Saia(SAIA) - 2021 Q4 - Annual Report

PART I. Business Saia, Inc. is a transportation company primarily focused on less-than-truckload (LTL) services, generating over 97% of its revenue from this segment. The company has expanded its network, investing significantly in equipment, real estate, and technology to support growth and improve efficiency. Saia operates in a highly competitive and regulated industry, with a strategic focus on safety, pricing, service quality, and environmental responsibility, while managing a diverse, non-union workforce Overview Saia, Inc. is a transportation company primarily providing less-than-truckload (LTL) services across 45 states, with over 97% of revenue from LTL. It also offers non-asset truckload, expedited, and logistics services. The company has expanded its network, opening 30 new terminals since 2017, and invested over $1.25 billion in capital expenditures for equipment, real estate, and technology. In 2021, Saia generated $2.3 billion in revenue and $335.1 million in operating income - Saia, Inc. is a transportation company headquartered in Johns Creek, Georgia, primarily providing less-than-truckload (LTL) services, which accounts for over 97% of its revenue. It also offers non-asset truckload, expedited, and logistics services across North America[11] - Since May 2017, Saia has opened 30 new terminals and invested over $1.25 billion in capital expenditures for revenue equipment, real estate, and technology to support growth, improve fuel economy, reduce emissions, and enhance safety[14] Saia Financial Performance (2020-2021) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $2.3 billion | $1.8 billion | | Operating Income | $335.1 million | $180.3 million | Industry The trucking industry comprises private fleets and "for-hire" carriers (truckload and LTL). Saia primarily operates in the LTL segment, handling shipments between 100 and 10,000 pounds, which requires extensive networks of terminals and significant capital investment in infrastructure and technology. The LTL segment is more concentrated than truckload due to these high capital requirements - The trucking industry includes private fleets and 'for-hire' carriers, categorized into truckload (shipments >10,000 lbs) and LTL (shipments <10,000 lbs). Saia is primarily an LTL carrier[16] - LTL carriers typically pick up numerous shipments (100-10,000 pounds), consolidate them at local terminals, and transport them to destination terminals, requiring expansive networks and significant capital for facilities, equipment, and technology[17][20] - The LTL segment is more concentrated than the truckload segment due to the substantial infrastructure required, and LTL carriers face lower driver turnover compared to truckload, though shortages still occur[20] Business Strategy Saia's business strategy focuses on organic growth and geographic expansion, with key elements including operating safely, managing pricing and business mix for profitability, increasing density in existing geographies, delivering best-in-class service, improving operating efficiencies, preparing for growth, and addressing environmental and social issues - Saia has historically grown through organic growth and geographic integration, with a recent focus on organic growth[21] - Continue to focus on operating safely to reduce injuries and accidents, protecting employees and communities, and improving stockholder returns - Manage pricing and business mix to operate the network more profitably, leveraging economic improvements and industry capacity tightening - Increase density in existing geographies to gain operating leverage and improve margins, asset turnover, and return on capital - Deliver best-in-class service through on-time delivery and reduced claims to improve market share and justify fair compensation - Improve operating efficiencies by optimizing linehaul scheduling and pick-up/delivery operations to offset cost increases and reduce fuel consumption/carbon emissions - Prepare for growth and enhanced geographic footprint by investing in new terminals, fleet, and technology, and considering acquisitions - Address environmental and social issues through fleet investments for fuel efficiency and emissions reduction, pilot programs for alternative fuels, and employee well-being initiatives - In 2020, Saia achieved the highest rank (Rank 1 – top 20%) among EPA's SmartWay Carrier Performance Rankings for LTL carriers for Carbon Dioxide (CO2), Nitrogen Oxide (NOX), and Particulate Matter (PM) emissions per ton-mile[30] Seasonality Saia's revenues are subject to seasonal variations, with the first quarter typically being the weakest due to reduced shipments after winter holidays and higher operating expenses from lower capacity utilization and weather effects. The second and third quarters are generally the strongest in terms of revenue and profit - Saia's revenues are subject to seasonal variations, with the first quarter generally being the weakest due to reduced shipments after winter holidays and higher operating expenses from lower capacity utilization and weather effects[32] - The second and third quarters are typically the strongest in terms of revenue and profit, with quarterly profitability also influenced by the timing of salary and wage increases and general rate adjustments[33] Human Capital Saia prioritizes its workforce, with a human capital strategy focused on recruiting, hiring, training, retention, and competitive compensation/benefits. The company employs 11,600 union-free individuals, with a diverse workforce and initiatives for safety, professional development, diversity, inclusion, and employee engagement - Saia employs 11,600 union-free individuals, comprising approximately 50% licensed commercial drivers, 25% dock workers, and 25% in sales, technology, and administration[35] - The company offers comprehensive benefits, including medical programs (96% participation, premiums waived for 10+ years of service), dental, vision, a 401(k) savings plan with a company match, and paid vacation/personal days[36][37] - Saia invests in employee development through over 40 hours of onboarding training for new drivers, annual Smith System defensive driving, weekly safety training, and a dock-to-driver program for commercial driver certifications[40][41] - Saia is committed to fostering diversity and inclusion, launching a Diversity Council in early 2021 to promote a culture where individual differences are respected and all employees are valued[42][43][44] - Saia's corporate culture is guided by its mission to safely drive customer success with values centered on people, purpose, and performance, emphasizing Customer First, Safety, Taking Care of Each Other, Dignity and Respect, Do the Right Thing, and Community[47] Competition Saia operates in a highly competitive transportation industry, facing national and regional LTL carriers, truckload, private fleets, small package