What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-29 compared with 2020-04-30 · 92 added, 79 removed, 198 unchanged (46% of the section changed)

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

the effect of governmental regulations, including but not limited to Hours of Service, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, the Food and Drug Administration, compliance with legislation requiring companies to evaluate their internal control over financial reporting, Homeland Security, environmental regulations, tax law changes and potential changes to the North American Free Trade Agreement and to certain international tariffs;

the effect of governmental regulations, including but not limited to Hours of Service, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, the Food and Drug Administration, compliance with legislation requiring companies to evaluate their internal control over financial reporting, Homeland Security, environmental regulations, tax law changes and changes to international trade agreements and tariffs;

changes in interpretation of accounting principles;

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We are considered an essential and critical business by the U.S.

Department of Homeland Security’s Cyber and Infrastructure Security Agency ( CISA ) and will continue to operate under state of emergency and shelter in place orders recently issued in various states across the country.

Department of Homeland Security’s Cyber and Infrastructure Security Agency ( CISA ) and will continue to operate under state of emergency and shelter in place orders issued in various jurisdictions across the country.

Management has made a variety of efforts seeking to ensure the ongoing availability of Saia’s transportation services, while instituting a variety of actions and policies to help safeguard employees and customers from COVID-19 , including limiting physical employee and customer contact, implementing enhanced cleaning and hygiene protocols at Saia’s facilities, and instituting telecommuting where possible.

Through the date of this filing, as a result of these efforts, the Company has not experienced significant disruptions in the Company’s LTL network operations.

We are experiencing, and expect to continue experiencing, lower demand for our transportation services and increased costs and other challenges related to COVID-19 that adversely affects our business.

We believe we have significant liquidity on hand to continue business operations during this volatile period.

Beginning in the latter part of the first quarter of 2020, we experienced lower demand for our transportation services along with increased costs and other challenges related to COVID-19 that has adversely affected our business.

We believe we have significant liquidity available to continue business operations during this volatile period.

As discussed in the Financial Condition section, the Company has a revolving credit facility (including a $100 million accordion feature that is available, subject to certain conditions and lender commitments) and other sources of borrowing in place that provides liquidity of up to $300 million in addition to its regular cash inflows from operations.

The Company was in compliance with the debt covenants under its debt agreements at March 31, 2020.

Although there have been logistical and other challenges to date, there was no material adverse impact on the Company’s first quarter 2020 results of operations.

The Company began to see the impacts of COVID-19 on customer demand in late March and continues to see declines in the second quarter of 2020.

The Company was in compliance with the debt covenants under its debt agreements at June 30, 2020 .

The Company began to see the impacts of COVID-19 on customer demand in late March and continue d to see declines during the second quarter of 2020.

The situation surrounding COVID-19 remains fluid and we believe the adverse impact on the Company increases the longer the virus affects the level of economic activity in the United States.

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See Par t II, Item 1A - “Risk Factors” for further discussion concerning COVID-19.

First Quarter Overview

The Company’s operating revenue increased by 8.7 percent in the first quarter of 2020 compared to the same period in 2019.

The increase resulted primarily from pricing actions and increased shipments and tonnage.

Consolidated operating income was $38.8 million for the first quarter of 2020 compared to $28.6 million for the first quarter of 2019.

In the first quarter of 2020, LTL shipments were up 2.3 percent per workday and LTL tonnage was up 4.0 percent per workday versus the prior year quarter.

Diluted earnings per share were $1.06 in the first quarter of 2020, compared to diluted earnings per share of $0.85 in the prior year quarter.

The operating ratio (operating expenses divided by operating revenue) was 91.3 percent in the first quarter of 2020 compared to 93.0 percent in the first quarter of 2019.

The Company generated $51.3 million in net cash provided by operating activities in the first three months of 2020 compared with $30.4 million in the same period last year.

The increase is primarily due to an increase in operating income and change in working capital.

The Company’s net cash used in investing activities was $102.7 million during the first three months of 2020 compared to $56.5 million in the first three months of 2019, primarily as a result of the timing of capital expenditures for revenue equipment and real estate in the first three months of 2020.

