UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      to                     

Saia, Inc.

Delaware		48-1229851
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
11465 Johns Creek Parkway, Suite 400
Johns Creek, Georgia		30097
(Address of Principal Executive Offices)		(Zip Code)

(770) 232-5067

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class		Names of each exchange on which registered
Common Stock, par value $.001 per share		The Nasdaq National Market
Preferred Stock Purchase Rights		The Nasdaq National Market

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o       No þ

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o       No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ       No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

      Large accelerated filer o               Accelerated filer þ                         Non-accelerated filer o                         Smaller reporting company o

                                        (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o       No þ

As of June 30, 2007 the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $381,753,811 based on the last reported sales price of the common stock as reported on the National Association of Securities Dealers Automated Quotation System National Market System. The number of shares of Common Stock outstanding as of February 15, 2008 was 13,448,602.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement to be filed within 120 days of December 31, 2007, pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held April 24, 2008 have been incorporated by reference into Part III of this Form 10-K. 

 

 

				Page
PART I.
Item 1.		Business			3
		Executive Officers			8
		Additional Information			8
Item 1A.		Risk Factors			8
Item 1B.		Unresolved Staff Comments			11
Item 2.		Properties			11
Item 3.		Legal Proceedings			12
Item 4.		Submission of Matters to a Vote of Security Holders			12
PART II.
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			13
Item 6.		Selected Financial Data			16
Item 7.		Management’s Discussion and Analysis of Results of Operations and Financial Condition			17
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			27
Item 8.		Financial Statements and Supplementary Data			28
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			53
Item 9A.		Controls and Procedures			53
Item 9B.		Other Information			53
PART III.
Item 10.		Directors, Executive Officers and Corporate Governance			54
Item 11.		Executive Compensation			54
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			54
Item 13.		Certain Relationships and Related Transactions, and Director Independence			54
Item 14.		Principal Accounting Fees and Services			54
PART IV.
Item 15.		Exhibits, Financial Statement Schedules			55
EXHIBITS
Exhibit Index				E-1
Amended and Restated 2003 Omnibus Incentive Plan
Amendment to Amended and Restated 2003 Omnibus Incentive Plan
Subsidiaries of the Registrant
Consent of KPMG LLP
Certification of Principal Executive Officer
Certification of Principal Financial Officer
906 Certification of Principal Executive Officer
906 Certification of Principal Financial Officer

PART I.

Item 1. Business

Overview

Saia, Inc. (Saia or the Company) is a leading asset-based trucking company that provides a variety of transportation and supply chain solutions to a broad range of industries, including the retail, chemical and manufacturing industries.

We were organized in 2000 as a wholly owned subsidiary of Yellow Corporation, now known as YRC Worldwide, (Yellow) to better manage its regional transportation business. We became an independent public company on September 30, 2002 as a result of a 100 percent tax-free distribution of shares to Yellow shareholders (the Spin-off). Each Yellow shareholder received one share of Saia stock for every two shares of Yellow stock held as of the September 3, 2002 record date. As a result of the Spin-off, Yellow does not own any shares of our capital stock.

On June 30, 2006, the Company completed the sale of the outstanding stock of Jevic Transportation, Inc. (Jevic), its hybrid less-than-truckload (LTL) and truckload (TL) carrier business to a private investment firm. The transaction included net cash proceeds of $41.3 million and $12.5 million in income tax benefits from structuring the transaction as an asset sale for tax purposes. Jevic has been reflected as a discontinued operation in the Company’s financial statements for all periods presented.

We are now a single segment company with one operating subsidiary, Saia Motor Freight Line LLC (Saia Motor Freight). We serve a wide variety of customers by offering regional and interregional LTL services and guarantee expedited services. None of our approximately 8,200 employees is represented by a union. In 2007 from continuing operations, Saia generated revenue of $976 million and operating income of $38.2 million. In 2006 from continuing operations, Saia generated revenue of $875 million and operating income of $50.0 million.

Saia Motor Freight Line LLC.

Founded in 1924, Saia Motor Freight is a leading multi-regional LTL carrier that serves 33 states in the South, Southwest, Midwest, Pacific Northwest and the West. Saia Motor Freight specializes in offering its customers a range of regional and interregional LTL services including time-definite and expedited options. Saia Motor Freight primarily provides its customers with solutions for shipments between 100 and 10,000 pounds, but also provides selected guaranteed, expedited and truckload service.

