SAIA INC (SAIA) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations generally discusses our 2024 and 2023 results and year-to-year comparisons between 2024 and 2023. Discussions of our 2022 results and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 23, 2024.

Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission (the SEC) encourages companies to disclose forward-looking information so that investors can better understand the future prospects of a company and make informed investment decisions. This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains these types of statements, which are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “predict,” “believe,” “should,” “potential” 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, 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 Annual Report on Form 10-K 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. These factors, risks, uncertainties and assumptions include, but are not limited to, the following:

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

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

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industry-wide external factors largely out of our control;

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cost and availability of qualified drivers, dock workers, mechanics and other employees, purchased transportation and fuel;

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inflationary increases in expenses and corresponding reductions of profitability;

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cost and availability of diesel fuel and fuel surcharges;

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cost and availability of insurance coverage and 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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failure to successfully execute the strategy to expand our service geography;

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unexpected liabilities resulting from the acquisition of real estate assets;

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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;

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risks arising from remote work, including increased risk of related cybersecurity incidents;

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failure to keep pace with technological developments;

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liabilities and costs arising from the use of artificial intelligence;

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

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cost, availability and resale value of real property and revenue equipment;

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supply chain disruption and delays on new equipment delivery;

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capacity and highway infrastructure constraints;

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risks arising from new or higher tariffs;

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risks arising from international business operations and relationships;

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

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

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our need for capital and uncertainty of the credit markets;

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

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inaccuracies and changes to estimates and assumptions used in preparing our financial statements;

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

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dependence on key employees;

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employee turnover from changes to compensation and benefits or market factors;

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increased costs of healthcare benefits;

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

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failure to achieve synergies and the disruption to our business due to acquisitions;

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the effect of litigation and class action lawsuits arising from the operation of our business, including the possibility of claims or judgments 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;

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

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the effect of governmental regulations, including hours of service and licensing compliance 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;

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unforeseen costs from new and existing data privacy laws;

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changes to the way LTL freight is categorized;

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costs from new and existing laws regarding how to classify workers;

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changes in accounting and financial standards or practices;

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widespread outbreak of an illness or any other communicable disease;

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international conflicts and geopolitical instability;

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evolving stakeholder expectations regarding environmental and social issues;

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

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issuances of equity that would dilute stock ownership;

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weakness, disruption or loss of confidence in financial or credit markets; and

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

These factors and risks are described in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-K. 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 revenue per shipment while also increasing volumes. Components of this strategy include building density in existing geography and pursuing geographic and terminal expansion in an effort 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

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effectiveness and asset utilization (primarily tractors and trailers). Pricing initiatives have had a positive impact on 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 as we work towards improving customer experience, operational efficiencies and Company image.

The Company’s operating revenue increased by 11.4 percent in 2024 compared to 2023. The increase was a result of increased volume and pricing actions, which included 7.9, 7.5 and 6.5 percent general rate increases on October 21, 2024, December 4, 2023 and January 30, 2023, respectively, for customers subject to general rate increases. Additionally, the Company experienced year over year increases in shipments and tonnage partially as a result of the redistribution of freight due to industry consolidation mid-year 2023. These increases were offset by a decrease in fuel surcharge revenue, resulting from lower diesel fuel prices.

Consolidated operating income increased to $482.2 million for 2024 compared to $460.5 million in 2023. The increase in 2024 operating income resulted primarily from increased volumes partially offset by increases in salaries, wages and benefits, including workers' compensation claims and related expense, and depreciation expense.

The Company generated $583.7 million in net cash provided by operating activities in 2024 versus $577.9 million in 2023. The Company used $1,035.9 million of net cash in investing activities during 2024 compared to $448.7 million during 2023.

General

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. and its wholly-owned subsidiaries (together, the Company or Saia). This discussion should be read in conjunction with the accompanying audited consolidated financial statements which include additional information about our significant accounting policies, practices and the transactions that underlie our financial results.

Saia is a transportation company headquartered in Johns Creek, Georgia that provides less-than-truckload (LTL) services through a single integrated organization. While more than 97% of its revenue is derived from transporting LTL shipments across the United States, the Company also offers customers a wide range of other value-added services, including non-asset truckload, expedited and logistics services across North America.

Our business is highly correlated to non-service sectors of the general economy. Our business also is impacted by a number of other factors as discussed under “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A., “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 shipment and revenue per hundredweight (a measure of yield), whether including or excluding fuel surcharge revenue; our ability to manage our cost structure for capital expenditures and operating expenses such as salaries, wages and benefits; purchased transportation; claims and insurance expense; fuel and maintenance; and our ability to match operating costs to shifting volume levels.

