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SAIA INC - Quarter Report: 2023 September (Form 10-Q)

10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-49983

 

Saia, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

48-1229851

(State of incorporation)

(I.R.S. Employer

Identification No.)

11465 Johns Creek Parkway, Suite 400

Johns Creek, GA

30097

(Address of principal executive offices)

(Zip Code)

(770) 232-5067

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $.001 per share

 

SAIA

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

There were 26,547,937 shares of Common Stock outstanding at October 25, 2023.

1


 

 

SAIA, INC. AND SUBSIDIARIES

INDEX

 

PAGE

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

ITEM 1:

Financial Statements

 

3

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the quarters and nine months ended September 30, 2023 and 2022

 

4

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the quarters and nine months ended September 30, 2023 and 2022

 

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

 

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

ITEM 2:

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

 

12

 

 

 

 

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

 

19

 

 

ITEM 4:

Controls and Procedures

 

20

 

PART II. OTHER INFORMATION

 

ITEM 1:

Legal Proceedings

 

21

 

 

ITEM 1A:

Risk Factors

 

21

 

 

ITEM 2:

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

 

 

ITEM 6:

Exhibits

 

22

 

 

Signature

 

23

 

 

2


 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

Saia, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

 

 

September 30, 2023

 

 

December 31, 2022

 

Assets

 

(in thousands, except share and per share data)

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

249,262

 

 

$

187,390

 

Accounts receivable, net

 

 

345,940

 

 

 

290,306

 

Prepaid expenses

 

 

28,485

 

 

 

22,525

 

Income tax receivable

 

 

14,434

 

 

 

23,438

 

Other current assets

 

 

7,472

 

 

 

7,227

 

Total current assets

 

 

645,593

 

 

 

530,886

 

Property and Equipment, at cost

 

 

2,789,357

 

 

 

2,478,824

 

Less: accumulated depreciation and amortization

 

 

1,115,858

 

 

 

996,204

 

Net property and equipment

 

 

1,673,499

 

 

 

1,482,620

 

Operating Lease Right-of-Use Assets

 

 

126,122

 

 

 

120,455

 

Goodwill and Identifiable Intangibles, net

 

 

17,509

 

 

 

18,149

 

Other Noncurrent Assets

 

 

22,596

 

 

 

22,600

 

Total assets

 

$

2,485,319

 

 

$

2,174,710

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

112,594

 

 

$

99,792

 

Wages, vacation and employees’ benefits

 

 

77,721

 

 

 

66,684

 

Claims and insurance accruals

 

 

46,047

 

 

 

45,481

 

Other current liabilities

 

 

25,090

 

 

 

22,684

 

Current portion of long-term debt

 

 

10,971

 

 

 

14,519

 

Current portion of operating lease liability

 

 

26,805

 

 

 

24,925

 

Total current liabilities

 

 

299,228

 

 

 

274,085

 

Other Liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

7,963

 

 

 

16,489

 

Operating lease liability, less current portion

 

 

102,848

 

 

 

98,581

 

Deferred income taxes

 

 

163,267

 

 

 

145,771

 

Claims, insurance and other

 

 

62,550

 

 

 

60,443

 

Total other liabilities

 

 

336,628

 

 

 

321,284

 

Stockholders’ Equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 50,000 shares authorized,
     
none issued and outstanding

 

 

-

 

 

 

-

 

Common stock, $0.001 par value, 100,000,000 shares authorized,
     
26,547,937 and 26,464,197 shares issued and outstanding at
     September 30, 2023 and December 31, 2022, respectively

 

 

27

 

 

 

26

 

Additional paid-in-capital

 

 

282,175

 

 

 

277,366

 

Deferred compensation trust, 69,682 and 69,982 shares of common
     stock at cost at September 30, 2023 and December 31, 2022, respectively

 

 

(5,565

)

 

 

(5,248

)

Retained earnings

 

 

1,572,826

 

 

 

1,307,197

 

Total stockholders’ equity

 

 

1,849,463

 

 

 

1,579,341

 

Total liabilities and stockholders’ equity

 

$

2,485,319

 

 

$

2,174,710

 

See accompanying notes to condensed consolidated financial statements.

3


 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the quarters and nine months ended September 30, 2023 and 2022

(unaudited)

 

 

Third Quarter

 

 

Nine Months

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands, except per share data)

 

Operating Revenue

 

$

775,144

 

 

$

729,561

 

 

$

2,130,301

 

 

$

2,136,331

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employees' benefits

 

 

344,605

 

 

 

297,247

 

 

 

955,449

 

 

 

881,762

 

Purchased transportation

 

 

76,746

 

 

 

85,452

 

 

 

173,244

 

 

 

255,519

 

Fuel, operating expenses and supplies

 

 

144,282

 

 

 

145,461

 

 

 

419,397

 

 

 

413,762

 

Operating taxes and licenses

 

 

17,018

 

 

 

16,261

 

 

 

51,540

 

 

 

48,813

 

Claims and insurance

 

 

18,024

 

 

 

15,988

 

 

 

49,039

 

 

 

40,940

 

Depreciation and amortization

 

 

45,618

 

 

 

40,682

 

 

 

133,156

 

 

 

117,578

 

Other operating, net

 

 

416

 

 

 

115

 

 

 

643

 

 

 

160

 

Total operating expenses

 

 

646,709

 

 

 

601,206

 

 

 

1,782,468

 

 

 

1,758,534

 

Operating Income

 

 

128,435

 

 

 

128,355

 

 

 

347,833

 

 

 

377,797

 

Nonoperating (Income) Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

454

 

 

 

581

 

 

 

1,600

 

 

 

1,941

 

Interest income

 

 

(2,423

)

 

 

(72

)

 

 

(3,050

)

 

 

(134

)

Other, net

 

 

157

 

 

 

140

 

 

 

(1,336

)

 

 

1,206

 

Nonoperating (income) expenses, net

 

 

(1,812

)

 

 

649

 

 

 

(2,786

)

 

 

3,013

 

Income Before Income Taxes

 

 

130,247

 

 

 

127,706

 

 

 

350,619

 

 

 

374,784

 

Income Tax Provision

 

 

32,034

 

 

 

29,815

 

 

 

84,990

 

 

 

88,224

 

Net Income

 

$

98,213

 

 

$

97,891

 

 

$

265,629

 

 

$

286,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

26,644

 

 

 

26,539

 

 

 

26,626

 

 

 

26,506

 

Weighted average common shares outstanding – diluted

 

 

26,779

 

 

 

26,676

 

 

 

26,755

 

 

 

26,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

3.69

 

 

$

3.69

 

 

$

9.98

 

 

$

10.81

 

Diluted Earnings Per Share

 

$

3.67

 

 

$

3.67

 

 

$

9.93

 

 

$

10.75

 

See accompanying notes to condensed consolidated financial statements.

