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 JUNE 30, 20192020
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 ☒
Securities registered pursuant to Section 12(b) of the Act:
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There were 25,905,66426,148,831 shares of Common Stock outstanding at July 31, 2019
29, 2020.
SAIA, INC. AND SUBSIDIARIES
INDEX
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ITEM 1: |
| 3 | |
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| Condensed Consolidated Balance Sheets as of June 30, |
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ITEM 2: | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3: |
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ITEM 4: |
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ITEM 1: |
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ITEM 1A: |
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ITEM 2: |
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ITEM 3: |
| 23 | |
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ITEM 4: |
| 23 | |
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ITEM 5: |
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ITEM 6: |
| 24 | |
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| 25 | ||
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Saia, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
|
| June 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
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Assets |
| (in thousands, except share and per share data) |
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| (in thousands, except share and per share data) |
| ||||||||||
Current Assets: |
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Cash and cash equivalents |
| $ | 503 |
|
| $ | 2,194 |
|
| $ | 29,280 |
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| $ | 248 |
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Accounts receivable, net |
|
| 227,046 |
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| 181,612 |
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| 205,131 |
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| 196,119 |
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Income tax receivable |
|
| 1,150 |
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| 8,288 |
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Prepaid expenses and other |
|
| 33,840 |
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| 29,567 |
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| 34,082 |
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| 27,724 |
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Total current assets |
|
| 261,389 |
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| 213,373 |
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| 269,643 |
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| 232,379 |
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Property and Equipment, at cost |
|
| 1,665,557 |
|
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| 1,521,341 |
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| 1,862,048 |
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|
| 1,739,222 |
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Less-accumulated depreciation |
|
| 674,220 |
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| 628,283 |
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Less: accumulated depreciation |
|
| 743,345 |
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| 686,623 |
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Net property and equipment |
|
| 991,337 |
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| 893,058 |
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| 1,118,703 |
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| 1,052,599 |
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Operating Lease Right-of-Use Assets |
|
| 71,765 |
|
|
| — |
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| 122,401 |
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| 103,890 |
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Goodwill and Identifiable Intangibles, net |
|
| 22,066 |
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| 22,664 |
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| 20,902 |
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| 21,484 |
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Other Noncurrent Assets |
|
| 5,563 |
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| 4,648 |
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| 6,551 |
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| 5,341 |
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Total assets |
| $ | 1,352,120 |
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| $ | 1,133,743 |
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| $ | 1,538,200 |
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| $ | 1,415,693 |
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Liabilities and Stockholders’ Equity |
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Current Liabilities: |
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Accounts payable |
| $ | 77,521 |
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| $ | 78,994 |
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| $ | 81,516 |
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| $ | 83,621 |
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Wages, vacation and employees’ benefits |
|
| 47,095 |
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| 48,116 |
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| 55,355 |
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| 49,668 |
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Claims and insurance accruals |
|
| 47,255 |
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| 40,980 |
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| 39,627 |
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| 36,888 |
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Other current liabilities |
|
| 29,439 |
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| 23,138 |
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| 32,953 |
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| 32,644 |
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Current portion of long-term debt |
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| 18,959 |
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| 18,082 |
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| 19,727 |
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| 19,405 |
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Current portion of operating lease liability |
|
| 16,921 |
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| — |
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| 18,916 |
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| 19,020 |
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Total current liabilities |
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| 237,190 |
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| 209,310 |
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| 248,094 |
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| 241,246 |
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Other Liabilities: |
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Long-term debt, less current portion |
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| 160,920 |
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| 104,777 |
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| 141,112 |
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| 117,025 |
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Operating lease liability, less current portion |
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| 55,960 |
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| — |
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| 104,958 |
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| 86,239 |
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Deferred income taxes |
|
| 100,244 |
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| 86,893 |
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| 119,125 |
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| 111,555 |
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Claims, insurance and other |
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| 40,304 |
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| 36,899 |
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| 49,821 |
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| 44,402 |
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Total other liabilities |
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| 357,428 |
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| 228,569 |
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| 415,016 |
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| 359,221 |
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Commitments and Contingencies |
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Stockholders’ Equity: |
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Preferred stock, $0.001 par value, 50,000 shares authorized, none issued and outstanding |
|
| — |
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| — |
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Common stock, $0.001 par value, 50,000,000 shares authorized, 25,905,664 and 25,693,651 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively |
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| 26 |
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| 26 |
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Preferred stock, $0.001 par value, 50,000 shares authorized, NaN issued and outstanding |
|
| — |
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| — |
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Common stock, $0.001 par value, 50,000,000 shares authorized, 26,148,831 and 25,936,532 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively |
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| 26 |
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| 26 |
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Additional paid-in-capital |
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| 257,583 |
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| 254,738 |
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| 265,264 |
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| 260,871 |
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Deferred compensation trust, 148,066 and 143,614 shares of common stock at cost at June 30, 2019 and December 31, 2018, respectively |
|
| (3,920 | ) |
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| (3,381 | ) | ||||||||
Deferred compensation trust, 154,977 and 143,987 shares of common stock at cost at June 30, 2020 and December 31, 2019, respectively |
|
| (4,965 | ) |
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| (3,871 | ) | ||||||||
Retained earnings |
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| 503,813 |
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| 444,481 |
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| 614,765 |
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| 558,200 |
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Total stockholders’ equity |
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| 757,502 |
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| 695,864 |
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| 875,090 |
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| 815,226 |
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Total liabilities and stockholders’ equity |
| $ | 1,352,120 |
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| $ | 1,133,743 |
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| $ | 1,538,200 |
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| $ | 1,415,693 |
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See accompanying notes to condensed consolidated financial statements.
Saia, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the quarters and six months ended June 30, 20192020 and 20182019
(unaudited)
|
| Second Quarter |
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| Six Months |
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| Second Quarter |
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| Six Months |
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| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| (in thousands, except per share data) |
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| (in thousands, except per share data) |
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Operating Revenue |
| $ | 464,195 |
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| $ | 428,732 |
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| $ | 874,779 |
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| $ | 821,537 |
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| $ | 418,114 |
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| $ | 464,195 |
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| $ | 864,510 |
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| $ | 874,779 |
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Operating Expenses: |
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Salaries, wages and employees’ benefits |
|
| 237,689 |
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| 220,406 |
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| 458,041 |
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| 431,530 |
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Salaries, wages and employees' benefits |
|
| 224,277 |
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| 237,689 |
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| 462,922 |
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| 458,041 |
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Purchased transportation |
|
| 34,154 |
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| 34,113 |
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| 62,572 |
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| 64,029 |
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| 26,406 |
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| 34,154 |
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| 56,465 |
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| 62,572 |
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Fuel, operating expenses and supplies |
|
| 85,328 |
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| 84,745 |
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| 168,871 |
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| 163,539 |
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| 65,902 |
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| 85,328 |
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| 148,801 |
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| 168,871 |
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Operating taxes and licenses |
|
| 13,529 |
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| 12,794 |
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| 26,731 |
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| 24,944 |
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| 13,743 |
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| 13,529 |
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| 28,139 |
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| 26,731 |
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Claims and insurance |
|
| 13,156 |
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| 9,910 |
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| 22,686 |
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| 20,101 |
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| 18,293 |
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| 13,156 |
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|
| 28,714 |
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| 22,686 |
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Depreciation and amortization |
|
| 29,143 |
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| 25,241 |
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| 55,925 |
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| 48,271 |
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| 33,664 |
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| 29,143 |
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| 66,254 |
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| 55,925 |
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Loss (gain) from property disposals, net |
|
| 30 |
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|
| (42 | ) |
|
| 156 |
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|
| (21 | ) |
|
| 148 |
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|
| 30 |
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|
| (1,242 | ) |
|
| 156 |
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Total operating expenses |
|
| 413,029 |
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| 387,167 |
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|
| 794,982 |
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| 752,393 |
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| 382,433 |
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| 413,029 |
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|
| 790,053 |
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|
| 794,982 |
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Operating Income |
|
| 51,166 |
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| 41,565 |
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| 79,797 |
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| 69,144 |
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| 35,681 |
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| 51,166 |
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| 74,457 |
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| 79,797 |
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Nonoperating Expenses (Income): |
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Interest expense |
|
| 1,903 |
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|
| 1,454 |
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| 3,286 |
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|
| 2,680 |
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|
| 1,594 |
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|
| 1,903 |
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|
| 2,996 |
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|
| 3,286 |
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Other, net |
|
| (140 | ) |
|
| (142 | ) |
|
| (474 | ) |
|
| (245 | ) |
|
| (751 | ) |
|
| (140 | ) |
|
| (204 | ) |
|
| (474 | ) |
Nonoperating expenses, net |
|
| 1,763 |
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|
| 1,312 |
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|
| 2,812 |
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|
| 2,435 |
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|
| 843 |
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|
| 1,763 |
|
|
| 2,792 |
|
|
| 2,812 |
|
Income Before Income Taxes |
|
| 49,403 |
|
|
| 40,253 |
|
|
| 76,985 |
|
|
| 66,709 |
|
|
| 34,838 |
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|
| 49,403 |
|
|
| 71,665 |
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|
| 76,985 |
|
Income Tax Provision |
|
| 12,330 |
|
|
| 9,972 |
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|
| 17,653 |
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|
| 15,303 |
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|
| 6,384 |
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|
| 12,330 |
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|
| 15,100 |
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|
| 17,653 |
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Net Income |
| $ | 37,073 |
|
| $ | 30,281 |
|
| $ | 59,332 |
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| $ | 51,406 |
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| $ | 28,454 |
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| $ | 37,073 |
|
| $ | 56,565 |
|
| $ | 59,332 |
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Weighted average common shares outstanding – basic |
|
| 25,958 |
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|
| 25,766 |
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| 25,915 |
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| 25,732 |
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| 26,134 |
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| 25,958 |
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| 26,102 |
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| 25,915 |
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Weighted average common shares outstanding – diluted |
|
| 26,406 |
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| 26,354 |
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|
| 26,373 |
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|
| 26,326 |
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|
| 26,569 |
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|
| 26,406 |
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|
| 26,543 |
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|
| 26,373 |
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Basic Earnings Per Share |
| $ | 1.43 |
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| $ | 1.18 |
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| $ | 2.29 |
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| $ | 2.00 |
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| $ | 1.09 |
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| $ | 1.43 |
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| $ | 2.17 |
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| $ | 2.29 |
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Diluted Earnings Per Share |
| $ | 1.40 |
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| $ | 1.15 |
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| $ | 2.25 |
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| $ | 1.95 |
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| $ | 1.07 |
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| $ | 1.40 |
|
| $ | 2.13 |
|
| $ | 2.25 |
|
See accompanying notes to condensed consolidated financial statements.