The Company’s net cash provided by financing activities was $98.1 million in the first three months of 2020 compared to $23.9 million cash provided by financing activities during the same period last year.

This change was primarily due to increased usage of the revolving credit facility to fund capital expenditures and management’s decision to maintain an increased cash position due to the COVID-19 pandemic.

The Company had $150.1 million in outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $29.8 million and a cash and cash equivalents balance of $46.9 million at March 31, 2020.

The Company also had $85.7 million in obligations under finance leases at March 31, 2020.

At March 31, 2020, the Company had $121.9 million in availability under the revolving credit facility, subject to the Company’s satisfaction of existing debt covenants.

Second Quarter Overview

The Company’s operating revenue decreased by 9.9 percent in the second quarter of 2020 compared to the same period in 2019.

The decrease resulted primarily from decreases in shipments and tonnage due to the economic impact of COVID-19.

Consolidated operating income was $35.7 million for the second quarter of 2020 compared to $51.2 million for the second quarter of 2019.

In the second quarter of 2020, LTL shipments were down 9.7 percent per workday and LTL tonnage was down 8.9 percent per workday versus the prior year quarter.

The decrease in shipments and tonnage was most significant in April with improvements in average shipments per day and monthly revenue in May and June.

Diluted earnings per share were $1.07 in the second quarter of 2020, compared to diluted earnings per share of $1.40 in the prior year quarter.

The operating ratio (operating expenses divided by operating revenue) was 91.5 percent in the second quarter of 2020 compared to 89.0 percent in the second quarter of 2019.

The Company generated $148.2 million in net cash provided by operating activities in the first six months of 2020 compared with $113.6 million in the same period last year.

The increase is primarily due to a change in working capital compared to the same period last year.

The Company’s net cash used in investing activities was $142.7 million during the first six months of 2020 compared to $166.1 million in the first six months of 2019, primarily as a result of decreased capital expenditures for revenue equipment and real estate in the first six months of 2020.

The Company’s net cash provided by financing activities was $23.5 million in the first six months of 2020 compared to $50.8 million net cash provided by financing activities during the same period last year.

This change was primarily due to reduced borrowing (net of repayments) to fund capital expenditures .

The Company had $80.0 million in outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $29.8 million and a cash and cash equivalents balance of $29.3 million at June 30, 2020.

The Company also had $80.8 million in obligations under finance leases at June 30, 2020.

At June 30, 2020, the Company had $192.0 million in availability under the revolving credit facility, subject to the Company’s satisfaction of existing debt covenants.

The revolving credit facility also has an accordion feature that allows for an additional $100 million availability, subject to certain conditions and availability of lender commitments.

The Company was in compliance with the debt covenants under its revolving credit agreement at March 31, 2020.

The Company was in compliance with the debt covenants under its revolving credit agreement at June 30, 2020.

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.

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Selected Results of Operations and Operating Statistics

For the quarters ended March 31, 2020 and 2019

For the quarters ended June 30, 2020 and 2019

(in thousands, except ratios, workdays and revenue per

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Nonoperating Expense

Working Capital (as of March 31, 2020 and 2019)

Working Capital (as of June 30, 2020 and 2019)

Cash Flows provided by Operating Activities (year to date)

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LTL Revenue per hundredweight

Quarter March 31, 2020 compared to quarter March 31, 2019

Quarter and six months ended June 30, 2020 compared to quarter and six months ended June 30, 2019

Revenue and volume

Consolidated revenue for the quarter ended March 31, 2020 increased 8.7 percent to $446.4 million primarily as a result of increased shipments, tonnage and pricing actions in the first quarter of 2020, partially offset by a quick and meaningful downturn in business volumes across our network in late March due to the impact of COVID-19.

Saia’s LTL revenue per hundredweight (a measure of yield) increased 3.1 percent to $18.16 per hundredweight for the first quarter of 2020 as a result of increased rates and changes in business mix.

For the first quarter of 2020, Saia’s LTL tonnage increased 4.0 percent per workday to 1.2 million tons, and LTL shipments increased 2.3 percent per workday to 1.8 million shipments.