4


 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the quarters and nine months ended September 30, 2023 and 2022

(unaudited)

 

 

 

Common Shares

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Deferred Compensation Trust

 

 

Retained Earnings

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2022

 

 

26,464

 

 

$

26

 

 

$

277,366

 

 

$

(5,248

)

 

$

1,307,197

 

 

$

1,579,341

 

Stock compensation, including options and long-term incentives

 

 

 

 

 

 

 

 

2,225

 

 

 

 

 

 

 

 

 

2,225

 

Exercise of stock options, less shares withheld for taxes

 

 

21

 

 

 

 

 

 

2,204

 

 

 

 

 

 

 

 

 

2,204

 

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

 

 

48

 

 

 

1

 

 

 

(8,928

)

 

 

 

 

 

 

 

 

(8,927

)

Purchase of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

474

 

 

 

(474

)

 

 

 

 

 

 

Sale of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

(67

)

 

 

67

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76,097

 

 

 

76,097

 

Balance at March 31, 2023

 

 

26,533

 

 

$

27

 

 

$

273,274

 

 

$

(5,655

)

 

$

1,383,294

 

 

$

1,650,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation, including options and long-term incentives

 

 

 

 

 

 

 

 

2,500

 

 

 

 

 

 

 

 

 

2,500

 

Director deferred share activity

 

 

2

 

 

 

 

 

 

1,417

 

 

 

 

 

 

 

 

 

1,417

 

Exercise of stock options, less shares withheld for taxes

 

 

 

 

 

 

 

 

46

 

 

 

 

 

 

 

 

 

46

 

Sale of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

(29

)

 

 

29

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

91,319

 

 

 

91,319

 

Balance at June 30, 2023

 

 

26,535

 

 

$

27

 

 

$

277,208

 

 

$

(5,626

)

 

$

1,474,613

 

 

$

1,746,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation, including options and long-term incentives

 

 

 

 

 

 

 

 

2,686

 

 

 

 

 

 

 

 

 

2,686

 

Exercise of stock options, less shares withheld for taxes

 

 

12

 

 

 

 

 

 

2,541

 

 

 

 

 

 

 

 

 

2,541

 

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

 

 

1

 

 

 

 

 

 

(199

)

 

 

 

 

 

 

 

 

(199

)

Sale of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

(61

)

 

 

61

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

98,213

 

 

 

98,213

 

Balance at September 30, 2023

 

 

26,548

 

 

$

27

 

 

$

282,175

 

 

$

(5,565

)

 

$

1,572,826

 

 

$

1,849,463

 

 

 

5


 

 

 

Common Shares

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Deferred Compensation Trust

 

 

Retained Earnings

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2021

 

 

26,337

 

 

$

26

 

 

$

274,633

 

 

$

(4,101

)

 

$

949,775

 

 

$

1,220,333

 

Stock compensation, including options and long-term incentives

 

 

 

 

 

 

 

 

2,056

 

 

 

 

 

 

 

 

 

2,056

 

Exercise of stock options, less shares withheld for taxes

 

 

10

 

 

 

 

 

 

907

 

 

 

 

 

 

 

 

 

907

 

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

 

 

61

 

 

 

 

 

 

(11,230

)

 

 

 

 

 

 

 

 

(11,230

)

Purchase of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

2,445

 

 

 

(2,445

)

 

 

 

 

 

 

Sale of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

(1,066

)

 

 

1,066

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79,424

 

 

 

79,424

 

Balance at March 31, 2022

 

 

26,408

 

 

$

26

 

 

$

267,745

 

 

$

(5,480

)

 

$

1,029,199

 

 

$

1,291,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation, including options and long-term incentives

 

 

 

 

 

 

 

 

1,756

 

 

 

 

 

 

 

 

 

1,756

 

Director deferred share activity

 

 

3

 

 

 

 

 

 

1,170

 

 

 

 

 

 

 

 

 

1,170

 

Exercise of stock options, less shares withheld for taxes

 

 

1

 

 

 

 

 

 

101

 

 

 

 

 

 

 

 

 

101

 

Purchase of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

631

 

 

 

(631

)

 

 

 

 

 

 

Sale of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

(8

)

 

 

8

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

109,245

 

 

 

109,245

 

Balance at June 30, 2022

 

 

26,412

 

 

$

26

 

 

$

271,395

 

 

$

(6,103

)

 

$

1,138,444

 

 

$

1,403,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation, including options and long-term incentives

 

 

 

 

 

 

 

 

1,894

 

 

 

 

 

 

 

 

 

1,894

 

Exercise of stock options less shares withheld for taxes

 

 

48

 

 

 

 

 

 

3,408

 

 

 

 

 

 

 

 

 

3,408

 

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

 

 

2

 

 

 

 

 

 

(473

)

 

 

 

 

 

 

 

 

(473

)

Purchase of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

93

 

 

 

(93

)

 

 

 

 

 

 

Sale of shares by Deferred Compensation Trust

 

 

 

 

 

 

 

 

(959

)

 

 

959

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97,891

 

 

 

97,891

 

Balance at September 30, 2022

 

 

26,462

 

 

$

26

 

 

$

275,358

 

 

$

(5,237

)

 

$

1,236,335

 

 

$

1,506,482

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2023 and 2022

(unaudited)

 

 

Nine Months

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

265,629

 

 

$

286,560

 

Noncash items included in net income:

 

 

 

 

 

 

Depreciation and amortization

 

 

133,156

 

 

 

117,578

 

Deferred income taxes

 

 

17,496

 

 

 

824

 

Other, net

 

 

12,158

 

 

 

268

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(58,005

)

 

 

(60,684

)

Accounts payable

 

 

25,160

 

 

 

392

 

Change in other assets and liabilities, net

 

 

20,674

 

 

 

(864

)

Net cash provided by operating activities

 

 

416,268

 

 

 

344,074

 

Investing Activities:

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(340,528

)

 

 

(279,057

)

Proceeds from disposal of property and equipment

 

