What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-28 compared with 2020-10-29 · 128 added, 135 removed, 149 unchanged (64% of the section changed)

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These factors, risks, uncertainties and assumptions 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;

widespread outbreak of an illness or any other communicable disease, including the COVID-19 pandemic, or any other health crisis or business disruptions that may arise from the COVID-19 pandemic in the future;

failure to achieve acquisition synergies;

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

general economic conditions including downturns or inflationary periods in the business cycle;

operation within a highly competitive industry and the adverse impact from downward pricing pressures, including in connection with fuel surcharges, and other factors;

industry-wide external factors largely out of our control;

cost and availability of qualified drivers, purchased transportation and fuel;

claims expenses and other expense volatility, including for personal injury, cargo loss and damage, workers’ compensation, employment and group health plan claims;

cost and availability of insurance coverage, including the possibility the Company may be required to pay additional premiums, assume additional liability under its auto liability policy or be unable to obtain insurance coverage;

failure to successfully execute the strategy to expand our service geography;

costs and liabilities from the disruption in or failure of our technology or equipment essential to our operations, including as a result of cyber incidents, security breaches, malware or ransomware attacks;

failure to keep pace with technological developments;

labor relations, including the adverse impact should a portion of our workforce become unionized;

cost and availability of real property and revenue equipment;

capacity and highway infrastructure constraints;

risks arising from international business operations and relationships;

seasonal factors, harsh weather and disasters caused by climate change;

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, 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 changes to international trade agreements and tariffs;

changes in interpretation of accounting principles;

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

our need for capital and uncertainty of the credit markets;

the possibility of defaults under our debt agreements (including violation of financial covenants);

failure to operate and grow acquired businesses in a manner that support the value allocated to acquired businesses;

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;

risks arising from international business operations and relationships;

recent increases in the severity of auto liability claims against trucking companies and sharply higher costs of settlements and verdicts;

cost and availability of insurance coverage, including the possibility the Company may be required to pay additional premiums, may be required to assume additional liability under its auto policy or be unable to obtain coverage;

increased costs of healthcare and prescription drugs, including as a result of healthcare reform legislation;

social media risks;

disruption in or failure of the Company’s technology or equipment including services essential to operations of the Company and/or cyber-security risk;

failure to successfully execute the strategy to expand the Company’s service geography into the Northeastern United States;

increased costs of healthcare benefits;

damage to our reputation from adverse publicity, including from the use of or impact from social media;

failure to make future acquisitions or to achieve acquisition synergies;

the effect of litigation and class action lawsuits arising from the operation of our business, including the possibility of claims or judgements in excess of our insurance coverages or that result in increases in the cost of insurance coverage or that preclude us from obtaining adequate insurance coverage in the future;

the potential of higher corporate taxes and new regulations, including with respect to climate change, employment and labor law, healthcare and securities regulation;

the effect of governmental regulations, including hours of service for drivers, engine emissions, the Compliance, Safety, Accountability (CSA) initiative, regulations of the Food and Drug Administration and Homeland Security, and healthcare and environmental regulations;

unforeseen costs from new and existing data privacy laws;

changes in accounting and financial standards or practices;

increasing investor and customer sensitivity to social and sustainability issues, including climate change;

anti-terrorism measures and terrorist events;

provisions in our governing documents and Delaware law that may have anti-takeover effects;

issuances of equity that would dilute stock ownership;

other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s SEC filings.

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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.

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, except as otherwise required by applicable law.

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 and to expand our service geography into the Northeastern United States.

While the Company’s business is labor intensive, capital intensive and service sensitive, management continues to look for opportunities to improve safety, cost effectiveness and asset utilization (primarily tractors and trailers).

Additionally, pricing initiatives have had a positive impact on yield and profitability and the Company continues to execute targeted sales and marketing programs along with initiatives to align costs with volumes and improve customer satisfaction.

The Company’s strategy is to improve profitability by increasing yield while also increasing volumes to build density in existing geography and to pursue geographic expansion to promote profitable growth and improve our customer value proposition over time.

The Company’s business is labor intensive, capital intensive and service sensitive.

The Company looks for opportunities to improve safety, cost effectiveness and asset utilization (primarily tractors and trailers).

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 improving customer experience, operational efficiencies and Company image.

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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 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.

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 adversely affected our business, particularly in the second quarter of 2020.

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 September 30, 2020 .