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Results of Operations

Saia, Inc. and Subsidiaries

Selected Results of Operations and Operating Statistics

For the years ended December 31, 2024 and 2023

(in thousands, except ratios, workdays, revenue per hundredweight,

revenue per shipment, pounds per shipment and length of haul)

Year ended December 31, 2024 as compared to year ended December 31, 2023

Revenue and volume

Consolidated revenue increased 11.4 percent to $3.2 billion primarily due to increased shipments and tonnage, partially as a result of a redistribution of freight due to a competitor bankruptcy in 2023. Saia’s LTL tonnage increased 8.9 percent while LTL shipments increased 12.4 percent for 2024. Overall LTL revenue per shipment, excluding fuel surcharges, increased 1.1 percent in 2024 as a result of pricing actions and changes in business mix. For 2024 and 2023, approximately 75 percent of Saia’s operating revenue was subject to specific customer price adjustment negotiations that occur throughout the year. The remaining 25 percent of operating revenue was subject to a general rate increase which is based on market conditions. For customers subject to general rate increases, Saia implemented 7.9, 7.5 and 6.5 percent general rate increases on October 21, 2024, December 4, 2023 and January 30, 2023, respectively. Competitive factors, customer turnover and mix changes, among other things, impact the extent to which customer rate increases are retained over time.

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Operating revenue includes fuel surcharge revenue from the Company’s fuel surcharge program. This program is designed to reduce the Company’s exposure to fluctuations in diesel fuel prices by adjusting total freight charges to account for changes in the price of diesel fuel. The Company’s fuel surcharge is generally based on the average national price for diesel fuel and is typically reset weekly. Fuel surcharges 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 decreased to 15.0 percent of operating revenue in 2024 compared to 16.9 percent in 2023 primarily as a result of decreases in the cost of diesel fuel.

Operating expenses and margin

Consolidated operating income increased to $482.2 million in 2024 compared to $460.5 million in 2023. The increase in 2024 operating income resulted primarily from increased volumes which were partially offset by increases in salaries, wages and benefits, including workers' compensation claims and related expense, and depreciation expense. The 2024 operating ratio (operating expenses divided by operating revenue) was 85.0 percent as compared to 84.0 percent in 2023.

Salaries, wages and employees’ benefits expense increased $186.6 million in 2024 compared to 2023. This increase was largely driven by increased head count to support increased volumes, ongoing business growth and network expansion, as well as, increased training hours and a Company-wide wage increase in July 2024 of approximately 4.1 percent, excluding executives. In addition, other employee related costs increased, including an increase in the number and costs of workers' compensation claims and unfavorable development of historical claims. Purchased transportation expense decreased $1.4 million in 2024 compared to 2023 primarily due to a decrease in cost per mile. Fuel, operating expenses and supplies increased by $65.7 million primarily driven by increased facility costs and administrative costs related to increased volumes and expanded footprint. Claims and insurance expense in 2024 was $9.7 million higher than 2023 largely due to increased auto liability and cargo claims activity and development of open claims. The Company experiences volatility in accident expense from time to time as a result of utilizing self-insurance as a part of its risk management program. Depreciation and amortization expense increased $31.3 million in 2024 compared to 2023 primarily due to ongoing investments in revenue equipment and network expansion.

Other

Interest expense in 2024 was $6.4 million greater than 2023 due to interest expense related to increased borrowings under the credit arrangements in 2024. Interest income in 2024 was $5.2 million less than 2023 due to due to decreased deposit balances during the period. The effective income tax rate was 23.9 percent for the years ended December 31, 2024 and 2023.

Outlook

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. Our outlook is dependent on a number of external factors, including strength of the economy, inflation, changes in regulatory conditions and international trade relations, including higher tariffs, labor availability, diesel fuel prices and supply chain constraints. The potential impact of these factors on our operations, financial performance and financial condition, as well as the impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. We are continuing initiatives to improve and enhance customer service in an effort to support our ongoing pricing and business mix optimization, while seeking to control costs and improve productivity. Planned revenue initiatives include building density in our current geography, targeted marketing initiatives to grow revenue in more profitable areas and further expanding our geographic and terminal network. On October 21, 2024, Saia implemented a 7.9 percent general rate increases for customers comprising approximately 25 percent of Saia’s operating revenue. The success of these revenue initiatives is impacted by what proves to be the underlying economic trends, competitor initiatives and other factors discussed under “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A., “Risk Factors.”

