What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-28 compared with 2021-07-29 · 103 added, 92 removed, 201 unchanged (49% of the section changed)

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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.

Investors should not place undue reliance on forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as otherwise required by applicable law.

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.

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industry-wide external factors largely out of our control;

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

cost and availability of qualified drivers, dock workers and other employees, 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;

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changes in accounting and financial standards or practices;

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;

widespread outbreak of an illness or any other communicable disease, including the COVID-19 pandemic, or any other health crisis or business disruptions and higher costs that may arise from the COVID-19 pandemic in the future, including governmental regulations requiring that employees be vaccinated or be tested regularly for COVID-19 before reporting to work;

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

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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 as appropriate.

President Biden has issued a directive to OSHA to develop an Emergency Temporary Standard requiring all employers of 100 or more employees to ensure that their workforce is vaccinated or subject to weekly COVID-19 testing.

This standard, or comparable state or local requirements, could adversely affect

our ability to hire and retain employees which could lead to service disruptions and higher costs .

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 .

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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 June 30, 2021 .

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 September 30, 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 .

Second Quarter Overview

The Company’s operating revenue increased by 36.6 percent in the second quarter of 2021 compared to the same period in 2020.

Third Quarter Overview

The Company’s operating revenue increased by 28.0 percent in the third 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 $82.9 million for the second quarter of 2021 compared to $35.7 million for the second quarter of 2020.

In the second quarter of 2021, LTL shipments were up 15.3 percent per workday and LTL tonnage was up 23.1 percent per workday compared to the prior year quarter.

Diluted earnings per share were $2.34 in the second quarter of 2021, compared to diluted earnings per share of $1.07 in the prior year quarter.

The operating ratio (operating expenses divided by operating revenue) was 85.5 percent in the second quarter of 2021 compared to 91.5 percent in the second quarter of 2020.

The improved operating ratio compared to prior year is due to the negative economic impact of COVID-19 in the prior year quarter, as well as the Company’s continued focus on pricing initiatives, cost control and operational efficiencies.

The Company generated $140.1 million in net cash provided by operating activities in the first six months of 2021 compared with $148.2 million in the same period last year.

The decrease is primarily due to a change in working capital, largely increases in accounts receivable and cash and cash equivalents, compared to prior year, partially offset by increased profitability.

The Company’s net cash used in investing activities was $100.0 million during the first six months of 2021 compared to $142.7 million in the first six months of 2020, primarily as a result of decreased capital expenditures for revenue equipment in the first six months of 2021 caused by COVID-19 related manufacturing delays for revenue equipment.

The Company’s net cash used in financing activities was $12.6 million in the first six months of 2021 compared to $23.5 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 six months of 2021 .

The Company had no outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $31.1 million and a cash and cash equivalents balance of $52.9 million at June 30, 2021.

The Company also had $61.0 million in obligations under finance leases at June 30, 2021.

At June 30, 2021, the Company had $270.7 million in availability under the revolving credit facility, subject to the Company’s satisfaction of existing debt covenants.

Consolidated operating income was $106.1 million for the third quarter of 2021 compared to $55.2 million for the third quarter of 2020.

In the third quarter of 2021, LTL shipments were up 2.3 percent per workday and LTL tonnage was up 11.0 percent per workday compared to the prior year quarter.

Diluted earnings per share were $2.98 in the third quarter of 2021, compared to diluted earnings per share of $1.56 in the prior year quarter.

The operating ratio (operating expenses divided by operating revenue) was 82.8 percent in the third quarter of 2021 compared to 88.5 percent in the third 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 operating efficiencies.

Additionally, a real estate gain drove 70 basis points of the improvement in the operating ratio.

The Company generated $267.7 million in net cash provided by operating activities in the first nine months of 2021 compared with $239.0 million in the same period last year.

The increase is primarily due to increased profitability partially offset by a change in working capital, largely increases in accounts receivable and cash and cash equivalents, compared to prior year.

The Company’s net cash used in investing activities was $148.9 million during the first nine months of 2021 compared to $197.5 million in the first nine months of 2020, primarily as a result of decreased capital expenditures for revenue equipment in the first nine months of 2021 caused by COVID-19 related manufacturing delays for revenue equipment.

The Company’s net cash used in financing activities was $18.7 million in the first nine months of 2021 compared to $16.2 million net cash used in financing activities during the same period last year.

This change was primarily due to equity based compensation shares withheld for taxes as well as repayment of finance leases during the first nine months of 2021 .