carriers, final mile delivery, railroads, air freight, and third-party logistics providers. Key competitive differentiators include service quality, price, service variety, geographic coverage, responsiveness, and flexibility - Saia operates in a highly competitive environment against a wide range of transportation service providers, including large national and regional LTL carriers, truckload, private fleets, small package carriers, railroads, air freight, and third-party logistics providers[51] - Key competitive differentiators include service quality, price, variety of services offered, geographic coverage, responsiveness, and flexibility[50] - The LTL trucking segment has greater barriers to entry, particularly for larger service areas, due to the significant equipment, freight terminals, technology investment, and density required for adequate labor and asset utilization[51] Regulation The trucking industry, despite deregulation of rates and services, remains subject to extensive federal and state regulations covering motor carrier operations, driver hours, safety, emissions, hazardous materials, food security, and data privacy. Compliance with these regulations can increase operational costs and impact business - The trucking industry is subject to extensive federal and state regulations governing motor carrier operations, driver hours of service, safety, insurance, fuel efficiency, emissions standards, and hazardous materials transportation[52] - Department of Homeland Security (DHS): Anti-terrorism measures, trailer security, driver identification, and border-crossing procedures can increase operational costs and disrupt deliveries - Department of Transportation (DOT) / FMCSA: Safety, insurance, and bonding requirements, hours of service regulations, the Compliance Safety Accountability Program (CSA), and the Commercial Driver's License Drug and Alcohol Clearinghouse impact operations, driver availability, and wages - Environmental Protection Agency (EPA): Regulations on air and water quality, diesel fuel sulfur content, engine emissions, and greenhouse gas emissions (e.g., Clean Trucks Plan, CARB standards) increase equipment and maintenance costs and may impact operations - Food and Drug Administration (FDA): Rules under the Sanitary Food and Transportation Act (SFTA) for food transportation security require written procedures for vehicle cleaning, inspection, and maintenance, potentially incurring additional expenses - Data Privacy Regulations: Increased regulatory efforts like GDPR and CCPA impose strict rules on customer data handling, potentially increasing compliance costs and reputational risks Trademarks and Patents Saia holds several registered service marks and trademarks, including Saia Guaranteed Select®, Saia Customer Service Indicators®, and Saia Xtreme Guarantee®, which are considered important for its marketing strategy - Saia has registered several service marks and trademarks in the United States Patent and Trademark Office, including Saia Guaranteed Select®, Saia Customer Service Indicators®, and Saia Xtreme Guarantee®, which are important components of its marketing strategy[66] Additional Information Saia provides its SEC filings free of charge on its website, www.saia.com, as soon as practicable after filing - Saia makes all its filings with the Securities and Exchange Commission (SEC) available free of charge through its website, www.saia.com, as soon as reasonably practicable after filing[67] Executive Officers of the Registrant This section lists the executive officers of Saia, Inc., including their age and positions held, along with their tenure and previous roles. Officers are elected by the Board of Directors and serve at its discretion, with no family relationships between executive officers or directors Saia, Inc. Executive Officers (as of February 17, 2022) | Name | Age | Positions Held | | :--- | :--- | :--- | | Frederick J. Holzgrefe, III | 54 | President and Chief Executive Officer (since April 2020) | | Douglas L. Col | 57 | Executive Vice President and Chief Financial Officer (since April 2020) | | Patrick D. Sugar | 34 | Executive Vice President of Operations (since March 2021) | | Raymond R. Ramu | 53 | Executive Vice President and Chief Customer Officer (since May 2015) | | Rohit Lal | 61 | Executive Vice President and Chief Information Technology Officer (since August 2017) | | Karla J. Staver | 59 | Vice President of Human Resources (since October 2019, retiring March 1, 2022) | - Officers are elected by the Board of Directors and serve at its discretion. There are no family relationships between any executive officer and any other executive officer or director of Saia or its subsidiaries[69] Risk Factors Saia stockholders face various risks, including those related to general economic conditions, intense industry competition, and operational challenges. Key concerns include the cost and availability of qualified employees and fuel, significant insurance and claims expenses, risks associated with geographic expansion and technology dependence, and potential impacts from litigation, regulatory changes, and the ongoing COVID-19 pandemic Industry and Economic Risks Saia faces risks from general economic conditions, including recessions, inflation, and global instability, which can impact customer demand and pricing. The highly competitive industry, characterized by downward pricing pressures, consolidation, and disruptive technologies, further challenges profitability. Dependence on qualified employees and fuel cost/availability are also significant risks - Saia's business is subject to general economic conditions, including recessionary cycles, inflation, and global instability, which can adversely affect customer business levels, demand for services, and pricing ability[71][77][78] - Operating in a highly competitive industry with numerous transportation service providers, some with greater resources or competitive advantages - Potential for downward pricing pressures due to competition, customer consolidation, and alternative delivery mechanisms - Disruptive technologies (e.g., driverless trucks, AI) may alter historical business models, leading to increased capital expenditures and new competitors - Dependence on the cost and availability of qualified employees (especially drivers) and purchased transportation, exacerbated by labor shortages and regulatory requirements - Fuel is a significant operating expense; Saia does not hedge against price increases, relying on fuel surcharges which may not fully offset volatility Business and Operational Risks Operational risks include significant and volatile insurance and claims expenses due to self-insured retention limits and increasing claim severity. Geographic expansion into new markets requires substantial investment and carries risks of disruption and delayed profitability. Heavy reliance on technology exposes the company to cybersecurity