The situation surrounding COVID-19 remains fluid and we believe that there still could be an adverse impact on the Company the longer the virus affects the level of economic activity in the United States.

In these circumstances, there may be developments outside our control requiring us to adjust our operating plan.

As such, given the dynamic nature of this situation , we are unable to predict the extent to which the pandemic and related impacts could adversely impact our business operations, financial condition, results of operations, liquidity and cash flows .

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

Third Quarter Overview

The Company’s operating revenue increased by 2.7 percent in the third quarter of 2020 compared to the same period in 2019.

The increase resulted primarily from increases in shipments and revenue per shipment.

Consolidated operating income was $55.2 million for the third quarter of 2020 compared to $45.4 million for the third quarter of 2019.

In the third quarter of 2020, LTL shipments were up 0.9 percent per workday and LTL tonnage was flat per workday compared to the prior year quarter.

Diluted earnings per share were $1.56 in the third quarter of 2020, compared to diluted earnings per share of $1.25 in the prior year quarter.

The operating ratio (operating expenses divided by operating revenue) was 88.5 percent in the third quarter of 2020 compared to 90.3 percent in the third quarter of 2019.

Department of Homeland Security’s Cyber and Infrastructure Security Agency (CISA) and in some areas 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 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, the Company has not experienced significant disruptions in the Company’s LTL network operations as a result of the COVID-19 pandemic.

We believe we have significant liquidity available to continue business operations in the event of future disruptions from the COVID-19 pandemic.

As discussed in the “Financial Condition” section below, 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, 2021 .

The situation surrounding COVID-19 remains fluid and there may be developments outside our control requiring us to adjust our operating plan.

As such, given the dynamic nature of this situation, we are unable to predict the extent to which the pandemic and related impacts could impact our business operations, financial condition, results of operations, liquidity and cash flows .

First Quarter Overview

The Company’s operating revenue increased by 8.4 percent in the first quarter of 2021 compared to the same period in 2020.

The increase resulted primarily from increases in revenue per shipment and tonnage.

Consolidated operating income was $48.7 million for the first quarter of 2021 compared to $38.8 million for the first quarter of 2020.

In the first quarter of 2021, LTL shipments were up 2.6 percent per workday and LTL tonnage was up 5.3 percent per workday compared to the prior year quarter.

Diluted earnings per share were $1.40 in the first quarter of 2021, compared to diluted earnings per share of $1.06 in the prior year quarter.

The operating ratio (operating expenses divided by operating revenue) was 89.9 percent in the first quarter of 2021 compared to 91.3 percent in the first quarter of 2020.

The improved operating ratio compared to prior year is due to the Company’s continued focus on pricing initiatives, cost control and operational efficiencies.

The Company generated $239.0 million in net cash provided by operating activities in the first nine months of 2020 compared with $207.3 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 $197.5 million during the first nine months of 2020 compared to $244.5 million in the first nine months of 2019, primarily as a result of decreased capital expenditures for revenue equipment and real estate in the first nine months of 2020 in response to COVID-19.

The Company’s net cash used in financing activities was $16.2 million in the first nine months of 2020 compared to $35.0 million net cash provided by financing activities during the same period last year.

This change was primarily due to improved net borrowings .

The Company had $45.0 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 $25.5 million at September 30, 2020.

The Company also had $75.9 million in obligations under finance leases at September 30, 2020.

At September 30, 2020, the Company had $227.0 million in availability under the revolving credit facility, subject to the Company’s satisfaction of existing debt covenants.

The Company generated $61.0 million in net cash provided by operating activities in the first three months of 2021 compared with $51.3 million in the same period last year.

The increase is primarily due to increased profitability compared to the same period last year.

The Company’s net cash used in investing activities was $25.4 million during the first three months of 2021 compared to $102.7 million in the first three months of 2020, primarily as a result of decreased capital expenditures for revenue equipment and real estate in the first three months of 2021 caused by COVID-19 related manufacturing delays for revenue equipment.

The Company’s net cash used in financing activities was $7.6 million in the first three months of 2021 compared to $98.1 million net cash provided by financing activities during the same period last year.

This change was primarily due to reduced net borrowings after the Company’s revolver balance was paid in full in the fourth quarter of 2020 and decreased investing activities during the first three months of 2021 .

The Company had no outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $30.6 million and a cash and cash equivalents balance of $53.3 million at March 31, 2021.

The Company also had $66.0 million in obligations under finance leases at March 31, 2021.

