Saia, Inc. and its subsidiaries (“Saia” or the “Company”) is headquartered in Johns Creek, Georgia. Saia is a leading, less-than-truckload (“LTL”) motor carrier with more than 97% of its revenue historically derived from transporting LTL shipments for customers. In addition to the core LTL services provided in 45 states, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited and logistics services across the United States.

The Chief Operating Decision Maker is the Chief Executive Officer who manages the business, regularly reviews financial information and allocates resources. The Company has one operating segment.

The accompanying consolidated financial statements include the accounts of Saia, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The preparation of our consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: revenue reserves; self-insurance accruals; long-term incentive compensation; tax liabilities; loss contingencies; litigation claims; and impairment assessments on long-lived assets and goodwill.

In 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Under this ASU an entity is required to utilize an “expected credit loss model” on certain financial instruments, including trade and financing receivables. This model requires consideration of a broader range of reasonable and supportable information and requires an entity to estimate expected credit losses over the lifetime of the asset. This standard is effective for interim and annual reporting periods beginning after December 15, 2019. The Company adopted the standard effective January 1, 2020 and, upon adoption, this standard did not have a material impact on its consolidated financial statements or related disclosures.

In 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard became effective for interim and annual reporting periods beginning after December 15, 2020. The Company adopted the standard effective January 1, 2021 and, upon adoption, this standard did not have a material impact on its consolidated financial statements or related disclosures.

Significant accounting policies and practices used in the preparation of the accompanying consolidated financial statements are as follows:

Cash and Cash Equivalents and Checks Outstanding: Cash and cash equivalents in excess of current operating requirements are invested in short-term interest bearing instruments purchased with original maturities of three months or less and are stated at cost, which approximates their market value. Checks outstanding in excess of cash on deposit are included in accounts payable on the accompanying consolidated balance sheets and in operating activities in the accompanying consolidated statements of cash flows.

Spare Parts, Fuel and Operating Supplies: Spare parts, fuel and operating supplies on hand are carried at average cost and are included in other current assets on the accompanying consolidated balance sheet.

Property and Equipment, Including Repairs and Maintenance: Property and equipment are carried at cost less accumulated depreciation. Replacements and improvements that extend the useful life of an asset are capitalized, while repairs and maintenance that do not improve or extend the lives of the respective assets are charged to expense as incurred.

Depreciation is computed using the straight-line method based on the following service lives:

				Years
Structures				20 to 25
Tractors				6 to 10
Trailers				10 to 14
Other revenue equipment				7 to 14
Technology equipment and software				3 to 5
Other				3 to 10

At December 31, property and equipment consisted of the following (in thousands):

	2021		2020
Land	$	159,309	$	116,187
Structures		521,578		440,015
Tractors		601,599		583,711
Trailers		490,248		426,000
Other revenue equipment		104,153		96,912
Technology equipment and software		161,791		141,735
Other		105,850		96,684

Total property and equipment, at cost	$	2,144,528	$	1,901,244

The Company’s investment in technology equipment and software consists primarily of systems to support customer service, maintenance and freight management. Depreciation and amortization expense was $140.5 million, $133.5 million and $117.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. Depreciation and amortization expense includes amortization of assets under finance leases. At December 31, 2021, trailers acquired under finance leases had a gross carrying value of $137.9 million and accumulated depreciation of $49.4 million. At December 31, 2020, trailers acquired under finance leases had a gross carrying value of $138.0 million and accumulated depreciation of $40.1 million.

Computer Software Developed or Obtained for Internal Use: The Company capitalizes certain costs associated with developing or obtaining internal-use software. Capitalizable costs include external direct costs of materials and services utilized in developing or obtaining the software and payroll and payroll-related costs for employees directly associated with the development of the project. For the years ended December 31, 2021, 2020, and 2019, the Company capitalized $1.0 million, $0.8 million, and $1.5 million, respectively, of primarily payroll-related costs.