 

2,141

 

 

 

1,061

 

Other

 

 

1,379

 

 

 

 

Net cash used in investing activities

 

 

(337,008

)

 

 

(277,996

)

Financing Activities:

 

 

 

 

 

 

Repayments of revolving credit agreement

 

 

 

 

 

(1,000

)

Borrowings of revolving credit agreement

 

 

 

 

 

1,000

 

Proceeds from stock option exercises

 

 

4,791

 

 

 

4,416

 

Shares withheld for taxes

 

 

(9,126

)

 

 

(11,703

)

Repayment of finance leases

 

 

(12,074

)

 

 

(15,554

)

Other financing activity

 

 

(979

)

 

 

 

Net cash used in financing activities

 

 

(17,388

)

 

 

(22,841

)

Net Increase in Cash and Cash Equivalents

 

 

61,872

 

 

 

43,237

 

Cash and Cash Equivalents, beginning of period

 

 

187,390

 

 

 

106,588

 

Cash and Cash Equivalents, end of period

 

$

249,262

 

 

$

149,825

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

7


 

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, 2022. Operating results for the quarter and nine months ended September 30, 2023 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2023.

Business

The Company provides national less-than-truckload (LTL) services through a single integrated organization. While more than 97 percent of its revenue has been derived from transporting LTL shipments across 45 states, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited transportation and logistics services across North America. The Company’s customer base is diversified across numerous industries.

Revenue Recognition

The Company’s revenues are derived primarily from the transportation of freight as it satisfies performance obligations that arise from contracts with its customers. The Company’s performance obligations arise when it receives a bill of lading (BOL) to transport a customer's commodities at negotiated prices contained in either a transportation services agreement or a publicly disclosed tariff rate. Once a BOL is received and accepted, a legally-enforceable contract is formed whereby the parties are committed to perform and the rights of the parties, shipping terms and conditions, and payment terms have been identified. Each shipment represents a distinct service that is a separately identified performance obligation.

The typical transit time to complete a shipment is from one to five days. Billing for transportation services normally occurs after completion of the service and payment is generally due within 30 days after the invoice date. The Company recognizes revenue related to the Company’s transportation services over the transit time of the shipment as it moves from origin to destination based on the transit status at the end of each reporting period.

Key estimates included in the recognition and measurement of revenue and related accounts receivable are as follows:

Revenue associated with shipments in transit is recognized ratably over transit time; and
Adjustments to revenue for billing adjustments and collectability.

The portion of the gross invoice related to interline transportation services that involve the services of another party, such as another LTL service provider, is not recorded in the Company’s revenues. Revenue from logistics services is recognized as the services are provided.

8


 

Claims and Insurance Accruals

The Company maintains a significant amount of insurance coverage with third-party insurance carriers that provides various levels of protection for covered risk exposure, including in the areas of workers’ compensation, bodily injury and property damage, casualty, cargo loss and damage and group health, with coverage limits, retention amounts and deductible amounts that vary based on policy periods and claim type. Claims and insurance accruals related to workers’ compensation, bodily injury and property damage, casualty, cargo loss and damage and group health are established by management based on estimates of losses that the Company will ultimately incur on reported claims and on claims that have been incurred but not yet reported. Accruals are calculated on reported claims based on an evaluation of the nature and severity of the claim, historical loss experience and on legal, economic and other factors. Actuarial analysis is also used in calculating the accruals for workers’ compensation and bodily injury and property damage claims.

(2) Computation of Earnings Per Share

The calculation of basic earnings per common share and diluted earnings per common share was as follows (in thousands, except per share amounts):

 

 

Third Quarter

 

 

Nine Months

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

98,213

 

 

$

97,891

 

 

$

265,629

 

 

$

286,560

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share–weighted
     average common shares

 

 

26,644

 

 

 

26,539

 

 

 

26,626

 

 

 

26,506

 

Dilutive effect of share-based awards

 

 

135

 

 

 

137

 

 

 

129

 

 

 

157

 

Denominator for diluted earnings per share–adjusted
     weighted average common shares

 

 

26,779

 

 

 

26,676

 

 

 

26,755

 

 

 

26,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

3.69

 

$

3.69

 

 

$

9.98

 

$

10.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$

3.67

 

$

3.67

 

 

$

9.93

 

$

10.75

 

For the quarter and nine months ended September 30, 2023, options and restricted stock for 5,370 and 6,154 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 nine months ended September 30, 2022, options and restricted stock for 43,602 and 27,598 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 is subject to legal proceedings that arise in the ordinary course of its business. Management believes that adequate provisions for the resolution of all contingencies, claims and pending litigation have been made for probable and estimable losses and that the ultimate outcome of these actions will not have a material adverse effect on its financial condition but could have a material adverse effect on the results of operations in a given quarter or annual period.

(4) Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair value as of September 30, 2023 and December 31, 2022, because of the relatively short maturity of these instruments. Based on the borrowing rates currently available to the Company for debt with similar terms and remaining maturities, the estimated fair value of total debt at September 30, 2023 and December 31, 2022 was $18.5 million and $31.2 million, respectively, based upon level two inputs in the fair value hierarchy. The carrying value of the debt was $18.9 million and $31.0 million at September 30, 2023 and December 31, 2022, respectively.

9


 

(5) Debt and Financing Arrangements

At September 30, 2023 and December 31, 2022, debt consisted of the following (in thousands):

 

 

September 30, 2023

 

 

December 31, 2022

 

Credit Agreement with Banks, described below

 

$

 

 

$

 

Finance Leases, described below

 

 

18,934

 

 

 

31,008

 

Total debt

 

 

18,934

 

 

 

31,008

 

Less: current portion of long-term debt

 

 

10,971

 

 

 

14,519

 

Long-term debt, less current portion

 

$

7,963

 

 

$

16,489

 

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 3, 2023, the Company was a party to a Sixth Amended and Restated Credit Agreement with a banking group (the Amended Credit Agreement), that provided up to a $300 million revolving line of credit through February 2024. The Amended Credit Agreement also had an accordion feature that allowed for an additional $100 million availability, subject to certain conditions and availability of lender commitments. Under the Amended Credit Agreement, the Company was required to maintain a minimum debt service coverage ratio set at 1.25 to 1.00 and a maximum leverage ratio set at 3.25 to 1.00. The Amended Credit Agreement provided for a pledge by the Company of certain land and structures, accounts receivable and other assets to secure indebtedness under this agreement. The Amended Credit Agreement contained certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default.