Saia Motor Freight has invested substantially in technology, training and business processes to enhance its ability to monitor and manage customer service, operations and profitability. These data capabilities enable Saia Motor Freight to provide its trademarked Customer Service Indicators® program, allowing customers to monitor service performance on a wide array of attributes. Customers can access the information via the Internet (www.saia.com) to help manage their shipments. The Customer Service Indicators® (CSI’s) measure the following: on-time pickup; on-time delivery; claim free shipments; claims settled within 30 days; proof of delivery request turnaround; and invoicing accuracy. The CSI’s provide both Saia Motor Freight and the customer with a report card of overall service levels.

As of December 31, 2007, Saia Motor Freight operated a network comprised of 151 service facilities. In 2007, the average Saia Motor Freight shipment weighed approximately 1,295 pounds and traveled an average distance of approximately 630 miles. In March 2001, Saia Motor Freight successfully integrated its WestEx and Action Express affiliates into its operations and expanded its geographic reach to 21 states. On February 16, 2004, Saia Motor Freight acquired Clark Bros. Transfer, Inc. (Clark Bros.), a Midwestern LTL carrier serving 11 states with approximately 600 employees. The operations of Clark Bros. were successfully integrated into Saia Motor Freight in May 2004 bringing the benefits of Saia Motor Freight transportation service to major Midwestern markets including Chicago, Minneapolis, St. Louis and Kansas City. On November 18, 2006, Saia Motor Freight acquired The Connection Company (the Connection), a less-than-truckload carrier serving four states (Indiana, Kentucky, Michigan, and Ohio) with approximately 700 employees. The operations of the Connection were integrated into Saia Motor Freight in February 2007. On February 1, 2007, Saia Motor Freight acquired Madison Freight Systems, Inc. (MFS), a less-than-truckload carrier serving all of Wisconsin and parts of Illinois and Minnesota with approximately 200 employees. The operations of MFS were integrated into the Saia Motor Freight network in March 2007.

Industry

According to an American Trucking Associations report, in 2006 the trucking industry accounted for 84 percent of total domestic freight revenue, or $646 billion, and 69 percent of domestic freight volume. Trucks provide transportation services to virtually every industry operating in the United States and generally offer higher levels of reliability, shipment integrity and speed than other surface transportation options.

The trucking industry consists of three segments, including private fleets and two “for-hire” carrier groups. The private carrier segment generated approximately $288 billion in revenue or 37 percent of total trucking revenue and consists of fleets owned and operated by shippers who move their own goods. The two “for-hire” groups, TL and LTL, are based on the typical shipment sizes handled by transportation service companies. TL refers to providers generally transporting shipments greater than 10,000 pounds and LTL refers to providers generally transporting shipments less than 10,000 pounds.

Saia is primarily an LTL carrier. The LTL segment accounted for approximately $48 billion of revenue in 2006, or 6 percent of total trucking revenue, according to the American Trucking Associations.

LTL transportation providers consolidate numerous orders, generally ranging from 100 to 10,000 pounds, from businesses in different locations. Orders are consolidated at individual locations within a certain radius from service facilities and then transported from there to the ultimate destination. As a result, LTL carriers require expansive networks of pickup and delivery operations around local service facilities and shipments are moved between origin and destination often through an intermediate distribution or “breakbulk” facility. Depending on the distance shipped, the LTL segment historically was classified into three subgroups:

	•		Regional — Average distance is typically less than 500 miles with a focus on one- and two-day markets. Regional transportation companies can move shipments directly to their respective destination centers, which increases service reliability and avoids costs associated with intermediate handling.
	•		Interregional — Average distance is usually between 500 and 1,000 miles with a focus on serving two- and three-day markets.
	•		National — Average distance is typically in excess of 1,000 miles with a focus on service in two- to five-day markets. National providers rely on intermediate shipment handling through hub and spoke networks, which require numerous satellite service facilities, multiple distribution facilities, and a relay network. To gain service and cost advantages, they occasionally ship directly between service facilities, reducing intermediate handling.

Over the last several years there has been a blurring of the above subgroups as individual companies are increasingly attempting to serve multiple markets. For example, a number of companies are focusing on serving one- and two-day lanes, as well as serving three and more day markets between adjacent regions. Saia operates as a traditional LTL carrier with a primary focus on regional and interregional LTL lanes.

The TL segment is the largest portion of the “for-hire” truck transportation market. In 2006 the TL segment generated approximately $310 billion in revenue or 40 percent of total trucking revenue, according to the American Trucking Associations. TL carriers primarily transport large shipments from origin to destination with no intermediate handling. Although a full truckload can weigh over 40,000 pounds, it is common for carriers to haul two or three shipments exceeding 10,000 pounds each at one time, making multiple delivery stops.