Saia, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the threequarters and six months ended June 30, 20192020 and 20182019
(unaudited)
|
| Common Shares |
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| Common Stock |
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| Additional Paid-in Capital |
|
| Deferred Compensation Trust |
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| Retained Earnings |
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| Total |
|
| Common Shares |
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| Common Stock |
|
| Additional Paid-in Capital |
|
| Deferred Compensation Trust |
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| Retained Earnings |
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| Total |
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BALANCE at December 31, 2018 |
|
| 25,693,651 |
|
| $ | 26 |
|
| $ | 254,738 |
|
| $ | (3,381 | ) |
| $ | 444,481 |
|
| $ | 695,864 |
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| (in thousands, except per share data) |
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BALANCE at December 31, 2019 |
|
| 25,936,532 |
|
| $ | 26 |
|
| $ | 260,871 |
|
| $ | (3,871 | ) |
| $ | 558,200 |
|
| $ | 815,226 |
| ||||||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 998 |
|
|
| — |
|
|
| — |
|
|
| 998 |
|
|
| — |
|
|
| — |
|
|
| 1,317 |
|
|
| — |
|
|
| — |
|
|
| 1,317 |
|
Director deferred share activity |
|
| 45,075 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Exercise of stock options less shares withheld for taxes |
|
| 68,169 |
|
|
| — |
|
|
| 1,798 |
|
|
| — |
|
|
| — |
|
|
| 1,798 |
|
|
| 69,640 |
|
|
| — |
|
|
| 2,137 |
|
|
| — |
|
|
| — |
|
|
| 2,137 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 83,281 |
|
|
| — |
|
|
| (3,268 | ) |
|
| — |
|
|
| — |
|
|
| (3,268 | ) |
|
| 57,176 |
|
|
| — |
|
|
| (3,404 | ) |
|
| — |
|
|
| — |
|
|
| (3,404 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 309 |
|
|
| (458 | ) |
|
| — |
|
|
| (149 | ) |
|
| — |
|
|
| — |
|
|
| 1,146 |
|
|
| (1,146 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 148 |
|
|
| — |
|
|
| 148 |
|
|
| — |
|
|
| — |
|
|
| (59 | ) |
|
| 59 |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,259 |
|
|
| 22,259 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,111 |
|
|
| 28,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE at March 31, 2019 |
|
| 25,890,176 |
|
|
| 26 |
|
|
| 254,575 |
|
|
| (3,691 | ) |
|
| 466,740 |
|
|
| 717,650 |
| ||||||||||||||||||||||||
BALANCE at March 31, 2020 |
|
| 26,063,348 |
|
| $ | 26 |
|
| $ | 262,008 |
|
| $ | (4,958 | ) |
| $ | 586,311 |
|
| $ | 843,387 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,342 |
|
|
| — |
|
|
| — |
|
|
| 1,342 |
|
|
| — |
|
|
| — |
|
|
| 1,640 |
|
|
| — |
|
|
| — |
|
|
| 1,640 |
|
Director deferred share activity |
|
| 4,155 |
|
|
| — |
|
|
| 1,117 |
|
|
| — |
|
|
| — |
|
|
| 1,117 |
|
|
| 71,681 |
|
|
| — |
|
|
| 1,230 |
|
|
| — |
|
|
| — |
|
|
| 1,230 |
|
Exercise of stock options less shares withheld for taxes |
|
| 10,832 |
|
|
| — |
|
|
| 356 |
|
|
| — |
|
|
| — |
|
|
| 356 |
|
|
| 12,800 |
|
|
| — |
|
|
| 454 |
|
|
| — |
|
|
| — |
|
|
| 454 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 501 |
|
|
| — |
|
|
| (36 | ) |
|
| — |
|
|
| — |
|
|
| (36 | ) |
|
| 1,002 |
|
|
| — |
|
|
| (75 | ) |
|
| — |
|
|
| — |
|
|
| (75 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 229 |
|
|
| (229 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 128 |
|
|
| (128 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (121 | ) |
|
| 121 |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37,073 |
|
|
| 37,073 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,454 |
|
|
| 28,454 |
|
BALANCE at June 30, 2019 |
|
| 25,905,664 |
|
| $ | 26 |
|
| $ | 257,583 |
|
| $ | (3,920 | ) |
| $ | 503,813 |
|
| $ | 757,502 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
BALANCE at June 30, 2020 |
|
| 26,148,831 |
|
| $ | 26 |
|
| $ | 265,264 |
|
| $ | (4,965 | ) |
| $ | 614,765 |
|
| $ | 875,090 |
|
|
| 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 |
| ||||||||||||
BALANCE at December 31, 2017 |
|
| 25,551,617 |
|
| $ | 26 |
|
| $ | 246,454 |
|
| $ | (3,486 | ) |
| $ | 339,500 |
|
| $ | 582,494 |
| ||||||||||||||||||||||||
|
| (in thousands, except per share data) |
| |||||||||||||||||||||||||||||||||||||||||||||
BALANCE at December 31, 2018 |
|
| 25,693,651 |
|
| $ | 26 |
|
| $ | 254,738 |
|
| $ | (3,381 | ) |
| $ | 444,481 |
|
| $ | 695,864 |
| ||||||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,058 |
|
|
| — |
|
|
| — |
|
|
| 1,058 |
|
|
| — |
|
|
| — |
|
|
| 998 |
|
|
| — |
|
|
| — |
|
|
| 998 |
|
Director deferred share activity |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,075 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Exercise of stock options less shares withheld for taxes |
|
| 97,370 |
|
|
| — |
|
|
| 4,018 |
|
|
| — |
|
|
| — |
|
|
| 4,018 |
|
|
| 68,169 |
|
|
| — |
|
|
| 1,798 |
|
|
| — |
|
|
| — |
|
|
| 1,798 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 31,428 |
|
|
| — |
|
|
| (1,302 | ) |
|
| — |
|
|
| — |
|
|
| (1,302 | ) |
|
| 83,281 |
|
|
| — |
|
|
| (3,268 | ) |
|
| — |
|
|
| — |
|
|
| (3,268 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| (295 | ) |
|
| — |
|
|
| (290 | ) |
|
| — |
|
|
| — |
|
|
| 309 |
|
|
| (458 | ) |
|
| — |
|
|
| (149 | ) |
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 291 |
|
|
| — |
|
|
| 291 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 148 |
|
|
| — |
|
|
| 148 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,125 |
|
|
| 21,125 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,259 |
|
|
| 22,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
BALANCE at March 31, 2018 |
|
| 25,680,415 |
|
|
| 26 |
|
|
| 250,233 |
|
|
| (3,490 | ) |
|
| 360,625 |
|
|
| 607,394 |
| ||||||||||||||||||||||||
BALANCE at March 31, 2019 |
|
| 25,890,176 |
|
| $ | 26 |
|
| $ | 254,575 |
|
| $ | (3,691 | ) |
| $ | 466,740 |
|
| $ | 717,650 |
| ||||||||||||||||||||||||
Stock compensation, including options and long-term incentives |
|
| — |
|
|
| — |
|
|
| 1,061 |
|
|
| — |
|
|
| — |
|
|
| 1,061 |
|
|
| — |
|
|
| — |
|
|
| 1,342 |
|
|
| — |
|
|
| — |
|
|
| 1,342 |
|
Director deferred share activity |
|
| 5,184 |
|
|
| — |
|
|
| 1,109 |
|
|
| — |
|
|
| — |
|
|
| 1,109 |
|
|
| 4,155 |
|
|
| — |
|
|
| 1,117 |
|
|
| — |
|
|
| — |
|
|
| 1,117 |
|
Exercise of stock options less shares withheld for taxes |
|
| 6,333 |
|
|
| — |
|
|
| 147 |
|
|
| — |
|
|
| — |
|
|
| 147 |
|
|
| 10,832 |
|
|
| — |
|
|
| 356 |
|
|
| — |
|
|
| — |
|
|
| 356 |
|
Shares issued for long-term incentive awards, net of shares withheld for taxes |
|
| 635 |
|
|
| — |
|
|
| (18 | ) |
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| 501 |
|
|
| — |
|
|
| (36 | ) |
|
| — |
|
|
| — |
|
|
| (36 | ) |
Purchase of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| (156 | ) |
|
| — |
|
|
| (152 | ) |
|
| — |
|
|
| — |
|
|
| 229 |
|
|
| (229 | ) |
|
| — |
|
|
| — |
|
Sale of shares by Deferred Compensation Trust |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| — |
|
|
| 152 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 30,281 |
|
|
| 30,281 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37,073 |
|
|
| 37,073 |
|
BALANCE at June 30, 2018 |
|
| 25,692,567 |
|
| $ | 26 |
|
| $ | 252,536 |
|
| $ | (3,494 | ) |
| $ | 390,906 |
|
| $ | 639,974 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
BALANCE at June 30, 2019 |
|
| 25,905,664 |
|
| $ | 26 |
|
| $ | 257,583 |
|
| $ | (3,920 | ) |
| $ | 503,813 |
|
| $ | 757,502 |
|
See accompanying notes to condensed consolidated financial statements.