On February 3, 2023, the Company entered into a new unsecured credit agreement with a banking group (the 2023 Credit Agreement) and terminated the Amended Credit Agreement. The 2023 Credit Agreement maintains the amount of the previous line of credit of $300 million and extends the term until February 2028. The 2023 Credit Agreement contains an accordion feature that allows the Company to increase the size of the facility by up to $150 million, subject to certain conditions and availability of lender commitments. Under the 2023 Credit Agreement, the Company is subject to a maximum consolidated net lease adjusted leverage ratio of less than 3.50 to 1.00 with the potential to be temporarily increased in the event the Company makes an acquisition that meets certain criteria. The 2023 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default. Under the 2023 Credit Agreement, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due.

At September 30, 2023 and December 31, 2022, the Company had no outstanding borrowings and outstanding letters of credit of $32.1 million and $31.2 million, respectively, under these credit agreements. The available portion of the 2023 Credit Agreement may be used for general corporate purposes, including capital expenditures, working capital and letter of credit requirements, as needed.

Finance Leases

The Company is obligated under finance leases with seven-year original terms collateralized by revenue equipment. Total liabilities recognized under finance leases were $18.9 million and $31.0 million as of September 30, 2023 and December 31, 2022, respectively. Amortization of assets held under the finance leases is included in depreciation and amortization expense. As of September 30, 2023 and December 31, 2022, approximately $39.7 million and $60.5 million of finance leased assets, net of depreciation, were included in Property and Equipment, respectively. The weighted average interest rates for the finance leases at September 30, 2023 and December 31, 2022 were 3.9 percent and 3.7 percent, respectively.

10


 

Principal Maturities of Long-Term Debt

The principal maturities of long-term debt, including interest on finance leases, for the next five years are as follows (in thousands):

 

 

Amount

 

2023

 

$

2,626

 

2024

 

 

10,604

 

2025

 

 

5,453

 

2026

 

 

995

 

2027

 

 

 

Thereafter

 

 

 

Total

 

 

19,678

 

Less: Amounts Representing Interest on Finance Leases

 

 

744

 

Total

 

$

18,934

 

 

 

 

11


 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and our 2022 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Those consolidated financial statements include additional information about our significant accounting policies, practices and the transactions that underlie our financial results.

Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission (the SEC) encourages companies to disclose forward-looking information so that investors can better understand the future prospects of a company and make informed investment decisions. This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains these types of statements, which are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “predict,” “believe,” “should” and similar words or expressions are intended to identify forward-looking statements. Investors should not place undue reliance on forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as otherwise required by applicable law. All forward-looking statements reflect the present expectation of future events of our management as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors, risks, uncertainties and assumptions that could cause actual results to differ materially from those described in any forward-looking statements. These factors, risks, uncertainties and assumptions include, but are not limited to, the following:

general economic conditions including downturns or inflationary periods in the business cycle;
operation within a highly competitive industry and the adverse impact from downward pricing pressures, including in connection with fuel surcharges, and other factors;
industry-wide external factors largely out of our control;
cost and availability of qualified drivers, dock workers, mechanics and other employees, purchased transportation and fuel;
inflationary increases in operating expenses and corresponding reductions of profitability;
cost and availability of diesel fuel and fuel surcharges;
cost and availability of insurance coverage and claims expenses and other expense volatility, including for personal injury, cargo loss and damage, workers’ compensation, employment and group health plan claims;
failure to successfully execute the strategy to expand our service geography;
costs and liabilities from the disruption in or failure of our technology or equipment essential to our operations, including as a result of cyber incidents, security breaches, malware or ransomware attacks;
failure to keep pace with technological developments;
labor relations, including the adverse impact should a portion of our workforce become unionized;
cost, availability and resale value of real property and revenue equipment;
supply chain disruption and delays on new equipment delivery;
capacity and highway infrastructure constraints;
risks arising from international business operations and relationships;
seasonal factors, harsh weather and disasters caused by climate change;
economic declines in the geographic regions or industries in which our customers operate;
the creditworthiness of our customers and their ability to pay for services;
our need for capital and uncertainty of the credit markets;
the possibility of defaults under our debt agreements, including violation of financial covenants;
inaccuracies and changes to estimates and assumptions used in preparing our financial statements;
failure to operate and grow acquired businesses in a manner that support the value allocated to acquired businesses;
dependence on key employees;
employee turnover from changes to compensation and benefits or market factors;
increased costs of healthcare benefits;
damage to our reputation from adverse publicity, including from the use of or impact from social media;
failure to make future acquisitions or to achieve acquisition synergies;

12


 

the effect of litigation and class action lawsuits arising from the operation of our business, including the possibility of claims or judgments in excess of our insurance coverages or that result in increases in the cost of insurance coverage or that preclude us from obtaining adequate insurance coverage in the future;
the potential of higher corporate taxes and new regulations, including with respect to climate change, employment and labor law, healthcare and securities regulation;
the effect of governmental regulations, including hours of service and licensing compliance for drivers, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, regulations of the Food and Drug Administration and Homeland Security, and healthcare and environmental regulations;
unforeseen costs from new and existing data privacy laws;
changes in accounting and financial standards or practices;
widespread outbreak of an illness or any other communicable disease, including the COVID-19 pandemic;
international conflicts and geopolitical instability;
increasing investor and customer sensitivity to social and sustainability issues, including climate change;
provisions in our governing documents and Delaware law that may have anti-takeover effects;
issuances of equity that would dilute stock ownership;
weakness, disruption or loss of confidence in financial or credit markets; and
other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s SEC filings.

These factors and risks are described in Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as updated by Part II, Item 1A. of this Quarterly Report on Form 10-Q.

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-Q. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by applicable law.

Executive Overview

The Company’s business is highly correlated to non-service sectors of the general economy. The Company’s strategy is to improve profitability by increasing yield while also increasing volumes to build density in existing geography and to pursue geographic and terminal expansion to promote profitable growth and improve our customer value proposition over time. The Company’s business is labor intensive, capital intensive and service sensitive. The Company looks for opportunities to improve safety, cost effectiveness and asset utilization. Pricing initiatives have had a positive impact on yield and profitability. The Company continues to execute targeted sales and marketing programs along with initiatives to align costs with volumes and improve customer satisfaction. Technology continues to be an important investment as the Company continues to work toward improving customer experience, operational efficiencies, safety and company image.