For the first quarter of 2020, approximately 75 to 80 percent of Saia’s operating revenue was subject to specific customer price negotiations that occur throughout the year.

Consolidated revenue for the quarter ended June 30, 2020 decreased 9.9 percent to $418.1 million primarily as a result of decreased shipments and tonnage, due to a downturn in business volumes across our network caused by the impact of COVID-19.

Saia’s LTL revenue per hundredweight (a measure of yield) decreased 0.6 percent to $17.95 per hundredweight for the second quarter of 2020 as a result of changes in business mix, in addition to a 27.6 percent decrease in fuel surcharge revenue due to lower fuel prices.

For the second quarter of 2020, Saia’s LTL tonnage decreased 8.9 percent per workday to 1.1 million tons, and LTL shipments decreased 9.7 percent per workday to 1.7 million shipments.

For the second quarter of 2020, approximately 75 to 80 percent of Saia’s operating revenue was subject to specific customer price negotiations that occur throughout the year.

The remaining 20 to 25 percent of operating revenue was subject to a general rate increase which is based on market conditions.

For these customers subject to a general rate increase, on February 3, 2020 and February 18, 2019, Saia implemented 5.9 percent general rate increases.

For these customers subject to a general rate increase, on February 3, 2020, Saia implemented a 5.9 percent general rate increase.

Competitive factors, customer turnover and mix changes, impact the extent to which customer rate increases are retained over time.

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Fuel surcharges are an integral part of customer contract negotiations but represent only one portion of overall customer price negotiations as customers may negotiate increases in base rates instead of increases in fuel surcharges or vice versa.

Fuel surcharge revenue as a percentage of operating revenue decreased to 12.8 percent for the quarter ended March 31, 2020 compared to 12.9 percent for the quarter ended March 31, 2019, as a result of decreases in the cost of fuel.

Fuel surcharge revenue as a percentage of operating revenue decreased to 10.6 percent for the quarter ended June 30, 2020 compared to 13.2 percent for the quarter ended June 30, 2019, as a result of decreases in the cost of fuel.

For the six months ended June 30, 2020 , operating revenues were $864.5 million , down 1.2 percent from $874.8 million for the six months ended June 30, 2019 , primarily due to decreased volumes as a result of the COVID-19 economic impact .

Fuel surcharge revenue as a percentage of operating revenue decrease d to 11.8 percent for the six months ended June 30, 2020 , compared to 13.0 percent for the six months ended June 30, 2019 , as a result of decreases in the cost of fuel.

Operating expenses and margin

Consolidated operating income was $38.8 million in the first quarter of 2020 compared to $28.6 million in the prior year quarter.

Overall, the operations were favorably impacted in the first quarter of 2020 by pricing actions and higher shipments and tonnage, which were offset by salary and wage increases, increased depreciation expense and other expense impacts caused by the COVID-19 pandemic outbreak towards the end of the quarter.

The first quarter of 2020 operating ratio (operating expenses divided by operating revenue) was 91.3 percent compared to 93.0 percent for the same period in 2019.

Salaries, wages and benefits increased $18.3 million in the first quarter of 2020 compared to the first quarter of 2019 largely due to higher wages associated with increased headcount in the first quarter of 2020, a wage increase in July 2019 and higher healthcare benefit costs.

Fuel, operating expenses and supplies decreased $0.6 million in the first quarter of 2020 compared to the prior year quarter largely due to decreases in fuel expense during the quarter, partially offset by an increase in building rent expense compared to the first quarter of 2019.

During the first quarter of 2020, claims and insurance expense was $0.9 million higher than the first quarter of 2019 primarily due to increased severity of claims and cost of insurance partially offset by the benefit from the commutation of the bodily injury and property damage liability policy.

Purchased transportation increased $1.6 million in the first quarter of 2020 compared to the first quarter of 2019 primarily due to shipment increases during the first quarter of 2020.

Consolidated operating income was $35.7 million in the second quarter of 2020 compared to $51.2 million in the prior year quarter.