Saia, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 20192020 and 20182019
(unaudited)
|
| Six Months |
|
| Six Months |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 59,332 |
|
| $ | 51,406 |
|
| $ | 56,565 |
|
| $ | 59,332 |
|
Noncash items included in net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 55,925 |
|
|
| 48,271 |
|
|
| 66,254 |
|
|
| 55,925 |
|
Deferred income taxes |
|
| 7,570 |
|
|
| — |
| ||||||||
Other, net |
|
| 17,403 |
|
|
| 9,395 |
|
|
| 7,239 |
|
|
| 17,403 |
|
Changes in operating assets and liabilities, net |
|
| (19,086 | ) |
|
| 3,046 |
|
|
| 10,605 |
|
|
| (19,086 | ) |
Net cash provided by operating activities |
|
| 113,574 |
|
|
| 112,118 |
|
|
| 148,233 |
|
|
| 113,574 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment |
|
| (166,434 | ) |
|
| (118,573 | ) |
|
| (148,865 | ) |
|
| (166,434 | ) |
Proceeds from disposal of property and equipment |
|
| 380 |
|
|
| 418 |
|
|
| 6,143 |
|
|
| 380 |
|
Net cash used in investing activities |
|
| (166,054 | ) |
|
| (118,155 | ) |
|
| (142,722 | ) |
|
| (166,054 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of revolving credit agreement |
|
| (100,517 | ) |
|
| (92,475 | ) |
|
| (221,026 | ) |
|
| (100,517 | ) |
Borrowing of revolving credit agreement |
|
| 161,515 |
|
|
| 99,475 |
|
|
| 255,097 |
|
|
| 161,515 |
|
Proceeds from stock option exercises |
|
| 2,154 |
|
|
| 4,165 |
|
|
| 2,591 |
|
|
| 2,154 |
|
Shares withheld for taxes |
|
| (3,304 | ) |
|
| (1,321 | ) |
|
| (3,479 | ) |
|
| (3,304 | ) |
Debt issuance costs |
|
| (23 | ) |
|
| — |
|
|
| — |
|
|
| (23 | ) |
Repayment of finance leases |
|
| (9,036 | ) |
|
| (7,338 | ) |
|
| (9,662 | ) |
|
| (9,036 | ) |
Net cash provided by financing activities |
|
| 50,789 |
|
|
| 2,506 |
|
|
| 23,521 |
|
|
| 50,789 |
|
Net Decrease in Cash and Cash Equivalents |
|
| (1,691 | ) |
|
| (3,531 | ) | ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| 29,032 |
|
|
| (1,691 | ) | ||||||||
Cash and cash equivalents, beginning of period |
|
| 2,194 |
|
|
| 4,720 |
|
|
| 248 |
|
|
| 2,194 |
|
Cash and cash equivalents, end of period |
| $ | 503 |
|
| $ | 1,189 |
|
| $ | 29,280 |
|
| $ | 503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Cash Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment financed with finance leases |
| $ | 5,058 |
|
| $ | 22,422 |
|
| $ | — |
|
| $ | 5,058 |
|
See accompanying notes to condensed consolidated financial statements.
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, 2018.2019. Operating results for the quarter and six months ended June 30, 20192020 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2019.2020.
Business
The Company provides regional and interregional less-than-truckload (LTL) services through a single integrated organization. While more than 97%97 percent of its revenue has been derived from transporting LTL shipments across 4244 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, when collectability is considered probable.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, 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 average transit time to complete a shipment is typically betweenfrom 1 to 5 days. PaymentsBilling for transportation services are normally billedoccurs after completion of the service and arepayment 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 started but not completed at the reporting date is allocated basedrecognized on the relativeactual transit timestatus in each reporting period, with the portion allocated for services subsequent to the reporting date considered remaining performance obligations.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 is based on average cycle times to move shipments from their origin to their final destination or interchange; and |
| • | Adjustments to revenue for billing |
RevenueThe portion of the gross invoice related to interline transportation services that involve the services of another party, such as another LTL service provider, is reported on a net basis. The portion ofnot recorded in the gross amount billed to customers that is remitted by the Company to another party is not reflected as revenue.Company’s revenues. Revenue from logistics services is recognized as the services are provided.
Remaining performance obligations represent the transaction price allocated to future reporting periods for freight services started but not completed at the reporting date. This includes the unearned portion of billed and unbilled amounts for cancellable freight shipments in transit that the Company expects to recognize as revenue in the period subsequent to the reporting date, which is on average 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) 606 as it pertains to additional quantitative disclosures pertaining to remaining performance obligations.
Claims and Insurance Accruals
Effective March 1, 2018, the Company entered into a new bodily injury and property damage liability policy with a three-year term. Generally, the Company is responsible for the risk retention amount per occurrence of $2.0 million under the new 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 ended March 1, 2021. Under the policy the Company may 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 are 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 has been extended for one additional year to March 1, 2022. As a result of the return premium and policy extension, the Company recognized a $0.4 million reduction in insurance premium expense in the second quarter of 2020. The Company will continue to recognize the remainder of the return premium as a reduction in insurance premium expense ratably over the remainder of the policy period now ending March 1, 2022. In addition, commencing on August 30, 2021, 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 $15.6 million, based on the amount of claims paid and the insurer would be released from all liability under the policy ending March 1, 2022. 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 such period. Additionally, the Company may be required to pay an additional premium of up to $11.0 million if losses paid by the insurer are greater than $15.6 million over the three-year policy period ending March 1, 2022. Based on claims experience since inception of the policy, 0 such additional premium was accrued at June 30, 2020.
Accounting Pronouncements Adopted in 20192020
In February 2016, the FASB established Topic 842, Leases, by issuingissued ASU No. 2016-02, which2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Under this ASU an entity is required to utilize an “expected credit loss model” on certain financial instruments, including trade and financing receivables. This model requires lesseesconsideration of a broader range of reasonable and supportable information and requires an entity to recognize leases onestimate expected credit losses over the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability onlifetime of the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
The newasset. This standard became effective for the Company on January 1,interim and annual reporting periods beginning after December 15, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard using the effective date as its date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019.
The new2020 and upon adoption this standard provided a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsighthave a material impact on its consolidated financial statements or the practical expedient pertaining to land easements; the latter not being applicable to it. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.related disclosures.
As of January 1, 2019, the Company recognized additional net lease assets and operating liabilities of approximately $77 million, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments for existing operating leases. Additionally, per the requirements of the new standard for measurement of the ROU, approximately $3 million of deferred rent liability was reclassified as a contra account against the ROU asset. Substantially all of the balance came from the Claims, insurance and other section of the balance sheet reported at December 31, 2018.
(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):
|
| Second Quarter |
|
| Six Months |
|
| Second Quarter |
|
| Six Months |
| ||||||||||||||||||||
|
| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
| ||||||||
Numerator: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 37,073 |
|
| $ | 30,281 |
|
| $ | 59,332 |
|
| $ | 51,406 |
|
| $ | 28,454 |
|
| $ | 37,073 |
|
| $ | 56,565 |
|
| $ | 59,332 |
|
Denominator: |
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|
|
|
|
|
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|
|
|
Denominator for basic earnings per share–weighted average common shares |
|
| 25,958 |
|
|
| 25,766 |
|
|
| 25,915 |
|
|
| 25,732 |
|
|
| 26,134 |
|
|
| 25,958 |
|
|
| 26,102 |
|
|
| 25,915 |
|
Effect of dilutive stock options |
|
| 107 |
|
|
| 167 |
|
|
| 116 |
|
|
| 170 |
|
|
| 77 |
|
|
| 107 |
|
|
| 87 |
|
|
| 116 |
|
Effect of other common stock equivalents |
|
| 341 |
|
|
| 421 |
|
|
| 342 |
|
|
| 424 |
|
|
| 358 |
|
|
| 341 |
|
|
| 354 |
|
|
| 342 |
|
Denominator for diluted earnings per share–adjusted weighted average common shares |
|
| 26,406 |
|
|
| 26,354 |
|
|
| 26,373 |
|
|
| 26,326 |
|
|
| 26,569 |
|
|
| 26,406 |
|
|
| 26,543 |
|
|
| 26,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
Basic Earnings Per Share |
| $ | 1.43 |
|
| $ | 1.18 |
|
| $ | 2.29 |
|
| $ | 2.00 |
|
| $ | 1.09 |
|
| $ | 1.43 |
|
| $ | 2.17 |
|
| $ | 2.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share |
| $ | 1.40 |
|
| $ | 1.15 |
|
| $ | 2.25 |
|
| $ | 1.95 |
|
| $ | 1.07 |
|
| $ | 1.40 |
|
| $ | 2.13 |
|
| $ | 2.25 |
|
For the quarter and six months ended June 30, 2019,2020, options and restricted stock for 113,25148,840 and 65,053 shares of common stock, respectively, were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. For the quarter and six months ended June 30, 2018,2019, options and restricted stock for 45,150 and 61,233113,251 shares of common stock respectively, 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 June 30, 2019.2020.