Third Quarter Overview

The Company’s operating revenue increased by 6.2 percent in the third quarter of 2023 compared to the same period in 2022. This increase resulted primarily from increases in shipments and tonnage partially as a result of the redistribution of freight due to industry consolidation. This increase was partially offset by decreases in fuel surcharge revenue, resulting from lower diesel fuel prices. In the third quarter of 2023, LTL shipments per workday were up 12.2 percent and LTL tonnage per workday was up 6.7 percent compared to the prior year quarter. Additionally, increases in revenue were driven by improved revenue per hundredweight and revenue per shipment, excluding fuel surcharge, due to pricing and changes in business mix.

Consolidated operating income of $128.4 million for the third quarter of 2023 was relatively flat compared to the third quarter of 2022. Diluted earnings per share of $3.67 in the third quarter of 2023 was also flat compared to the prior year quarter. The operating ratio (operating expenses divided by operating revenue) was 83.4 percent in the third quarter of 2023 compared to 82.4 percent in the third quarter of 2022. The Company generated $416.3 million in net cash provided by operating activities in the first nine months of 2023 compared with $344.1 million in the same period last year.

13


 

General

The following Management’s Discussion and Analysis describes the principal factors affecting the results of operations, financial condition, liquidity and capital resources, as well as the critical accounting policies and estimates of Saia, Inc. and its wholly-owned subsidiaries (together, the Company or Saia).

Saia is a transportation company headquartered in Johns Creek, Georgia that provides national less-than-truckload (LTL) services through a single integrated organization. While more than 97 percent of revenue is historically derived from transporting LTL shipments across 45 states, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited transportation and logistics services across North America.

Our business is highly correlated to non-service sectors of the general economy. Our business also is impacted by a number of other factors as discussed under “Cautionary Note Regarding Forward Looking Statements” and Part II, Item 1A. “Risk Factors.” The key factors that affect our operating results are the volumes of shipments transported through our network, as measured by our average daily shipments and tonnage; the prices we obtain for our services, as measured by revenue per hundredweight (a measure of yield) and revenue per shipment; our ability to manage our cost structure for capital expenditures and operating expenses such as salaries, wages and benefits; purchased transportation; claims and insurance expense; fuel and maintenance; and our ability to match operating costs to shifting volume levels.

14


 

Results of Operations

Saia, Inc. and Subsidiaries

Selected Results of Operations and Operating Statistics

For the quarters ended September 30, 2023 and 2022

(unaudited)

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

 

 

 

Variance

 

 

 

 

2023

 

 

2022

 

 

'23 v. '22

 

 

 

 

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

Operating Revenue

 

$

775,144

 

 

$

729,561

 

 

 

6.2

 

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employees’ benefits

 

 

344,605

 

 

 

297,247

 

 

 

15.9

 

 

Purchased transportation

 

 

76,746

 

 

 

85,452

 

 

 

(10.2

)

 

Fuel and other operating expenses

 

 

179,740

 

 

 

177,825

 

 

 

1.1

 

 

Depreciation and amortization

 

 

45,618

 

 

 

40,682

 

 

 

12.1

 

 

Operating Income

 

 

128,435

 

 

 

128,355

 

 

 

0.1

 

 

Operating Ratio

 

 

83.4

%

 

 

82.4

%

 

 

 

 

Nonoperating (Income) Expense

 

 

(1,812

)

 

 

649

 

 

 

(379.2

)

 

 

 

 

 

 

 

 

 

 

 

 

Working Capital (as of September 30, 2023 and 2022)

 

 

346,365

 

 

 

212,933

 

 

 

 

 

Cash Flows provided by Operating Activities (year to date)

 

 

416,268

 

 

 

344,074

 

 

 

 

 

Net Acquisitions of Property and Equipment (year to date)

 

 

338,387

 

 

 

277,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saia Motor Freight Operating Statistics:

 

 

 

 

 

 

 

 

 

 

Workdays

 

 

63

 

 

 

64

 

 

 

 

 

LTL Tonnage

 

 

1,467

 

 

 

1,397

 

 

 

5.0

 

 

LTL Shipments

 

 

2,158

 

 

 

1,954

 

 

 

10.4

 

 

LTL Revenue per hundredweight

 

$

25.87

 

 

$

25.10

 

 

 

3.1

 

 

LTL Revenue per hundredweight, excluding fuel surcharge

 

$

21.39

 

 

$

19.74

 

 

 

8.4

 

 

LTL Revenue per shipment

 

$

351.64

 

 

$

359.04

 

 

 

(2.1

)

 

LTL Revenue per shipment, excluding fuel surcharge

 

$

290.79

 

 

$

282.41

 

 

 

3.0

 

 

LTL Pounds per shipment

 

 

1,360

 

 

 

1,431

 

 

 

(5.0

)

 

LTL Length of haul

 

 

896

 

 

 

897

 

 

 

(0.1

)

 

 

Quarter and nine months ended September 30, 2023 compared to quarter and nine months ended September 30, 2022

Revenue and volume

Consolidated revenue for the quarter ended September 30, 2023 increased 6.2 percent to $775.1 million. This increase resulted primarily from increases in shipments and tonnage partially as a result of the redistribution of freight due to industry consolidation. This increase was partially offset by decreases in fuel surcharge revenue as a result of lower diesel fuel prices. For the third quarter of 2023, Saia’s LTL tonnage was up 5.0 percent to 1.5 million tons, and LTL shipments increased 10.4 percent to 2.2 million total shipments. LTL revenue per hundredweight, excluding fuel surcharge, increased 8.4 percent to $21.39 per hundredweight for the third quarter of 2023 as a result of changes in business mix and pricing actions. For the third quarter of 2023, approximately 75 to 80 percent of the Company’s operating revenue was subject to specific customer price negotiations that occur throughout the year. The remaining 20 to 25 percent of operating revenue was subject to a general rate increase. For customers subject to a general rate increase, Saia implemented 6.5 and 7.5 percent general rate increases on January 30, 2023 and January 24, 2022, respectively. Competitive factors, customer turnover and mix changes impact the extent to which customer rate increases are retained over time.