threats and the need to keep pace with technological developments. Non-union status is a competitive advantage, but unionization efforts pose a risk. Other risks include fluctuating equipment prices, real estate availability/cost, supply chain disruptions, infrastructure constraints, and international operational risks - Ongoing insurance and claims expenses are significant and volatile, with self-insured retention limits generally ranging from $250,000 to $10 million per occurrence, and increasing liability insurance costs and jury verdicts[81][83][84][85] - Geographic expansion (e.g., 7 new terminals in 2021, 10-15 planned for 2022) requires significant investments in terminals, equipment, technology, and employees, with risks of disruption, higher costs, and delayed profitability[87] - Heavy reliance on technology exposes the business to cybersecurity threats, system disruptions, and the need to continuously update systems to maintain competitiveness and customer service[88][89][90][91][92] - The non-union status of Saia's employees is an important competitive factor; unionization efforts could increase costs and reduce operating flexibility - Price fluctuations for new and used revenue equipment can impact capital expenditures and salvage values - Higher costs or limited availability of suitable real estate for terminal facilities can restrict growth and increase operating expenses - Ongoing supply chain disruptions, particularly for microchips and equipment, can delay deliveries, increase costs, and reduce operating capacity - Capacity and infrastructure constraints, including decaying highway infrastructure, could slow service times and increase maintenance expenses - International business operations expose the company to risks like restrictive trade policies, anti-corruption laws, and foreign COVID-19 policies - Seasonal factors, harsh weather, and climate change-related disasters can disrupt operations, reduce demand, damage assets, and increase costs - Geographic concentration of customers makes the company vulnerable to regional economic downturns - Creditworthiness of customers and their ability to pay for services poses risks of decreased demand, non-payment, and bankruptcy preference claims Financial and Capital Risks Saia has significant ongoing cash requirements for capital investments, funded by operations and credit facilities. Inability to generate sufficient cash or obtain favorable financing could limit growth. The company is subject to debt covenants, and default could accelerate debt. Goodwill impairment is an annual risk - Saia has significant ongoing cash requirements for capital investments (e.g., $277 million in 2021, over $500 million projected for 2022), funded by cash flows from operations and credit facilities[105][214] - The company is subject to debt covenants under its credit facilities, which limit dividends, stock repurchases, and require maintaining minimum debt service coverage and maximum leverage ratios; a default could cause debt acceleration[106][108] - Goodwill is subject to annual impairment assessments, and a material, non-cash write-down could adversely impact financial condition and results of operations[109] Human Resources and Reputation Risks Saia's success depends on retaining key employees and senior management, for whom competition is intense. Changes in compensation and benefits could affect attraction and retention. Increasing healthcare costs pose a financial burden. The company's strong reputation is a valuable asset, but adverse publicity, especially via social media, could negatively impact operations and profitability - Saia's future success depends on retaining its current management team and attracting highly qualified personnel; competition for senior management is intense, and loss of key personnel could adversely impact financial results[110][111] - Changes to compensation and benefits or increasing healthcare costs could negatively affect the ability to attract and retain qualified employees, potentially leading to increased costs or reduced operations[112][113] - Saia's corporate reputation is a valuable asset, but susceptibility to adverse publicity, particularly from social media, could result in immediate damage and negatively impact operations and profitability[114] Acquisition Risks Future acquisitions carry risks including integration difficulties, disruption of existing business, distraction of management, increased indebtedness or equity dilution, loss of key customers/employees, unionization risks, inability to achieve financial goals, asset impairment, and due diligence failures - Difficulty in integrating operations and personnel of acquired companies or unanticipated costs to support new business lines - Disruption of ongoing business and distraction of management and employees due to integration issues - Additional indebtedness or the issuance of additional equity to finance future acquisitions, which could be dilutive to stockholders - Potential loss of key customers or employees of acquired companies, along with the risk of unionization of employees - Inability to achieve the financial and strategic goals for the acquired and combined businesses - Potential impairment of tangible and intangible assets and goodwill acquired as a result of acquisitions - Potential failure of the due diligence processes to identify significant issues with legal and financial liabilities and contingencies Litigation and Regulatory Risks Saia faces various litigation risks, including accidents, workers' compensation, employment claims, and environmental liabilities, which can be costly and disruptive. The highly regulated industry is subject to new laws and regulations (e.g., corporate taxes, climate change, emissions, driver hours, food safety, data privacy), increasing compliance costs and operational burdens - Saia faces litigation risks regarding accidents, workers' compensation, labor and employment law claims, and environmental liability, which can be time-consuming, expensive, and disruptive, potentially exceeding insurance coverage or increasing costs[118] - The company may face higher corporate taxes and new regulations on climate change, greenhouse gas emissions (e.g., EPA's Clean Trucks Plan, CARB standards), employment, healthcare, and Department of Transportation initiatives, which could substantially increase operating expenses and compliance costs[119][120][121][122][127][132][133] - FMCSA rules on driver hours of service limit maximum on-duty hours, potentially impacting customer demands, increasing driver wages, and raising purchased transportation costs - TSA security measures (trailer security, driver identification, border crossing) could increase operational costs, reduce qualified drivers, and disrupt delivery timing - FDA rules under the Sanitary Food and Transportation Act (SFTA) for food transportation security require specific procedures, potentially incurring