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 June 30, 20192020 and December 31, 2018,2019, 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 June 30, 20192020 and December 31, 20182019 was $179.7$161.1 million and $122.0$136.5 million, respectively, based upon levels one and two in the fair value hierarchy. The carrying value of the debt was $179.9$160.8 million and $122.9$136.4 million at June 30, 20192020 and December 31, 2018,2019, respectively.
(5) Debt and Financing Arrangements
At June 30, 20192020 and December 31, 2018,2019, debt consisted of the following (in thousands):
|
| June 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
Credit Agreement with Banks, described below |
| $ | 80,998 |
|
| $ | 20,000 |
|
| $ | 80,000 |
|
| $ | 45,929 |
|
Finance Leases, described below |
|
| 98,881 |
|
|
| 102,859 |
|
|
| 80,839 |
|
|
| 90,501 |
|
Total debt |
|
| 179,879 |
|
|
| 122,859 |
|
|
| 160,839 |
|
|
| 136,430 |
|
Less: current portion of long-term debt |
|
| 18,959 |
|
|
| 18,082 |
|
|
| 19,727 |
|
|
| 19,405 |
|
Long-term debt, less current portion |
| $ | 160,920 |
|
| $ | 104,777 |
|
| $ | 141,112 |
|
| $ | 117,025 |
|
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 Fifth Amended and Restated Credit Agreement dated March 6, 2015 (the Restated Credit Agreement) was a revolving credit facility for up to $250 million expiring in March 2020. The Restated Credit Agreement also had an accordion feature that allowed for an additional $75 million availability, subject to lender approval. The Restated Credit Agreement provided for a LIBOR rate margin range from 112.5 basis points to 225 basis points, base rate margins from minus 12.5 basis points to plus 50 basis points, an unused portion fee from 20 basis points to 30 basis points and letter of credit fees from 112.5 basis points to 225 basis points, in each case based on the Company’s leverage ratio. Under the Restated Credit Agreement, the Company was required to maintain certain financial covenants including a minimum fixed charge coverage ratio and a maximum leverage ratio, among others. The Restated Credit Agreement also provided for a pledge by the Company of certain land and structures, certain tractors, trailers and other personal property and accounts receivable, to secure indebtedness under the Restated Credit Agreement.
On February 5, 2019, the Company entered into the Sixth Amended and Restated Credit Agreement with its banking group (as amended, the Amended Credit Agreement). The amendment increased the amount of the revolver from $250 million to $300 million and extended the term until February 2024. The Amended Credit Agreement also has an accordion feature that allows for an
additional $100 million availability, subject to bank approval.certain conditions and availability of lender commitments. The amendment reduced the interest rate pricing grid compared to the Restated Credit Agreement.pricing. 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 June 30, 2020, the Company had borrowings of $80.0 million and outstanding letters of credit of $28.0 million under the Amended Credit Agreement. At December 31, 2019, the Company had borrowings of $81.0$45.9 million and outstanding letters of credit of $26.1 million under the Amended Credit Agreement. At December 31, 2018, the Company had borrowings of $20.0 million and outstanding letters of credit of $27.7 million under the Restated 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 terms covering revenue equipment totaling $98.9$80.8 million and $102.9$90.5 million as of June 30, 20192020 and December 31, 2018,2019, respectively. Amortization of assets held under the finance leases is included in depreciation and amortization expense. As of June 30, 2020 and December 31, 2019, approximately $105.7 million and $111.5 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 June 30, 20192020 and December 31, 20182019 were 3.43.5 percent.
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 |
| ||
2019 |
| $ | 11,034 |
| ||||
2020 |
|
| 22,068 |
|
| $ | 11,115 |
|
2021 |
|
| 22,593 |
|
|
| 22,755 |
|
2022 |
|
| 20,857 |
|
|
| 21,019 |
|
2023 |
|
| 15,278 |
|
|
| 15,441 |
|
2024 |
|
| 90,677 |
| ||||
Thereafter |
|
| 97,530 |
|
|
| 6,313 |
|
Total |
|
| 189,360 |
|
|
| 167,320 |
|
Less: Amounts Representing Interest on Finance Leases |
|
| 9,481 |
|
|
| 6,481 |
|
Total |
| $ | 179,879 |
|
| $ | 160,839 |
|
(6) COVID-19
(6) LeasesIn March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The Company is considered an essential and critical business by the U.S. Department of Homeland Security’s Cyber and Infrastructure Security Agency (CISA) and will continue to operate under state of emergency and shelter in place orders issued in various jurisdictions across the country. With this being said, the Company has instituted a variety of actions and policies to help safeguard employees and customers from COVID-19. The Company has been in regular communication with all levels of employees to make sure that there are policies, resources, and infrastructure in place to not only protect employees, but be able to continue the Company’s very important role in supporting the nation’s supply chain.
The Company’s leases include but are not limited to real estate, including terminalsconsolidated financial statements reflect estimates and general office buildings, trailers, corporate fleet vehiclesassumptions made by management that affect the reported amounts of assets and other equipment. Leases with an initial termliabilities. The Company has considered the impact of 12 months or less are not recordedCOVID-19 on the consolidated balance sheet;assumptions and estimates used and determined that there were no material adverse impacts on the Company’s second quarter 2020 financial position. It is possible that these assumptions and estimates may materially change prior to December 31, 2020.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
As of June 30, 2019, approximately $116.2 million of finance leased assets, net of depreciation, were included in Property and Equipment. Accumulated depreciation for these assets totaled $31.7 million asdoes not believe it will be able to take advantage of the same period ended.
|
| Three Months Ended |
|
| Six Months Ended |
| ||
|
| June 30, 2019 |
|
| June 30, 2019 |
| ||
Lease Cost |
| (in thousands) |
| |||||
|
|
|
|
|
|
|
|
|
Finance Lease Cost: |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
| $ | 2,875 |
|
| $ | 5,645 |
|
Interest on lease liabilities |
|
| 987 |
|
|
| 1,787 |
|
Operating lease cost (includes variable and sublease costs as they are immaterial) |
|
| 5,180 |
|
|
| 10,488 |
|
Short-term lease cost |
|
| 1,473 |
|
|
| 2,453 |
|
Total lease cost |
| $ | 10,515 |
|
| $ | 20,373 |
|
|
|
|
|
|
|
|
|
|
Other Information |
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
| 5,058 |
|
|
| 5,058 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
| 2,248 |
|
|
| 5,266 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow and balance sheet information related to leases was as follows:
| ||||
| ||||
| ||||
| ||||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
|
| ||
|
|
|
Asprovisions of June 30, 2019, maturities of lease liabilities were as follows:
Maturity of Lease Liabilities (in thousands) |
| Operating Leases |
|
| Finance Leases |
| ||
2019 |
| $ | 11,540 |
|
| $ | 11,034 |
|
2020 |
|
| 18,827 |
|
|
| 22,068 |
|
2021 |
|
| 15,669 |
|
|
| 22,593 |
|
2022 |
|
| 12,450 |
|
|
| 20,857 |
|
2023 |
|
| 8,930 |
|
|
| 15,278 |
|
Thereafter |
|
| 23,451 |
|
|
| 16,532 |
|
Total lease payments |
|
| 90,867 |
|
|
| 108,362 |
|
Less: Interest |
|
| 17,986 |
|
|
| 9,481 |
|
Present value of lease liabilities |
| $ | 72,881 |
|
| $ | 98,881 |
|
|
|
|
|
|
|
|
|
|
the CARES Act.
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments for non-cancellable operating leases requiring minium annual rentals payable would have been as follows (in thousands):
|
| Amount |
| |
2019 |
| $ | 21,285 |
|
2020 |
|
| 16,978 |
|
2021 |
|
| 14,159 |
|
2022 |
|
| 11,482 |
|
2023 |
|
| 8,215 |
|
Thereafter |
|
| 22,531 |
|
Total |
| $ | 94,650 |
|
|
|
|
|
|
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 20182019 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019. 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. 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 in the business cycle; |
| • | effectiveness of Company-specific performance improvement initiatives, including management of the cost structure to match shifts in customer volume levels; |
| • | the creditworthiness of our customers and their ability to pay for services; |
| • | widespread outbreak of an illness or any other communicable disease, including the COVID-19 pandemic, or any other public health crisis, or business disruptions that may arise from the COVID-19 pandemic in the future; |
• | failure to achieve acquisition synergies; |
| • | failure to operate and grow acquired businesses in a manner that supports the value allocated to these acquired |
| • | economic declines in the geographic regions or industries in which our customers operate; |
| • | competitive initiatives and pricing pressures, including in connection with fuel surcharge; |
| • | loss of significant customers; |
| • | the Company’s need for capital and uncertainty of the credit markets; |
| • | the possibility of defaults under the Company’s debt agreements (including violation of financial covenants); |
| • | possible issuance of equity which would dilute stock ownership; |
| • | integration risks; |
| • | the effect of litigation including class action lawsuits; |
| • | cost and availability of qualified drivers, fuel, purchased transportation, real property, revenue equipment, technology and other assets; |
| • | the effect of governmental regulations, including but not limited to Hours of Service, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, the Food and Drug Administration, compliance with legislation requiring companies to evaluate their internal control over financial reporting, Homeland Security, environmental regulations, |
| • | changes in interpretation of accounting principles; |
| • | dependence on key employees; |
| • | inclement weather; |
| • | labor relations, including the adverse impact should a portion of the Company’s workforce become unionized; |
| • | terrorism risks; |
| • | self-insurance claims and other expense volatility; |
| • | risks arising from international business operations and relationships; |
• | recent increases in the severity of auto liability claims against trucking companies and sharply higher costs of settlements and verdicts; |
| • | cost and availability of insurance coverage, including the possibility the Company may be required to pay additional premiums, |
| • | increased costs of healthcare and prescription drugs, including as a result of healthcare reform legislation; |
| • | social media risks; |
| • | disruption in or failure of the Company’s technology or equipment including services essential to operations of the Company and/or cyber-security risk; |
| • | failure to successfully execute the strategy to expand the Company’s service geography into the Northeastern United States; 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 II, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, 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.