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Effective July 2024, the Company implemented a salary and wage increase of approximately 4.1 percent for all of its employees, excluding executives. The total cost of the compensation increase is expected to be approximately $59.0 million annually, and the Company anticipates the impact will be partially offset by productivity and efficiency gains.

The strategic objective of the Company is to build market share through excellent customer service, continued operating efficiencies and through its geographic and terminal expansion which should result in numerous operating leverage cost benefits. However, should the economy soften, the Company plans to match resources and capacity to shifting volume levels to lessen unfavorable operating leverage. The success of cost improvement initiatives is impacted by a number of factors, including the cost and availability of drivers, dock workers and personnel, and purchased transportation, diesel fuel and insurance costs and inflation.

See “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A., “Risk Factors,” for a more complete discussion of potential risks and uncertainties that could materially adversely affect our financial condition, results of operation, cash flows and prospects.

Recent Accounting Pronouncements Adopted in 2024

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The standard requires all entities with a single reportable segment to apply all segment disclosure requirements. This standard became effective for annual reporting periods beginning after December 15, 2023 and interim reporting periods beginning after December 15, 2024. The Company adopted the standard on a retrospective basis for the 2024 annual reporting period with the impact limited to incremental disclosures in our consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” Under this ASU income tax disclosures are expanded primarily by requiring the disaggregation of the rate reconciliation and income taxes paid disclosures. This standard is effective for annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." Under this ASU, entities are required to disclose additional disaggregated information related to certain expense captions included in the Consolidated Statements of Operations. This standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

Financial Condition, Liquidity and Capital Resources

The Company's liquidity needs arise primarily from capital investment in new equipment, land and structures, information technology and letters of credit and surety bonds required under insurance programs, as well as funding working capital requirements.

Working Capital and Capital Expenditures

Working capital at December 31, 2024 was $157.4 million compared to $326.6 million at December 31, 2023. This decrease is primarily due to a decrease in cash and cash equivalents of $276.7 million to fund the Yellow Corporation real estate acquisitions and additional revenue equipment used to support higher volumes and expanded footprint, partially offset by an increase in income taxes receivable and decreases in accounts payable and wages, vacation and employees' benefits.

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A summary of our cash flows is presented below:

Cash flows from operating activities were $583.7 million for 2024 versus $577.9 million for 2023 largely driven by increased depreciation and amortization and deferred income taxes, partially offset by changes in other assets and liabilities. For 2024, net cash used in investing activities was $1,035.9 million versus $448.7 million in 2023 primarily due to the acquisition of terminals from Yellow Corporation in January 2024 in addition to increased purchases of revenue equipment to support higher volumes and expanded footprint. Net cash used in financing activities was $175.4 million in 2024 versus $20.4 million in 2023 as a result of borrowings to fund capital expenditures during 2024.

The Company has historically generated cash flows from operations to fund a large portion of its capital expenditure requirements. The Company believes it has adequate sources of capital to meet short-term liquidity needs through its cash on hand, operating cash flows and availability under its credit arrangements. As of December 31, 2024, the Company has $473.8 million of availability under its Revolving Credit Facility and $250 million of uncommitted financing under the Company's Private Shelf Agreement, subject to certain conditions. 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 December 31, 2024.

Net capital expenditures pertain primarily to investments in tractors and trailers and other revenue equipment, information technology, land and structures. Projected net capital expenditures for 2025 are expected to be over $700 million compared to 2024 net capital expenditures of $1.0 billion. Estimated 2025 capital expenditures include a normal replacement cycle of revenue equipment and technology investments for our operations, and additional revenue equipment and real estate investments to support our growth initiatives.

See “Cautionary Note Regarding Forward-Looking Statements” and Item 1A., “Risk Factors,” for a more complete discussion of potential risks and uncertainties that could materially affect our future performance and financial condition.

Net capital expenditures are summarized in the following table (in millions):

In addition to the amounts disclosed in the table above, the Company had an additional $24.4 million in capital expenditures for revenue equipment that was received but not paid for prior to December 31, 2024.