Because TL carriers do not require an expansive network to provide point-to-point service, the overall cost structure of TL participants is typically lower relative to LTL service providers. The TL segment is comprised of several major carriers and numerous small entrepreneurial players. At the most basic level, a TL company can be started with capital for rolling stock (a tractor and a trailer), insurance, a driver and little else. As size becomes a factor, capital is needed for technology infrastructure and some limited facilities. Saia Motor Freight participates in the TL market as a means to fill empty miles in lanes that are not at capacity.

Capital requirements are significantly different in the traditional LTL segment versus the TL segment. In the LTL sector, substantial amounts of capital are required for a network of service facilities, shipment handling equipment and revenue equipment (both for city pick-up, delivery and linehaul). In addition, investment in effective technology has become increasingly important in the LTL segment, largely due to the number of transactions and number of customers served on a daily basis. Saia Motor Freight picks up approximately 27,000 shipments per day, each of which has a shipper and consignee, and occasionally a third party, all of who need access to information in a timely manner. More importantly, technology plays a key role in improving customer service, operations efficiency

and compliance, safety and yield management. Due to the significant infrastructure spending required, the cost structure is relatively prohibitive to new startup or small entrepreneurial operations. As a result, the LTL segment is more concentrated than the TL segment, with a few large national carriers and several large regional carriers.

Business Strategy

Saia has grown over the last decade through a combination of organic growth and the integration or “tuck-in” of smaller trucking companies. In 2001, Saia integrated WestEx and Action Express, regional LTL companies which had been acquired by Yellow in 1994 and 1998, respectively. WestEx operated in California and the Southwest, and Action Express operated in the Pacific Northwest and Rocky Mountain states. In 2004, Saia acquired and integrated Clark Bros., a Midwestern less-than-truckload carrier serving eleven states. Saia has successfully integrated these companies, which had contiguous regional coverage with minimal overlap. In late 2006, Saia acquired the Connection which operated in Indiana, Kentucky, Michigan and Ohio. Saia integrated the operations of the Connection during February 2007. Saia acquired Madison Freight Systems in February 2007 and integrated their operations in March 2007. Madison operated in Wisconsin, Illinois and Minnesota.

Key elements of our business strategy include:

Continue to focus on operating safely.

Our most valuable resource is our employees. It is a corporate priority to continually emphasize the importance of safe operations and to reduce both the frequency and severity of injuries and accidents. This emphasis is not only appropriate to protect our employees and our communities, but with the continued escalation of commercial insurance and health care costs, is important to maintain and improve shareholder returns.

Continue focus on delivering best-in-class service.

The foundation of Saia’s growth strategy is consistent delivery of high-quality service. Commitment to service quality is valued by customers and allows us to gain fair compensation for our services and positions us to improve market share.

Increase density in existing geographies.

We gain operating leverage by growing volume and density within existing geography. We estimate the potential incremental profitability on growth in current markets can be 15 percent or even higher. This improves margins, asset turnover and return on capital. We actively monitor opportunities to add service facilities where we have sufficient density. We see potential for future volume growth at Saia from the general economy, industry consolidation, opportunistic acquisitions, as well as specific sales and marketing initiatives.

Manage yields and business mix.

This strategy involves managing both the pricing process and the mix of customers and segments in ways that allow our networks to operate more profitably. Regional pricing became increasingly competitive as the economy slowed in 2007. Management expects pricing to be more rational when the economy improves and it should benefit from industry consolidation and tight capacity in the future.

Continue focus on improving operating efficiencies.

Saia has management initiatives and ongoing establishment of comprehensive operating best practices focused on continuing to improve operating efficiency. These initiatives help offset a variety of structural cost increases like casualty insurance, wage rates and health care benefits. We believe Saia continues to be well positioned to manage costs and asset utilization and we believe we will continue to see new opportunities for cost savings.

Prepare the organization for future growth.

Our primary focus within organizational development is maintaining sound relationships with our current employees. We invest in our employees through internal communication, training programs and providing competitive wages and benefits.

We believe it is also important to invest in the development of human resources, technology capabilities and strategic real estate that are designed to position our Company for future growth to meet the increasing demands of the marketplace.

Expand geographic footprint.

While our immediate priority is to improve profitability of existing geography, over time we plan to pursue additional geographic expansion at Saia as we believe it promotes profitability growth and

improves our customer value proposition. For example, we believe Saia’s 2004 acquisition of Clark Bros. accounted for the some of Saia’s strongest revenue trends, which were shipments into and out of this new geography.

Management may consider acquisitions from time to time to help expand geographic reach and density while gaining the business base of the acquired entity. Management believes integration of acquisitions is a core competency and it has developed a repeatable process from its successful experience in 2001 in integrating WestEx and Action Express into Saia and in 2004 in integrating Clark Bros. into Saia. Also during November 2006, Saia acquired the Connection expanding its footprint into Indiana, Kentucky, Michigan and Ohio and integrated it into Saia’s operations in February 2007. On February 1, 2007, Saia acquired MFS to expand its coverage and density in Wisconsin and integrated it into Saia’s operations in March 2007.

