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EX-32.2 - EX-32.2 - SAIA INCsaia-ex322_6.htm
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EX-31.2 - EX-31.2 - SAIA INCsaia-ex312_7.htm
EX-31.1 - EX-31.1 - SAIA INCsaia-ex311_8.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

OR

o

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)

 

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  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes  x    No  o

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

 

Large accelerated filer

x

 

 

Accelerated filer

o

 

 

 

 

 

 

Non-accelerated filer

o

 

 

Smaller reporting company

o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

Common Stock

 

Outstanding Shares at July 29, 2016

Common Stock, par value $.001 per share

 

25,207,381

 

 

 

 


 

SAIA, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

PAGE

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

ITEM 1:

Financial Statements

 

3

 

 

 

 

 

Condensed Consolidated Balance Sheets June 30, 2016 and December 31, 2015

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations Quarters and Six Months ended June 30, 2016 and 2015

 

4

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows Six Months ended June 30, 2016 and 2015

 

5

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

6

 

 

 

 

ITEM 2:

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

 

10

 

 

 

 

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

 

18

 

 

 

 

ITEM 4:

Controls and Procedures

 

18

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

ITEM 1:

Legal Proceedings

 

20

 

 

 

 

ITEM 1A:

Risk Factors

 

20

 

 

 

 

ITEM 2:

Unregistered Sales of Equity Securities and Use of Proceeds

 

20

 

 

 

 

ITEM 3:

Defaults Upon Senior Securities

 

20

 

 

 

 

ITEM 4:

Mine Safety Disclosures

 

20

 

 

 

 

ITEM 5:

Other Information

 

20

 

 

 

 

ITEM 6:

Exhibits

 

21

 

 

 

 

Signature

 

22

 

 

 

 

Exhibit Index

 

E-1

 

2


 

Item 1. Financial Statements

Saia, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

June 30, 2016

 

 

December 31, 2015

 

Assets

 

(in thousands, except share and per share data)

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

360

 

 

$

124

 

Accounts receivable, net

 

 

142,331

 

 

 

124,222

 

Prepaid expenses and other

 

 

29,450

 

 

 

34,643

 

Total current assets

 

 

172,141

 

 

 

158,989

 

Property and Equipment, at cost

 

 

1,107,001

 

 

 

995,514

 

Less-accumulated depreciation

 

 

481,088

 

 

 

456,335

 

Net property and equipment

 

 

625,913

 

 

 

539,179

 

Goodwill and Identifiable Intangibles, net

 

 

26,232

 

 

 

26,986

 

Other Noncurrent Assets

 

 

4,621

 

 

 

4,039

 

Total assets

 

$

828,907

 

 

$

729,193

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

49,679

 

 

$

54,754

 

Wages, vacation and employees’ benefits

 

 

33,619

 

 

 

27,834

 

Other current liabilities

 

 

45,014

 

 

 

46,360

 

Current portion of long-term debt

 

 

16,627

 

 

 

12,432

 

Total current liabilities

 

 

144,939

 

 

 

141,380

 

Other Liabilities:

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

122,747

 

 

 

56,540

 

Deferred income taxes

 

 

71,673

 

 

 

67,417

 

Claims, insurance and other

 

 

35,352

 

 

 

35,967

 

Total other liabilities

 

 

229,772

 

 

 

159,924

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 50,000 shares authorized,

     none issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized,

     25,207,381 and 25,141,799 shares issued and outstanding at

     June 30, 2016 and December 31, 2015, respectively

 

 

25

 

 

 

25

 

Additional paid-in-capital

 

 

233,200

 

 

 

230,593

 

Deferred compensation trust, 170,027 and 165,971 shares of common

     stock at cost at June 30, 2016 and December 31, 2015, respectively

 

 

(3,252

)

 

 

(3,102

)

Retained earnings

 

 

224,223

 

 

 

200,373

 

Total stockholders’ equity

 

 

454,196

 

 

 

427,889

 

Total liabilities and stockholders’ equity

 

$

828,907

 

 

$

729,193

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3


 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the quarters and six months ended June 30, 2016 and 2015

(unaudited)

 

 

 

Second Quarter

 

 

Six Months

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(in thousands, except per share data)

 

Operating Revenue

 

$

311,905

 

 

$

323,480

 

 

$

601,816

 

 

$

616,502

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employees’ benefits

 

 

175,924

 

 

 

170,465

 

 

 

346,190

 

 

 

328,194

 

Purchased transportation

 

 

14,315

 

 

 

20,184

 

 

 

26,782

 

 

 

37,898

 

Fuel, operating expenses and supplies

 

 

59,026

 

 

 

69,165

 

 

 

113,066

 

 

 

136,310

 

Operating taxes and licenses

 

 

10,126

 

 

 

9,411

 

 

 

20,166

 

 

 

18,507

 