The Company had no outstanding borrowings under its revolving credit agreement, outstanding letters of credit of $31.1 million and a cash and cash equivalents balance of $121.7 million at September 30, 2021.

The Company also had $55.2 million in obligations under finance leases at September 30, 2021.

At September 30, 2021, the Company had $270.7 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 June 30, 2021.

The Company was in compliance with the debt covenants under its revolving credit agreement at September 30, 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 and estimates of Saia, Inc.

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“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;

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;

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Selected Results of Operations and Operating Statistics

For the quarters ended June 30, 2021 and 2020

For the quarters ended September 30, 2021 and 2020

(in thousands, except ratios, workdays, revenue per hundredweight, revenue per shipment and length of haul)

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Nonoperating Expense

Working Capital (as of June 30, 2021 and 2020)

Working Capital (as of September 30, 2021 and 2020)

Cash Flows provided by Operating Activities (year to date)

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LTL Length of haul

Quarter and six months ended June 30, 2021 compared to quarter ended June 30, 2020

Quarter and nine months ended September 30, 2021 compared to quarter and nine months ended September 30, 2020

Revenue and volume

Consolidated revenue for the quarter ended June 30, 2021 increased 36.6 percent to $571.3 million primarily as a result of increased revenue per shipment, shipments and tonnage as the quarter ending June 30, 2020 was negatively impacted by COVID-19.

Saia’s LTL revenue per hundredweight (a measure of yield) increased 10.5 percent to $19.84 per hundredweight for the second quarter of 2021 as a result of changes in business mix.

For the second quarter of 2021, Saia’s LTL tonnage was up 23.1 percent per workday to 1.4 million tons, and LTL shipments increased 15.3 percent per workday to 2.0 million shipments.

For the second 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.

Consolidated revenue for the quarter ended September 30, 2021 increased 28.0 percent to $616.2 million primarily as a result of increased revenue per shipment and tonnage.

Saia’s LTL revenue per hundredweight (a measure of yield) increased 14.9 percent to $21.36 per hundredweight for the third quarter of 2021 as a result of changes in business mix and pricing actions.

For the third quarter of 2021, Saia’s LTL tonnage was up 11.0 percent per workday to 1.4 million tons, and LTL shipments increased 2.3 percent per workday to 2.0 million shipments.

For the third 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.

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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 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 increased to 14.4 percent for the quarter ended June 30, 2021 compared to 10.6 percent for the quarter ended June 30, 2020, as a result of increases in the cost of fuel.

For the six months ended June 30, 2021 , operating revenues were $1.1 billion , up 22.1 percent from $864.5 million for the six months ended June 30, 2020 .

This increase is primarily due to in creased revenue per shipment , shipments and tonnage during the first six months of 2021 compared to the comparable period last year, which was negativel y impacted by COVID-19.

Fuel surcharge revenue as a percentage of operating revenue increase d to 13.7 percent for the six months ended June 30, 2021 , compared to 11.8 percent for the six months ended June 30, 2020 , as a result of in creases in the cost of fuel.

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 increase d to 13.9 percent for the quarter ended September 30, 2021 compared to 10.4 percent for the quarter ended September 30, 2020 , as a result of in crease s in the cost of fuel.

For the nine months ended September 30, 2021 , operating revenues were $1.7 billion, up 24.2 percent from $1.3 billion for the nine months ended September 30, 2020.

This increase is primarily due to increased revenue per shipment, shipments and tonnage during the first nine months of 2021 compared to the comparable period last year.

Fuel surcharge revenue as a percentage of operating revenue increased to 13.8 percent for the nine months ended September 30, 2021 compared to 11.3 percent for the nine months ended September 30, 2020, as a result of increases in the cost of fuel.

Operating expenses and margin

Consolidated operating income was $82.9 million in the second quarter of 2021 compared to $35.7 million in the prior year quarter.

Overall, the increase in consolidated operating income in the second quarter of 2021 compared to the second quarter of 2020 was the result of the negative impact of COVID-19 in the prior year period.

Additionally, pricing actions in 2021 and the 23.1 percent increase in tonnage per day, combined with continued focus on cost controls and operational efficiencies contributed to the improvement.

The second quarter of 2021 operating ratio (operating expenses divided by operating revenue) was 85.5 percent compared to 91.5 percent for the same period in 2020.