Seasonality

Our revenues are subject to seasonal variations. Customers tend to reduce shipments after the winter holiday season, and operating expenses tend to be higher as a percent of revenue in the winter months primarily due to lower capacity utilization and weather effects. Generally, the first quarter is the weakest while the second and third quarters are the strongest. Quarterly profitability is also impacted by the timing of salary and wage increases which has varied in recent years.

Labor

Most LTL companies, including Saia, and virtually all TL companies are not subject to collective bargaining agreements.

In recent years, due to competition for quality employees, the compensation divide between union and non-union carriers has closed dramatically. However, there are still significant differences in benefit costs and work rule flexibility. Benefit costs for union carriers remain significantly above those paid by non-union carriers, and union carriers may be subject to certain contingent multi-employer pension liabilities. In addition, non-union carriers have more work rule flexibility with respect to work schedules, routes and other similar items. Work rule flexibility is a major consideration in the regional LTL sector, as flexibility is important to meet the service levels required by customers.

Our employees are not represented by a collective bargaining unit. We believe this provides for better communications and employee relations, stronger future growth prospects, as well as improved efficiencies and customer service capabilities.

Competition

Although there is industry consolidation, shippers continue to have a wide range of choices. We believe that service quality, variety of services offered, geographic coverage, responsiveness and flexibility are the important competitive differentiators.

Saia focuses primarily on regional and interregional business and operates in a highly competitive environment against a wide range of transportation service providers. These competitors include a small number of large, national transportation service providers in the national and two-day markets and a large number of shorter-haul or regional transportation companies in the two-day and overnight markets. Saia also competes in and against several modes of transportation, including LTL, truckload and private fleets. The larger the service area, the greater the barriers to entry into the LTL trucking segment due to the need for broader geographic coverage and additional equipment and facility requirements associated with this coverage. The level of technology applications required and the ability to generate shipment densities that provide adequate labor and equipment utilization also make larger-scale entry into the market difficult.

Regulation

The trucking industry has been substantially deregulated and rates and services are now largely free of regulatory controls, although federal and state authorities retain the right to require compliance with safety and insurance requirements. The trucking industry remains subject to regulatory and legislative changes that can have a material adverse effect on our operations.

Key areas of regulatory activity include:

Department of Homeland Security.

The trucking industry is working closely with government agencies to define and implement improved security processes. The Transportation Security Administration continues to focus on trailer security, driver identification, security clearance and border-crossing procedures. These and other safety and security measures such as rules for transportation of hazardous materials could increase the cost of operations, reduce the number of qualified drivers and disrupt or impede the timing of our deliveries to customers.

Department of Transportation.

Within the Department of Transportation, the Federal Motor Carrier Safety Administration (the “FMCSA”) issued in August 2005, amended rules on motor carrier driver hours of service, which limit the maximum number of hours a driver may be on duty between mandatory off-duty hours. These amended rules replaced those vacated by the courts in July 2004. The Company’s operations were adjusted to comply with these new rules, and base operations were not materially affected. Revisions to these new rules, as a result of pending or future legal challenges, or any future requirements for on board recorders, could impact our operations, further tighten the market for qualified drivers, and put additional upward pressure on driver wages and purchased transportation costs.

Environmental Protection Agency.

A significant reduction in emissions occurred in 2007, which included both reductions in sulfur content of diesel fuel and further reductions in engine emissions. These regulations increased the cost of replacing and maintaining trucks, and also increased fuel costs by lowering miles per gallon.

Our motor carrier operations are also subject to environmental laws and regulations, including laws and regulations dealing with underground fuel storage tanks, the transportation of hazardous materials and other environmental matters. We maintain bulk fuel storage and fuel islands at several of our facilities. Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. We have established programs designed to monitor and control environmental risks and to comply with all applicable environmental regulations. As part of our safety and risk management program, we periodically perform internal environmental reviews to maintain environmental compliance and avoid environmental risk. We believe that we are currently in substantial compliance with applicable environmental laws and regulations and that the cost of compliance has not materially affected results of operations.

Food and Drug Administration.

As transportation providers of foodstuffs, we have had to comply with all rules issued by the Food and Drug Administration to provide security of food and foodstuffs throughout the supply chain. We believe that we are currently in substantial compliance with applicable Food and Drug Administration rules and that the cost of compliance has not materially affected our results of operations.

Trademarks and Patents

We have registered several service marks and trademarks in the United States Patent and Trademark office, including Saia Guaranteed Select®, Saia Customer Service Indicators® and Saia Xtreme Guarantee®. We believe that these service marks and trademarks are important components of our marketing strategy.