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 expand our service geography into the Northeastern United States. TheWhile the Company’s business is labor intensive, capital intensive and service sensitive. The Company lookssensitive, management continues to look for opportunities to improve safety, cost effectiveness and asset utilization (primarily tractors and trailers). PricingAdditionally, pricing initiatives have had a positive impact on yield and profitability. Theprofitability and 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
In March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. We are considered an essential and critical business by the U.S. Department of Homeland Security’s Cyber and Infrastructure Security Agency (CISA) and will continue to operate under state of emergency and shelter in place orders issued in various jurisdictions across the country. Management has made a variety of efforts seeking to ensure the ongoing availability of Saia’s transportation services, while instituting a variety of actions and policies to help safeguard employees and customers from COVID-19, including limiting physical employee and customer contact, implementing enhanced cleaning and hygiene protocols at Saia’s facilities, and instituting telecommuting where possible. Through the date of this filing, as a result of these efforts, the Company has not experienced significant disruptions in the Company’s LTL network operations.
Beginning in the latter part of the first quarter of 2020, we experienced lower demand for our transportation services along with increased costs and other challenges related to COVID-19 that has adversely affected our business. We believe we have significant liquidity available to continue business operations during this volatile period. As discussed in the Financial Condition section, the Company has a revolving credit facility (including a $100 million accordion feature that is available, subject to certain conditions and lender commitments) and other sources of borrowing in place that provides liquidity of up to $300 million in addition to its regular cash inflows from operations. The Company was in compliance with the debt covenants under its debt agreements at June 30, 2020.
The Company began to see the impacts of COVID-19 on customer demand in late March and continued to see declines during the second quarter of 2020. The situation surrounding COVID-19 remains fluid and we believe the adverse impact on the Company increases the longer the virus affects the level of economic activity in the United States. In these circumstances, 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 will continue to adversely impact our business operations, financial condition, results of operations, liquidity and cash flows. See Part II, Item 1A - “Risk Factors” for further discussion concerning COVID-19.
Second Quarter Overview
The Company’s operating revenue increaseddecreased by 8.39.9 percent in the second quarter of 20192020 compared to the same period in 2018.2019. The increasedecrease resulted primarily from pricing actions and increaseddecreases in shipments and fuel surcharges.tonnage due to the economic impact of COVID-19.
Consolidated operating income was $35.7 million for the second quarter of 2020 compared to $51.2 million for the second quarter of 2019 compared to $41.6 million for the second quarter of 2018.2019. In the second quarter of 2019,2020, LTL shipments were up 3.6down 9.7 percent per workday and LTL tonnage was down 1.98.9 percent per workday versus the prior year quarter. The decrease in shipments and tonnage was most significant in April with improvements in average shipments per day and monthly revenue in May and June. Diluted earnings per share were $1.40$1.07 in the second quarter of 2019,2020, compared to diluted earnings per share of $1.15$1.40 in the prior year quarter. The operating ratio (operating expenses divided by operating revenue) was 91.5 percent in the second quarter of 2020 compared to 89.0 percent in the second quarter of 2019 compared to 90.3 percent in the second quarter of 2018.2019.
The Company generated $113.6$148.2 million in net cash provided by operating activities in the first six months of 20192020 compared with $112.1$113.6 million in the same period last year. The increase is primarily due to improved operating income partially offset bya change in working capital needs.compared to the same period last year. The Company’s net cash used in investing activities was $166.1$142.7 million during the first six months of 20192020 compared to $118.2$166.1 million in the first six months of 2018,2019, primarily as a result of the timing ofdecreased capital expenditures for revenue equipment and real estate in the first six months of 2019.2020. The Company’s net cash provided by financing activities was $50.8$23.5 million in the first six months of 20192020 compared to $2.5$50.8 million net cash provided by financing activities during the same period last year, year. This change was primarily due to increasedreduced borrowing (net of repayments) largely to fund capital expenditures.expenditures. The Company had $81.0$80.0 million in outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $27.9$29.8 million and a minimal cash and cash equivalents balance of $29.3 million at June 30, 2019.2020. The Company also had $98.9$80.8 million in obligations under finance leases at June 30, 2019.2020. At June 30, 2020, the Company had $192.0 million in availability under the revolving credit facility, subject to the Company’s satisfaction of existing debt covenants. 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 June 30, 2019.2020.
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 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 less-than-truckload (LTL) services through a single integrated organization. While historically more than 97 percent of its revenue has been derived from transporting LTL shipments across 4244 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.
Results of Operations
Saia, Inc. and Subsidiaries
Selected Results of Operations and Operating Statistics
For the quarters ended June 30, 20192020 and 20182019
(unaudited)
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Operating Revenue |
| $ | 464,195 |
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| $ | 428,732 |
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| 8.3 |
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| $ | 418,114 |
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| $ | 464,195 |
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| (9.9 | ) | % |
Operating Expenses: |
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Salaries, wages and employees’ benefits |
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| 237,689 |
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| 220,406 |
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| 7.8 |
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| 224,277 |
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| 237,689 |
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| (5.6 | ) |
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Purchased transportation |
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| 34,154 |
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| 34,113 |
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| 0.1 |
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| 26,406 |
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| 34,154 |
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| (22.7 | ) |
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Depreciation and amortization |
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| 29,143 |
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| 25,241 |
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| 15.5 |
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| 33,664 |
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| 29,143 |
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| 15.5 |
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Fuel and other operating expenses |
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| 112,043 |
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| 107,407 |
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| 4.3 |
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| 98,086 |
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| 112,043 |
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| (12.5 | ) |
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Operating Income |
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| 51,166 |
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| 41,565 |
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| 23.1 |
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| 35,681 |
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| 51,166 |
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| (30.3 | ) |
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Operating Ratio |
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| 89.0 | % |
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| 90.3 | % |
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| 1.4 |
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| 91.5 | % |
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| 89.0 | % |
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| (2.8 | ) |
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Nonoperating Expense |
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| 1,763 |
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| 1,312 |
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| 34.4 |
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| 843 |
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| 1,763 |
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| (52.2 | ) |
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Working Capital (as of June 30, 2019 and 2018) |
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| 24,199 |
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| 27,110 |
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Working Capital (as of June 30, 2020 and 2019) |
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| 21,549 |
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| 24,199 |
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Cash Flows provided by Operating Activities (year to date) |
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| 113,574 |
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| 112,118 |
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| 148,233 |
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| 113,574 |
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Net Acquisitions of Property and Equipment (year to date) |
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| 166,054 |
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| 118,155 |
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| 142,722 |
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| 166,054 |
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Saia Motor Freight Operating Statistics: |
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Workdays |
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| 64 |
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| 64 |
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| - |
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LTL Tonnage |
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| 1,254 |
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| 1,278 |
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| (1.9 | ) |
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| 1,142 |
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| 1,254 |
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| (8.9 | ) |
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LTL Shipments |
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| 1,933 |
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| 1,866 |
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| 3.6 |
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| 1,745 |
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| 1,933 |
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| (9.7 | ) |
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LTL Revenue per hundredweight |
| $ | 18.05 |
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| $ | 16.44 |
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| 9.8 |
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| $ | 17.95 |
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| $ | 18.05 |
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| (0.6 | ) |
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Quarter and six months ended ended June 30, 20192020 compared to Quarterquarter and six months ended ended June 30, 20182019
Revenue and volume
Consolidated revenue for the quarter ended June 30, 2019 increased 8.32020 decreased 9.9 percent to $464.2$418.1 million primarily as a result of increaseddecreased shipments and pricing actions partially offsettonnage, due to a downturn in business volumes across our network caused by lower tonnage in the second quarterimpact of 2019.COVID-19. Saia’s LTL revenue per hundredweight (a measure of yield) increased 9.8decreased 0.6 percent to $18.05$17.95 per hundredweight for the second quarter of 20192020 as a result of increased rates and changes in business mix.mix, in addition to a 27.6 percent decrease in fuel surcharge revenue due to lower fuel prices. For the second quarter of 2019,2020, Saia’s LTL tonnage decreased 1.98.9 percent per workday to 1.31.1 million tons, and LTL shipments increased 3.6decreased 9.7 percent per workday to 1.91.7 million shipments. For the second quarter of 2019,2020, approximately 75 to 80 percent of Saia’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. For these customers subject to a general rate increase, on May 21, 2018 and February 18, 2019,3, 2020, Saia implemented a 5.9 percent general rate increases.increase. 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 from the Company’s fuel surcharge program. That program is designed to reduce the Company’s exposure to fluctuations in fuel prices by adjusting total freight charges to account for changes in the price of fuel. The Company’s fuel surcharge is based on the average national price for diesel fuel and is reset weekly. Fuel surcharges have remained in effect for several years, 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. Fuel surcharge revenue as a percentage of operating revenue decreased to 10.6 percent for the quarter ended June 30, 2020 compared to 13.2 percent for the quarter ended June 30, 2019, comparedas a result of decreases in the cost of fuel.