Operating revenue includes revenue recognized from the Company’s fuel surcharge program, which is designed to reduce exposure to fluctuations in diesel fuel prices by adjusting freight charges to account for changes in the price of diesel fuel. The Company’s fuel surcharge is generally based on the average national price for diesel fuel (as published by the United States Energy Information Administration) and is typically reset weekly. Fuel surcharges are widely accepted in the industry and are a significant component of revenue and pricing. Fuel surcharges are an integral part of customer contract negotiations, but represent only one portion of overall customer price negotiations. Fuel surcharge revenue as a percentage of operating revenue decreased to 16.9 percent for the quarter ended

15


 

September 30, 2023 compared to 20.5 percent for the quarter ended September 30, 2022, as a result of decreases in the average cost of diesel fuel, pricing structures and changes in mix for the quarter compared to the prior year.

 

For the nine months ended September 30, 2023, operating revenues were $2.1 billion, down 0.3 percent from operating revenues for the nine months ended September 30, 2022. Shipments and tonnage were relatively flat year over year. Decreases in fuel surcharge revenue, resulting from lower diesel fuel prices, were partially offset by increased revenue per shipment, excluding fuel surcharge, during the first nine months of 2023 compared to the same period in the prior year. Fuel surcharge revenue as a percentage of operating revenue decreased to 16.9 percent for the nine months ended September 30, 2023 compared to 19.8 percent for the nine months ended September 30, 2022, as a result of decreases in the cost of fuel.

Operating expenses and margin

Consolidated operating income of $128.4 million for the third quarter of 2023 was relatively flat compared to the third quarter of 2022. Overall, increased operating revenue was primarily offset by increased salaries, wages and employees’ benefits as well as depreciation and amortization expense during the third quarter of 2023. The third quarter of 2023 operating ratio (operating expenses divided by operating revenue) was 83.4 percent compared to 82.4 percent for the same period in 2022.

Salaries, wages and employees’ benefits increased $47.4 million in the third quarter of 2023 compared to the third quarter of 2022. This change was primarily driven by increases in employee hours and headcount in response to overall increased volumes during the quarter combined with a Company-wide wage increase in July of 2023 of approximately 4.1 percent. Purchased transportation decreased $8.7 million in the third quarter of 2023 compared to the third quarter of 2022 primarily due to a decrease in non-asset truckload volume in addition to a decrease in cost per mile, partially offset by an increase in LTL purchased transportation miles compared to the same period in 2022. Fuel, operating expenses and supplies decreased by $1.2 million compared to the third quarter of 2022 largely due to decreases in fuel expense during the quarter, partially offset by increased vehicle maintenance costs and facility costs. Claims and insurance expense in the third quarter of 2023 was $2.0 million higher than the third quarter of 2022 primarily due to increases in insurance premiums as well as accident related self-insurance costs. Depreciation and amortization expense increased $4.9 million in the third quarter of 2023 compared to the same period in 2022 primarily due to ongoing investments in revenue equipment and network expansion.

For the nine months ended September 30, 2023, consolidated operating income was $347.8 million, down 7.9 percent compared to $377.8 million for the nine months ended September 30, 2022. This decrease was largely due to increased salaries, wages and employee’s benefits, partially offset by a decrease in purchased transportation and fuel expense.

Salaries, wages and employees’ benefits increased $73.7 million during the first nine months of 2023 compared to the same period last year. This change was primarily driven by a Company-wide wage increase in July 2023 of approximately 4.1 percent combined with headcount increases which allowed us to optimize our internal resources to support our current volumes and network expansion. Purchased transportation decreased $82.3 million for the first nine months of 2023 compared to the same period in the prior year primarily due to a decrease in purchased transportation miles in addition to a decrease in cost per mile for purchased transportation. Fuel, operating expenses and supplies increased $5.6 million during the first nine months of 2023 compared to the same period last year largely due to increased vehicle maintenance costs, investments in information technology network support and an increase in facility costs. These changes were partially offset by decreases in costs of fuel during the period. During the first nine months of 2023, claims and insurance expense was $8.1 million higher than the same period last year primarily due to increases in insurance premiums as well as accident related self-insurance costs. Depreciation and amortization expense increased $15.6 million during the first nine months of 2023 compared to the same period in 2022 primarily due to ongoing investments in revenue equipment and network expansion.

Other

Interest expense for the quarter and nine months ended September 30, 2023 was lower than the same period in 2022 as the Company continued to pay down finance lease obligations.

Interest income for the quarter and nine months ended September 30, 2023 was higher than the same period in 2022 due to increased interest rates on higher average deposit balances during the period.

The effective tax rate was 24.6 percent and 23.3 percent for the quarters ended September 30, 2023 and 2022, respectively. For the nine months ended September 30, 2023 and 2022, the effective tax rate was 24.2 and 23.5 percent, respectively. For the nine months ended September 30, 2023 approximately $57.8 million in net cash tax payments were made compared to $102.1 million in the nine months ended September 30, 2022 due to the timing of estimated tax payments.

Net income was $98.2 million, or $3.67 per diluted share, in the third quarter of 2023 compared to net income of $97.9 million, or $3.67 per diluted share, in the third quarter of 2022. Net income was $265.6 million, or $9.93 per diluted share, for the first nine months of 2023 compared to net income of $286.6 million, or $10.75 per diluted share, for the first nine months of 2022.

16


 

Outlook

Our business remains highly correlated to non-service sectors of the general economy and competitive pricing pressures, as well as the success of Company-specific improvement initiatives. Our outlook for the remainder of 2023 and beyond is dependent on a number of external factors, including strength of the economy, inflation, labor availability, diesel fuel prices and supply chain constraints. The potential impact of these factors on our operations, financial performance and financial condition, as well as the impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict.

As the market continues to absorb the redistribution of volumes resulting from a large LTL competitor ceasing operations, we believe both positive and challenging effects remain on our business operations and financial performance. The profitability related to any increased volume resulting from the redistribution is uncertain, as revenue increases may be offset by higher costs, or may otherwise be less profitable than our historical business due to changes in freight characteristics.

We are continuing initiatives to improve and enhance customer service in an effort to support our ongoing pricing and business mix optimization, while seeking to control costs and improve productivity. Planned revenue initiatives include building density in our current geography, targeted marketing initiatives to grow revenue in more profitable areas, further expansion of our geographic and terminal network, as well as pricing and yield management. On January 30, 2023 and January 24, 2022 Saia implemented 6.5 and 7.5 percent general rate increases, respectively, for customers comprising approximately 20 to 25 percent of Saia’s operating revenue. The success of these revenue initiatives is impacted by what proves to be the underlying economic trends, competitor initiatives and other factors discussed under “Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A. “Risk Factors.”