Overall, the operations were negatively impacted in the second quarter of 2020 by the economic impact of the COVID-19 pandemic which caused lower shipments and tonnage, partially offset by corresponding reductions in fuel and operating expenses, a decrease in salary and wage expense, and a decrease in purchased transportation expense.

The second quarter of 2020 operating ratio (operating expenses divided by operating revenue) was 91.5 percent compared to 89.0 percent for the same period in 2019.

Salaries, wages and benefits decreased $13.4 million in the second quarter of 2020 compared to the second quarter of 2019 largely due to lower headcount in the second quarter of 2020 in response to impacts from the COVID-19 pandemic.

Fuel, operating expenses and supplies decreased $19.4 million in the second quarter of 2020 compared to the prior year quarter largely due to decreases in fuel expense during the quarter, partially offset by an increase in building rent expense.

During the second quarter of 2020, claims and insurance expense was $5.1 million higher than the second quarter of 2019 primarily due to increased severity of claims, an increase in total claims and higher cost of insurance, partially offset by the benefit from the commutation of the bodily injury and property damage liability policy.

Purchased transportation decreased $7.7 million in the second quarter of 2020 compared to the second quarter of 2019 primarily due to overall volume decreases during the second quarter of 2020 as a result of the economic impact of COVID-19.

For the six months ended June 30, 2020 , consolidated operating income was $74.5 million, down 6.7 percent compared to $79.8 million for the six months ended June 30, 2019.

This decrease was largely due to the economic impact of COVID-19 in the second quarter of 2020.

Salaries, wages and benefits increased $4.9 million during the first six months of 2020 compared to the same period last year largely due to higher wages in the first six months of 2020 , a wage increase in July 2019 and higher healthcare benefit costs.

Fuel, operating expenses and supplies decreased $20.1 million during the first six months of 2020 compared to the same period last year largely due to decreases in fuel expenses and other operating expenses and supplies, partially offset by an increase in building rent expense compared to the first six months of 2019 .

During the first six months of 2020 , claims and insurance expense was $6.0 million higher than the same period last year primarily due to increased severity of claims, an increase in total claims and higher cost of insurance, partially offset by the benefit from the commutation of the bodily injury and property damage liability policy.

Purchased transportation decreased $6.1 million for the first six months of 2020 compared to the same period last year primarily due to overall volume decreases during the first six months of 2020 as a result of the economic impact of COVID-19.

Substantially all non-operating expenses represent interest expense.

Interest expense in the first quarter of 2020 was slightly higher than the first quarter of 2019 due to increased average borrowings in the first quarter of 2020.

The effective tax rate was 23.7 percent and 19.3 percent for the quarters ended March 31, 2020 and 2019, respectively.

The increase in the first quarter tax rate in 2020 is primarily a result of decreased excess tax benefits related to stock activity and the relatively greater impact of non-temporary differences when earnings are lower in the remainder of 2020.

Net income was $28.1 million, or $1.06 per diluted share, in the first quarter of 2020 compared to net income of $22.3 million, or $0.85 per diluted share, in the first quarter of 2019.

Interest expense in the second quarter of 2020 was lower than the second quarter of 2019 due to decreased average interest rates and decreased borrowings in the second quarter of 2020.

Interest expense in the first six months of 2020 was $0.3 million lower than the first six months of 2019 due to decreased average interest rates and decreased average borrowings in the first six months of 2020 .

The effective tax rate was 18.3 percent and 25.0 percent for the quarters ended June 30, 2020 and 2019, respectively.

The decrease in the second quarter tax rate in 2020 is primarily a result of increased excess tax benefits related to stock activity.

For the six months ended June 30, 2020 and June 30, 2019, the effective tax rates were 21.1 percent and 22.9 percent, respectively.

Net income was $28.5 million, or $1.07 per diluted share, in the second quarter of 2020 compared to net income of $37.1 million, or $1.40 per diluted share, in the second quarter of 2019.

Net income was $56.6 million, or $2.13 per diluted share, for the first six months of 2020 compared to net income of $59.3 million, or $2.25 per diluted share, for the first six months of 2019 .