Salaries, wages and benefits increased $44.5 million in the second quarter of 2021 compared to the second quarter of 2020 due to lower headcount in the second quarter of 2020 in response to impacts of the COVID-19 pandemic.

Additionally, in January 2021 the Company implemented salary and wage increases while significant growth led to higher overall compensation levels.

Fuel, operating expenses and supplies increased $24.8 million in the second quarter of 2021 compared to the prior year quarter largely due to increases in fuel cost due to volume and price per gallon increases during the quarter, in addition to increases in other operating expenses and supplies .

During the second quarter of 2021, claims and insurance expense was $1.0 million lower than the second quarter of 2020 primarily due to lower claims activity.

Purchased transportation increased $36.1 million in the second quarter of 2021 compared to the second quarter of 2020 primarily due to surges in demand, capacity constraints in the internal network and higher rates for purchased miles during the second quarter of 2021.

For the six months ended June 30, 2021, consolidated operating income was $131.6 million, up 76.8 percent compared to $74.5 million for the six months ended June 30, 2020.

This increase was largely due to the economic impact of COVID-19 in the prior period.

Salaries, wages and benefits increased $50.3 million during the first six months of 2021 compared to the same period last year largely due to higher wages in the first six months of 2021 .

Additionally, in January 2021 the Company implemented salary and wage increases while significant growth led to higher overall compensation levels.

Fuel, operating expenses and supplies increased $26.8 million during the first six months of 2020 compared to the same period last year largely due to increases in fuel cost due to volume and price per gallon increases during the first six months of 2021, in addition to increases in other operating expenses and supplies.

During the first six months of 2021 , claims and insurance expense was $0.1 million higher than the same period last year primarily due to higher premiums, largely offset by decreased claims.

Purchased transportation increased $51.0 million for the first six months of 2021 compared to the same period last year primarily due to surges in demand, capacity constraints in the internal network and higher rates for purchased miles during the first six months of 2021 .

Consolidated operating income was $106.1 million in the third quarter of 2021 compared to $55.2 million in the prior year quarter.

Overall, the increase in consolidated operating income in the third quarter of 2021 compared to the third quarter of 2020 was the result of increased tonnage and improved pricing actions and business mix management during the third quarter 2021.

These actions in 2021 combined with the 11.0 percent increase in tonnage per day, along with continued focus on cost controls and operational efficiencies drove improvement during the quarter.

The third quarter of 2021 operating ratio (operating expenses divided by operating revenue) was 82.8 percent compared to 88.5 percent for the same period in 2020.

Additionally, a real estate gain drove 70 basis points of the improvement in the operating ratio.

Salaries, wages and benefits increased $25.0 million in the third quarter of 2021 compared to the third quarter of 2020 due to lower headcount in the third quarter of 2020.

Additionally, in January 2021 and August 2021 the Company implemented salary and wage increases, while significant growth led to higher overall compensation levels.

Fuel, operating expenses and supplies increased $24.7 million in the third quarter of 2021 compared to the prior year quarter largely due to increases in fuel cost due to volume and price per gallon increases during the quarter, in addition to increases in other operating expenses and supplies .

During the third quarter of 2021, claims and insurance expense was $3.6 million higher than the third quarter of 2020 primarily due to higher claims activity in addition to an increase in premiums compared to prior year.

Purchased transportation increased $32.1 million in the third quarter of 2021 compared to the third quarter of 2020 primarily due to increasing demand, capacity constraints in the internal network and higher rates for purchased miles during the third quarter of 2021.

Gain from property disposals increased $3.5 million in the third quarter of 2021 compared to prior year due to the gain on disposal of a previously occupied terminal.

This transaction occurred as the result of management’s efforts towards expanding door count by replacing a smaller facility with a larger facility better positioned to successfully support the Company’s overall strategy.

For the nine months ended September 30, 2021, consolidated operating income was $237.8 million, up 83.4 percent compared to $129.7 million for the nine months ended September 30, 2020.

This increase was due to the overall increase in shipments, tonnage and improved pricing actions and mix management as the company successfully returned service from the distruptive impact of the COVID-19 environment.

Salaries, wages and benefits increased $75.3 million during the first nine months of 2021 compared to the same period last year largely due to higher wages in the first nine months of 2021 .

Additionally, in January 2021 and August 2021 the Company implemented salary and wage increases, while significant growth led to higher overall compensation levels.

Fuel, operating expenses and supplies increased $51.5 million during the first nine months of 2021 compared to the same period last year largely due to increases in fuel cost due to volume and price per gallon increases during the first nine months of 2021, in addition to increases in other operating expenses and supplies.