Additional Information

Saia has an Internet website that is located at www.saia.com. Saia makes available free of charge through its Internet website all filings with the Securities and Exchange Commission as soon as reasonably practicable after making such filings with the Securities and Exchange Commission.

Executive Officers

Information regarding executive officers of Saia is as follows (included herein pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G (3) of Form 10-K):

Name		Age				Positions Held
Richard D. O’Dell			46			Effective January 1, 2007, President and Chief Executive Officer, Saia, Inc. having served as President of Saia, Inc. since July 2006. Previously, Mr. O’Dell served as President and Chief Executive Officer, Saia Motor Freight Line, LLC since November 1999. Mr. O’Dell has been a member of the Board of Directors of Saia, Inc. since July 2006.
Anthony D. Albanese			55			Senior Vice President of Sales & Operations of Saia Motor Freight Line, LLC since 1999.
James A. Darby			56			Vice President of Finance and Chief Financial Officer of Saia, Inc. since September 2006, having served as Vice President of Finance & Administration for Saia Motor Freight Line, LLC since 2000.
Mark H. Robinson			49			Vice President and Chief Information Officer of Saia, Inc. since August 2005, having served as Vice President of Information Technology for Saia Motor Freight Line, LLC since 1999.
Sally R. Buchholz			50			Vice President of Marketing and Customer Service of Saia Motor Freight Line, LLC since 1999.
Stephanie R. Maschmeier			35			Controller, Saia, Inc. since October 2007, having served as director of financial reporting and taxation. Ms. Maschmeier joined Saia, Inc. in July 2002 as corporate financial reporting manager. Prior to joining Saia, Inc., Ms. Maschmeier had eight years of experience in public accounting with Ernst & Young LLP.

Officers are elected by, and serve at the discretion of, the Board of Directors. There are no family relationships between any executive officer and any other executive officer or director of Saia or of any of its subsidiaries.

Item 1A. Risk Factors

Saia shareholders should be aware of certain risks, including those described below and elsewhere in this Form 10-K, which could adversely affect the value of their holdings and could cause our actual results to differ materially from those projected in any forward looking statements.

We are subject to general economic factors that are largely out of our control, any of which could have a material adverse effect on the results of our operations.

Our business is subject to a number of general economic factors that may have a material adverse effect on the results of our operations, many of which are largely out of our control. These include recessionary economic cycles and downturns in customer business cycles, particularly in market segments and industries, such as retail, manufacturing and chemical, where we have a significant concentration of customers. Economic conditions may adversely affect the business levels of our customers, the amount of transportation services they need and their ability to pay for our services. It is not possible to predict the long-term effects of terrorist attacks and subsequent events on the economy or on customer confidence in the United States, or the impact, if any, on our future results of operations.

We are dependent on cost and availability of qualified drivers and purchased transportation.

There is significant competition for qualified drivers within the trucking industry and attracting and retaining drivers has become more challenging. We may periodically experience shortages of qualified drivers that could result in us not meeting customer demands, upward pressure on driver wages, underutilization of our truck fleet and/or use of higher cost purchased transportation, which could have a material adverse effect on our operating results. There is also significant competition for quality purchased transportation within the trucking industry. We may periodically

experience shortages of quality purchased transportation that could result in us not meeting customer demands, which could have a material adverse effect on our operating results.

We are dependent on cost and availability of fuel.

Fuel is a significant operating expense. We do not hedge against the risk of fuel price increases. Global political events, federal, state and local regulations, natural disasters and other external factors could influence the cost and availability of fuel. Increases in fuel prices to the extent not offset by fuel surcharges or other customer price increases or any fuel shortages or interruption in the supply or distribution of fuel could have a material adverse effect on operating results. Historically we have been able to offset significant fuel price increases through fuel surcharges and other pricing adjustments to our customers, but we cannot be certain that we will be able to do so in the future. In addition, in recent years, given the significance of fuel surcharges, the negotiation of customer price increases has become commingled with fuel surcharges and fuel surcharges have more than offset higher diesel fuel costs. We have experienced cost increases in other operating costs as a result of increased fuel prices. However, the total impact of higher energy prices on other non-fuel related expenses is difficult to determine. A rapid and significant decline in diesel fuel prices would reduce the Company’s revenue and yield until we made the appropriate adjustments to our pricing strategy.

Limited supply of new revenue equipment and real estate may adversely impact financial results and cash flows.