Working capital/capital expenditures

Working capital at March 31, 2020 was $56.9 million, which increased from working capital at March 31, 2019 of $29.6 million.

Current assets at March 31, 2020 increased by $64.8 million as compared to March 31, 2019 and includes an increase in accounts receivable of $8.8 million, and an increase of cash and cash equivalents of $46.9 million.

Current liabilities increased by $37.6 million at March 31, 2020 compared to March 31, 2019 largely due to an increase in accounts payable.

Cash flows provided by operating activities were $51.3 million for the three months ended March 31, 2020 versus $30.4 million for the three months ended March 31, 2019.

The increase is primarily due to an increase in operating income and change in working capital.

For the three months ended March 31, 2020, net cash used in investing activities was $102.7 million versus $56.5 million in the same period last year, a $46.2 million increase.

This increase resulted primarily from acquisition of revenue equipment, technology and real estate.

The Company currently plans net capital expenditures in 2020 will be less than the $250 million previously planned as a result of management continuing to evaluate the impact of COVID-19.

For the three months ended March 31, 2020, net cash provided by financing activities was $98.1 million compared to $23.9 million cash provided by financing activities during the same period last year, as a result of additional borrowings under the revolving credit agreement to fund capital expenditures and Management’s decision to maintain an increased cash position due to the COVID-19 pandemic.

Working capital at June 30, 2020 was $21.5 million, which decreased from working capital at June 30, 2019 of $24.2 million.

Current assets at June 30, 2020 increased by $8.3 million as compared to June 30, 2019 and includes a decrease in accounts receivable of $21.9 million, and an increase of cash and cash equivalents of $28.8 million.

Current liabilities increased by $10.9 million at June 30, 2020 compared to June 30, 2019 largely due to an increase in wages, vacation and employees’ benefits.

Cash flows provided by operating activities were $148.2 million for the six months ended June 30, 2020 versus $113.6 million for the six months ended June 30, 2019.

The increase is primarily due to a change in working capital compared to the same period last year.

For the six months ended June 30, 2020, net cash used in investing activities was $142.7 million versus $166.1 million in the same period last year, a $23.4 million decrease.

This decrease resulted primarily from decreased capital expenditures for revenue equipment and real estate.

The Company currently expects that net capital expenditures in 2020 will be less than the $250 million previously planned as a result of management continuing to evaluate the impact of COVID-19.

For the six months ended June 30, 2020, net cash provided by financing activities was $23.5 million compared to $50.8 million net cash provided by financing activities during the same period last year, as a result of reduced borrowings (net of repayments) to fund capital expenditures .

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.

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The Company anticipates there will be no salary or wage increases in 2020.

Effective in April 2020, the Company has temporarily suspended its 401(k) match, temporarily suspended its annual incentive programs and temporarily furloughed certain employees in response to COVID-19’s impact on the Company’s operations.

On April 1 st we offered all hourly full-time workers an additional five

days of paid time off and offered one additional paid day off for our part-time workers in light of C OVID -19.

Effective in April 2020, the Company temporarily suspended its 401(k) match and temporarily furloughed certain employees in response to COVID-19’s impact on the Company’s operations.

On April 1, 2020, we offered all hourly full-time workers an additional five days of paid time off and offered one additional paid day off for our part-time workers in light of COVID-19.

This action was an effort to provide employees time off for health issues or those of family and friends.

We believe t his action will result in approximately $10 million of additional benefit costs over the remainder of the year.

We believe this action will result in approximately $10 million of additional benefit costs for the year.

In July 2020, the Company paid virtually all employees a $250 bonus to compensate for working through the difficult conditions created by the pandemic, which costs approximately $2.6 million and is included in the second quarter 2020 results.

Effective July 2019, the Company implemented a market competitive salary and wage increase for all of its employees.

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Additionally, the Company’s renewal of insurance policies effective March 1, 2020 resulted in $6.2 million of anticipated cost increases for 2020 compared to 2019.