During the first nine months of 2021 , claims and insurance expense was $3.7 million higher than the same period last year primarily due to higher premiums, largely offset by decreased claims.

Purchased transportation increased $83.2 million for the first nine months of 2021 compared to the same period last year primarily due to increasing demand, capacity constraints in the internal network and higher rates for purchased miles during the first nine months of 2021 .

Gain from property disposals increased $2.6 million for the first nine months of 2021 compared to prior year due to the gain on disposal of a previously occupied terminal.

Substantially all non-operating expenses represent interest expense.

Interest expense in the second quarter of 2021 was lower than the same period in 2020 due to decreased borrowings in the current period as a result of delayed capital expenditures.

The effective tax rate was 24.3 percent and 18.3 percent for the quarters ended June 30, 2021 and 2020, respectively.

The increase in the second quarter effective tax rate in 2021 is primarily a result of higher excess tax benefits related to stock compensation activity in the prior year.

For the six months ended June 30, 2021 and June 30, 2020, the effective tax rates were 23.6 percent and 21.1 percent, respectively.

For the six months ended June 30, 2021 approximately $40.2 million in cash tax payments were made compared to $0.3 million in the six months ended June 30, 2020 .

Net income was $62.5 million, or $2.34 per diluted share, in the second quarter of 2021 compared to net income of $28.5 million, or $1.07 per diluted share, in the second quarter of 2020.

Net income was $99.8 million, or $3.74 per diluted share, for the first six months of 2021 compared to net income of $56.6 million, or $2.13 per diluted share, for the first six months of 2020 .

Interest expense in the third quarter of 2021 was lower than the same period in 2020 due to decreased borrowings in the current period as a result of delayed capital expenditures.

The effective tax rate was 24.3 percent and 23.7 percent for the quarters ended September 30, 2021 and 2020 , respectively.

The in crease in the third quarter effective tax rate in 2021 is primarily a result of higher excess tax benefits related to stock compensation activity in the prior year .

For the nine months ended September 30, 2021 and September 30, 2020 , the effective tax rates were 23.9 percent and 22.2 percent, respectively.

For the nine months ended September 30, 2021 approximately $ 58.7 million in cash tax payments were made compared to $ 6.6 million in the nine months ended September 30, 2020 .

Net income was $79.7 million, or $2.98 per diluted share, in the third quarter of 2021 compared to net income of $41.5 million, or $1.56 per diluted share, in the third quarter of 2020.

Net income was $179.5 million, or $6.72 per diluted share, for the first nine months of 2021 compared to net income of $98.1 million, or $3.69 per diluted share, for the first nine months of 2020 .

Working capital/capital expenditures

Working capital at June 30, 2021 was $69.0 million, which increased from working capital at June 30, 2020 of $21.5 million.

Current assets at June 30, 2021 increased by $84.2 million as compared to June 30, 2020 and includes an increase in accounts receivable of $56.0 million, and an increase of cash and cash equivalents of $23.6 million.

Current liabilities increased by $36.8 million at June 30, 2021 compared to June 30, 2020 largely due to an increase in accounts payable, and claims and insurance liabilities.

Cash flows provided by operating activities were $140.1 million for the six months ended June 30, 2021 versus $148.2 million for the six months ended June 30, 2020.

The decrease is primarily due to a change in working capital compared to prior year, partially offset by increased profitability.

For the six months ended June 30, 2021, net cash used in investing activities was $100.0 million versus $142.7 million in the same period last year, a $42.7 million decrease.

Working capital at September 30, 2021 was $112.0 million, which increased from working capital at September 30, 2020 of $4.4 million.

Current assets at September 30, 2021 increased by $170.5 million as compared to September 30, 2020 and includes an increase in accounts receivable of $69.2 million, and an increase in cash and cash equivalents of $96.2 million.

Current liabilities increased by $62.9 million at September 30, 2021 compared to September 30, 2020 largely due to an increase in accounts payable.

Cash flows provided by operating activities were $267.7 million for the nine months ended September 30, 2021 versus $239.0 million for the nine months ended September 30, 2020.

The increase is primarily due to increased profitability, partially offset by a change in working capital compared to prior year.

For the nine months ended September 30, 2021, net cash used in investing activities was $148.9 million versus $197.5 million in the same period last year, a $48.6 million decrease.

This decrease 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 six months ended June 30, 2021, net cash used in financing activities was $12.6 million compared to $23.5 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 six months of 2021.