additional expenses - The Commercial Driver's License Drug and Alcohol Clearinghouse may reduce the pool of qualified commercial motor vehicle drivers - The Infrastructure Investment and Jobs Act (IIJA) apprenticeship pilot program for 18-20 year old drivers could affect delivery times and costs - New and existing data privacy laws (e.g., GDPR, CCPA) increase compliance costs and risks of significant fines or reputational damage - CSA evaluations could damage customer relationships and reputation if unacceptable scores are publicly disclosed, and may shrink the industry's driver pool - Healthcare legislation (Affordable Care Act) and related regulations could increase labor costs or force reductions in benefits programs - Changes in accounting standards or the discontinuation of LIBOR could adversely impact financial reporting and interest expenses Other Risks The ongoing COVID-19 pandemic presents uncertain impacts on operations, financial performance, and liquidity, potentially heightening other risks. Increasing investor and customer sensitivity to ESG issues could affect stock price and demand for services. Certain provisions in governing documents and Delaware law have anti-takeover effects. Future equity issuances could dilute stockholder ownership, and financial market weakness could impact demand for services or stock - The severity, magnitude, and duration of the COVID-19 pandemic and its economic consequences are uncertain, posing risks to operations, financial performance, and liquidity, and potentially heightening many other existing risks[140][141] - Operations-related risks from COVID-19 include increased operational challenges, higher expenses for employee health and safety, workplace disruptions, capacity constraints, and potential for lower demand and supply chain issues - Liquidity- and funding-related risks from COVID-19 include potential for lower cash from operations and failure to satisfy financial covenants, as well as limited or costlier funding from financial markets - Increasing investor and customer focus on Environmental, Social & Governance (ESG) metrics could impact Saia's stock price and demand for services if efforts are deemed insufficient or the industry is generally disfavored[144] - Certain provisions in Saia's governing documents and Delaware law (e.g., classified Board, prohibition on written consent, preferred stock authorization) could have anti-takeover effects, delaying or preventing a change of control[145][146] - Future equity issuances could dilute stockholders' ownership and potentially cause the common stock price to decline[147] - Weakness or loss of confidence in financial markets could adversely impact demand for services, increase customer defaults, or lead to insolvency, affecting financial condition[148][149][150] - The market value of common stock may fluctuate due to various factors, including actual or anticipated variations in earnings, analyst recommendations, general economic conditions, regulatory actions, and litigation[151] Unresolved Staff Comments There are no unresolved staff comments from the SEC regarding the company's filings Properties As of December 31, 2021, Saia operated 176 facilities (88 owned, 93 leased), including general offices in Johns Creek, GA (headquarters), Houma, LA, Boise, ID, and Dallas, TX. The company owns 49% of its service facilities, accounting for 61% of door capacity, aligning with its strategy to own strategically-located facilities and lease in smaller markets for flexibility. Saia also owned approximately 5,600 tractors and 19,300 trailers - As of December 31, 2021, Saia operated 176 facilities (88 owned and 93 leased), including general offices in Johns Creek, GA (headquarters), Houma, LA, Boise, ID, and Dallas, TX[154] - Saia owns 49% of its service facilities, accounting for 61% of its door capacity, following a strategy to own strategically-located facilities and lease in smaller markets for flexibility[154] - The company owned approximately 5,600 tractors and 19,300 trailers as of December 31, 2021, inclusive of equipment acquired with finance leases[154] Top 20 Saia Terminals by Number of Doors (December 31, 2021) | Location | Own/Lease | Doors | | :--- | :--- | :--- | | Houston, TX | Own | 234 | | Atlanta, GA | Own | 217 | | Memphis, TN | Own | 200 | | Dallas, TX | Own | 174 | | Fontana, CA | Own | 162 | | Chicago, IL | Lease | 153 | | Indianapolis, IN (1) | Own | 147 | | Garland, TX | Own | 145 | | Harrisburg, PA (1) | Own | 130 | | Phoenix, AZ | Own | 121 | | Nashville, TN | Own | 116 | | Cleveland, OH | Lease | 115 | | Charlotte, NC | Own | 108 | | Kansas City, MO (1) | Own | 102 | | Newburgh, NY | Lease | 101 | | Newark, NJ | Lease | 101 | | Grayslake, IL (1) | Own | 100 | | St. Louis, MO (1) | Own | 99 | | Toledo, OH | Own | 96 | | Philadelphia, PA | Lease | 90 | Legal Proceedings Saia is involved in legal proceedings in the ordinary course of business. Management believes adequate provisions have been made for probable and estimable losses, and the ultimate outcome will not materially affect financial condition, though it could impact results in a given quarter or year - Saia is subject to legal proceedings that arise in the ordinary course of its business[158] - Management believes adequate provisions for resolution of all contingencies, claims, and pending litigation have been made for probable and estimable losses[158] - The ultimate outcome of these actions is not expected to have a material adverse effect on the company's financial condition, but could have a material adverse effect on its results of operations in a given quarter or annual period[158] Mine Safety Disclosures This item is not applicable to Saia, Inc PART II. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Saia's common stock is listed on the Nasdaq Global Select Market under the symbol "SAIA". As of January 31, 2022, there were 854 holders of record. The company has not paid cash dividends and future payments are restricted by its credit agreement. The Saia, Inc. Executive Capital Accumulation Plan made open market purchases and sales of common stock during Q4 2021 Stock Information Saia's common stock is listed on the Nasdaq Global Select Market under the symbol "SAIA". As of January 31, 2022, there were 854 holders of record - Saia's common stock is listed under the symbol "SAIA" on the Nasdaq Global Select Market[162] - As of January 31, 2022, there were 854 holders of record of Saia's common stock[163] Dividends Saia has not paid cash dividends on its common stock. Future dividend payments depend on financial condition, capital requirements, earnings, cash flow, and are restricted under the current credit agreement - Saia has not paid a cash dividend on its common stock[164] - Any payment of dividends in the future is dependent upon the company's financial condition, capital requirements, earnings, cash flow, and other factors, and is restricted under the