The success of cost improvement initiatives is also impacted by the cost and availability of drivers and purchased transportation, fuel, self-insurance claims and insurance expense, regulatory changes, successful expansion of our service geography into the Northeastern United States, the COVID-19 pandemic and other factors discussed under “Forward-Looking Statements” and Part II, Item 1A.

The success of cost improvement initiatives is impacted by the cost and availability of drivers and purchased transportation, fuel, self-insurance claims and insurance expense, regulatory changes, successful expansion of our service geography into the Northeastern United States, the COVID-19 pandemic and other factors discussed under “Forward-Looking Statements” and Part II, Item 1A.

“Risk Factors.”

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The amendment increased the amount of the revolver from $250 million to $300 million and extended the term until February 2024.

The Amended Credit Agreement also has an accordion feature that allows for an additional $100 million availability, subject to certain conditions and availability of lender commitments.

The Amended Credit Agreement also has an accordion feature that allows for an

additional $100 million availability, subject to certain conditions and availability of lender commitments .

The amendment reduced the interest rate pricing grid compared to the prior agreement .

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Under the Amended Credit Agreement, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due.

At March 31, 2020, the Company had borrowings of $150.1 million and outstanding letters of credit of $28.0 million under the Amended Credit Agreement.

At June 30, 2020, the Company had borrowings of $80.0 million and outstanding letters of credit of $28.0 million under the Amended Credit Agreement.

At December 31, 2019, the Company had borrowings of $45.9 million and outstanding letters of credit of $26.1 million under the Amended Credit Agreement.

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Finance Leases

The Company is obligated under finance leases with seven-year terms covering revenue equipment totaling $85.7 million and $90.5 million as of March 31, 2020 and December 31, 2019, respectively.

The Company is obligated under finance leases with seven-year terms covering revenue equipment totaling $80.8 million and $90.5 million as of June 30, 2020 and December 31, 2019, respectively.

Amortization of assets held under the finance leases is included in depreciation and amortization expense.

The weighted average interest rates for the finance leases at March 31, 2020 and December 31, 2019 were 3.5 percent.

The weighted average interest rates for the finance leases at June 30, 2020 and December 31, 2019 were 3.5 percent.

The Company has historically generated cash flows from operations to fund a large portion of its capital expenditure requirements.

Cash flows from operating activities were $272.9 million for the year ended December 31, 2019, while net cash used in investing activities was $281.0 million.

Cash flows provided by operating activities were $51.3 million for the three months ended March 31, 2020, $20.9 million higher than the first three months of the prior year.

The increase is primarily due to an increase in operating income and deferral of income taxes.

Cash flows provided by operating activities were $148.2 million for the six months ended June 30, 2020, $34.6 million higher than the first six months of the prior year.

The increase is primarily due to a change in working capital compared to the prior year.

The timing of capital expenditures can largely be managed around the seasonal working capital requirements of the Company.

The Company believes it has significant sources of capital to meet short-term liquidity needs through its operating cash flows and availability under the Amended Credit Agreement.

At March 31, 2020, the Company had $121.9 million in availability under the Amended Credit Agreement, subject to the Company’s satisfaction of existing debt covenants.

At June 30, 2020, the Company had $192.0 million in availability under the Amended Credit Agreement, 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 March 31, 2020.

The Company was in compliance with its debt covenants at June 30, 2020.

Effective March 1, 2018, the Company entered into a new bodily injury and property damage liability policy with a three-year term.

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The Company is now self-insured for the first $10 million per occurrence with respect to such 12-month period and the policy has been extended for one additional year to March 1, 2022.

As a result of the return premium and policy extension, the Company recognized a $0.4 million reduction in insurance premium expense in the first quarter of 2020.

The Company will continue to recognize the remainder of the return premium as a reduction in insurance premium expense ratably over the remainder of the policy period.

In addition, commencing on August 30, 2021 the Company may elect to commute the policy with respect to the insurer’s entire liability under the policy in which case the Company would be entitled to a return of a portion of the premium paid, up to $15.6 million, based on the amount of claims paid and the insurer would be released from all liability under the policy.