Claims and Insurance Accruals: Insurance reserves related to workers’ compensation, cargo loss and damage, and bodily injury and property damage are established based on estimates of losses that the Company will ultimately incur on reported claims, as well as, estimates of claims that have been incurred but not yet reported. Actuarial estimates are used in the calculation of the Company’s workers’ compensation claims reserves. Other reserves are calculated based on evaluation of the nature and severity of the claims, historical loss experience and judgments about the present and expected levels of cost per claim.

The Company carries a significant amount of insurance with third-party insurance carriers that provides various levels of protection for our risk exposure, with coverage limits and retention and deductible levels that the Company’s management believes are reasonable given historical claim activity and severity. The Company periodically reviews its risk exposure and insurance coverage applicable to those risks. Risk retention amounts per occurrence during the three years ended December 31, 2021, were as follows:

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. 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 originally ended March 1, 2021. 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. In August 2019, the Company elected to commute the policy for such period. As a result, the Company received a return of $5.2 million of the premium paid (the maximum return premium available), based on the amount of claims paid and the insurer was released from all liability in connection with claims occurring in such 12-month period. 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 $1.5 million reduction in insurance premium expense in 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 December 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.

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. As required by FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, the Company defines the threshold for recognizing the benefits of tax-filing positions in the financial statements as “more-likely-than-not” to be sustained by the tax authority. ASC Topic 740 also prescribes a method for computing the tax benefit of such tax positions as recognized in the financial statements. In addition, it provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

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. 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 and accepted, 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 typical transit time to complete a shipment is from 1 to 5 days. Billing for transportation services normally occurs after completion of the service and payment is 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 is recognized based on transit status at the end of each reporting period.

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

The portion of the gross invoice related to interline transportation services that involve the services of another party, such as another LTL service provider, is not recorded in the Company’s revenues. Revenue from logistics services is recognized as the services are provided.

Remaining performance obligations represent the transaction price allocated to future periods for freight services started but not completed at the reporting date. These amounts include the unearned portion of billed and unbilled amounts for freight shipments in transit that the Company expects to recognize as revenue in the period subsequent to the reporting date, generally within less than one week. The Company has elected to apply the optional exemption in accordance with the FASB ASC Topic 606, Revenue from Contracts with Customers, as it relates to additional quantitative disclosures pertaining to remaining performance obligations.

Stock-Based Compensation: The Company has various stock-based compensation plans for its employees and non-employee directors. The Company stock-based compensation includes awards of stock options, restricted stock awards, and stock-based compensation unit awards, all of which are accounted for under ASC Topic 718, Compensation-Stock Compensation. Stock options granted to employees are valued using a Black-Scholes-Merton model with the expense amortized over the three-year vesting period. Restricted stock is valued using the intrinsic valuation method and the expense is amortized over the three to five year vesting period. Stock-based performance unit awards are valued using a Monte Carlo model and the expense is amortized over the three-year vesting period.

Credit Risk: The Company routinely grants credit to its customers. The risk of significant loss in trade receivables is substantially mitigated by the Company’s credit evaluation process, short collection terms, low revenue per transaction and services performed for a large number of customers with no single customer representing more than 5 percent of accounts receivable at year-end. Allowances for potential credit losses are based on historical loss experience, current economic environment, expected trends and customer specific factors.

Impairment of Long-Lived Assets: Long-lived assets, such as property, plant and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as deemed necessary.

Goodwill: The Company tests goodwill for impairment annually and whenever events or changes in circumstance indicate that impairment may have occurred. The Company first performs a qualitative assessment to determine whether it is necessary to perform a required two-step goodwill impairment test. The Company is not required to estimate the fair value of a reporting unit unless the Company determines, based on qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.

Advertising: The costs of advertising are expensed as incurred. Advertising costs charged to expense were $5.7 million, $4.6 million, and $6.1 million in 2021, 2020 and 2019, respectively.

Financial Instruments: The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair value as of December 31, 2021 and 2020, because of the relatively short maturity of these instruments. See Note 2 for fair value disclosures related to long-term debt.

Workers’ compensation

Bodily injury and property damage⁽¹⁾

Employee medical and hospitalization

Cargo loss and damage

⁽¹⁾ $10 million for period March 1, 2018 - February 28, 2019.