current credit agreement[164] Issuer Purchases of Equity Securities The Saia, Inc. Executive Capital Accumulation Plan made open market purchases and sales of common stock during Q4 2021. In December 2021, 990 shares were purchased at an average price of $318.52. The plan also sold shares in October, November, and December 2021 Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share (or Unit) | | :--- | :--- | :--- | | October 1, 2021 through October 31, 2021 | — | — | | November 1, 2021 through November 30, 2021 | — | — | | December 1, 2021 through December 31, 2021 | 990 | $318.52 | | Total | 990 | | - The Saia, Inc. Executive Capital Accumulation Plan sold 840 shares at an average price of $312.16 in October 2021, 540 shares at $351.43 in November 2021, and 421 shares at $315.02 in December 2021[166][167] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Saia's financial performance, liquidity, and capital resources, along with critical accounting policies. Saia experienced significant revenue and operating income growth in 2021, driven by pricing actions and increased volumes, while managing rising operating expenses. The company maintains strong liquidity and plans substantial capital expenditures for future growth. The discussion also highlights forward-looking statements and the ongoing impact of the COVID-19 pandemic Forward-Looking Statements This section contains forward-looking statements, identified by words like "anticipate," "estimate," and "expect," which are subject to various factors, risks, uncertainties, and assumptions that could cause actual results to differ materially. Investors should not place undue reliance on these statements, and the company undertakes no obligation to update them - This Annual Report contains forward-looking statements, identified by words such as "anticipate," "estimate," "expect," and "project," which are subject to important factors, risks, uncertainties, and assumptions that could cause actual results to differ materially[169] - 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[169][172] - General economic conditions, including downturns or inflationary periods - Operation within a highly competitive industry and adverse impact from downward pricing pressures - Cost and availability of qualified drivers, dock workers, other employees, purchased transportation, and fuel - Inflationary increases in operating expenses and corresponding reductions of profitability - Claims expenses and other expense volatility, including for personal injury, cargo loss and damage, and workers' compensation - Failure to successfully execute the strategy to expand service geography - Costs and liabilities from the disruption in or failure of technology or equipment, including cyber incidents - Labor relations, including the adverse impact should a portion of the workforce become unionized - Supply chain disruption and delays on new equipment delivery - Seasonal factors, harsh weather, and disasters caused by climate change - The creditworthiness of customers and their ability to pay for services - The possibility of defaults under debt agreements, including violation of financial covenants - Widespread outbreak of an illness or any other communicable disease, including the COVID-19 pandemic Executive Overview Saia's business is highly correlated with non-service sectors of the economy. The company's strategy focuses on improving profitability through increased yield and volumes, building density, and geographic expansion. It is a labor and capital-intensive business, emphasizing safety, cost-effectiveness, and asset utilization. Technology investments are crucial for customer experience and operational efficiency. The COVID-19 pandemic's impact remains fluid, but the company maintains significant liquidity - Saia's business is highly correlated to non-service sectors of the general economy, with a strategy to improve profitability by increasing yield and volumes, building density in existing geography, and pursuing geographic expansion[173] - The company's business is labor-intensive, capital-intensive, and service-sensitive, with a focus on improving safety, cost-effectiveness, and asset utilization, and technology investments enhancing customer experience and operational efficiencies[173] - The COVID-19 pandemic's situation remains fluid, but Saia has implemented safety protocols and maintains significant liquidity, including a revolving credit facility with up to $300 million in availability plus an additional $100 million accordion feature[174][175][176] Key Financial and Operational Highlights (2021 vs 2020) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Operating Revenue | $2.3 billion | $1.8 billion | +25.6% | | Operating Income | $335.1 million | $180.3 million | +85.9% | | Net Cash from Operating Activities | $382.6 million | $309.1 million | +23.8% | | Net Cash Used in Investing Activities | $277.8 million | $218.8 million | +27.0% | | Net Cash Used in Financing Activities | $23.5 million | $65.3 million | -64.0% | | Cash & Cash Equivalents (Dec 31) | $106.6 million | $25.3 million | +321.3% | | Revolving Credit Facility Availability (Dec 31) | $270.7 million | $272.8 million | -0.8% | | Finance Lease Obligations (Dec 31) | $50.4 million | $71.0 million | -29.0% | Results of Operations Saia experienced significant revenue and operating income growth in 2021, with consolidated revenue increasing 25.6% to $2.3 billion and operating income surging 85.9% to $335.1 million, improving the operating ratio to 85.4%. This was driven by pricing actions and increased volumes, partially offset by rising operating expenses. In 2020, revenue grew 2.0% to $1.8 billion, and operating income increased 18.2% to $180.3 million, with the operating ratio improving to 90.1%. The company anticipates continued revenue growth through pricing and geographic expansion, while managing costs and productivity, with a 7.5% general rate increase in January 2022 Selected Results of Operations and Operating Statistics (2021, 2020, 2019) | Metric | 2021 | 2020 | 2019 | Percent Variance '21 v. '20 | Percent Variance '20 v. '19 | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenue (in thousands) | $2,288,704 | $1,822,366 | $1,786,735 | 25.6% | 2.0% | | Operating Income (in thousands) | $335,141 | $180,321 | $152,586 | 85.9% | 18.2% | | Operating Ratio | 85.4% | 90.1% | 91.5% | (4.7) | (1.4) | | LTL Revenue per hundredweight | $20.68 | $18.33 | $18.05 | 12.8% | 1.6% | | LTL Revenue per shipment | $289.00 | $240.86 | $234.81 | 20.0% | 2.6% | | LTL Tonnage (in thousands) | 5,401 | 4,842 | 4,820 | 11.5% | 0.5% | | LTL Shipments (in thousands) | 7,730 | 7,371 | 7,409 | 4.9% | (0.5)% | | LTL Pounds/shipment | 1,397 | 1,314 | 1,301 | 6.3% | 1.0% | | LTL Length of haul | 913 | 879 | 840 | 3.9% | 4.6% | Year ended December 31, 2021 as compared to year ended December 31, 2020 - Consolidated revenue increased 25.6% to $2.3 billion in 