SCS Trans Inc is a leading transportation company that provides a variety of trucking transportation and supply chain solutions to a broad range of industries including the retail petrochemical and manufacturing industries. We serve a wide variety of customers by offering regional interregional and national LTL services and selected TL services across the United States.Saia customers can choose from a wide variety of service options including overnight and second-day regional LTL shipping and a guaranteed/expedited delivery Saia Inc. has a market cap of $210.2 million; its shares were traded at around $15.56 with and P/S ratio of 0.2. Saia Inc. had an annual average earning growth of 1.9% over the past 5 years.
Highlight of Business Operations:The Company generated $9.7 million in cash from operating activities of continuing operations through the first six months of the year compared with $30.8 million generated in the prior-year period. While there were no cash flows from discontinued operations in 2009, cash flows from operating activities of discontinued operations were $0.7 million for the six months ended June 30, 2008. The Company had net cash used in investing activities of $4.4 million during the first six months of 2009 for the purchase of property and equipment compared to $19.6 million in the first six months of 2008. The Companys cash used in financing activities during the first six months of 2009 was $20.3 million for debt repayments and $1.8 million for debt issuance costs compared to net debt repayments of $13.0 million in the first six months of 2008. The Company had no borrowings on its revolving credit agreement, outstanding letters of credit of $57.7 million and cash and cash equivalents balance of $10.4 million as of June 30, 2009. The Company was in compliance with its debt covenants at June 30, 2009.
Consolidated operating loss of $0.4 million in the second quarter of 2009, compared to operating income of $10.9 million in the prior year quarter, was significantly impacted by the decreased tonnage. The second quarter 2009 operating ratio (operating expenses divided by operating revenue) was 100.2 compared to 96.1 for the same period in 2008. Lower fuel prices, in conjunction with volume changes due to decreased tonnage, caused $27.9 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 suspended its 401(k) match effective February 1, 2009. On April 1, 2009, the Company implemented a compensation reduction equal to ten percent of salary for the Companys leadership team, five percent for hourly, linehaul and salaried employees in operations, maintenance and administration and ten percent in the annual retainer and meeting fees paid to the non-employee members of the Companys Board of Directors. Estimated annualized savings from the 401(k) match is $6 million and $18 million from the compensation and wage reductions. The cost reductions from the above actions have been partially offset by increased health insurance and workers compensation costs of $1.8 million. Accident expense in the second quarter of 2009 was $1.9 million more than the second quarter of 2008 primarily reflecting unfavorable development of accidents incurred in prior periods along with unfavorable trends in the severity of accidents incurred. Purchased transportation expenses decreased 19.3 percent reflecting lower fuel prices, decreased utilization due to lower volumes and increased usage of Company drivers. The Company recorded pre-tax expense of $0.1 million in the second quarter of 2009 for equity-based compensation compared to a $0.6 million benefit in the second 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.
For the six months ended June 30, 2009, operating loss was $7.9 million with an operating ratio of 101.8 percent compared to operating income of $12.9 million with an operating ratio of 97.6 percent for the six months ended June 30, 2008. The actions described above, along with decreased volumes, resulted in a $16.9 million decrease in salaries, wages and benefit expense for the six months ended June 30, 2009. Lower fuel prices and fuel volumes resulted in $47.1 million of the decrease in fuel, operating expenses and supplies. Purchased transportation expenses decreased 22.9 percent during the first six months of 2009 due to lower utilization and fuel prices.
Loss from continuing operations was $1.7 million or $0.13 per diluted share in the second quarter of 2009 compared to income of $6.2 million, or $0.46 per diluted share, in the second quarter of 2008. Loss from continuing operations was $8.0 million or $0.60 per diluted share in the first six months of 2009 compared to income from continuing operations of $5.4 million or $0.40 per diluted share in the first six months of 2008.
Working capital at June 30, 2009 was $11.6 million, which decreased from working capital at June 30, 2008 of $22.8 million due to a decrease in net accounts receivable balances of $31.0 million reflecting lower revenues, offset by a decrease in accounts payable of $19.8 million due to the timing of payments. Cash flows from operating activities were $9.7 million for the six months ended June 30, 2009 versus $31.5 million for the six months ended June 30, 2008. For the six months ended June 30, 2009, cash used in investing activities was $4.4 million versus $19.6 million in the prior-year period, primarily due to lower property and equipment purchases. For the six months ended June 30, 2009, cash used in financing activities was $22.0 million versus $13.0 million for the prior-year
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 continuing operations were $9.7 million for the six months ended June 30, 2009 which funded the $4.4 million of total capital expenditures in the first six months of 2009. Cash flows from operating activities for the six months ended June 30, 2009 were $21.1 million lower than the prior year period primarily due to the net loss compared to net income in the first six months of 2008. 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 $10.4 million at June 30, 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 June 30, 2009.
Read the The complete ReportSAIA is in the portfolios of Charles Brandes of Brandes Investment.