownership; and

 

other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s SEC filings.

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, 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 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 is improving customer experience, operational efficiencies and Company image.

 

COVID-19

 

We are continuing to monitor the progression of the COVID-19 pandemic, further government response, and development of treatments and vaccines and their potential effect on our short-term and long-term financial results and liquidity.  These events could have an impact in future periods on certain estimates used in the preparation of our 2022 financial results.  Local, state and national governments have designated transportation as an essential service.  The Company has made a variety of efforts to ensure the ongoing availability of Saia’s transportation services, while instituting actions and policies to help keep employees and customers safe.

13


 

We believe we have significant liquidity available to continue business operations in the event of future disruptions from the COVID-19 pandemic. As discussed in “Financial Condition, Liquidity and Capital Resources” below, the Company has in place a revolving credit facility with up to $300 million in availability, plus an accordion feature that provides for an additional $100 million in availability, subject to certain conditions and lender commitments, in addition to its cash flow from operations.

The situation surrounding COVID-19 remains fluid and there may be developments outside our control requiring us to adjust our operating plan.  As such, given the dynamic nature of this situation, we are unable to predict the extent to which the pandemic and related impacts could impact our business operations, financial condition, results of operations, liquidity and cash flows.

First Quarter Overview

The Company’s operating revenue increased by 36.6 percent in the first quarter of 2022 compared to the same period in 2021.  The increase resulted primarily from increases in revenue per shipment, tonnage and fuel surcharge revenue.  

Consolidated operating income was $103.4 million for the first quarter of 2022 compared to $48.7 million for the first quarter of 2021.  In the first quarter of 2022, LTL shipments were up 5.7 percent per workday and LTL tonnage was up 9.5 percent per workday compared to the prior year quarter. Diluted earnings per share were $2.98 in the first quarter of 2022, compared to diluted earnings per share of $1.40 in the prior year quarter. The operating ratio (operating expenses divided by operating revenue) was 84.4 percent in the first quarter of 2022 compared to 89.9 percent in the first 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.

The Company generated $96.0 million in net cash provided by operating activities in the first three months of 2022 compared with $61.0 million in the same period last year.  The increase is primarily due to increased profitability partially offset by a change in working capital, largely increases in accounts receivable compared to prior year.  The Company’s net cash used in investing activities was $45.4 million during the first three months of 2022 compared to $25.4 million in the first three months of 2021, primarily as a result of increased capital expenditures related to real estate acquisitions in the first three months of 2022.  The Company’s net cash used in financing activities was $15.8 million in the first three months of 2022 compared to $7.6 million net cash used in financing activities during the same period last year. This change was primarily due to equity based compensation shares withheld for taxes as well as increased repayment of finance leases during the first three months of 2022.  The Company had no outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $33.8 million and a cash and cash equivalents balance of $141.3 million at March 31, 2022.  The Company also had $44.9 million in obligations under finance leases at March 31, 2022.  At March 31, 2022, the Company had $268.0 million in availability under the revolving credit facility.  The revolving credit facility also has an accordion feature that allows for an additional $100 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 March 31, 2022.

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 97 percent of revenue is 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 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 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.

14


 

Results of Operations

Saia, Inc. and Subsidiaries

Selected Results of Operations and Operating Statistics

For the quarters ended March 31, 2022 and 2021

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

 

 

 

 

 

Variance

 

 

 

 

2022

 

 

2021

 

 

'22 v. '21

 

 

 

 

(in thousands, except ratios, workdays, revenue per hundredweight, revenue per shipment and length of haul)

Operating Revenue

 

$

661,216

 

 

$

484,074

 

 

 

36.6

 

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employees’ benefits

 

 

289,463

 

 

 

244,437

 

 

 

18.4

 

 

Purchased transportation

 

 

78,248

 

 

 

45,031

 

 

 

73.8

 

 

Depreciation and amortization

 

 

39,952

 

 

 

35,372

 

 

 

12.9

 

 

Fuel and other operating expenses

 

 

150,104

 

 

 

110,520

 

 

 

35.8

 

 

Operating Income

 

 

103,449

 

 

 

48,714

 

 

 

112.4

 

 

Operating Ratio

 

 

84.4

%

 

 

89.9

%

 

 

 

 

 

Nonoperating Expense

 

 

927

 

 

 

721

 

 

 

28.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Capital (as of March 31, 2022 and 2021)

 

 

171,545

 

 

 

41,057

 

 

 

 

 

 

Cash Flows provided by Operating Activities (year to date)

 

 

95,961

 

 

 

60,971

 

 

 

 

 

 

Net Acquisitions of Property and Equipment (year to date)

 

 

45,376

 

 

 

25,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saia Motor Freight Operating Statistics:

 

 

 

 

 

 

 

 

 

 

 

 

 

Workdays

 

 

64

 

 

 

63

 

 

 

1.6

 

 

LTL Tonnage

 

 

1,387

 

 

 

1,247

 

 

 

11.2

 

 

LTL Shipments

 

 

1,962

 

 

 

1,826

 

 

 

7.4

 

 

LTL Revenue per hundredweight

 

$

23.29