Investment in new revenue equipment is a significant part of our annual capital expenditures. We may have difficulty in purchasing new trucks due to decreased supply and the price of such equipment may be adversely impacted by future regulations on newly manufactured diesel engines. The Company’s business model is also dependent on cost and availability of terminal facilities in key metropolitan areas. Shortages in the availability of real estate or delays in construction due to difficulties in obtaining permits may require significant additional investment in leasing, purchasing or building facilities, increase our operating expenses and/or prevent us from efficiently serving certain markets. In addition, we may not realize sufficient revenues or profits from our infrastructure investments.

Effectiveness of Company-specific performance improvement initiatives.

Operating performance improvement at Saia is dependent on the implementation and/or the continuation of various performance improvement initiatives. Our operating margin is still below several “best-in-class” competitors. There can be no assurance that Saia’s historical performance trend will be representative of future performance. Failure to achieve performance improvement initiatives could have a material adverse impact on our operating results.

We operate in a highly regulated and highly taxed industry, and costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business.

The U.S. Department of Transportation and various state agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carrier operations, safety and financial reporting. We may also become subject to new or more restrictive regulations imposed by the Department of Transportation, the Occupational Safety and Health Administration or other authorities relating to engine exhaust emissions, driver hours of service, security, ergonomics, as well as other unforeseen matters. Compliance with such regulations could substantially impair equipment productivity and increase our costs. Various federal and state authorities impose significant operating taxes on the transportation industry, including fuel taxes, tolls, excise and other taxes. There can be no assurance such taxes will not substantially increase or that new forms of operating taxes will not be imposed on the industry.

Within the Department of Transportation, the Federal Motor Carrier Safety Administration (the FMCSA) issued in August 2005, amended rules on motor carrier driver hours of service, which limit the maximum number of hours a driver may be on duty between mandatory off-duty hours. These amended rules replaced those vacated by the courts in July 2004. The Company’s operations were adjusted to comply with these new rules, and while our base operations were not materially affected, we did experience deterioration in the cost, availability and reliability of purchased transportation. Revisions to these new rules, as a result of pending or future legal challenges, or any future requirements for on-board recorders, could further impact our operations, further tighten the market for qualified drivers, and put additional pressure on driver wages and purchased transportation costs.

The Transportation Security Administration continues to focus on trailer security, driver identification and security clearance, and border crossing procedures. These and other safety and security measures such as rules for transportation of hazardous materials could increase the cost of operations, reduce the number of qualified drivers and disrupt or impede the timing of our deliveries for our customers.

The Environmental Protection Agency has issued regulations that require progressive reductions in exhaust emissions from diesel engines through 2010. A significant reduction in emissions occurred in 2007, which included both reductions in sulfur content of diesel fuel and further reductions in engine emissions. These regulations increased the cost of replacing and maintaining trucks, and increased fuel costs by reducing miles per gallon. These regulations have the potential to reduce availability of fuel and reduce productivity.

We are subject to various environmental laws and regulations, and costs of compliance with, or liabilities for violations of, existing or future regulations could have a material adverse effect on our business.

Our operations are subject to environmental laws and regulations dealing with the handling of hazardous materials, underground fuel storage tanks, and discharge and retention of storm water. We operate in industrial areas, where truck terminals and other industrial activities are located, and where groundwater or other forms of environmental contamination may have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of applicable laws or regulations, it could have a material adverse effect on our business and operating results. If we fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

We operate in a highly competitive industry, and our business will be adversely impacted if we are unable to adequately address potential downward pricing pressures and other factors that may adversely affect our operations and profitability.

Numerous competitive factors could impair our ability to maintain our current profitability. These factors include the following:

	•		competition with many other transportation service providers of varying types including non-asset based logistics and freight brokerage companies, some of which have greater capital resources than we do or have other competitive advantages;
	•		transportation companies periodically reduce their prices to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase prices or achieve significant growth in our business; and
	•		advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.

The transportation industry is affected by business risks that are largely out of our control, any of which could have a material adverse effect on the results of our operations.

Businesses operating in the transportation industry are affected by risks that are largely out of our control, any of which could have a material adverse effect on the results of our operations. These factors include weather, excess capacity in the transportation industry, interest rates, fuel taxes, license and registration fees, and insurance premiums. Our results of operations may also be affected by seasonal factors.

We have significant ongoing cash requirements that could limit our growth and affect profitability if we are unable to obtain sufficient financing.

Our business is highly capital intensive. Our net capital expenditures from continuing operations for 2007 were approximately $89 million and we anticipate net capital expenditures in 2008 of approximately $56 million including $39 million for strategic real estate projects. We depend on cash flows from operations, borrowings under our credit facilities and operating leases. If we are unable in the future to raise sufficient capital or borrow sufficient funds to make these purchases, our growth could be impacted and could potentially result in operating trucks and trailers for longer periods of time, which could have a material adverse effect on operations.

