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Saia Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 2, 2012 03:38PM

Saia Inc. (SAIA) filed Annual Report for the period ended 2011-12-31. Saia Inc has a market cap of $263.8 million; its shares were traded at around $15.99 with a P/E ratio of 23.6 and P/S ratio of 0.3.

Highlight of Business Operations:

The Company generated $59.3 million in cash provided by operating activities of continuing operations in 2011 versus $25.0 million in 2010. Cash flows from operating activities of discontinued operations were a use of $1.1 million and $1.6 million for 2011 and 2010, respectively. The Company had net cash used in investing activities of $67.9 million during 2011, principally for the purchase of revenue equipment, and $3.3 million during 2010.

Consolidated operating income was $28.1 million in 2011 compared to an operating income of $12.1 million in 2010. Overall, operating margins were favorably impacted by higher yield and increased tonnage, partially offset by increases in specific expense items described below. The 2011 operating ratio (operating expenses divided by operating revenue) was 97.3 percent as compared to 98.7 for 2010. Salaries, wages and benefit expense increased $32.8 million due to increased volumes and more internal miles, $7.3 million in higher healthcare costs and increased workers’ compensation expense caused by development of existing claims and greater frequency of injuries in 2011. The fuel, operating expenses and supplies line reflected a $48.7 million increase in fuel costs due to higher mileage and price per gallon and a $7.1 million increase from fleet maintenance costs. Claims and insurance in 2011 was $10.2 million more than 2010 reflecting unfavorable trends in self-insurance claims, primarily due to increased accident severity in 2011. The Company can experience volatility in accident expense as a result of its self-insurance structure and $2.0 million retention limits per occurrence. Purchased transportation expense increased $6.3 million primarily due to higher fuel surcharge.

Substantially all non-operating expenses represent interest expense. The interest expense in 2011 was slightly lower due to lower borrowings. The effective tax rate was 35.9 percent for the year ended December 31, 2011 compared to a net benefit of 1.2 percent in 2010 due to improved earnings in 2011. The significant difference in the effective tax rate from 2010 to 2011 is due to the lower level of pretax income in 2010. The 2011 and 2010 effective tax rate included approximately $1.0 million in alternative fuel tax credits. The notes to the consolidated financial statements provide an analysis of the income tax provision and the effective tax rate.

Consolidated operating income was $12.1 million in 2010 compared to an operating loss of $3.7 million in 2009. The Company changed its vacation policy in 2009 which reduced vacation expense only for 2009 by $12.3 million. The 2010 operating ratio (operating expenses divided by operating revenue) was 98.7, as compared to 100.4 in 2009. Higher fuel prices, in conjunction with volume changes due to increased tonnage, caused $26.6 million of the increase in fuel, operating expenses and supplies. This is reflective of the diesel fuel price trends throughout the year. The Company implemented reductions-in-force during the first and fourth quarters of 2009 to bring the Company’s workforce in line with business levels and a 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 Company’s 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 Company’s Board of Directors. Estimated annualized savings from the suspension of the 401(k) match is $6 million and from the compensation and wage reductions is $18 million. These reductions in compensation remained in effect for all of 2010. During 2010, accident expense was $4.7 million lower than the prior year due to decreased severity. The Company can experience volatility in accident expense as a result of its self-insurance structure and $2.0 million retention limits per occurrence. Purchased transportation expenses increased 24.9 percent in 2010 compared to the prior year reflecting higher fuel prices, increased utilization due to higher volumes and a reduction in the available Company drivers.

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 1-3 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.

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