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Saia Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 30, 2009 04:02PM
Saia Inc. (SAIA) filed Quarterly Report for the period ended 2009-03-31.
Highlight of Business Operations:
The Company had $7.0 million in cash from operating activities through the first three months of the year compared with cash used in the amount of $0.4 million in the prior-year period. The Company had net cash used in investing activities of $1.9 million during the first three months of 2009 for the purchase of property and equipment compared to $13.4 million in the first three months of 2008. The Companys cash used in financing activities during the first three months of 2009 was $20.2 million for debt repayments compared to net borrowings of $12.5 million in the first three months of 2008. The Company had no borrowings on its revolving credit agreement, outstanding letters of credit of $53.7 million and cash and cash equivalents balance of $12.0 million as of March 31, 2009. The Company was in compliance with its debt covenants at March 31, 2009. Due to macro economic conditions, the Company is closely monitoring compliance with its debt covenants and will evaluate financing alternatives should that become necessary.
in 2008. Lower fuel prices, in conjunction with volume changes due to decreased tonnage, caused $19.2 million of the decrease in fuel, operating expenses and supplies. The Company implemented reductions-in-force during the fourth quarter of 2008 and the first quarter of 2009 to bring the Companys workforce in line with business levels and reduced outlook. The Company also suspended its 401(k) match effective February 1, 2009. Increases in health insurance costs partially offset the decrease in salaries and wages by $1.5 million. Estimated annualized savings from the 401(k) match is $6 million and $18 million from the compensation and wage reduction. Claims and insurance expense in the first quarter of 2009 was $1.8 million less than the first quarter of 2008 primarily reflecting favorable trends in the frequency and severity of accidents incurred. Purchased transportation expenses decreased 27.0 percent reflecting lower fuel prices, decreased utilization due to lower volumes and increased usage of Company drivers. The Company recorded pre-tax expense of $0.2 million in the first quarter of 2009 for equity-based compensation compared to $0.5 million in the first quarter of 2008. Equity-based compensation expense includes the expense for the cash-based awards under the Companys long-term incentive plans, which is a function of the Companys stock price performance versus a peer group, and the deferred compensation plans expense, which is tied to changes in the Companys stock price. However, a plan amendment in November 2008 changed the accounting for the deferred compensation plan and results in equity plan accounting for the plan going forward.
Working capital at March 31, 2009 was $12.5 million, which decreased from working capital at March 31, 2008 of $37.7 million due to decreased net accounts receivable balances of $20.0 million reflecting lower revenues, as well as an increase in accounts payable and other accrued liabilities of $12.5 million due to the timing of payments. Cash flows from operating activities were $7.0 million for the three months ended March 31, 2009 versus $0.4 million used in operating activities for the three months ended March 31, 2008. For the three months ended March 31, 2009, cash used in investing activities was $1.9 million versus $13.4 million in the prior-year period, primarily due to lower property and equipment purchases. For the three months ended March 31, 2009, cash used in financing activities was $20.2 million versus cash from financing activities of $12.5 million for the prior-year period. The $20.2 million used for financing activities in 2009 was fully comprised of debt repayments including $11.5 million for the redemption of the subordinated debentures.
On September 20, 2002, the Company issued $100 million in Senior Notes under a $125 million (amended to $150 million in April 2005) Master Shelf Agreement with Prudential Investment Management, Inc. and certain of its affiliates. The Company issued another $25 million in Senior Notes on November 30, 2007 and $25 million in Senior Notes on January 31, 2008 under the same Master Shelf Agreement.
The initial $100 million Senior Notes are unsecured and have a fixed interest rate of 7.38 percent. Payments due under the $100 million Senior Notes were interest only until June 30, 2006 and at that time semi-annual principal payments began with the final payment due December 2013. The November 2007 issuance of $25 million Senior Notes are unsecured and have a fixed interest rate of 6.14 percent. The January 2008 issuance of $25 million Senior Notes are unsecured and have a fixed interest rate of 6.17 percent. Payments due for both recent $25 million issuances will be interest only until June 30, 2011 and at that time semi-annual principal payments will begin with the final payments due January 1, 2018. Under the terms of the Senior Notes, the Company must maintain certain financial covenants including a maximum ratio of total indebtedness to earnings before interest, taxes, depreciation, amortization and rent (EBITDAR), a minimum fixed charge coverage ratio, an adjusted leverage ratio and a minimum tangible net worth. At March 31, 2009 the Company was in compliance with these covenants.
The Company has historically generated cash flows from operations that have funded its capital expenditure requirements. Cash flows from operations were $82.3 million for the year ended December 31, 2008, while net cash used in investing activities was $26.0 million. As such, the additional cash flows from operations also funded the $35.9 million cash used in financing activities in 2008. Cash flows from operations were $7.0 million for the three months ended March 31, 2009 which funded the $1.9 million of total capital expenditures in the first three months of 2009. Cash flows from operating activities for the three months ended March 31, 2009 were $7.4 million higher than the prior year period primarily due to decreased working capital 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 and cash equivalents of $12.0 million at March 31, 2009 and availability under its revolving credit facility, subject to the satisfaction of existing debt covenants. Future operating cash flows are primarily dependent upon the Companys 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 March 31, 2009.
Charles Brandes of Brandes Investment.
Stocks Discussed: SAIA,