In addition, under our current unsecured credit facilities, we are subject to certain debt covenants and prepayment penalties. Those debt covenants limit our ability to pay dividends and require maintenance of certain maximum leverage, minimum interest coverage and minimum tangible net worth ratios, among other restrictions, that could limit availability of capital to meet our future growth.

Our ability to repay or refinance our indebtedness will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory and other factors beyond our control.

Ongoing insurance and claims expenses could significantly reduce and cause volatility to our earnings.

We are exposed to claims resulting from cargo loss, personal injury, property damage, group health care and workers’ compensation in amounts ranging from $250,000 to $2.0 million per claim. We also maintain insurance

with licensed insurance companies above these large deductible amounts. If the number or severity of future claims increases, insurance claim expenses might exceed historical levels, which could significantly reduce our earnings. Significant increases in insurance premiums could also impact financial results or cause us to raise our self-insured retentions.

Furthermore, insurance companies as well as certain states require collateral in the form of letters of credit or surety bonds for the estimated exposure of claims within our self-insured retentions. Their estimate of our future exposure as well as external market conditions could influence the amount and cost of additional letters of credit required under our insurance programs and thereby reduce capital available for future growth.

Employees of Saia are non-union. The ability of Saia to compete would be substantially impaired if operations were to become unionized.

None of our employees are currently represented by a collective bargaining agreement. Saia has in the past been the subject of unionization efforts, which have been defeated. While Saia believes its current relationship with its employees is good, there can be no assurance that further unionization efforts will not occur in the future. The non-union status of Saia is a critical factor in its ability to compete in its respective markets.

If we are unable to retain our key employees, our business, financial condition and results of operation could be adversely impacted.

The future success of our business will continue to depend on our executive officers and certain other key employees, who with the principal exceptions of Mr. O’Dell and Mr. Albanese do not have employment agreements. The loss of services of any of our key personnel could have a material adverse effect on us.

We rely heavily on technology to operate our business, and any disruption to our technology infrastructure could harm our operations.

Our ability to attract and retain customers and compete effectively depends in part upon reliability of our technology network, including our ability to provide services that are important to our customers. Any disruption to our technology infrastructure, including those impacting our computer systems and web site, could adversely impact our customer service, revenues and result in increased costs. While we have invested and continue to invest in technology security initiatives and disaster recovery plans, these measures cannot fully protect us from technology disruptions that could have a material adverse effect on us.

Certain provisions of our governing documents and Delaware law could have anti-takeover effects.

Our Restated Certificate of Incorporation and By-laws contain certain provisions, which may have the effect of delaying, deferring or preventing a change of control of our company. Such provisions include, for example, provisions classifying our Board of Directors, a prohibition on shareholder action by written consent, authorization of the Board of Directors to issue preferred stock in series, with the terms of each series to be fixed by the Board of Directors, and the provision of an advance notice procedure for shareholder proposals and nominations to the Board of Directors. These provisions could diminish the opportunities for a shareholder of Saia to participate in certain tender offers, including tender offers at prices above the then-current fair market value, and may also inhibit fluctuations in the market price of our common stock that could result from takeover attempts. In addition, Saia has a shareholder rights plan that allows the Board of Directors, without further shareholder approval, to issue common stock and preferred stock that could have the effect of delaying, deferring or preventing a change of control of our company. The issuance of common stock and preferred stock could also adversely affect the voting power of the holders of common stock, including resulting in the loss of voting control to others. We have no current plans to issue any such common or preferred stock.

We are subject to various warranties, representations and indemnification provisions under the Stock Purchase Agreement for the sale of Jevic Transportation, Inc.

The Company and its subsidiary are subject to various warranties, representations and indemnification provisions under the Stock Purchase Agreement. Adverse developments related to those warranties, representations and indemnification provisions could have a material adverse effect on us. We have received an indemnification claim related to the sale of Jevic Transportation arising from the fuel surcharge lawsuits. Given the nature and status of the claims, we cannot yet determine the amount or a reasonable range of potential loss, if any.

We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management.

We intend in the future to make additional acquisitions. We may not realize the anticipated benefits of any future acquisitions. Each acquisition has numerous risks, including:

	•		difficulty in integrating the operations and personnel of the acquired company;
	•		disruption of our ongoing business, distraction of our management and employees from other opportunities and challenges due to integration issues;
	•		inability to achieve the financial and strategic goals for the acquired and combined businesses; and
	•		potential failure of the due diligence processes to identify significant issues with legal and financial contingencies, among other things.

In the event that the integrations are not successfully completed there could be a material adverse effect on us.

We face litigation risks that could have a material adverse effect on the operation of our business.