As a result of the return premium and policy extension, the Company recognized a $0.4 million reduction in insurance premium expense in the second quarter of 2020.

The Company will continue to recognize the remainder of the return premium as a reduction in insurance premium expense ratably over the remainder of the policy period now ending March 1, 2022.

As a result, if the Company elects to commute the policy as to the entire policy term, the Company would be self-insured for $10 million per occurrence for such period.

Additionally, the Company may be required to pay an additional premium of up to $11.0 million if losses paid by the insurer are greater than $15.6 million over the three-year policy period.

Based on claims experience since inception of the policy, no such additional premium was accrued at March 31, 2020.

Additionally, the Company may be required to pay an additional premium of up to $11.0 million if losses paid by the insurer are greater than $15.6 million over the three-year policy period ending March 1, 2022.

Based on claims experience since inception of the policy, no such additional premium was accrued at June 30, 2020.

Net capital expenditures pertain primarily to investments in tractors and trailers and other revenue equipment, information technology, land and structures.

Projected net capital expenditures for 2020 are expected to be less than the $250 million previously planned as a result of management continuing to evaluate the impact of COVID-19.

This would represent a decrease from 2019 net capital expenditures of $287 million for property and equipment, inclusive of equipment acquired using finance leases, information technology, and land and structures.

This would represent a de crease from 2019 net capital expenditures of $2 87 million for property and equipment, inclusive of equipment acquired using finance leases , information technology , and land and structures .

Projected 2020 capital expenditures include a normal replacement cycle of revenue equipment and technology investment for our operations.

Net capital expenditures were $102.7 million in the first three months of 2020.

Approximately $61.1 million of the 2020 remaining capital budget was committed as of March 31, 2020.

In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $6.1 million for the remainder of 2020 and decreasing for each year thereafter based on borrowings and commitments outstanding at March 31, 2020.

Net capital expenditures were $ 142.7 million in the first six months of 2020 .

Approximately $ 40.9 million of the 2020 remaining capital budget was committed as of June 30, 2020 .

In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $4.3 million for the remainder of 2020 and decreasing for each year thereafter based on borrowings and commitments outstanding at June 30, 2020.

Contractual Obligations

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of March 31, 2020 (in millions):

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of June 30, 2020 (in millions):

Payments due by year

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Subject to the satisfaction of existing debt covenants.

The Company has accrued approximately $1.0 million for uncertain tax positions and $0.1 million for interest and penalties related to the uncertain tax positions as of March 31, 2020.

The Company has accrued approximately $1.1 million for uncertain tax positions and $0.1 million for interest and penalties related to the uncertain tax positions as of June 30, 2020.

The Company cannot reasonably estimate the timing of cash settlements with respective taxing authorities beyond one year and accordingly has not included the amounts within the above contractual cash obligations and other commercial commitment tables.

At March 31, 2020, the Company has $81.4 million in claims and insurance liabilities.

At June 30, 2020, the Company has $88.3 million in claims and insurance liabilities.

The Company cannot reasonably estimate the timing of cash settlements with respective adverse parties beyond one year and accordingly has not included the amounts within the above contractual cash obligations and other commercial commitment tables.

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Claims and Insurance Accruals .

As described in more detail in the Notes to Consolidated Financial Statements contained in Form 10-K for the year ended December 31, 2019, the Company has self-insured retention limits generally ranging from $250,000 to $1 million per occurrence for medical, workers’ compensation, casualty and cargo claims and from $2 million to $10 million for auto liability.

$250,000 to $1 million per occurrence for medical, workers’ compensation, casualty and cargo claims and from $2 million to $10 million for auto liability.

The liabilities are estimated in part based on historical experience, third-party actuarial analysis with respect to workers’ compensation claims, demographics, nature and severity, and other assumptions.

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These estimates are routinely evaluated and updated when circumstances warrant.

However, actual depreciation and residual values could differ from these assumptions based on market conditions and other factors.

However, actual useful lives and residual values could differ from these assumptions based on market conditions and other factors, thereby impacting the estimated amount or timing of depreciation expense.

These accounting policies and others are described in further detail in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis