Saia’s strong first quarter had a significant purchased transportation component

Saia Inc. had a quarter strong enough that it spent a significant amount of money on purchased transportation, and the amount became the focus of one of the questions on its earnings call.

Richard O’Dell, President and CEO of the LTL carrier, said in the company’s first quarter earnings call that purchased transportation miles were 10.9% of the company’s linehaul miles in the first quarter of 2018, compared to 7.5% in the corresponding quarter of 2017. Expenditures on purchased transportation in the first quarter of 2018 were $29.9-million, up from $20.8-million a year, earlier, for a roughly 40% increase. “This increase is being driven by volume growth as well as purchased transportation used about the network after weather related terminal closures,” O’Dell said in the prepared portion of the call.

Frederick Holzgrefe, Saia’s CFO, said during the call that the cost per mile for PT, as it’s known, was up 14.6%, “driven primarily by truckload market conditions.”

Saia wasn’t the only LTL carrier with a significant increase in PT. Old Dominion posted a 20.7% increase in PT expenditures, though questioning of that figure did not come up in the company’s conference call. Notably, Old Dominion said the PT expenses were 2.7% of all expenditures in the first quarter of this year, unchanged from the percentage of 2017.

Brad Delco, an analyst with Stephens, asked O’Dell on the call about the PT figure, noting that “one of your competitors”—which he didn’t identify—“doesn’t use a lot of PT.”

O’Dell described the PT purchases by Saia as falling in two categories. One was “sub-optimal,” but there are others where PT “does provide some enhanced capacity.” In the latter category, using an empty truckload carrier to haul LTL quantities might be efficient for both parties.

O’Dell also noted that about 40% of the PT miles at Saia are on rail. “That’s a lower cost and a lower cost opportunity there,” he said.

“We see it as a mixed bag,” O’Dell said of the PT amount. Controlling your own capacity is beneficial, he said, “but some of the carriers are pretty efficient, and in some cases it makes sense for us. So I guess there’s kind of a balance in there.”

Saia disclosed that it had a cargo claims ratio of 0.88%, worsening from 0.75% in the corresponding quarter of last year. But the company’s employee count is up approximately 10%, and O’Dell said the company expects that to improve as these new hires gain further experience.

O’Dell noted that the cargo claims rate does not need to be disclosed. Delco asked whether the higher PT rates might have been a cause of the increase in the cargo claims rate, but O’Dell said it was more a function of the higher number of new hires. “We tend to report the number because we think it’s pretty good in the industry,” he said.

In other key points from the company’s earnings release and call with analysts:

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