At March 31, 2021, the Company had $271.2 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 September 30, 2020.

The Company was in compliance with the debt covenants under its revolving credit agreement at March 31, 2021.

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 September 30, 2020 and 2019

For the quarters ended March 31, 2021 and 2020

(in thousands, except ratios, workdays and revenue per

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Nonoperating Expense

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

Working Capital (as of March 31, 2021 and 2020)

Cash Flows provided by Operating Activities (year to date)

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LTL Revenue per hundredweight

Quarter and nine months ended September 30, 2020 compared to quarter and nine months ended September 30, 2019

Quarter ended March 31, 2021 compared to quarter ended March 31, 2020

Revenue and volume

Consolidated revenue for the quarter ended September 30, 2020 increased 2.7 percent to $481.4 million primarily as a result of increased shipments and revenue per shipment.

Saia’s LTL revenue per hundredweight (a measure of yield) increased 2.6 percent to $18.59 per hundredweight for the third quarter of 2020 as a result of changes in business mix, partially offset by a 16.7 percent decrease in fuel surcharge revenue due to lower fuel prices.

For the third quarter of 2020, Saia’s LTL tonnage was flat per workday at 1.3 million tons, and LTL shipments increased 0.9 percent per workday to 2.0 million shipments.

For the third 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 March 31, 2021 increased 8.4 percent to $484.1 million primarily as a result of increased revenue per shipment and tonnage.

Saia’s LTL revenue per hundredweight (a measure of yield) increased 5.6 percent to $19.18 per hundredweight for the first quarter of 2021 as a result of changes in business mix.

For the first quarter of 2021, Saia’s LTL tonnage was up 5.3 percent per workday to 1.2 million tons, and LTL shipments increased 2.6 percent per workday to 1.8 million shipments.

For the first quarter of 2021, 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, Saia implemented a 5.9 percent general rate increase.

For these customers subject to a general rate increase, on January 18, 2021 and February 3, 2020, Saia implemented 5.9 percent general rate increases.

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 10.4 percent for the quarter ended September 30, 2020 compared to 12.8 percent for the quarter ended September 30, 2019, as a result of decreases in the cost of fuel.

For the nine months ended September 30, 2020 , operating revenues were $1,345.9 million , up 0.2 percent from $1,343.7 million for the nine months ended September 30, 2019 , primarily due to favorable pricing, partially offset by decreased volumes as a result of the COVID-19 economic impact .

Fuel surcharge revenue as a percentage of operating revenue decrease d to 11.3 percent for the nine months ended September 30, 2020 , compared to 12.9 percent for the nine months ended September 30, 2019 , as a result of decreases in the cost of fuel.

Fuel surcharge revenue as a percentage of operating revenue increased to 12.9 percent for the quarter ended March 31, 2021 compared to 12.8 percent for the quarter ended March 31, 2020, as a result of an increase in the cost of fuel.

Operating expenses and margin

Consolidated operating income was $55.2 million in the third quarter of 2020 compared to $45.4 million in the prior year quarter.

Overall, the operations were favorably impacted in the third quarter of 2020 by pricing actions and higher shipments, combined with continued focus on cost controls and operational efficiencies.

The third quarter of 2020 operating ratio (operating expenses divided by operating revenue) was 88.5 percent compared to 90.3 percent for the same period in 2019.

Salaries, wages and benefits increased $1.9 million in the third quarter of 2020 compared to the third quarter of 2019 due to an increase in benefit and self insurance costs in the third quarter of 2020.

Fuel, operating expenses and supplies decreased $10.2 million in the third 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 third quarter of 2020, claims and insurance expense was $4.1 million higher than the third quarter of 2019 primarily due to increased severity of claims, an increase in total claims and higher cost of insurance.

Purchased transportation increased $4.2 million in the third quarter of 2020 compared to the third quarter of 2019 primarily due to surges in demand and capacity constraints in the internal network during the third quarter of 2020.

For the nine months ended September 30, 2020 , consolidated operating income was $129.7 million, up 3.6 percent compared to $125.2 million for the nine months ended September 30, 2019.

This increase was largely due to an expanded terminal network compared to the prior year along with strategic adjustments made to the operating model earlier in 2020.

Salaries, wages and benefits increased $6.8 million during the first nine months of 2020 compared to the same period last year largely due to higher benefit and self insurance costs in the first nine months of 2020 .

Fuel, operating expenses and supplies decreased $30.2 million during the first nine 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 nine months of 2019 .