Claims and insurance

 

 

10,880

 

 

 

6,361

 

 

 

18,961

 

 

 

11,198

 

Depreciation and amortization

 

 

19,740

 

 

 

16,561

 

 

 

36,983

 

 

 

31,760

 

Operating losses, net

 

 

173

 

 

 

52

 

 

 

363

 

 

 

121

 

Total operating expenses

 

 

290,184

 

 

 

292,199

 

 

 

562,511

 

 

 

563,988

 

Operating Income

 

 

21,721

 

 

 

31,281

 

 

 

39,305

 

 

 

52,514

 

Nonoperating Expenses (Income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,264

 

 

 

1,074

 

 

 

2,227

 

 

 

2,093

 

Other, net

 

 

(36

)

 

 

(14

)

 

 

(43

)

 

 

(65

)

Nonoperating expenses, net

 

 

1,228

 

 

 

1,060

 

 

 

2,184

 

 

 

2,028

 

Income Before Income Taxes

 

 

20,493

 

 

 

30,221

 

 

 

37,121

 

 

 

50,486

 

Income Tax Provision

 

 

7,218

 

 

 

10,974

 

 

 

13,271

 

 

 

18,634

 

Net Income

 

$

13,275

 

 

$

19,247

 

 

$

23,850

 

 

$

31,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

25,030

 

 

 

24,936

 

 

 

25,014

 

 

 

24,870

 

Weighted average common shares outstanding – diluted

 

 

25,583

 

 

 

25,561

 

 

 

25,560

 

 

 

25,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.53

 

 

$

0.77

 

 

$

0.95

 

 

$

1.28

 

Diluted Earnings Per Share

 

$

0.52

 

 

$

0.75

 

 

$

0.93

 

 

$

1.25

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

4


 

Saia, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2016 and 2015

(unaudited)

 

 

 

Six Months

 

 

 

2016

 

 

2015

 

 

 

(in thousands)

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

23,850

 

 

$

31,852

 

Noncash items included in net  income:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

36,983

 

 

 

31,760

 

Other, net

 

 

6,351

 

 

 

(27

)

Changes in operating assets and liabilities, net

 

 

(1,370

)

 

 

3,460

 

Net cash provided by operating activities

 

 

65,814

 

 

 

67,045

 

Investing Activities:

 

 

 

 

 

 

 

 

Acquisition of business, net of cash received

 

 

 

 

 

(22,238

)

Acquisition of property and equipment

 

 

(102,140

)

 

 

(56,466

)

Proceeds from disposal of property and equipment

 

 

595

 

 

 

517

 

Net cash used in investing activities

 

 

(101,545

)

 

 

(78,187

)

Financing Activities:

 

 

 

 

 

 

 

 

Repayment of revolving credit agreement

 

 

(73,372

)

 

 

(131,504

)

Borrowing of revolving credit agreement

 

 

116,128

 

 

 

144,504

 

Proceeds from stock option exercises (including excess tax benefits)

 

 

248

 

 

 

2,629

 

Repayment of senior notes

 

 

(3,572

)

 

 

(3,571

)

Repayment of capital leases

 

 

(3,465

)

 

 

(1,165

)

Other financing activity

 

 

 

 

 

(455

)

Net cash provided by financing activities

 

 

35,967

 

 

 

10,438

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

236

 

 

 

(704

)

Cash and cash equivalents, beginning of period

 

 

124

 

 

 

4,367

 

Cash and cash equivalents, end of period

 

$

360

 

 

$

3,663

 

 

 

 

 

 

 

 

 

 

Non Cash Investing Activities

 

 

 

 

 

 

 

 

Equipment financed with capital leases

 

$

34,683

 

 

$

17,336

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

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 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, 2015.  Operating results for the quarter and six months ended June 30, 2016 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2016.

Business

The Company offers customers a wide range of less-than-truckload, non-asset truckload, expedited and logistics services across the United States through its wholly-owned subsidiaries.  The Company has one operating segment.

Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services.  The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective.  In July 2015, the FASB updated ASU No. 2014-09 to defer the effective date by one year.  The new standard is effective for the Company on January 1, 2018.  Early application is permitted for the Company on January 1, 2017.  The standard permits the use of either the retrospective or cumulative effect transition method.  The Company is evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures.  The Company has not yet selected a transition method nor has it completed its evaluation of the effect of the standard on its ongoing financial reporting.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), a leasing standard for both lessees and lessors. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. generally accepted accounting principles. The new standard is effective for the Company on January 1, 2019. Early adoption is permitted. The standard requires the use of a modified retrospective transition method. The Company is evaluating the effect that ASU No. 2016-02 will have on its consolidated financial statements and related disclosures.  The Company has not completed its evaluation of the effect of the standard on its ongoing financial reporting.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which requires entities to recognize the income tax effects of stock awards in the income statement when the awards vest or are settled.  Further, the ASU allows entities to withhold up to the maximum individual statutory tax rate without classifying the stock awards as a liability and to account for forfeitures either upon occurrence or by estimating forfeitures.  The new standard is effective for the Company on January 1, 2017. Early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-09 will have on its consolidated financial statements and related disclosures.  The Company has not yet selected a transition method nor has it completed its evaluation of the effect of the standard on its ongoing financial reporting.

 

6


 

 

(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):

 

 

 

Second Quarter

 

 

Six Months

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

13,275

 

 

$

19,247

 

 

$

23,850

 

 

$

31,852

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic  earnings per share–weighted

     average common shares

 

 

25,030

 

 

 

24,936

 

 

 

25,014

 

 

 

24,870

 

Effect of dilutive stock options

 

 

43

 

 

 

128

 

 

 

45

 

 

 

143

 

Effect of other common stock equivalents

 

 

510

 

 

 

497

 

 

 

501

 

 

 

513

 

Denominator for diluted earnings per share–adjusted

     weighted average common shares

 

 

25,583

 

 

 

25,561

 

 

 

25,560

 

 

 

25,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.53

 

 

$

0.77

 

 

$

0.95

 

 

$

1.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$

0.52

 

 

$

0.75

 

 

$

0.93

 

 

$

1.25

 

 

For the quarter and six months ended  June 30, 2016, options and restricted stock for 516,312 and 534,527 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 six months ended June 30, 2015, options and restricted stock for 125,536 and 117,600 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. The Company 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.

The Company pays its pro rata share of the cost in connection with letters of credit for certain workers’ compensation and casualty claims incurred prior to March 31, 2000 that another carrier must maintain for insurance programs.  The pro rata share of these letters of credit was $1.8 million at June 30, 2016.

 

 

(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 June 30, 2016 and December 31, 2015, 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 June 30, 2016 and December 31, 2015 was $139.7 million and $73.1 million, respectively, based upon levels one and two in the fair value hierarchy.  The carrying value of the debt was $139.4 million and $69.0 million at June 30, 2016 and December 31, 2015, respectively.

 

 

7


 

(5) Debt and Financing Arrangements

At June 30, 2016 and December 31, 2015, debt consisted of the following (in thousands):

 

 

 

June 30, 2016

 

 

December 31, 2015

 

Credit Agreement with Banks, described below

 

$

57,290

 

 

$

14,534

 

Senior Notes under a Master Shelf Agreement, described

     below

 

 

10,714

 

 

 

14,286

 

Capital Leases, described below

 

 

71,370

 

 

 

40,152

 

Total debt

 

 

139,374

 

 

 

68,972

 

Less: current portion of long-term debt

 

 

16,627

 

 

 

12,432

 

Long-term debt, less current portion

 

$

122,747

 

 

$

56,540

 

 

On March 6, 2015, the Company entered into the Fifth Amended and Restated Credit Agreement with its banking group (as amended, the Restated Credit Agreement).  The amendment increased the amount of the revolver from $200 million to $250 million and extended the term until March 2020.  The amendment also reduced the interest rate pricing grid and eliminated both the borrowing base and the minimum tangible net worth covenant.  On the same date, the Company also entered into the Second Amended and Restated Master Shelf Agreement with its long term note holders (as amended, the Restated Master Shelf Agreement) that made changes to this agreement to conform with certain changes in the Restated Credit Agreement.

Restated Credit Agreement

The Restated Credit Agreement is a revolving credit facility for up to $250 million expiring in March 2020. The Restated Credit Agreement also has an accordion feature that allows for an additional $75 million availability, subject to lender approval.  The Restated Credit Agreement provides for a LIBOR rate margin range from 112.5 basis points to 225 basis points, base rate margins from minus 12.5 basis points to plus 50 basis points, an unused portion fee from 20 basis points to 30 basis points and letter of credit fees from 112.5 basis points to 225 basis points in each case based on the Company’s leverage ratio.

Under the Restated Credit Agreement, the Company must maintain certain financial covenants including a minimum fixed charge coverage ratio and a maximum leverage ratio, among others.  The Restated Credit Agreement also provides for a pledge by the Company of certain land and structures, certain tractors, trailers and other personal property and accounts receivable, as defined in the Restated Credit Agreement.

At June 30, 2016, the Company had borrowings of $57.3 million and outstanding letters of credit of $39.9 million under the Restated Credit Agreement.  At December 31, 2015, the Company had borrowings of $14.5 million and outstanding letters of credit of $44.8 million under the Restated Credit Agreement.  The available portion of the Restated Credit Agreement may be used for general corporate purposes, including future capital expenditures, working capital and letter of credit requirements as needed.

Restated Master Shelf Agreement

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 an additional $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 had 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 made in December 2013.  The November 2007 issuance of $25 million Senior Notes has a fixed interest rate of 6.14 percent.  The January 2008 issuance of $25 million Senior Notes has a fixed interest rate of 6.17 percent.  Payments due for both $25 million issuances were interest only until June 30, 2011 and at that time semi-annual principal payments began with the final payments due January 1, 2018.  Under the terms of the Senior Notes, the Company must maintain certain financial covenants including a minimum fixed charge coverage ratio and a maximum leverage ratio, among others.  The Senior Notes also provide for a pledge by the Company of certain land and structures, certain tractors, trailers and other personal property and accounts receivable, as defined in the Senior Notes.  At June 30, 2016 and December 31, 2015, the Company had $10.7 million and $14.3 million, respectively, in Senior Notes outstanding.

Capital Leases

The Company is obligated under capital leases covering revenue equipment with seven year terms totaling $71.4 million at June 30, 2016 compared to $40.2 million at December 31, 2015.  Amortization of assets held under the capital leases is included in

8


 

depreciation and amortization expense.  The weighted average interest rate for the capital leases at June 30, 2016 and December 31, 2015 is 2.82% and 2.85%, respectively.

Principal Maturities of Long-Term Debt

The principal maturities of long-term debt instruments (in thousands) are as follows:

 

 

 

Amount

 

2016

 

$

9,258

 

2017

 

 

18,517

 

2018

 

 

11,374

 

2019

 

 

11,374

 

2020

 

 

68,665

 

Thereafter

 

 

27,405

 

Total

 

$

146,593

 

Less: Amounts Representing Interest on Capital Leases

 

 

7,219

 

Total

 

$

139,374

 

 

9


 

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 2015 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.  Those consolidated financial statements include additional information about our significant accounting policies, practices and the transactions that underlie our financial results.

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.  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, assumptions and uncertainties include, but are not limited to, the following:

 

·

general economic conditions including downturns in the business cycle;

 

·

effectiveness of Company-specific performance improvement initiatives, including management of the cost structure to match shifts in customer volume levels;

 

·

the creditworthiness of our customers and their ability to pay for services;

 

·

failure to achieve acquisition synergies;

 

·

failure to operate and grow acquired businesses in a manner that supports the value allocated to these acquired businesses, including their goodwill;

 

·

economic declines in the geographic regions or industries in which our customers operate;

 

·

competitive initiatives and pricing pressures, including in connection with fuel surcharge;

 

·

loss of significant customers;

 

·

the Company’s need for capital and uncertainty of the credit markets;

 

·

the possibility of defaults under the Company’s debt agreements (including violation of financial covenants);

 

·

possible issuance of equity which would dilute stock ownership;

 

·

integration risks;

 

·

the effect of litigation including class action lawsuits;

 

·

cost and availability of qualified drivers, fuel, purchased transportation, real property, revenue equipment and other assets;

 

·

governmental regulations, including but not limited to Hours of Service, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, compliance with legislation requiring companies to evaluate their internal control over financial reporting, Homeland Security, environmental regulations and the FDA;

 

·

changes in interpretation of accounting principles;

 

·

dependence on key employees;

 

·

inclement weather;

 

·

labor relations, including the adverse impact should a portion of the Company’s workforce become unionized;

 

·

terrorism risks;

 

·

self-insurance claims and other expense volatility;

 

·

cost and availability of insurance coverage;

 

·

increased costs of healthcare benefits and administration, including as a result of healthcare legislation;

10


 

 

·

social media risk; 

 

·

cyber security risk; 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 II, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, 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.

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.  The Company’s business is labor intensive, capital intensive and service sensitive.  The Company looks for opportunities to improve cost effectiveness, safety 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 that is facilitating operational efficiencies and improving Company image.

The Company’s operating revenue decreased by 3.6 percent in the second quarter of 2016 compared to the same period in 2015.  The decrease resulted primarily from decreased shipments, tonnage and fuel surcharges, partially offset by yield management.

Consolidated operating income was $21.7 million for the second quarter of 2016 compared to $31.3 million for the second quarter of 2015.  In the second quarter of 2016, LTL shipments and tonnage per workday were down 2.6 and 4.3 percent, respectively, versus the prior year quarter.  Diluted earnings per share were $0.52 in the second quarter of 2016, compared to diluted earnings per share of $0.75 in the prior year quarter. The operating ratio (operating expenses divided by operating revenue) was 93.0 percent in the second quarter of 2016 compared to 90.3 percent in the second quarter of 2015.