For the six months endedJune 30, 2020, operating revenues were $864.5 million, down 1.2 percent from $874.8 million for the six months ended June 30, 2019, primarily due to 13.8decreased volumes as a result of the COVID-19 economic impact. Fuel surcharge revenue as a percentage of operating revenue decreased to 11.8 percent for the quartersix months endedJune 30, 2018,2020, compared to 13.0 percent for the six months endedJune 30, 2019, as a result of decreases in the cost of fuel.
For the six months ended June 30, 2019, operating revenues were $874.8 million, up 6.5 percent from $821.5 million for the six months ended June 30, 2018, primarily due to pricing actions and increased shipments. Fuel surcharge revenue as a percentage of operating revenue decreased to 13.0 percent for the six months ended June 30, 2019, compared to 13.4 percent for the six months ended June 30, 2018, as a result of decreases in the cost of fuel.
Operating expenses and margin
Consolidated operating income was $51.2$35.7 million in the second quarter of 20192020 compared to $41.6$51.2 million in the prior year quarter. Overall, the operations were favorablynegatively impacted in the second quarter of 20192020 by pricing actions and higherthe economic impact of the COVID-19 pandemic which caused lower shipments and fuel surcharges, which weretonnage, partially offset by corresponding reductions in fuel and operating expenses, a decrease in salary and wage increases, increased depreciation expense, and costs associated with the Company’s geographic expansion.a decrease in purchased transportation expense. The second quarter of 20192020 operating ratio (operating expenses divided by operating revenue) was 89.091.5 percent compared to 90.389.0 percent for the same period in 2018.2019.
Salaries, wages and benefits increased $17.3decreased $13.4 million in the second quarter of 20192020 compared to the second quarter of 20182019 largely due to higher wages associated with increasedlower headcount in the second quarter of 2019, a wage increase2020 in July 2018 and higher healthcare benefit costs.response to impacts from the COVID-19 pandemic. Fuel, operating expenses and supplies increased $0.6decreased $19.4 million in the second quarter of 20192020 compared to the prior year quarter largely due to increasesdecreases in other operating expenses and supplies, including increased expenses related tofuel expense during the geographic expansion,quarter, partially offset by improved fuel efficiency resulting from a newer fleet.an increase in building rent expense. During the second quarter of 2019,2020, claims and insurance expense was $3.2$5.1 million higher than the second quarter of 20182019 primarily due to increased severity of claims.claims, an increase in total claims and higher cost of insurance, partially offset by the benefit from the commutation of the bodily injury and property damage liability policy. Purchased transportation was consistentdecreased $7.7 million in the second quarter of 20192020 compared to the second quarter of 20182019 primarily due to shipment increases offset by higher utilization of existing fleet capacity to maintain service requirementsoverall volume decreases during the second quarter of 2019.2020 as a result of the economic impact of COVID-19.
For the six months ended June 30, 2019,2020, consolidated operating income was $79.8$74.5 million, up 15.4down 6.7 percent compared to $69.1$79.8 million for the six months ended June 30, 2018.2019. This decrease was largely due to the economic impact of COVID-19 in the second quarter of 2020.
Salaries, wages and benefits increased $26.5$4.9 million during the first six months of 20192020 compared to the same period last year largely due to higher wages associated with increased headcount in the first six months of 2019,2020, a wage increase in July 20182019 and higher healthcare benefit costs. Fuel, operating expenses and supplies increased $5.3decreased $20.1 million during the first six months of 20192020 compared to the same period last year largely due to increasesdecreases in fuel expenses and other operating expenses and supplies, including increased expenses related to the geographic expansion, partially offset by improved fuel efficiency resulting from a newer fleet.an increase in building rent expense compared to the first six months of 2019. During the first six months of 2019,2020, claims and insurance expense was $2.6$6.0 million higher than the same period last year primarily due to increased severity of claims.claims, an increase in total claims and higher cost of insurance, partially offset by the benefit from the commutation of the bodily injury and property damage liability policy. Purchased transportation decreased $1.5$6.1 million for the first six months of 20192020 compared to the same period last year primarily due to shipment increases offset by higher utilization of existing fleet capacity to maintain service requirementsoverall volume decreases during the first six months of 2019.2020 as a result of the economic impact of COVID-19.
Other
Substantially all non-operating expenses represent interest expense. Interest expense in the second quarter of 20192020 was $0.4 million higherlower than the second quarter of 20182019 due to increaseddecreased average interest rates and decreased borrowings in the second quarter of 2019. 2020. Interest expense in the first six months of 20192020 was $0.6$0.3 million higherlower than the first six months of 20182019 due to increaseddecreased average interest rates and increaseddecreased average borrowings in the first six months of 2019.2020.
The effective tax rate was 25.018.3 percent and 24.825.0 percent for the quarters ended June 30, 20192020 and 2018,2019, respectively. The increasedecrease in the second quarter tax rate in 20192020 is primarily a result of decreasedincreased excess tax benefits related to stock activity. For the six months ended June 30, 2020 and June 30, 2019, and June 30, 2018, the effective tax rate wasrates were 21.1 percent and 22.9 percent.percent, respectively.
Net income was $28.5 million, or $1.07 per diluted share, in the second quarter of 2020 compared to net income of $37.1 million, or $1.40 per diluted share, in the second quarter of 20192019. Net income was $56.6 million, or $2.13 per diluted share, for the first six months of 2020 compared to net income of $30.3 million, or $1.15 per diluted share, in the second quarter of 2018. Net income was $59.3 million, or $2.25 per diluted share, for the first six months of 2019 compared to net income of $51.4 million, or $1.95 per diluted share, for the first six months of 2018..
Working capital/capital expenditures
Working capital at June 30, 20192020 was $24.2$21.5 million, which decreased from working capital at June 30, 20182019 of $27.1$24.2 million.
Current assets at June 30, 20192020 increased by $28.7$8.3 million as compared to June 30, 20182019 and includes an increasea decrease in accounts receivable of $26.4$21.9 million, and an increase of cash and cash equivalents of $28.8 million. Current liabilities increased by $31.6$10.9 million at June 30, 20192020 compared to June 30, 20182019 largely due to the addition of operating lease liabilities as a result of the adoption of ASU 2016-02 on January 1, 2019 and increasesan increase in accrued taxes, accrued wages, vacation and employee benefits and claims and insurance accruals.employees’ benefits. Cash flows provided by operating activities were $148.2 million for the six months ended June 30, 2020 versus $113.6 million for the six months ended June 30, 2019 versus $112.1 million for2019. The increase is primarily due to a change in working capital compared to the six months ended June 30, 2018.same period last year. For the six months ended June 30, 2019,2020, net cash used in investing activities was $166.1$142.7 million versus $118.2$166.1 million in the same period last year, a $47.9$23.4 million increase.decrease. This increasedecrease resulted primarily from increased acquisitions ofdecreased capital expenditures for revenue equipment technology and real estate. The Company currently plansexpects that net capital expenditures in 20192020 will be less than the $250 million previously planned as a result of approximately $275management continuing to $300 million.evaluate the impact of COVID-19. For the six months ended June 30, 2019,2020, net cash provided by financing activities was $50.8$23.5 million compared to $2.5$50.8 million net cash provided by financing activities during the same period last year, as a result of increased borrowingreduced borrowings (net of repayments) on the revolving credit agreement to fund capital expenditures.expenditures.
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. ThereBecause the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations, financial performance and financial condition, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertainty asuncertain and difficult to the strength of economic conditions.predict. We are continuing initiatives to increase yield, reduce costs and improve productivity. We focusproductivity while also focusing on providing top quality service and improving safety performance. On February 18, 2019,3, 2020, Saia implemented a 5.9 percent general rate increase for customers comprising approximately 20 to 25 percent of Saia’s operating revenue. The extent of the success of these revenue initiatives is impacted by what proves to be the underlying economic trends, competitor initiatives and other factors discussed under “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors.”
The Company currently expectsanticipates there will be no salary or wage increases in 2020. Effective in April 2020, the effective tax rateCompany temporarily suspended its 401(k) match and temporarily furloughed certain employees in response to COVID-19’s impact on the Company’s operations. On April 1, 2020, we offered all hourly full-time workers an additional five days of paid time off and offered one additional paid day off for 2019our part-time workers in light of COVID-19. This action was an effort to beprovide employees time off for health issues or those of family and friends. We believe this action will result in approximately 23.5 percent. The effective tax rate may vary from$10 million of additional benefit costs for the year. In July 2020, the Company paid virtually all employees a $250 bonus to compensate for working through the difficult conditions created by the pandemic, which costs approximately $2.6 million and is included in the second quarter to quarter due to unusual or infrequently occurring discrete items, the resolution of income tax audits, changes in tax laws, including alternative fuel tax credits, or the tax impact from employee share-based payments.
2020 results. Effective July 2019, the Company implemented a market competitive salary and wage increase for all of its employees. The cost of the compensation increase is expected to be approximately $21$32 million annually, and the Company anticipates the impact will be partially offset by productivity and efficiency gains.