If we build market share, including through our geographic and terminal expansion, we expect there to be numerous operating leverage cost benefits. Conversely, should the economy soften, we plan to match resources and capacity to shifting volume levels in an effort to lessen unfavorable operating leverage. The success of cost improvement initiatives is impacted by a number of factors, including the cost and availability of drivers, dock workers and personnel, and availability and cost of purchased transportation, cost of diesel fuel, cost of insurance, and inflation.

Effective July 2023, the Company implemented a market competitive salary and wage increase for all employees. The compensation increase was approximately 4.1 percent, and the Company anticipates the impact will be partially offset by productivity and efficiency gains.

See “Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” for a more complete discussion of potential risks and uncertainties that could materially adversely affect our financial condition, results of operations, cash flows and prospects.

Financial Condition, Liquidity and Capital Resources

The Company’s liquidity needs arise primarily from capital investment in new equipment, land and structures, information technology and letters of credit required under insurance programs, as well as funding working capital requirements.

Working capital/capital expenditures

Working capital at September 30, 2023 was $346.4 million, an increase from $212.9 million at September 30, 2022.

Current assets at September 30, 2023 increased by $94.2 million as compared to September 30, 2022, driven by an increase in cash and cash equivalents of $99.4 million and accounts receivable of $10.3 million, partially offset by a decrease in prepaid expenses of $19.4 million. Current liabilities decreased by $39.2 million at September 30, 2023 compared to September 30, 2022 primarily related to a decrease in claims and insurance accruals largely due to the settlement of certain outstanding claims.

17


 

A summary of our cash activity is presented below:

 

 

 

Nine Months

 

 

2023

 

2022

 

 

(in thousands)

Cash and Cash Equivalents, beginning of period

 

$187,390

 

$106,588

Net Cash flows provided by (used in):

 

 

 

 

Operating activities

 

416,268

 

344,074

Investing activities

 

(337,008)

 

(277,996)

Financing activities

 

(17,388)

 

(22,841)

Net Increase in Cash and Cash Equivalents

 

61,872

 

43,237

Cash and Cash Equivalents, end of period

 

$249,262

 

$149,825

Cash flows provided by operating activities were $416.3 million for the nine months ended September 30, 2023 versus $344.1 million for the nine months ended September 30, 2022. The increase is primarily due to changes in working capital compared to the prior year, partially offset by decreased net income compared to the prior period. For the nine months ended September 30, 2023, net cash used in investing activities was $337.0 million compared to $278.0 million in the same period last year, a $59.0 million increase. This increase resulted from increased capital expenditures as the Company continues to expand its footprint and add density in markets. For the nine months ended September 30, 2023, net cash used in financing activities was $17.4 million compared to $22.8 million during the same period last year, as a result of decreased capital lease payments and less taxes withheld and remitted for equity based compensation shares during the first nine months of 2023 compared to the same period in 2022.

The Company has historically generated cash flows from operations to fund a large portion of its capital expenditure requirements. The timing of capital expenditures can largely be managed around the seasonal working capital requirements of the Company. The Company believes it has adequate sources of capital to meet short-term liquidity needs through its cash on hand, operating cash flows and availability under its credit agreement, discussed below. Future operating cash flows are primarily dependent upon the Company’s profitability and its ability to manage its working capital requirements, primarily accounts receivable, accounts payable and wage and benefit accruals.

The Company currently expects that net capital expenditures in 2023 will be in excess of $400 million, subject to the ongoing evaluation of market conditions. Projected 2023 capital expenditures include normal replacement cycles of revenue equipment and investments in technology. In addition, the Company plans to add revenue equipment and real estate investments to support growth initiatives. Net capital expenditures were $338.4 million in the first nine months of 2023. Approximately $139.8 million of the 2023 remaining capital budget was committed as of September 30, 2023.

Credit Agreement

Prior to February 3, 2023, the Company was party to a Sixth Amended and Restated Credit Agreement (the Amended Credit Agreement) with a banking group that provided up to a $300 million revolving line of credit through February 2024. The Amended Credit Agreement also had an accordion feature that allowed for an additional $100 million availability, subject to certain conditions and availability of lender commitments. The Amended Credit Agreement provided for a pledge by the Company of certain land and structures, accounts receivable and other assets to secure indebtedness under the Amended Credit Agreement.

On February 3, 2023, the Company entered into a new unsecured credit agreement with a banking group (the 2023 Credit Agreement) and terminated the Amended Credit Agreement. The 2023 Credit Agreement maintains the amount of the previous line of credit of $300 million and extends the term until February 2028. The 2023 Credit Agreement contains an accordion feature that allows the Company to increase the size of the facility by up to $150 million, subject to certain conditions and availability of lender commitments. Under the 2023 Credit Agreement, the Company is subject to a maximum consolidated net lease adjusted leverage ratio of less than 3.50 to 1.00 with the potential to be temporarily increased in the event the Company makes an acquisition that meets certain criteria. The 2023 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default. Under the 2023 Credit Agreement, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due. The Company was in compliance with its debt covenants at September 30, 2023.

At September 30, 2023 and December 31, 2022, the Company had no outstanding borrowings and outstanding letters of credit of $32.1 million and $31.2 million, respectively, under these credit agreements. At September 30, 2023, the Company had $267.9 million in availability under the 2023 Credit Agreement. The available portion of the 2023 Credit Agreement may be used for general corporate purposes, including capital expenditures, working capital and letter of credit requirements, as needed.

18


 

Finance Leases

The Company is obligated under finance leases with seven-year original terms covering revenue equipment. Total liabilities recognized under finance leases were $18.9 million and $31.0 million as of September 30, 2023 and December 31, 2022, respectively. Amortization of assets held under the finance leases is included in depreciation and amortization expense. The weighted average interest rates for the finance leases at September 30, 2023 and December 31, 2022 were 3.9 percent and 3.7 percent, respectively.