2021, primarily due to pricing actions, including a 5.9% general rate increase on January 18, 2021, increased volumes, terminal expansion, and improvements in business mix[189] - Operating income increased 85.9% to $335.1 million in 2021, improving the operating ratio to 85.4% (from 90.1% in 2020)[192] - Key expense increases in 2021 included salaries, wages and employees' benefits ($100.4 million), purchased transportation ($108.3 million), fuel and other operating expenses ($95.7 million, largely due to increased fuel costs), and claims and insurance expense ($11.6 million due to increased premiums and accident severity)[193] - Fuel surcharge revenue increased to 14.0% of operating revenue in 2021, up from 11.1% in 2020, primarily due to increases in the cost of fuel[191] Year ended December 31, 2020 as compared to year ended December 31, 2019 - Consolidated revenue increased 2.0% to $1.8 billion in 2020, primarily due to pricing actions (5.9% general rate increase on February 3, 2020) and terminal expansion, partially offset by a decrease in fuel surcharge revenue[197] - Operating income increased 18.2% to $180.3 million in 2020, improving the operating ratio to 90.1% (from 91.5% in 2019)[199] - Key expense changes in 2020 included increased salaries, wages and benefits ($15.3 million, due to paid time off and healthcare costs), decreased fuel, operating expenses and supplies ($40.8 million due to lower fuel costs), and increased claims and insurance expense ($6.7 million due to increased premiums and accident severity)[200] - Fuel surcharge revenue decreased to 11.1% of operating revenue in 2020, down from 13.0% in 2019, primarily due to decreases in the cost of fuel[198] Outlook - Saia's business remains highly correlated to non-service sectors of the general economy and competitive pricing pressures, with ongoing initiatives to increase revenue per shipment, reduce costs, and improve productivity[204] - A 7.5% general rate increase was implemented on January 24, 2022, for customers comprising approximately 20-25% of operating revenue, following a 5.9% increase on January 18, 2021[204] - Salary and wage increases implemented in January and August 2021 are expected to cost approximately $60.9 million annually, with anticipated partial offset from productivity and efficiency gains[204] - The company plans to build market share, including through geographic expansion, and will match resources and capacity to shifting volume levels to manage operating leverage[205] Accounting Pronouncements Adopted in 2021 Saia adopted ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," effective January 1, 2021. This standard did not have a material impact on its consolidated financial statements or disclosures upon adoption - Saia adopted ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," effective January 1, 2021, which did not have a material impact on its consolidated financial statements or related disclosures[207] Financial Condition, Liquidity and Capital Resources Saia's liquidity needs are primarily for capital investments (equipment, land, IT) and letters of credit. These are funded by operating cash flows and a $300 million revolving credit facility (with a $100 million accordion feature). The company had $106.6 million in cash and equivalents and $270.7 million in available credit at year-end 2021. Projected capital expenditures for 2022 exceed $500 million, significantly higher than $277 million in 2021, to support growth and normal replacements - Saia's liquidity needs primarily arise from capital investments in new equipment, land and structures, information technology, and letters of credit, funded by operating cash flows and availability under its revolving credit agreement[208][209][213] - The company has a $300 million revolving credit agreement with a term ending February 2024, including an accordion feature for an additional $100 million, secured by certain land, structures, accounts receivable, and other assets[210] Liquidity and Capital Resources (as of December 31) | Metric (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $106,588 | $25,308 | | Outstanding borrowings under revolving credit | $0 | $0 | | Outstanding letters of credit | $29,300 | $27,200 | | Remaining availability under revolving credit | $270,700 | $272,800 | | Finance lease obligations | $50,404 | $70,976 | - Projected net capital expenditures for 2022 are expected to exceed $500 million, inclusive of equipment acquired using finance leases, significantly higher than $277.3 million in 2021, to support growth initiatives and normal equipment replacement[214][215][216] Contractual Obligations Saia's contractual obligations include operating leases ($126.5 million at Dec 31, 2021), finance leases ($53.3 million), and purchase obligations ($60.2 million). The revolving credit line had no outstanding principal balance. The company also has significant letters of credit ($31.1 million) and surety bonds ($69.5 million) for insurance Contractual Obligations (as of December 31, 2021) | Obligation Type | Total Amount (in millions) | | :--- | :--- | | Operating Leases | $126.5 | | Finance Leases (principal + interest) | $53.3 | | Purchase Obligations | $60.2 | | Revolving Credit Line (outstanding principal) | $0 | | Outstanding Letters of Credit | $31.1 | | Surety Bonds | $69.5 | - The Company has interest obligations of approximately $2.8 million for 2022, decreasing for each year thereafter, based on borrowings and commitments outstanding at December 31, 2021[219] - As of December 31, 2021, the Company has accrued approximately $1.4 million for uncertain tax positions and $0.1 million for related accrued interest and penalties[219] - Total claims, insurance, and other liabilities amounted to $114.7 million at December 31, 2021[220] Critical Accounting Policies and Estimates Saia's critical accounting policies and estimates include claims and insurance accruals, revenue recognition and related allowances, and depreciation and capitalization of assets. These involve significant management judgment and assumptions, which, if actual costs or conditions differ, could materially impact financial results - Claims and Insurance Accruals: Liabilities are estimated based on historical experience, actuarial analysis, and claim severity, with self-insured retention limits. Estimates are sensitive to changes in claim severity, medical cost inflation, and specific case facts - Revenue Recognition and Related Allowances: Revenue is recognized over the transit time of shipments, with estimates for shipments in transit and adjustments for billing and collectability. These estimates are sensitive to economic conditions, pricing arrangements, and other factors - Depreciation and Capitalization of Assets: Management establishes depreciable lives and salvage values for revenue equipment based on estimated useful lives and residual values, using the straight-line method. Actual useful