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Credit Arrangements

Revolving Credit Facility

The Company is a party to an unsecured credit agreement with its banking group (the Revolving Credit Facility). On December 9, 2024, the Company entered into an amendment to the Revolving Credit Facility. The amendment increased commitments under the Revolving Credit Facility by $300 million to an aggregate commitment of $600 million and expanded the accordion feature, subject to certain conditions and availability of lender commitments, from $150 million to $300 million. This amendment also extended the maturity date of the Revolving Credit Facility from February 3, 2028, to December 9, 2029. Borrowings under the Revolving Credit Facility bear interest at the Company’s election at a variable rate equal to (a) one, three or six month term SOFR (the forward-looking secured overnight financing rate) plus 0.10%, or (b) an alternate base rate, in each case plus an applicable margin. Additionally, the amendment adjusted the applicable margin such that the applicable margin is now between 1.25% and 2.00% per annum for term SOFR loans and between 0.25% and 1.00% per annum for alternate base rate loans, in each case based on the Company’s consolidated net lease adjusted leverage ratio. The amendment also modified the fees that the Company accrues based on the daily unused portion of the credit facility, which will now range between 0.175% and 0.30% based on the Company’s consolidated net lease adjusted leverage ratio. The Revolving Credit Facility contains certain customary representations and warranties, affirmative and negative covenants and provisions relating to events of default. Under the Revolving Credit Facility, if an event of default occurs, the banks will be entitled to take various actions, including the acceleration of amounts due. Under the Revolving Credit Facility, the Company is subject to a maximum consolidated net lease adjusted leverage ratio of less than 3.50 to 1.00 with the potential to be temporarily increased in the event the Company makes an acquisition that meets certain criteria. The Company was in compliance with its debt covenants under the Revolving Credit Facility at December 31, 2024.

At December 31, 2024, the Company had outstanding borrowings of $94.0 million and outstanding letters of credit of $32.2 million under the Revolving Credit Facility. At December 31, 2023, the Company had no outstanding borrowings and outstanding letters of credit of $32.1 million under the Revolving Credit Facility.

See Note 2, "Debt and Financing Arrangements" of the accompanying audited Consolidated Financial Statements for more information on the Revolving Credit Facility.

Private Shelf Agreement

On November 9, 2023, the Company entered into a $350 million uncommitted Private Shelf Agreement (the Shelf Agreement), with PGIM, Inc. (Prudential), and certain affiliates and managed accounts of Prudential (the Note Purchasers) which allows the Company, from time to time, to offer for sale to Prudential and its affiliates, in one or a series of transactions, senior notes of the Company, through November 9, 2026.

Pursuant to the Shelf Agreement, on May 1, 2024, the Company issued senior promissory notes (the Initial Notes) in an aggregate principal amount of $100 million to the Note Purchasers. The Initial Notes bear interest at 6.09% per annum and mature on May 1, 2029, unless repaid earlier by the Company. The Initial Notes are senior unsecured obligations and rank pari passu with borrowings under the Revolving Credit Facility or other senior promissory notes issued pursuant to the Shelf Agreement.

Additional notes issued under the Shelf Agreement, if any, would bear interest at a rate per annum, and would have such other terms, as would be set forth in a confirmation of acceptance executed by the parties prior to the closing of the applicable sale transaction.

The Shelf Agreement requires that the Company maintain a consolidated net lease adjusted leverage ratio of less than 3.50 to 1.00, with limited exceptions. The Shelf Agreement also contains certain customary representations and warranties, affirmative and negative covenants and provisions related to events of default. Upon the occurrence and continuance of an event of default, the holders of notes issued under the Shelf Agreement may require immediate payment of all amounts owing under such notes. The Company was in compliance with its debt covenants under the Shelf Agreement at December 31, 2024.

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At December 31, 2024 and 2023, the Company had outstanding notes under the Shelf Agreement of $100.0 million and $0, respectively.

See Note 2, "Debt and Financing Arrangements" of the accompanying audited Consolidated Financial Statements for more information on the Shelf Agreement.

Finance Leases

The Company is obligated under finance leases with seven-year terms for revenue equipment totaling $6.3 million and $16.5 million as of December 31, 2024 and 2023, respectively. Amortization of assets held under the finance leases is included in depreciation expense. The weighted average interest rates for the finance leases at December 31, 2024 and 2023 were 4.09% and 3.95%, respectively.