Contractual Obligations

Contractual obligations for the Company are comprised of lease agreements, purchase obligations and long-term debt obligations related to any outstanding balance under the Company’s revolving line of credit. Contractual obligations for operating leases at September 30, 2023 totaled $154.5 million, including operating leases with original maturities of less than one year, which are not recorded in our consolidated balance sheet in accordance with U.S. generally accepted accounting principles. Contractual obligations in the form of finance leases were $19.7 million at September 30, 2023, which includes both principal and interest amounts. For the remainder of 2023, $0.4 million of interest payments are anticipated based on borrowings and commitments outstanding at September 30, 2023. See Note 5 to the accompanying unaudited condensed consolidated financial statements in this Current Report on Form 10-Q. Purchase obligations at September 30, 2023 were $141.7 million, including commitments of $141.1 million for capital expenditures. As of September 30, 2023, the revolving line of credit had no outstanding principal balance.

Other commercial commitments of the Company typically include letters of credit and surety bonds required for collateral towards insurance agreements and amounts outstanding under the revolving line of credit. As of September 30, 2023 the Company had total outstanding letters of credit of $33.9 million and $56.4 million in surety bonds. Additionally at September 30, 2023, the Company had $267.9 million available under its revolving credit facility, subject to existing debt covenants.

The Company has accrued approximately $4.6 million for uncertain tax positions and $0.5 million for interest and penalties related to the uncertain tax positions as of September 30, 2023. At September 30, 2023, the Company has accrued $93.1 million for claims and insurance liabilities.

Critical Accounting Policies and Estimates

There have been no significant changes to the application of the critical accounting policies and estimates contained in our Annual Report on Form 10-K for the year ended December 31, 2022. The reader should refer to our 2022 Annual Report on Form 10-K for a full disclosure of all critical accounting policies and estimates of amounts recorded in certain assets, liabilities, revenue and expenses.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to a variety of market risks including the effects of interest rates and diesel fuel prices. The detail of the Company’s debt structure is more fully described in Note 5 “Debt and Financing Arrangements” of the accompanying unaudited condensed financial statements in this Form 10-Q. To help mitigate our risk to rising diesel fuel prices, the Company has an established fuel surcharge program.

The following table provides information about the Company’s third-party financial instruments as of September 30, 2023. The table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. The fair value of the fixed rate debt (in millions) was estimated based upon level two inputs in the fair value hierarchy. The fair value of finance leases is based on current market interest rates for similar types of financial instruments.

 

 

Expected maturity date

 

 

2023

 

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

Thereafter

 

 

Total

 

 

Fair Value

 

Fixed rate debt

 

$

2.4

 

 

$

10.2

 

 

$

5.3

 

 

$

1.0

 

 

$

-

 

 

$

-

 

 

$

18.9

 

 

$

18.5

 

Average interest rate

 

 

3.9

%

 

 

3.9

%

 

 

4.2

%

 

 

3.5

%

 

 

-

 

 

 

-

 

 

 

3.9

%

 

 

 

 

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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.

20


 

PART II. OTHER INFORMATION

Item 1. Legal Proceedings — For a description of legal proceedings, see Note 3 “Commitments and Contingencies” of the accompanying unaudited condensed consolidated financial statements.

 

Item 1A. Risk Factors— In addition to the other information included in this report and in our other reports and statements that we file with the SEC, you should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition and/or operating results. The risks discussed in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

There have been no material changes to the risk factors identified in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022.

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

July 1, 2023 through

 

 

 

 

 

 

 

 

 

 

 

July 31, 2023

 

(2)

 

$—

(2)

 

 

 

$—

August 1, 2023 through

 

 

 

 

 

 

 

 

 

 

 

August 31, 2023

 

(3)

 

$—

(3)

 

 

 

September 1, 2023 through

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

(4)

 

$—

(4)

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

(1)

Any shares purchased by the Saia, Inc. Executive Capital Accumulation Plan are open market purchases. For more information on the Saia, Inc. Executive Capital Accumulation Plan, see the Registration Statement on Form S-8 (No. 333-155805) filed on December 1, 2008.

 

(2)

The Saia, Inc. Executive Capital Accumulation Plan sold 760 shares of Saia stock at an average price of $388.11 during the period of July 1, 2023 through July 31, 2023.

 

(3)

The Saia, Inc. Executive Capital Accumulation Plan had no sales of Saia stock during the period of August 1, 2023 through August 31, 2023.

 

(4)

The Saia, Inc. Executive Capital Accumulation Plan had no sales of Saia stock during the period of September 1, 2023 through September 30, 2023.

 

 

21


 

Item 6. Exhibits

Exhibit

 

Number

 

Description of Exhibit

 

3.1

 

Restated Certificate of Incorporation of Saia, Inc., as amended (incorporated herein by reference to Exhibit 3.1 of Saia, Inc.’s Form 8-K (File No. 0-49983) filed on July 26, 2006).

 

3.2

 

Certificate of Amendment to Restated Certificate of Incorporation of Saia, Inc. (incorporated herein by reference to Exhibit 3.1 of Saia, Inc.'s Form 8-K (File No. 0-49983) filed on July 2, 2021).

 

3.3

 

Certificate of Amendment to Restated Certificate of Incorporation of Saia, Inc. (incorporated herein by reference to Exhibit 3.1 of Saia, Inc.’s Form 8-K (File No. 0-49983) filed on June 9, 2022).

 

 

3.4

 

Certificate of Amendment to Restated Certificate of Incorporation of Saia, Inc. (incorporated herein by reference to Exhibit 3.2 of Saia, Inc.’s Form 8-K (File No. 0-49983) filed on June 9, 2022).

 

 

3.5

 

Amended and Restated By-laws of Saia, Inc. (incorporated herein by reference to Exhibit 3.1 of Saia, Inc.’s Form 8-K (File No. 0-49983) filed on July 29, 2008).

 

 

 

3.6

 

Certificate of Elimination filed with the Delaware Secretary of State on December 16, 2010 (incorporated herein by reference to Exhibit 3.1 of Saia, Inc.’s Form 8-K (File No. 0-49983) filed on December 20, 2010).

 

 

 

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

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101

 

The following financial information from Saia, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (unaudited), (ii) Condensed Consolidated Statements of Operations for the quarters and nine months ended September 30, 2023 and 2022 (unaudited), (iii) Condensed Consolidated Statements of Stockholders’ Equity for the quarters ended September 30, 2023 and 2022 (unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited), and (v) the Notes to Condensed Consolidated Financial Statements (unaudited). XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

104

 

The cover page from Saia’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL (included as Exhibit 101).

 

* Management contract or compensatory plan or arrangement.

 

22


 

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: October 27, 2023

 /s/ Douglas L. Col

Douglas L. Col

Executive Vice President and Chief Financial Officer

 

 

23