(1) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Saia, Inc. and its wholly-owned subsidiaries (together, the Company or Saia). All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The condensed consolidated financial statements have been prepared by the Company without audit by the independent registered public accounting firm. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations and cash flows for the interim periods included herein have been made. These interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information, the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these statements. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Operating results for the quarter ended March 31, 2018 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2018.

Business

The Company provides regional and interregional less-than-truckload (LTL) services across 39 states through a single integrated organization. While approximately 97 percent of its revenue is derived from transporting LTL shipments, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited and logistics services throughout North America. The Company’s customer base is diversified across numerous industries.

Revenue Recognition

The Company’s revenues are derived primarily from the transportation of freight as it satisfies performance obligations that arise from contracts with its customers, when collectability is considered probable. The Company’s performance obligations arise when it receives a bill of lading (“BOL”) to transport a customer's commodities at negotiated prices contained in either a transportation services agreement or a publicly disclosed tariff rate. Once a BOL is received, a legally-enforceable contract is formed whereby the parties are committed to perform and the rights of the parties, shipping terms and conditions, and payment terms have been identified. A customer may submit many BOLs for transportation services at various times throughout a service agreement term but each shipment represents a distinct service that is a separately identified performance obligation.

The average transit time to complete a shipment is between 1 to 3 days. Payments for transportation services are normally billed after completion of the service and are generally due within 30 days after the invoice date. The Company recognizes revenue related to the Company’s LTL, non-asset truckload and expedited services over the transit time of the shipment as it moves from origin to destination. Revenue for services started but not completed at the reporting date is allocated based on the relative transit time in each reporting period, with the portion allocated for services subsequent to the reporting date considered remaining performance obligations.

Key estimates included in the recognition and measurement of revenue and related accounts receivable are as follows:

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Revenue associated with shipments in transit is recognized ratably over transit time and is based on average cycle times to move shipments from their origin to their final destination or interchange;

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Adjustments to revenue for billing adjustments and collectability.

Revenue related to interline transportation services that involve the services of another party, such as another LTL service provider, is reported on a net basis. The portion of the gross amount billed to customers that is remitted by the Company to another party is not reflected as revenue. Revenue from logistics services is recognized as the services are provided.

Remaining performance obligations represent the transaction price allocated to future reporting periods for freight services started but not completed at the reporting date. This includes the unearned portion of billed and unbilled amounts for cancellable freight shipments in transit that the Company expects to recognize as revenue in the period subsequent to the reporting date, which is on average less than one week. The Company has elected to apply the optional exemption in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 606 as it pertains to additional quantitative disclosures pertaining to remaining performance obligations.

Accounting Pronouncements Adopted in 2018

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services. The ASU replaced most existing revenue recognition guidance in U.S. generally accepted accounting principles when it became effective for the Company on January 1, 2018. In-depth reviews of contracts were completed and changes to processes and internal controls to meet the standard’s reporting and disclosure requirements were implemented. The Company adopted the standard using the full retrospective transition method.

As a result of the adoption of this standard, the Company changed the presentation of its non-asset truckload business from net revenue to gross revenue and changed the method of recognizing that revenue from upon commencement of the services to over the transit time of the freight as it moves from origin to destination.

The Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements. The below tables reflect the effect of the adoption of this standard on the previously reported financial data.

Condensed Consolidated Balance Sheet impact:

	As of December 31, 2017
		As adjusted		As originally reported		Effect of change
	(in thousands)
Accounts receivable		$	170,278	$	170,610	$	(332	)
Total current assets			203,249		203,581		(332	)
Total assets			967,315		967,647		(332	)
Accounts payable			57,438		57,717		(279	)
Total current liabilities			166,926		167,205		(279	)
Retained earnings			339,500		339,553		(53	)
Total stockholders’ equity			582,494		582,547		(53	)
Total liabilities and stockholders’ equity			967,315		967,647		(332	)

Condensed Consolidated Statement of Operations impact:

	For the quarter ended March 31, 2017
		As adjusted		As originally reported		Effect of change
	(in thousands, except per share data)
Operating revenue		$	323,090	$	317,037	$	6,053
Purchased transportation			20,820		14,775		6,045
Total operating expenses			305,563		299,518		6,045
Operating income			17,527		17,519		8
Net income			11,395		11,387		8
Basic Earnings Per Share			0.45		0.45		—
Diluted Earnings Per Share			0.44		0.44		—

Condensed Consolidated Statement of Cash Flows impact:

	For the quarter ended March 31, 2017
		As adjusted			As originally reported			Effect of change
	(in thousands)
Net income		$	11,395		$	11,387		$	8
Changes in operating assets and liabilities, net			(12,765	)		(12,757	)		(8	)
Net cash provided by operating activities			24,128			24,128			—
Net decrease in cash and cash equivalents			(828	)		(828	)		—

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), a leasing standard for both lessees and lessors. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. Lessor accounting remains largely consistent with existing U.S. generally accepted accounting principles. The new standard is effective for the Company on January 1, 2019. Early adoption is permitted. The standard permits the use of either a modified retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2016-02 will have on its consolidated financial statements and related disclosures. While the Company has adopted a timeline for implementation and has selected a system to facilitate the adoption of the new standard, the Company has not yet completed its review of existing agreements using the new definition of a lease. Based on the Company’s current analysis, it believes the most significant changes relate to the recognition of lease assets and liabilities on its consolidated balance sheet.