The Company had $65.8 million in cash provided by operating activities through the first six months of 2016 compared with $67.0 million in the same period last year due to a decrease in operating income largely offset by working capital fluctuations and an increase in non-cash items included in net income for the six months ended June 30, 2016.  The Company had net cash used in investing activities of $101.6 million during the first six months of 2016 compared to $78.1 million in the first six months of 2015, primarily as a result of the purchase of revenue equipment this year.  The Company’s cash provided by financing activities was $36.0 million through the first six months of 2016 compared to $10.4 million in the same period last year.  The Company had $57.3 million in borrowings under its revolving credit agreement, outstanding letters of credit of $41.7 million and cash and cash equivalents balance of $0.4 million at June 30, 2016.  The Company also had $10.7 million outstanding in Senior Notes and $71.4 million in obligations under capital leases at June 30, 2016.  The Company was in compliance with the debt covenants under its debt agreements at June 30, 2016.

General

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

The Company is a transportation company headquartered in Johns Creek, Georgia providing a wide range of less-than-truckload, non-asset truckload, expedited and logistics services across the United States.  The Company has one operating segment.

Our business is highly correlated to non-service sectors of the general economy.  It also is impacted by a number of other factors as discussed under “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.

11


 

Results of Operations

Saia, Inc. and Subsidiaries

Selected Results of Operations and Operating Statistics

For the quarters ended June 30, 2016 and 2015

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

 

 

 

 

 

Variance

 

 

 

 

2016

 

 

2015

 

 

'16 v. '15

 

 

 

 

(in thousands, except ratios and revenue per hundredweight)

Operating Revenue

 

$

311,905

 

 

$

323,480

 

 

 

(3.6

)

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employees’ benefits

 

 

175,924

 

 

 

170,465

 

 

 

3.2

 

 

Purchased transportation

 

 

14,315

 

 

 

20,184

 

 

 

(29.1

)

 

Depreciation and amortization

 

 

19,740

 

 

 

16,561

 

 

 

19.2

 

 

Fuel and other operating expenses

 

 

80,205

 

 

 

84,989

 

 

 

(5.6

)

 

Operating Income

 

 

21,721

 

 

 

31,281

 

 

 

(30.6

)

 

Operating Ratio

 

 

93.0

%

 

 

90.3

%

 

 

(2.7

)

 

Nonoperating Expense

 

 

1,228

 

 

 

1,060

 

 

 

15.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Capital (as of June 30, 2016 and 2015) (1)

 

 

27,202

 

 

 

25,523

 

 

 

 

 

 

Cash Flows provided by Operations (year to date)

 

 

65,814

 

 

 

67,045

 

 

 

 

 

 

Net Acquisitions of Property and Equipment (year to date)

 

 

101,545

 

 

 

55,949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saia Motor Freight Operating Statistics:

 

 

 

 

 

 

 

 

 

 

 

 

 

LTL Tonnage

 

 

919

 

 

 

960

 

 

 

(4.3

)

 

LTL Shipments

 

 

1,639

 

 

 

1,683

 

 

 

(2.6

)

 

LTL Revenue per hundredweight

 

$

15.73

 

 

$

15.42

 

 

 

2.0

 

 

 

 

(1)

The prior year working capital amount has been adjusted for the reclassification of current deferred tax assets or liabilities to long-term as a result of the adoption of the Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2015-17.

Quarter and six months ended June 30, 2016 compared to Quarter and six months ended June 30, 2015

Revenue and volume

Consolidated revenue for the quarter ended June 30, 2016 decreased 3.6 percent to $311.9 million primarily as a result of decreased tonnage, shipments and fuel surcharges which were partially offset by yield management.  Saia’s LTL revenue per hundredweight (a measure of yield) increased 2.0 percent to $15.73 per hundredweight for the second quarter of 2016 as a result of increased rates largely offset by decreased fuel surcharges.  Saia’s LTL tonnage decreased 4.3 percent to 0.9 million tons.  LTL shipments decreased 2.6 percent to 1.6 million shipments.  Approximately 75 to 80 percent of Saia’s operating revenue is subject to specific customer price adjustment negotiations that occur throughout the year.  The remaining 20 to 25 percent of operating revenue is subject to an annual general rate increase.  On December 7, 2015, Saia implemented a 4.9 percent general rate increase for customers comprising this 20 to 25 percent of operating revenue.  Competitive factors, customer turnover and mix changes, impact the extent to which customer rate increases are retained over time.

Operating revenue includes fuel surcharge revenue from the Company’s fuel surcharge program.  That program is designed to reduce the Company’s exposure to fluctuations in fuel prices by adjusting total freight charges to account for changes in the price of fuel.  The Company’s fuel surcharge is based on the average national price for diesel fuel and is reset weekly.  Fuel surcharges have remained in effect for several years, are widely accepted in the industry and are a significant component of revenue and pricing.  Fuel surcharges are an integral part of annual customer contract renewals which blur the distinction between base price increases and recoveries under the fuel surcharge program.  Fuel surcharges represent only one portion of overall competitive price negotiations as customers may negotiate increases in base rates instead of increases in fuel surcharges or vice versa.  Saia revised its fuel surcharge program effective January 18, 2016.  Fuel surcharge revenue decreased to 9.7% of operating revenue for the quarter ended June 30, 2016 compared to 12.3% for the quarter ended June 30, 2015, as a result of lower fuel prices.

For the six months ended June 30, 2016, operating revenues were $601.8 million, down 2.4 percent from $616.5 million for the six months ended June 30, 2015, primarily due to decreased tonnage, shipments and fuel surcharges, partially offset by effective yield management and an additional workday in the current year period.  Fuel surcharge revenue decreased to 9.2% of operating revenue for the six months ended June 30, 2016 compared to 12.4% for the six months ended June 30, 2015, as a result of lower fuel prices.

12


 

Operating expenses and margin

Consolidated operating income was $21.7 million in the second quarter of 2016 compared to $31.3 million in the prior year quarter.  Overall, the operations were unfavorably impacted in the second quarter of 2016 by declining tonnage and shipments, salary and wage increases, and increased accident costs, which were only partially offset by higher yield and continued network optimization initiatives.  The second quarter 2016 operating ratio (operating expenses divided by operating revenue) was 93.0 percent compared to 90.3 percent for the same period in 2015.

Salaries, wages and benefits increased $5.5 million in the second quarter of 2016 compared to the prior year period largely due to an average 4 percent wage increase in July 2015, increased internal driver utilization and higher healthcare benefit costs. Fuel, operating expenses and supplies decreased $10.1 million in the second quarter of 2016 compared to the prior year period largely due to lower fuel costs, improved fuel efficiency, lower maintenance costs from a newer fleet and increased internal maintenance asset utilization, and reduced costs of other operating expenses and supplies.  During the second quarter of 2016, claims and insurance expense was $4.5 million higher than the previous year quarter primarily due to increased accident frequency and severity in the current period and negative development on older claims along with increased premiums partially offset by decreased cargo claims. 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 decreased $5.9 million compared to the second quarter of 2015 primarily due to a decline in fuel costs charged by carriers, favorable carrier rates and mix of transportation modes utilized, and increased utilization of internal assets.

For the six months ended June 30, 2016 consolidated operating income was $39.3 million, down 25.2 percent compared to $52.5 million for the six months ended June 30, 2015.

Salaries, wages and benefits increased $18.0 million during the first six months of 2016 compared to the same period last year largely due to increased wages associated with an additional workday in the first six months of 2016 and an average 4 percent wage increase in July 2015, increased internal driver utilization and higher healthcare benefit costs. Fuel, operating expenses and supplies decreased $23.2 million during the first six months of 2016 compared to the same period last year largely due to lower fuel costs, improved fuel efficiency, lower maintenance costs from a newer fleet and increased internal maintenance asset utilization, and reduced costs of other operating expenses and supplies.  During the first six months of 2016, claims and insurance expense was $7.8 million higher than the same period last year primarily due to increased accident frequency and severity in the current period and negative development on older claims partially offset by decreased cargo claims. Purchased transportation decreased $11.1 million compared to the first six months of 2015 primarily due to a decline in fuel costs charged by carriers, favorable carrier rates and mix of transportation modes utilized, and increased utilization of internal assets.

Other

Substantially all non-operating expenses represent interest expense. Interest expense in second quarter 2016 was higher due to an increased average borrowing rate in the second quarter of 2016 compared to the same period last year as a result of the $23.4 million increase in investing activities. The effective tax rate was 35.2 percent and 36.3 percent for the quarter ended June 30, 2016 and June 30, 2015, respectively.  For the six months ended June 30, 2016, the effective tax rate was 35.8 percent compared to 36.9 percent for the six months ended June 30, 2015.  The decreased tax rate is primarily a result of legislation enacted in December 2015 to extend alternative fuel tax credits for 2015 and 2016.

Net income was $13.3 million, or $0.52 per diluted share, in the second quarter of 2016 compared to net income of $19.2 million, or $0.75 per diluted share, in the second quarter of 2015.  Net income was $23.9 million, or $0.93 per diluted share, for the first six months of 2016 compared to net income of $31.9 million, or $1.25 per diluted share, for the first six months of 2015.

Working capital/capital expenditures

Working capital at June 30, 2016 was $27.2 million, which increased from working capital at June 30, 2015 of $25.5 million.

Current assets decreased by $2.4 million as compared to June 30, 2015 and include a decrease in accounts receivable of $3.9 million.  The decrease in accounts receivable is largely attributable to the decline in revenue.  Current liabilities decreased by $4.1 million at June 30, 2016 compared to June 30, 2015 largely due to a decrease in accrued wages, vacation and employee benefits along with other current liabilities partially offset by an increase in the current portion of long-term debt from capital leases used to finance certain revenue equipment.  Cash flows provided by operating activities were $65.8 million for the six months ended June 30, 2016 versus $67.0 million for the six months ended June 30, 2015.  For the six months ended June 30, 2016, cash used in investing activities was $101.6 million versus $78.1 million in the same period last year.  The increase in cash used in investing activities is driven by increased net capital expenditures for revenue equipment in 2016 partially offset by the acquisition of LinkEx, Inc. in February 2015.  For the six months ended June 30, 2016, net cash provided by financing activities was $36.0 million compared to $10.4 million in the same period last year.

13


 

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.  There remains uncertainty as to the strength of economic conditions. We are continuing initiatives to increase yield, reduce costs and improve productivity.  We focus on providing top quality service and improving safety performance.  If significant competitors were to cease operations and their capacity leave the market, current industry conditions would likely improve.  However, there can be no assurance that any industry consolidation will indeed happen or if such consolidation occurs that it will materially improve the excess industry capacity.  The Company continues to pursue revenue and cost initiatives to improve profitability.  On December 7, 2015, Saia implemented a 4.9 percent general rate increase for customers comprising approximately 20 to 25 percent of operating revenue.  Saia revised its fuel surcharge program effective January 18, 2016.  The extent of the success of these revenue initiatives is impacted by what proves to be the underlying economic trends, competitor initiatives and other factors discussed under “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors.”

Effective July 1, 2016, the Company implemented a market competitive salary and wage increase for all of its employees.  The impact of the July 2016 compensation increase is expected to be approximately $16 million annually.  The Company anticipates the impact of the July 2016 compensation increase to be partially offset by continued productivity and efficiency gains.

If the Company builds market share, there are numerous operating leverage cost benefits. Conversely, should the economy soften from present levels, the Company plans to match resources and capacity to shifting volume levels to lessen unfavorable operating leverage.  The success of cost improvement initiatives is also impacted by the cost and availability of drivers and purchased transportation, fuel, insurance claims, regulatory changes, successful implementation of profit improvement initiatives and other factors discussed under “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors.”

See “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” for a more complete discussion of potential risks and uncertainties that could materially affect our future performance.

New Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services.  The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective.  In July 2015, the FASB updated ASU No. 2014-09 to defer the effective date by one year.  The new standard is effective for the Company on January 1, 2018.  Early application is permitted for the Company on January 1, 2017.  The standard permits the use of either the retrospective or cumulative effect transition method.  The Company is evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures.  The Company has not yet selected a transition method nor has it completed its evaluation of the effect of the standard on its ongoing financial reporting.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), a leasing standard for both lessees and lessors. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. generally accepted accounting principles. The new standard is effective for the Company on January 1, 2019. Early adoption is permitted. The standard requires the use of a modified retrospective transition method. The Company is evaluating the effect that ASU No. 2016-02 will have on its consolidated financial statements and related disclosures.  The Company has not completed its evaluation of the effect of the standard on its ongoing financial reporting.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which requires entities to recognize the income tax effects of stock awards in the income statement when the awards vest or are settled.  Further, the ASU allows entities to withhold up to the maximum individual statutory tax rate without classifying the stock awards as a liability and to account for forfeitures either upon occurrence or by estimating the number of forfeitures.  The new standard is effective for the Company on January 1, 2017. Early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-09 will have on its consolidated financial statements and related disclosures.  The Company has not yet selected a transition method nor has it completed its evaluation of the effect of the standard on its ongoing financial reporting.

Financial Condition

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.

The Company is party to a revolving credit agreement (the Restated Credit Agreement) with a group of banks to fund capital investments, letters of credit and working capital needs.  The Company is also a party to a long-term note agreement (the Restated

14


 

Master Shelf Agreement).  The Company has pledged certain land and structures, tractors and trailers, accounts receivable and other assets to secure indebtedness under both agreements.

Restated Credit Agreement

The Restated Credit Agreement is a revolving credit facility for up to $250 million expiring in March 2020. The Restated Credit Agreement also has an accordion feature that allows for an additional $75 million availability, subject to lender approval.  The Restated Credit Agreement provides for a LIBOR rate margin range from 112.5 basis points to 225 basis points, base rate margins from minus 12.5 basis points to plus 50 basis points, an unused portion fee from 20 basis points to 30 basis points and letter of credit fees from 112.5 basis points to 225 basis points, in each case based on the Company’s leverage ratio.

Under the Restated Credit Agreement, the Company must maintain certain financial covenants including a minimum fixed charge coverage ratio and a maximum leverage ratio, among others.  The Restated Credit Agreement also provides for a pledge by the Company of certain land and structures, certain tractors, trailers and other personal property and accounts receivable, as defined in the Restated Credit Agreement.

At June 30, 2016, the Company had borrowings of $57.3 million and outstanding letters of credit of $39.9 million under the Restated Credit Agreement.  At December 31, 2015, the Company had borrowings of $14.5 million and outstanding letters of credit of $44.8 million under the Restated Credit Agreement.  The available portion of the Restated Credit Agreement may be used for general corporate purposes, including future capital expenditures, working capital and letter of credit requirements as needed.

Restated Master Shelf Agreement

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 an additional $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 had 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 made December 2013.  The November 2007 issuance of $25 million Senior Notes has a fixed interest rate of 6.14 percent.  The January 2008 issuance of $25 million Senior Notes has a fixed interest rate of 6.17 percent.  Payments due for both $25 million issuances were interest only until June 30, 2011 and at that time semi-annual principal payments began with the final payments due January 1, 2018.  Under the terms of the Senior Notes, the Company must maintain certain financial covenants including a minimum fixed charge coverage ratio and a maximum leverage ratio, among others.  The Senior Notes also provide for a pledge by the Company of certain land and structures, certain tractors, trailers and other personal property and accounts receivable, as defined in the Senior Notes.  At June 30, 2016 and December 31, 2015, the Company had $10.7 million and $14.3 million, respectively, in Senior Notes outstanding.

Capital Leases

The Company is obligated under capital leases covering revenue equipment with seven year terms totaling $71.4 million as of June 30, 2016, compared to $40.2 million at December 31, 2015.  Amortization of assets held under the capital leases is included in depreciation and amortization expense.  The weighted average interest rates for the capital leases at June 30, 2016 and December 31, 2015 are 2.82% and 2.85%, respectively.

Other

Projected net capital expenditures for 2016 are approximately $140 million. This represents an approximate $27 million increase from 2015 net capital expenditures of $113 million for property and equipment, inclusive of equipment acquired using capital leases.  Approximately $3.6 million of the 2016 remaining capital budget was committed as of June 30, 2016.  Net capital expenditures pertain primarily to investments in tractors and trailers and other revenue equipment, information technology, land and structures.  Net capital expenditures were $136.2 million in the first six months of 2016, inclusive of equipment acquired using capital leases.

15


 

The Company has historically generated cash flows from operations that have funded its capital expenditure requirements.  Cash flows from operating activities were $142.7 million for the year ended December 31, 2015, while net cash used in investing activities was $107.9 million.  Cash flows provided by operating activities were $65.8 million for the six months ended June 30, 2016, $1.2 million lower than the first six months of the prior year. The decrease is due to a decrease in operating income largely offset by working capital fluctuations and an increase in non-cash items included in net income.  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 operating cash flows and availability under the Restated Credit Agreement, which was $152.8 million at June 30, 2016, subject to the Company’s satisfaction of existing debt covenants.  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 was in compliance with its debt covenants at June 30, 2016.

In accordance with U.S. generally accepted accounting principles, our operating leases are not recorded in our condensed consolidated balance sheet; however, the future minimum lease payments are included in the “Contractual Obligations” table below.  See the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 for additional information.  In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $2.1 million for the remainder of 2016 and decreasing for each year thereafter based on borrowings and commitments outstanding at June 30, 2016.

Contractual Obligations

The following tables set forth a summary of our contractual obligations and other commercial commitments as of June 30, 2016 (in millions):

 

 

 

Payments due by year

 

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

Thereafter

 

 

Total

 

Contractual cash obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving line of credit

 

$

 

 

$

 

 

$

 

 

$

 

 

$

57.3

 

 

$

 

 

$

57.3

 

Long-term debt

 

 

3.6

 

 

 

7.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.7

 

Leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Leases (1)

 

 

5.7

 

 

 

11.3

 

 

 

11.4

 

 

 

11.4

 

 

 

11.4

 

 

 

27.4

 

 

 

78.6

 

Operating leases

 

 

7.7

 

 

 

14.3

 

 

 

11.8

 

 

 

9.2

 

 

 

6.4

 

 

 

15.7

 

 

 

65.1

 

Purchase obligations (2)

 

 

4.6

 

 

 

4.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.0

 

Total contractual obligations

 

$

21.6

 

 

$

37.1

 

 

$

23.2

 

 

$

20.6

 

 

$

75.1

 

 

$

43.1

 

 

$

220.7

 

 

(1)

The contractual capital lease obligation payments included in this table include both the principal and interest components.  See Note 5 to the accompanying condensed consolidated financial statements in this Form 10-Q.

(2)

Includes commitments of $8.0 million for capital expenditures.

 

 

 

Amount of commitment expiration by year

 

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

Thereafter

 

 

Total

 

Other commercial commitments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available line of credit (1)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

152.8

 

 

$

 

 

$

152.8

 

Letters of credit

 

 

 

 

 

41.6

 

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

41.7

 

Surety bonds

 

 

2.9

 

 

 

28.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.7

 

Total commercial commitments

 

$

2.9

 

 

$

70.4

 

 

$

0.1

 

 

$

 

 

$

152.8

 

 

$

 

 

$

226.2

 

 

(1)

Subject to the satisfaction of existing debt covenants.

The Company has accrued approximately $1.0 million for un