During the first nine months of 2020 , claims and insurance expense was $10.1 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.

Purchased transportation decreased $1.9 million for the first nine months of 2020 compared to the same period last year primarily due to overall volume decreases during the first nine months of 2020 as a result of the economic impact of COVID-19.

Consolidated operating income was $48.7 million in the first quarter of 2021 compared to $38.8 million in the prior year quarter.

Overall, the operations were favorably impacted in the first quarter of 2021 by pricing actions and 5.3 percent higher tonnage per day, combined with continued focus on cost controls and operational efficiencies.

The first quarter of 2021 operating ratio (operating expenses divided by operating revenue) was 89.9 percent compared to 91.3 percent for the same period in 2020.

Salaries, wages and benefits increased $5.8 million in the first quarter of 2021 compared to the first quarter of 2020 due to a salary and wage increase of approximately 3.5 percent for all of its employees and an increase in performance based compensation as profitability improved from a year ago.

Fuel, operating expenses and supplies increased $2.0 million in the first quarter of 2021 compared to the prior year quarter largely due to increases in fuel expense during the quarter, partially offset by a decrease in travel expense compared to the prior year.

During the first quarter of 2021, claims and insurance expense was $1.1 million higher than the first quarter of 2020 primarily due to higher cost of insurance.

Purchased transportation increased $15.0 million in the first quarter of 2021 compared to the first quarter of 2020 primarily due to surges in demand and capacity constraints in the internal network during the first quarter of 2021.

Substantially all non-operating expenses represent interest expense.

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

Interest expense in the first nine months of 2020 was $1.0 million lower than the first nine months of 2019 due to decreased average interest rates and decreased average borrowings in the first nine months of 2020 .

The effective tax rate was 23.7 percent and 24.2 percent for the quarters ended September 30, 2020 and 2019, respectively.

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

For the nine months ended September 30, 2020 and September 30, 2019, the effective tax rates were 22.2 percent and 23.4 percent, respectively.

Net income was $41.5 million, or $1.56 per diluted share, in the third quarter of 2020 compared to net income of $33.0 million, or $1.25 per diluted share, in the third quarter of 2019.

Net income was $98.1 million, or $3.69 per diluted share, for the first nine months of 2020 compared to net income of $92.3 million, or $3.49 per diluted share, for the first nine months of 2019 .

Interest expense in the first quarter of 2021 was lower than the first quarter of 2020 due to decreased borrowings in the first quarter of 2021.

The effective tax rate was 22.3 percent and 23.7 percent for the quarters ended March 31, 2021 and 2020, respectively.

The decrease in the first quarter tax rate in 2021 is primarily a result of increased excess tax benefits related to stock compensation activity.

Net income was $37.3 million, or $1.40 per diluted share, in the first quarter of 2021 compared to net income of $28.1 million, or $1.06 per diluted share, in the first quarter of 2020.

Working capital/capital expenditures

Working capital at September 30, 2020 was $4.4 million, which decreased from working capital at September 30, 2019 of $5.6 million.

Current assets at September 30, 2020 increased by $30.4 million as compared to September 30, 2019 and includes an increase in accounts receivable of $8.7 million, and an increase of cash and cash equivalents of $25.5 million.

Current liabilities increased by $31.6 million at September 30, 2020 compared to September 30, 2019 largely due to an increase in accounts payable, and claims and insurance liabilities.

Cash flows provided by operating activities were $239.0 million for the nine months ended September 30, 2020 versus $207.3 million for the nine months ended September 30, 2019.

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

For the nine months ended September 30, 2020, net cash used in investing activities was $197.5 million versus $244.5 million in the same period last year, a $47.0 million decrease.

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

The Company currently expects that capital expenditures in 2020 will be approximately $225 million.

For the nine months ended September 30, 2020, net cash used in financing activities was $16.2 million compared to $35.0 million net cash provided by financing activities during the same period last year, as a result of improved net borrowings .

Working capital at March 31, 2021 was $41.1 million, which decreased from working capital at March 31, 2020 of $56.9 million.

Current assets at March 31, 2021 increased by $42.4 million as compared to March 31, 2020 and includes an increase in accounts receivable of $32.0 million, and an increase of cash and cash equivalents of $6.4 million.

Current liabilities increased by $58.2 million at March 31, 2021 compared to March 31, 2020 largely due to an increase in accounts payable, and claims and insurance liabilities.