lives and residual values could differ from these assumptions, impacting depreciation expense - The preparation of financial statements requires significant judgments and estimates, which are routinely evaluated and updated, but even under optimal circumstances, estimates may require adjustment[224] Quantitative and Qualitative Disclosures About Market Risk Saia is exposed to market risks from interest rates and fuel prices. A fuel surcharge program helps mitigate fuel price volatility, though it may not fully offset rapid changes. The company's debt structure primarily consists of fixed-rate finance leases - Saia is exposed to market risks, including the effects of interest rates and fuel prices[225] - A fuel surcharge program, based on average national diesel fuel prices and reset weekly, is implemented to reduce exposure to fuel price volatility, though it may not fully offset rapid price fluctuations and is subject to competitive pricing negotiations[225] Third-Party Financial Instruments (as of December 31, 2021 and 2020) | Debt Type | 2021 Total (millions) | 2021 Fair Value (millions) | 2020 Total (millions) | 2020 Fair Value (millions) | | :--- | :--- | :--- | :--- | :--- | | Fixed rate debt (Finance Leases) | $50.4 | $50.8 | $71.0 | $71.2 | | Average interest rate (Fixed) | 3.6% | | 3.6% | | | Variable rate debt | $0 | $0 | $0 | $0 | Financial Statements and Supplementary Data This section presents Saia's audited consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2021, 2020, and 2019. It also includes the reports of the independent registered public accounting firm and detailed notes to the financial statements, covering accounting policies, debt, leases, equity, and other financial disclosures Reports of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on Saia's consolidated financial statements for the years ended December 31, 2021, 2020, and 2019, stating they present fairly the financial position and cash flows in conformity with U.S. GAAP. KPMG also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021 - KPMG LLP issued an unqualified opinion on Saia's consolidated financial statements for the years ended December 31, 2021, 2020, and 2019, confirming they present fairly the financial position and cash flows in conformity with U.S. GAAP[233] - KPMG LLP also issued an unqualified opinion on the effectiveness of Saia's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013)[234][244] - A critical audit matter identified was the evaluation of the estimated liabilities for self-insured workers' compensation and bodily injury claims due to the inherent uncertainty in settlement amounts and the need for specialized actuarial skills[238][239][240] Consolidated Balance Sheets Saia's total assets increased from $1.55 billion in 2020 to $1.85 billion in 2021, driven by increases in cash and cash equivalents, accounts receivable, and net property and equipment. Total liabilities also increased, but stockholders' equity saw a significant rise from $961.3 million to $1.22 billion Consolidated Balance Sheet Highlights (as of December 31, in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total current assets | $416,255 | $271,696 | | Net property and equipment | $1,280,454 | $1,136,027 | | Total assets | $1,845,250 | $1,548,774 | | Total current liabilities | $321,348 | $275,754 | | Long-term debt, less current portion | $31,008 | $50,388 | | Total liabilities | $624,917 | $587,486 | | Total stockholders' equity | $1,220,333 | $961,288 | - Cash and cash equivalents increased significantly from $25.3 million in 2020 to $106.6 million in 2021[254] - Accounts receivable, net, increased from $216.9 million in 2020 to $276.8 million in 2021[254] - Net property and equipment increased from $1.14 billion in 2020 to $1.28 billion in 2021[254] Consolidated Statements of Operations Saia reported strong financial performance in 2021, with operating revenue increasing by 25.6% to $2.29 billion and net income rising by 83.0% to $253.2 million. Basic EPS grew from $5.29 in 2020 to $9.62 in 2021. This growth was driven by higher revenue per shipment and volumes, partially offset by increased operating expenses such as salaries, purchased transportation, and fuel Consolidated Statements of Operations Highlights (Years Ended December 31, in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Operating Revenue | $2,288,704 | $1,822,366 | $1,786,735 | | Total operating expenses | $1,953,563 | $1,642,045 | $1,634,149 | | Operating Income | $335,141 | $180,321 | $152,586 | | Income Before Income Taxes | $332,773 | $176,278 | $146,652 | | Income Tax Expense | $79,538 | $37,938 | $32,933 | | Net Income | $253,235 | $138,340 | $113,719 | | Basic Earnings Per Share | $9.62 | $5.29 | $4.38 | | Diluted Earnings Per Share | $9.48 | $5.20 | $4.30 | - Operating revenue increased 25.6% in 2021, while net income grew 83.0% from $138.3 million in 2020 to $253.2 million in 2021[256] - Basic Earnings Per Share increased from $5.29 in 2020 to $9.62 in 2021[256] - Key operating expenses in 2021 included salaries, wages and employees' benefits ($1.06 billion), purchased transportation ($249.7 million), and fuel, operating expenses and supplies ($381.9 million)[256] Consolidated Statements of Stockholders' Equity Saia's total stockholders' equity increased from $961.3 million in 2020 to $1.22 billion in 2021, primarily driven by net income of $253.2 million. Stock compensation, director deferred share activity, and stock option exercises also contributed to the increase in additional paid-in capital Consolidated Stockholders' Equity Highlights (Years Ended December 31, in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $1,220,333 | $961,288 | $815,226 | | Retained Earnings | $949,775 | $696,540 | $558,200 | | Additional Paid-in Capital | $274,633 | $267,666 | $260,871 | | Net Income | $253,235 | $138,340 | $113,719 | - Total stockholders' equity increased by $259.0 million in 2021, primarily due to net income of $253.2 million[259] - Additional paid-in capital increased by $6.9 million in 2021, influenced by stock compensation ($7.2 million), director deferred share activity ($1.5 million), and stock option exercises ($3.7 million), offset by shares withheld for taxes ($6.6 million)[259] Consolidated Statements of Cash Flows In 2021, net cash provided by operating activities increased to $382.6 million, up from $309.1 million in 2020, primarily due to higher net income. Net cash used in investing activities increased to $277.8 million, reflecting higher capital expenditures. Net cash used in financing activities decreased significantly to $23.5 million, mainly due to zero net borrowings under the revolving credit facility compared to net repayments in 2020 Consolidated Statements of Cash Flows Highlights (Years Ended December 31, in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $382,592 | $309,145 | $272,876 | | Net cash used in investing activities | $(277,848) | $(218,817) | $(281,031) | | Net cash (used in) provided by financing activities | $(23,464) | $(65,268) | $6,209 | | Net Increase (Decrease) in Cash and Cash Equivalents | $81,280 | $25,060 | $(1,946) | | Cash and cash equivalents, end of year | $106,588 | $25,308 | $248 | - Net cash provided by operating activities increased by $73.4 million in 2021, primarily driven by higher net income[262] - Net cash used in investing activities increased by $59.0 million in 2021, reflecting higher acquisition of property and equipment[262] - Net cash used in financing activities decreased by $41.8 million in 2021, largely due to zero net borrowings under the revolving credit agreement compared to net repayments in 2020[262] Notes to Consolidated Financial Statements This section provides detailed disclosures on Saia's accounting policies, financial instruments, commitments, and specific financial statement line items. It covers the company's business description, significant accounting estimates, debt and lease arrangements, goodwill and intangible assets, earnings per share computation, stockholders' equity, stock-based compensation, employee benefits, income taxes, valuation accounts, and the impact of COVID-19 1. Description of Business and Summary of Accounting Policies - Saia is a leading less-than-truckload (LTL) motor carrier, with over 97% of its revenue derived from LTL shipments, and also offers non-asset truckload, expedited, and logistics services[264] - The Chief Executive Officer is the Chief Operating Decision Maker, managing the business as a single operating segment[265] - The preparation of financial statements requires significant estimates and assumptions, particularly for revenue reserves, self-insurance accruals, long-term incentive compensation, tax liabilities, loss contingencies, litigation claims, and impairment assessments[267] - Property and Equipment: Carried at cost and depreciated using the straight-line method over estimated useful lives (e.g., structures 20-25 years, tractors 6-10 years, trailers 10-14 years) - Claims and Insurance Accruals: Estimated based on historical experience, actuarial analysis, and claim severity, with self-insured retention limits generally ranging from $250,000 to $10 million per occurrence - Revenue Recognition: Revenue is recognized over the transit time of the shipment, with key estimates for shipments in transit and adjustments for billing and collectability - Income Taxes: Accounted for under the asset and liability method, recognizing deferred tax assets and liabilities for temporary differences - Stock-Based Compensation: Valued using Black-Scholes-Merton (stock options), intrinsic valuation (restricted stock), and Monte Carlo (Performance Unit Awards), with expense amortized over vesting periods 2. Debt and Financing Arrangements Debt and Financing Arrangements (as of December 31, in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total debt | $50,404 | $70,976 | | Long-term debt, less current portion | $31,008 | $50,388 | | Outstanding borrowings under revolving credit | $0 | $0 | | Outstanding letters of credit (under credit agreement) | $29,300 | $27,200 | | Weighted average interest rate (finance leases) | 3.55% | 3.48% | | Estimated fair value of finance leases | $50,800 | $71,200 | - The company has a $300 million revolving credit agreement with a term ending February 2024, including an accordion feature for an additional $100 million, and is subject to debt covenants requiring a minimum debt service coverage ratio (1.25 to 1.00) and a maximum leverage ratio (3.25 to 1.00)[295] Principal Maturities of Long-Term Debt (in thousands) | Year | Amount | | :--- | :--- | | 2022 | $20,956 | | 2023 | $15,409 | | 2024 | $10,606 | | 2025 | $5,453 | | 2026 | $919 | | Thereafter | $0 | | Total | $53,343 | | Less: Interest on Finance Leases | $2,939 | | Total Principal | $50,404 | 3. Commitments, Contingencies and Uncertainties Operating Lease Commitments (as of December 31, 2021, in thousands) | Year | Amount | | :--- | :--- | | 2022 | $26,123 | | 2023 | $24,658 | | 2024 | $20,840 | | 2025 | $16,145 | | 2026 | $12,624 | | Thereafter | $26,106 | | Total | $126,496 | - In April 2021, the Company committed to an additional terminal lease estimated to commence in 2023, with a 15-year term and annual rent ranging from $3.1 million to $4.6 million[302] - Purchase commitments related to capital expenditures were $57.5 million at December 31, 2021[304] - The Company had total outstanding letters of credit of $31.1 million and $69.5 million in surety bonds at December 31, 2021, required for collateral towards insurance agreements[218] 4. Leases - As of December 31, 2021, finance leased assets, net of depreciation and amortization, were $85.1 million, and operating lease right-of-use assets were $107.8 million[254][308] Lease Costs (Years Ended December 31, in thousands) | Lease Cost Type | 2021 | 2020 | | :--- | :--- | :--- | | Finance lease cost (amortization + interest) | $13,336 | $14,070 | | Operating lease cost | $28,859 | $27,960 | | Short-term lease cost | $8,322 | $6,355 | | Total lease cost | $50,517 | $48,385 | Maturities of Lease Liabilities (as of December 31, 2021, in thousands) | Year | Operating Leases | Finance Leases | | :--- | :--- | :--- | | 2022 | $26,043 | $20,956 | | 2023 | $24,658 | $15,409 | | 2024 | $20,840 | $10,606 | | 2025 | $16,145 | $5,453 | | 2026 | $12,624 | $919 | | Thereafter | $26,106 | $0 | | Total lease payments | $126,416 | $53,343 | | Less: Interest | $16,442 | $2,939 | | Present value of lease liabilities | $109,974 | $50,404 | 5. Goodwill and Other Intangible Assets - Goodwill remained unchanged at $12.1 million for the fiscal years ended December 31, 2021, 2020, and 2019[312] Identifiable Intangible Assets (as of December 31, 2021, in thousands) | Asset Type | Gross Amount | Accumulated Amortization | | :--- | :--- | :--- | | Customer relationships (useful life of 6-15 years) | $19,000 | $12,756 | | Trademarks (useful life of 15 years) | $1,500 | $692 | | Total | $20,500 | $13,448 | - Amortization expense for intangible assets was $1.2 million for each of the years ended December 31, 2021, 2020, and 2019[313] 6. Computation of Earnings Per Share Earnings Per Share (Years Ended December 31, in thousands except per share data) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net income | $253,235 | $138,340 | $113,719 | | Weighted average common shares outstanding – basic | 26,322 | 26,140 | 25,952 | | Basic Earnings Per Share | $9.62 | $5.29 | $4.38 | | Weighted average common shares outstanding – diluted | 26,707 | 26,592 | 26,435 | | Diluted Earnings Per Share | $9.48 | $5.20 | $4.30 | - In 2021, there were 19,386 anti-dilutive options or restricted stock, while there were no anti-dilutive options or restricted stock in 2020[314] 7. Stockholders' Equity Deferred Compensation Trust Stock Activity (Years Ended December 31) | Metric | 2021 | 2020 | 2