For the nine months ended September 30, 2021, net cash used in financing activities was $18.7 million compared to $16.2 million net cash used in financing activities during the same period last year, as a result of equity based compensation shares withheld for taxes as well as repayment of finance leases during the first nine 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 January 18, 2021 and 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.

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.

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

On January 18, 2021 and February 3, 2020, Saia implemented 5.9 percent general rate increases for customers comprising approximately 20 to 25 percent of Saia’s operating revenue.

The success of cost improvement initiatives is impacted by the cost and availability of drivers, dock workers and other employees 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.”

Effective mid-August 2021, the Company plans to implement a market competitive salary and wage increase for all employees, other than Saia executives.

The compensation increase is expected to be approximately three percent, and the Company anticipates the impact will be partially offset by productivity and efficiency gains.

Additionally, the renewal of the Company’s liability insurance policies effective March 1, 2021 will result in $4.3 million in cost increases for 2021 compared to 2020.

Effective mid-August 2021, the Company implemented a market competitive salary and wage increase for all employees, other than Saia executives.

The compensation increase was approximately five percent, and the Company anticipates the impact will be partially offset by productivity and efficiency gains.

Additionally, the renewal of the Company’s liability insurance policies effective March 1, 2021 is expected to result in approximately $4.3 million in cost increases for 2021 compared to 2020.

See “Forward-Looking Statements” and Part II, Item 1A.

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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.

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.

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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 June 30, 2021 , the Company had no outstanding borrowings and outstanding letters of credit of $ 29.3 million under the Amended Credit Agreement.

At September 30, 2021, the Company had no outstanding borrowings and outstanding letters of credit of $29.3 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 av ailable 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.

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 original terms covering revenue equipment.

Total liabilities recognized under finance leases were $61.0 million and $71.0 million as of June 30, 2021 and December 31, 2020, respectively.

Total liabilities recognized under finance leases were $55.2 million and $71.0 million as of September 30, 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 both June 30, 2021 and December 31, 2020 were 3.5 percent.

The weighted average interest rates for the finance leases at both September 30, 2021 and December 31, 2020 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 $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 $140.1 million for the six months ended June 30, 2021;

$8.1 million lower than the first six months of the prior year.

The decrease in operating cash flows is primarily due to a change in working capital, largely increases accounts receivable and cash and cash equivalents, compared to the prior year, partially offset by increased profitability.

Cash flows provided by operating activities were $267.7 million for the nine months ended September 30, 2021;

$28.7 million higher than the first nine months of the prior year.

The increase in operating cash flows is primarily due to increased profitability, partially offset by a change in working capital, largely increases in accounts receivable 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 June 30, 2021, the Company had $270.7 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 June 30, 2021.

At September 30, 2021, the Company had $270.7 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 September 30, 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.

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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 second quarter of 2021.

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 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.

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 June 30, 2021 .

Based on claims occurring since March 1, 2019, no such additional premium was accrued at September 30, 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.

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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.

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

This would represent an 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 $100.0 million in the first six months of 2021.

Approximately $118.1 million of the 2021 remaining capital budget was committed as of June 30, 2021.

In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $3.0 million for the remainder of 2021 and decreasing for each year thereafter based on borrowings and commitments outstanding at June 30, 2021.

Projected 2021 capital expenditures include a normal replacement cycle of

revenue equipment and technology investment for our operations.

Net capital expenditures were $ 148.4 million in the first nine months of 2021 .

Approximately $ 74.8 million of the 2021 remaining capital budget was committed as of September 30, 2021 .

In addition to the principal amounts disclosed in the tables below, the Company has interest obligations of approximately $2.9 million for the remainder of 2021 and decreasing for each year thereafter based on borrowings and commitments outstanding at September 30, 2021.

Contractual Obligations

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of June 30, 2021 (in millions):

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of September 30, 2021 (in millions):

Payments due by year

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Subject to the satisfaction of existing debt covenants.

The Company has accrued approximately $1.3 million for uncertain tax positions and $0.2 million for interest and penalties related to the uncertain tax positions as of June 30, 2021.

The Company has accrued approximately $1.4 million for uncertain tax positions and $0.2 million for interest and penalties related to the uncertain tax positions as of September 30, 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 June 30, 2021, the Company has accrued $95.8 million for claims and insurance liabilities.

At September 30, 2021, the Company has accrued $99.8 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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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 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 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 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.

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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