Cash flows provided by operating activities were $61.0 million for the three months ended March 31, 2021 versus $51.3 million for the three months ended March 31, 2020.

The increase is primarily due to increased profitability compared to the same period last year.

For the three months ended March 31, 2021, net cash used in investing activities was $25.4 million versus $102.7 million in the same period last year, a $77.3 million decrease.

This decrease for the three months ended resulted primarily from decreased capital expenditures caused by COVID-19 related manufacturing delays for revenue equipment.

The Company currently expects that net capital expenditures in 2021 will be approximately $275 million.

For the three months ended March 31, 2021, net cash used in financing activities was $7.6 million compared to $98.1 million net cash provided by financing activities during the same period last year, as a result of reduced net borrowings after the Company’s revolver balance was paid in full in the fourth quarter of 2020 and decreased investing activities during the first three months of 2021.

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.

Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations, financial performance and financial condition, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict.

We are continuing initiatives to increase yield, reduce costs and improve productivity while also focusing on providing top quality service and improving safety performance.

On February 3, 2020, Saia implemented a 5.9 percent general rate increase for customers comprising approximately 20 to 25 percent of Saia’s operating revenue.

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 this action will result in approximately $10 million of additional benefit costs across the last nine months of the year.

In September 2020, the 401(k) match for employees was retroactively reinstated from July 1, 2020 going forward.

We are continuing initiatives to increase yield, reduce costs and improve productivity while

also focusing on providing top quality service and improving safety performance.

On January 18, 2021 and February 3 , 20 20 , Saia implemented a 5.9 percent general rate increase for customers comprising approximately 20 to 25 percen t of Saia’s operating revenue.

If the Company continues to build market share, including through its geographic expansion, it expects numerous operating leverage cost benefits.

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Additionally, the Company’s renewal of insurance policies effective March 1, 2021 resulted in $3.3 million of anticipated cost increases for 2021 compared to 2020.

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.

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 throughout the 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 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.

The amendment reduced the interest rate pricing.

The Amended Credit Agreement provides for a LIBOR rate margin range from 100 basis points to 200 basis points, base rate margins from minus 50 basis points to plus 50 basis points, an unused portion fee from 17.5 basis points to 30 basis points and letter of credit fees from 100 basis points to 200 basis points, in each case based on the Company’s leverage ratio.

Under the Amended Credit Agreement, the Company must maintain a minimum debt service coverage ratio set at 1.25 to 1.00 and a maximum leverage ratio set at 3.25 to 1.00.

The Amended Credit Agreement provides for a pledge by the Company of certain land and

structures, accounts receivable and other assets to secure indebtedness under this agreement.

The Amended Credit Agreement provides for a pledge by the Company of certain land and structures, accounts receivable and other assets to secure indebtedness under this agreement.

The Amended Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default.

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 September 30, 2020, the Company had borrowings of $45.0 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.

At March 31, 2021, the Company had no outstanding borrowings and outstanding letters of credit of $28.8 million under the Amended Credit Agreement.

At December 31, 2020, the Company had no outstanding borrowings and outstanding letters of credit of $27.2 million under the Amended Credit Agreement.

The available portion of the Amended Credit Agreement may be used for general corporate purposes, including capital expenditures, working capital and letter of credit requirements as needed.

Finance Leases

The Company is obligated under finance leases with seven-year terms covering revenue equipment totaling $75.9 million and $90.5 million as of September 30, 2020 and December 31, 2019, respectively.

The Company is obligated under finance leases with seven-year original terms covering revenue equipment.

Total liabilities recognized under finance leases were $66.0 million and $71.0 million as of March 31, 2021 and December 31, 2020, 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 September 30, 2020 and December 31, 2019 were 3.5 percent and 3.4 percent, respectively.

The weighted average interest rates for the finance leases at both March 31, 2021 and December 31, 2020 were 3.5 percent, respectively.

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 $309.1 million for the year ended December 31, 2020, while net cash used in investing activities was $218.8 million.

Cash flows provided by operating activities were $239.0 million for the nine months ended September 30, 2020, $31.7 million higher than the first nine months of the prior year.

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

Cash flows provided by operating activities were $61.0 million for the three months ended March 31, 2021, $9.7 million higher than the first three months of the prior year.

The increase is primarily due to increased profitability 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 September 30, 2020, the Company had $227.0 million in availability under the Amended Credit Agreement, subject to the Company’s satisfaction of existing debt covenants.