If the Company buildscontinues to build market share, including through its geographic expansion, it expects numerous operating leverage cost benefits. Conversely, shouldthroughout the economy soften from present levels,duration of the COVID-19 pandemic and the period of economic disruption, the Company plans to match resources and capacity to shifting volume levels to lessen any unfavorable operating leverage. Additionally, the Company’s renewal of insurance policies effective March 1, 2020 resulted in $6.2 million of anticipated cost increases for 2020 compared to 2019. The success of cost improvement initiatives is also impacted by the cost and availability of drivers and purchased transportation, fuel, self-insurance claims and insurance expense, regulatory changes, successful expansion of our service geography into the Northeastern United States, the COVID-19 pandemic and other factors discussed under “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors.”
See “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” for a more complete discussion of potential risks and uncertainties that could materially affect our future performance.
Accounting Pronouncements Adopted in 2019
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with the classification affecting the pattern and classification of expense recognition in the income statement.
The new standard became effective for the Company on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard using the effective date as its date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019.
The new standard provided a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to it. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.
As of January 1, 2019, the Company recognized additional net lease assets and operating liabilities of approximately $77 million, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments for existing operating leases. Per the requirements of the new standard for measurement of the ROU, approximately $3 million of deferred rent liability was reclassified as a contra account against the ROU asset. Substantially all of the balance came from the Claims, insurance and other section of the balance sheet reported at December 31, 2018.
Financial Condition
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.
Credit Agreement
Prior to February 5, 2019, the Company was party to a Restated Credit Agreement with a group of banks that included a revolving credit facility for up to $250 million expiring in March 2020. The Restated Credit Agreement also had an accordion feature that allowed for an additional $75 million availability, subject to lender approval. The Restated Credit Agreement provided for a LIBOR rate margin range from 112.5 basis points to 225 basis points, base rate margins from minus 12.5 basis points to plus 50 basis points, an unused portion fee from 20 basis points to 30 basis points and letter of credit fees from 112.5 basis points to 225 basis points, in each case based on the Company’s leverage ratio. Under the Restated Credit Agreement, the Company was required to maintain certain financial covenants including a minimum fixed charge coverage ratio and a maximum leverage ratio, among others. The Restated Credit Agreement also provided for a pledge by the Company of certain land and structures, certain tractors, trailers and other personal property and accounts receivable, to secure indebtedness under the Restated Credit Agreement.
On February 5, 2019, the Company entered into the Sixth Amended and Restated Credit Agreement with its banking group (as amended, the Amended Credit Agreement). The amendment increased the amount of the revolver from $250 million to $300 million and extended the term until February 2024. The Amended Credit Agreement also has an accordion feature that allows for an
additional $100 million availability, subject to bank approval.certain conditions and availability of lender commitments. The amendment reduced the interest rate pricing grid compared to the Restated Credit Agreement.prior agreement. 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 June 30, 2020, the Company had borrowings of $80.0 million and outstanding letters of credit of $28.0 million under the Amended Credit Agreement. At December 31, 2019, the Company had borrowings of $81.0$45.9 million and outstanding letters of credit of $26.1 million under the Amended Credit Agreement. At December 31, 2018, the Company had borrowings of $20.0 million and outstanding letters of credit of $27.7 million under the Restated 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 terms covering revenue equipment totaling $98.9$80.8 million and $102.9$90.5 million as of June 30, 20192020 and December 31, 2018,2019, 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 June 30, 20192020 and December 31, 20182019 were 3.43.5 percent.
Other
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 $256.4$272.9 million for the year ended December 31, 2018,2019, while net cash used in investing activities was $222.6$281.0 million. Cash flows provided by operating activities were $113.6$148.2 million for the six months ended June 30, 2019, $1.52020, $34.6 million higher than the first six months of the prior year. The increase is primarily due to improved operating income partially offset bya change in working capital needs.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 adequatesignificant sources of capital to meet short-term liquidity needs through its operating cash flows and availability under the Amended Credit Agreement. At June 30, 2019,2020, the Company had $192.9$192.0 million in availability under the Amended Credit Agreement, subject to the Company’s satisfaction of existing debt covenants. 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. The Company was in compliance with its debt covenants at June 30, 2019.2020.
Effective March 1, 2018, the Company entered into a new bodily injury and property damage liability policy with a three-year term. TheGenerally, the Company is responsible for the risk retention amount per occurrence of $2.0 million under the new 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 ended March 1, 2021. Under the policy the Company may 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 are less than $5.2 million. In the eventAugust 2019, the Company electselected to commute the policy for such period, it will be entitled toperiod. As a result, the Company received a return of a portion$5.2 million of the premium paid up to $5.2 million,(the maximum return premium available), based on the amount of claims paid and the insurer will bewas released from all liability in connection with claims occurring in such 12-month period. As a result, ifThe Company is now self-insured for the Company elects to commute the policy as to such period, the Company will be self-insured forfirst $10 million per occurrence with respect to such 12-month period.period and the policy has been extended for one additional year to March 1, 2022. As a result of the return premium and policy extension, the Company recognized a $0.4 million reduction in insurance premium expense in the second quarter of 2020. The decision whetherCompany will continue to commuterecognize the first 12 monthsremainder of the return premium as a reduction in insurance premium expense ratably over the remainder of the policy could not be made beforeperiod now ending March 1, 2019 and must be made prior to2022. In addition, commencing on August 2019, unless the insurer agrees to extend such date. In addition,30, 2021 the Company may elect to commute the policy with respect to the insurer’s entire liability under the policy commencing on August 30, 2021 in which case the Company willwould be entitled to a return of a portion of the premium paid, up to $15.6 million, based on the amount of claims paid and the insurer willwould be released from all liability under the policy.policy ending March 1, 2022. As a result, if the Company elects to commute the policy as to the entire policy term, the Company willwould be self-insured up tofor $10 million per occurrence for such period. Additionally, the Company may be required to pay an additional premium of up to $11.0 million if losses paid lossesby the insurer are greater than $15.6 million over the three-year policy period.period ending March 1, 2022. Based on claims experience since inception of the policy, no such additional premium was accrued at June 30, 2019. The Company has not made a decision whether to commute the first 12 months of the policy. As such, no related amounts were recorded at June 30, 2019.2020.
Net capital expenditures pertain primarily to investments in tractors and trailers and other revenue equipment, information technology, land and structures. Projected net capital expenditures for 20192020 are $275expected to $300be less than the $250 million inclusivepreviously planned as a result of equipment acquired using finance leases.management continuing to evaluate the impact of COVID-19. This represents an increase of approximately $23 million to $48 millionwould represent a decrease from 20182019 net capital expenditures of $252$287 million for property and equipment, inclusive of equipment acquired using finance leases, information technology, and land and structures. Projected 20192020 capital expenditures include a normal replacement cycle of revenue equipment and technology investment for our operations. In addition, the Company is adding revenue equipment and real estate investments to support our growth initiatives. Net capital expenditures were $171.1$142.7 million in the first six months of 2019, inclusive of equipment acquired using finance leases.2020. Approximately $77.8$40.9 million of the 20192020 remaining capital budget was committed as of June 30, 2019.2020.
In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $3.6$4.3 million for the remainder of 20192020 and decreasing for each year thereafter based on borrowings and commitments outstanding at June 30, 2019.2020.
Contractual Obligations
The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of June 30, 20192020 (in millions):
|
| Payments due by year |
|
| Payments due by year |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
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| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| Thereafter |
|
| Total |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
Contractual cash obligations: |
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Long-term debt obligations: |
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Revolving line of credit (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 81.0 |
|
| $ | 81.0 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 80.0 |
|
| $ | — |
|
| $ | 80.0 |
|
Leases: |
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Finance Leases (1) |
|
| 11.0 |
|
|
| 22.1 |
|
|
| 22.6 |
|
|
| 20.9 |
|
|
| 15.3 |
|
|
| 16.5 |
|
|
| 108.4 |
|
|
| 11.1 |
|
|
| 22.8 |
|
|
| 21.0 |
|
|
| 15.4 |
|
|
| 10.7 |
|
|
| 6.3 |
|
|
| 87.3 |
|
Operating leases |
|
| 11.6 |
|
|
| 18.8 |
|
|
| 15.7 |
|
|
| 12.5 |
|
|
| 8.9 |
|
|
| 23.5 |
|
|
| 91.0 |
|
|
| 20.8 |
|
|
| 25.5 |
|
|
| 22.5 |
|
|
| 19.2 |
|
|
| 16.1 |
|
|
| 54.2 |
|
|
| 158.3 |
|
Purchase obligations |
|
| 78.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 78.7 |
|
|
| 41.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 41.6 |
|
Total contractual obligations |
| $ | 101.3 |
|
| $ | 40.9 |
|
| $ | 38.3 |
|
| $ | 33.4 |
|
| $ | 24.2 |
|
| $ | 121.0 |
|
| $ | 359.1 |
|
| $ | 73.5 |
|
| $ | 48.3 |
|
| $ | 43.5 |
|
| $ | 34.6 |
|
| $ | 106.8 |
|
| $ | 60.5 |
|
| $ | 367.2 |
|
(1) | See Note 5 to the accompanying condensed consolidated financial statements in this Current Report on Form 10-Q. The contractual finance lease obligation payments included in this table include both the principal and interest components. |
(2) |
|
| Includes commitments of |
|
| Amount of commitment expiration by year |
|
| Amount of commitment expiration by year |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
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| 2020 |
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| 2021 |
|
| 2022 |
|
| 2023 |
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| Thereafter |
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| Total |
|
| 2020 |
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| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| Thereafter |
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| Total |
| ||||||||||||||
Other commercial commitments: |
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Available line of credit (1) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 192.9 |
|
| $ | 192.9 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 192.0 |
|
| $ | — |
|
| $ | 192.0 |
|
Letters of credit |
|
| — |
|
|
| 27.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27.9 |
|
|
| — |
|
|
| 29.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29.8 |
|
Surety bonds |
|
| 4.8 |
|
|
| 44.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49.2 |
|
|
| 0.8 |
|
|
| 58.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59.3 |
|
Total commercial commitments |
| $ | 4.8 |
|
| $ | 72.3 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 192.9 |
|
| $ | 270.0 |
|
| $ | 0.8 |
|
| $ | 88.3 |
|
| $ | — |
|
| $ | — |
|
| $ | 192.0 |
|
| $ | — |
|
| $ | 281.1 |
|
(1) | Subject to the satisfaction of existing debt covenants. |
The Company has accrued approximately $1.0$1.1 million for uncertain tax positions and $0.2$0.1 million for interest and penalties related to the uncertain tax positions as of June 30, 2019.2020. The Company cannot reasonably estimate the timing of cash settlements with respective taxing authorities beyond one year and accordingly has not included the amounts within the above contractual cash obligations and other commercial commitment tables.
At June 30, 2019,2020, the Company has $86.4$88.3 million in claims and insurance liabilities. The Company cannot reasonably estimate the timing of cash settlements with respective adverse parties beyond one year and accordingly has not included the amounts within the above contractual cash obligations and other commercial commitment tables.
Critical Accounting Policies and Estimates
The Company makes estimates and assumptions in preparing the condensed consolidated financial statements that affect reported amounts and disclosures therein. In the opinion of management, the accounting policies that generally have the most significant impact on the financial position and results of operations of the Company include:
| • | Claims and Insurance Accruals. As described in more detail in the Notes to |
$250,000 to |
| • | Revenue Recognition and Related Allowances. Revenue is recognized over the transit time of the shipment as it moves from origin to destination while expenses are recognized as incurred. In addition, estimates included in the recognition of revenue and accounts receivable include estimates of shipments in transit and estimates of future adjustments to revenue and accounts receivable for billing adjustments and collectability. |
Revenue is recognized in a systematic process whereby estimates of shipments in transit are based upon actual shipments picked up, scheduled day of delivery and current trend in average rates charged to customers. Since the cycle for pickup and delivery of shipments is generally 1-5 days, typically less than 5 percent of a total month’s revenue is in transit at the end of any month. Estimates for credit losses and billing adjustments are based upon historical experience of credit losses, adjustments processed and trends of collections. Billing adjustments are primarily made for discounts and billing corrections. These estimates are
continuously evaluated and updated; however, changes in economic conditions, pricing arrangements and other factors can significantly impact these estimates.
| • | Depreciation and Capitalization of Assets. Under the Company’s accounting policy for property and equipment, management establishes appropriate depreciable lives and salvage values for the Company’s revenue equipment (tractors and trailers) based on their estimated useful lives and estimated residual values to be received when the equipment is sold or traded in. These estimates are routinely evaluated and updated when circumstances warrant. However, actual |
|
|
These accounting policies and others are described in further detail in the notesNotes to our audited consolidated financial statementsConsolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the consolidated financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the consolidated financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.
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 fuel prices. The detail of the Company’s debt structure is more fully described in the notesNotes to the consolidated financial statementsConsolidated Financial Statements set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019. To help mitigate our risk to rising fuel prices, the Company has implemented a 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 fuel prices and is 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 June 30, 2019.2020. The table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. The fair value of the variable and fixed rate debt (in millions) was estimated based upon levels one and two in the fair value hierarchy, respectively. The fair value of finance leases is based on current market interest rates for similar types of financial instruments.
|
| Expected maturity date |
|
| 2019 |
|
| Expected maturity date |
|
| 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| Thereafter |
|
| Total |
|
|
| Fair Value |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| Thereafter |
|
| Total |
|
|
| Fair Value |
| ||||||||||||||||||
Fixed rate debt |
| $ | 9.4 |
|
| $ | 19.3 |
|
| $ | 20.5 |
|
| $ | 19.4 |
|
| $ | 14.4 |
|
| $ | 15.9 |
|
| $ | 98.9 |
| $ | 98.2 |
|
| $ | 9.8 |
|
| $ | 20.6 |
|
| $ | 19.5 |
|
| $ | 14.5 |
|
| $ | 10.2 |
|
| $ | 6.2 |
|
| $ | 80.8 |
| $ | 81.1 |
| ||||||
Average interest rate |
|
| 3.4 | % |
|
| 3.4 | % |
|
| 3.4 | % |
|
| 3.4 | % |
|
| 3.4 | % |
|
| 3.4 | % |
|
|
|
|
|
|
|
| 3.5 | % |
|
| 3.5 | % |
|
| 3.5 | % |
|
| 3.5 | % |
|
| 3.5 | % |
|
| 3.5 | % |
|
|
|
|
|
| ||||||||
Variable rate debt |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 81.0 |
|
| $ | 81.0 |
| $ | 81.0 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 80.0 |
|
| $ | — |
|
| $ | 80.0 |
| $ | 80.0 |
| ||||||
Average interest rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.6 | % |
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.7 | % |
|
| — |
|
|
|
|
|
|
|
|
|
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.
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.
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—Risk Factors are described in Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019, as supplemented by the risk factor set forth below. The following is an amended and thererestated version of a risk factor included in Item 1A. “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
The global COVID-19 pandemic is having an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in businesses and industries that we serve. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial condition, results of operations, liquidity and cash flows.
Our operations and financial performance have been no material changes.negatively impacted by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations, financial performance and financial condition, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Further, the ultimate impact of the COVID-19 pandemic on our operations, financial performance and financial condition depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel, quarantines, shelter in place orders and workforce pressures); pricing pressures brought about by actions of competitors; the impact of the pandemic and actions taken in response on global, national and regional economies, travel, and economic activity; general economic uncertainty in key global, national and regional markets and financial market volatility; global economic conditions and levels of economic activity, including the effects of a recession, depression or other significant economic downturn; and the timing and pace of recovery when the COVID-19 pandemic subsides.
The COVID-19 pandemic has subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below:
• | Operations-related risks: We are facing increased operational challenges and have incurred higher operating expenses from the need to protect employee health and safety, workplace disruptions and restrictions on the movement of people and goods, both at our own facilities and at those of our customers and suppliers. We are also experiencing, and expect to continue experiencing, lower demand for our transportation services, increased costs, customer requests for potential payment deferrals, supply chain disruptions and delays and other challenges related directly and indirectly to the COVID-19 pandemic that adversely impact our business. We believe the longer the period of economic and global supply chain disruption continues, the more the adverse impact will be on our business operations, financial performance, financial condition and results of operations. |
• | Liquidity- and funding-related risks: While we have sources of cash and liquidity and access to a committed credit line, a prolonged period of generating lower cash from operations could adversely affect our financial condition, including as a result of a failure to satisfy financial covenants contained in our credit agreements. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding, which could adversely affect our business, financial position and results of operations. |
As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019. In particular, see the risk factors regarding “General Economic Conditions,” “Highly Competitive Industry,” “Significant Ongoing Cash Requirements,” “Credit and Debt Agreements,” “Disruptions in Credit Markets,” “Creditworthiness of Our Customers” and “Market Value of Our Common Stock.” Further, the COVID-19 pandemic may also affect our operating and financial results and financial condition in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds —
Issuer Purchases of Equity Securities |
| ||||||||||||||||||
Period |
| (a) Total Number of Shares (or Units) Purchased (1) |
|
|
| (b) Average Price Paid per Share (or Unit) |
|
|
| (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
|
|
| (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet be Purchased under the Plans or Programs |
| ||||
April 1, 2019 through |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2019 |
|
| — |
| (2) |
| $ | — |
| (2) |
|
| — |
|
|
| $ | — |
|
May 1, 2019 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2019 |
|
| 3,530 |
| (3) |
| $ | 64.84 |
| (3) |
|
| — |
|
|
|
| — |
|
June 1, 2019 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
| — |
| (4) |
| $ | — |
| (4) |
|
| — |
|
|
|
| — |
|
Total |
|
| 3,530 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
Issuer Purchases of Equity Securities |
| ||||||||||||||||||
Period |
| (a) Total Number of Shares (or Units) Purchased (1) |
|
|
| (b) Average Price Paid per Share (or Unit) |
|
|
| (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
|
|
| (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet be Purchased under the Plans or Programs |
| ||||
April 1, 2020 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2020 |
|
| 1,860 |
| (2) |
| $ | 68.81 |
| (2) |
|
| — |
|
|
| $ | — |
|
May 1, 2020 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2020 |
|
| — |
| (3) |
| $ | — |
| (3) |
|
| — |
|
|
|
| — |
|
June 1, 2020 through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 |
|
| — |
| (4) |
| $ | — |
| (4) |
|
| — |
|
|
|
| — |
|
Total |
|
| 1,860 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
(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 |
|
(3) | The Saia, Inc. Executive Capital Accumulation Plan |
|
(4) | The Saia, Inc. Executive Capital Accumulation Plan had no sales of Saia stock during the period of June 1, |
|
Item 3. Defaults Upon Senior Securities—None
Item 4. Mine Safety Disclosures—None
Item 5. Other Information—None
Item 6. Exhibits
Exhibit |
|
|
Number |
| Description of Exhibit |
|
|
|
3.1 |
| |
|
|
|
3.2 |
| |
|
|
|
3.3 |
| |
|
|
|
| ||
| ||
| ||
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 June 30, |
104 | The cover page from Saia’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (included as Exhibit 101). |
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: July |
|
| /s/ |
|
|
|
|
|
|
| Executive Vice President and Chief |
|
|
|
|
25