Contractual Obligations

Contractual obligations for the Company are comprised of lease agreements, purchase obligations and long-term debt obligations related to any outstanding balance under the credit arrangements. Total contractual obligations for operating leases at December 31, 2024 totaled $147.3 million. This includes operating leases with original maturities of less than one year, which are not recorded in our consolidated balance sheet in accordance with U.S. generally accepted accounting principles. Contractual obligations in the form of finance leases were $6.4 million at December 31, 2024, which include both principal and interest components. Purchase obligations at December 31, 2024 were $27.7 million. As of December 31, 2024 the Revolving Credit Facility had $94.0 million outstanding principal balance and the Shelf Agreement had $100.0 million outstanding principal balance. See Note 2, "Debt and Financing Arrangements" of the accompanying audited Consolidated Financial Statements for more information on the credit arrangements.

Other commercial commitments of the Company typically include letters of credit and surety bonds required for collateral under insurance agreements. As of December 31, 2024 the Company had total outstanding letters of credit of $32.2 million and $60.6 million in surety bonds.

In addition to any principal amounts disclosed, the Company has interest obligations of approximately $13.4 million for 2025, based on borrowings and commitments outstanding at December 31, 2024.

The Company has accrued approximately $3.2 million for uncertain tax positions and accrued interest and penalties of $0.4 million related to the uncertain tax positions as of December 31, 2024.

At December 31, 2024, the Company has $109.5 million accrued for claims, insurance and other liabilities.

Critical Accounting Policies and Estimates

The Company makes estimates and assumptions in preparing the consolidated financial statements that affect reported amounts and disclosures therein. In the opinion of management, the accounting policies that generally have the most significant impact on the financial position and results of operations of the Company include:

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Claims and Insurance Accruals.

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Description: The Company is self-insured for portions of workers’ compensation, bodily injury and property damage, casualty, cargo loss and damage and group health claims.

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Judgments and Uncertainties: Claims and insurance accruals for these claims are established by management based on estimates of losses that the Company will ultimately incur on reported claims and on claims that have been incurred but not yet reported. Accruals are calculated on reported claims based on an evaluation of the nature and severity of the claim, historical loss experience and on legal, economic and other factors. Actuarial analysis is also used in calculating the accruals for workers’ compensation and bodily injury and property damage claims.

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Sensitivity of Estimate to Change: These accruals could be significantly affected if the actual costs of these claims differ from the estimates and assumptions used to establish the accruals. A

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significant number of these claims typically take several years to develop and even longer to ultimately settle. These accruals have been reasonably accurate over time; however, changes to estimates and assumptions regarding severity of claims, medical cost inflation, as well as specific case facts can create short-term volatility in these accruals. A 100 basis point change in our loss development factors would result in an immaterial change in the claims and insurance accruals. There have been no material changes in the development factors for the year ended December 31, 2024.

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Revenue Recognition and Related Allowances.

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Description: Revenue is recognized over the transit time of the shipment as it moves from origin to destination while expenses are recognized as incurred. Estimates included in the recognition of revenue and accounts receivable include estimates related to shipments in transit and estimates of future adjustments to revenue and accounts receivable for billing adjustments and collectability.

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Judgments and Uncertainties: Revenue is recognized in a systematic process whereby estimates related to shipments in transit are based upon actual bills of lading received near period end and the estimated percentage of completion of the service at period end. Estimates for credit losses and billing adjustments are based upon historical experience.

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Sensitivity of Estimate to Change: Since the cycle for pick-up and delivery of shipments is generally one to five days, typically less than ten percent of a total month’s revenue is in transit at the end of any month. Estimates included in the recognition of revenue and accounts receivable are continuously evaluated and updated; however, changes in economic conditions, customer creditworthiness, pricing arrangements and other factors may significantly impact these estimates.

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Depreciation of Assets.

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Description: Under the Company’s accounting policy for property and equipment, management establishes 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.

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Judgments and Uncertainties: Selecting the appropriate accounting method for depreciation requires management judgment, as there are multiple acceptable methods that are in accordance with U.S. generally accepted accounting principles, including straight-line, declining-balance, and sum-of-the-years' digits. The Company depreciates property and equipment on straight-line and declining-balance bases over the estimated useful lives of the assets. The Company believes these methods properly spread the costs over the useful lives of the assets. Factors affecting estimated useful lives and residual values of property and equipment may include estimating loss, damage, obsolescence, and Company policies around maintenance and asset replacement.

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Sensitivity of Estimate to Change: 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. See Note 1, "Description of Business and Summary of Accounting Policies" of the accompanying audited Consolidated Financial Statements, for discussion of the effects of changes to judgments related to depreciation expense for the year ended December 31, 2024.

These accounting policies and others are described in further detail in the Notes to the audited Consolidated Financial Statements included in this Form 10-K.

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the consolidated financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the consolidated

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financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.