At March 31, 2021, the Company had $271.2 million in availability under the Amended Credit Agreement, subject to the Company’s satisfaction of existing debt covenants.

The Company was in compliance with its debt covenants at March 31, 2021.

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 September 30, 2020.

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

Generally, the Company is responsible for the risk retention amount per occurrence of $2.0 million under the new policy.

Thereafter, the policy provides insurance coverage for a single loss of $8.0 million, an aggregate loss limit of $24.0 million for each policy year, and a $48.0 million aggregate loss limit for the 36-month term ended March 1, 2021.

Effective March 1, 2018, the Company entered into a new automobile liability insurance policy with a three-year term.

Generally, the Company is responsible for the risk retention amount per occurrence of $2.0 million under the policy.

Under the policy, the Company may elect to commute the policy with respect to the first 12 months of the policy term and concurrently extend the policy for an additional one-year period if paid losses in the first 12 months of the policy are less than $5.2 million.

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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 $0.5 million reduction in insurance premium expense in the third quarter of 2020.

As a result of the return premium and policy extension, the Company recognized a $0.5 million reduction in insurance premium expense in the first quarter of 2021.

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.

In addition, commencing on August 30, 2022, 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 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 ending March 1, 2022.

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

Additionally, the Company is 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 occurring since March 1, 2019, no such additional premium was accrued at March 31, 2021 .

Commencing on August 30, 2022, 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 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 the four years ended March 1, 2022.

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

Projected capital expenditures for 2021 are expected to be approximately $275 million.

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 increase from 2020 net capital expenditures of $219 million for property and equipment, inclusive of equipment acquired using finance leases, information technology, and land and structures.

Projected 2021 capital expenditures include a normal replacement cycle of revenue equipment and technology investment for our operations.

Net capital expenditures were $197.5 million in the first nine months of 2020.

Approximately $4.0 million of the 2020 remaining capital budget was committed as of September 30, 2020.

In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $ 3.7 million for the remainder of 2020 and decreasing for each year thereafter based on borrowings and commitments outstanding at September 30, 2020 .

Net capital expenditures were $25.4 million in the first three months of 2021.

Approximately $171.8 million of the 2021 remaining capital budget was committed as of March 31, 2021.

In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $3.2 million for the remainder of 2021 and decreasing for each year thereafter based on borrowings and commitments outstanding at March 31, 2021.

Contractual Obligations

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

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of March 31, 2021 (in millions):

Payments due by year

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The contractual finance lease obligation payments included in this table include both the principal and interest components.

Subsequent to March 31, 2021 , the Company committed to an additional lease estimated to commence in 2023 of approximately $ 57 million with a lease term of 15 years.

Includes commitments of $171.8 million for capital expenditures.

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Subject to the satisfaction of existing debt covenants.

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 September 30, 2020.

The Company has accrued approximately $1.2 million for uncertain tax positions and $0.1 million for interest and penalties related to the uncertain tax positions as of March 31, 2021.

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 September 30, 2020, the Company has $92.0 million in claims and insurance liabilities.

At March 31, 2021, the Company has accrued $91.9 million for 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.

As described in more detail in the Notes to Consolidated Financial Statements contained in Form 10-K for the year ended December 31, 2020, the 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.

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.

The liabilities for self-funded retention are included in claims and insurance reserves based on claims incurred with liabilities for unsettled claims and claims incurred but not yet reported being actuarially determined with respect to workers’ compensation claims and, with respect to all other liabilities, estimated based on management’s evaluation of the nature and severity of individual claims and historical experience.

However, these estimated accruals could be significantly affected if the actual costs of the Company differ from these

The claims liabilities are included in claims and insurance reserves based on claims incurred with liabilities for unsettled claims and claims incurred but not yet reported being actuarially determined with respect to workers’ compensation claims and, with respect to all other liabilities, estimated based on management’s evaluation of the nature and severity of individual claims and historical experience.

However, these estimated accruals could be significantly affected if the actual costs of the Company differ from these assumptions.

A significant number of these claims typically take several years to develop and even longer to ultimately settle.

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Under the Company’s accounting policy for property and equipment, management establishes appropriate depreciable lives and salvage values for the Company’s revenue equipment (tractors and trailers) based on their estimated useful lives and estimated residual values to be received when the equipment is sold or traded in.

These estimates are routinely evaluated and updated when circumstances warrant.

These estimates

are routinely evaluated and updated when circumstances warrant.

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 .

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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