We face litigation concerning our fuel surcharge program and litigation regarding various alleged violations of state labor laws. See Part I, Item 3, “Legal Proceedings” for a more detailed description of these proceedings.  These proceedings may be time-consuming, expensive and disruptive to normal business operations. The defense of such lawsuits could result in significant expense and the diversion of our management’s time and attention from the operation of our business. Some or all of the amount we may be required to pay to defend or to satisfy a judgment or settlement of any or all of these proceedings may not be covered by insurance and could have a material adverse affect on us.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Saia is headquartered in Johns Creek, Georgia. At December 31, 2007 Saia owned 44 service facilities and the Houma, Louisiana general office and leased 107 service facilities, the Johns Creek, Georgia corporate office and the Boise, Idaho general office. Although Saia owns only 29 percent of its service facility locations, these locations account for 46 percent of its door capacity. This follows the Saia strategy of owning strategically located facilities that are integral to its operations and leasing service facilities in smaller markets to allow for more flexibility. As of December 31, 2007, Saia owned all of its 3,579 tractors and 11,449 trailers.

Top 20 Saia Service Facilities by Number of Doors at December 31, 2007

Location		Own/Lease				Doors
Atlanta, GA		Own					224
Dallas, TX		Own					174
Houston, TX		Own					158
Memphis, TN		Own					124
Nashville, TN		Own					116
Cleveland, OH		Lease					112
Charlotte, NC		Own					107
New Orleans, LA		Own					86
Los Angeles, CA		Lease					80
Fontana, CA		Own					79
St. Louis, MO		Lease					73
Indianapolis, IN		Lease					68
Miami, FL		Own					68
Markham, IL		Lease					68
Chicago, IL		Lease					67
South Bend, IN		Lease					66
Jacksonville, FL		Lease					64
Garland, TX		Lease					63
Toledo, OH		Lease					61
Phoenix, AZ		Own					59

Item 3. Legal Proceedings

Fuel Surcharge Litigation. In late July 2007, a lawsuit was filed in federal court in California against Saia and several other major LTL freight carriers alleging that the defendants conspired to fix fuel surcharge rates in violation of federal antitrust laws and seeking injunctive relief, treble damages and attorneys’ fees. Since the filing of the original case, similar cases have been filed against Saia and other LTL freight carriers, each with the same allegation of conspiracy to fix fuel surcharge rates. The plaintiffs in these cases are seeking class action certification. We believe that these claims have no merit and intend to vigorously defend ourselves. We have also received an indemnification claim related to the sale of Jevic Transportation arising from these lawsuits. Given the nature and status of the claims, we cannot yet determine the amount or a reasonable range of potential loss, if any.

California Labor Code Litigation. The Company is a defendant in a lawsuit filed in California state court on behalf of California dock workers alleging various violations of state labor laws. The claims include the alleged failure of the Company to provide rest and meal breaks and the failure to reimburse the employees for the cost of work shoes, among other claims. In January 2008, the parties negotiated a conditional class-wide settlement and are in the process of documenting the proposed agreement and submitting the proposed settlement agreement to the court for approval. The proposed settlement has been reflected as a liability of $0.8 million as of December 31, 2007 and was recorded as other operating expense in the fourth quarter of 2007.

Other. The Company is subject to legal proceedings that arise in the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect to these actions will not materially adversely effect our financial position but could have a material adverse effect on the results of operations in a quarter or annual period.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2007.

PART II.

Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Price Information
 
Saia’s common stock is listed on the NASDAQ National Market (NASDAQ) under the symbol “SAIA.” The
following table sets forth, for the periods indicated, the high and low sale prices per share for
the common stock as reported on NASDAQ.

		Low				High
Year Ended December 31, 2007
First Quarter		$	23.33			$	28.49
Second Quarter		$	22.81			$	30.37
Third Quarter		$	15.68			$	29.15
Fourth Quarter		$	11.76			$	17.25
Year Ended December 31, 2006
First Quarter		$	21.36			$	31.53
Second Quarter		$	23.12			$	30.75
Third Quarter		$	25.30			$	34.04
Fourth Quarter		$	22.80			$	36.17

Stockholders

 
As of January 31, 2008, there were 1,758 holders of record of our common stock.
  

Dividends

We have not paid a dividend on our common stock. Any payment of dividends in the future is dependent upon our financial condition, capital requirements, earnings, cash flow and other factors.

Dividends are prohibited under our current debt agreements, which have been previously filed with the Securities and Exchange Commission and are incorporated by reference herein. However, there are no material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. See Note 4 of the accompanying audited consolidated financial statements.

Equity Compensation Plan Information

Number of securities

Number of securities

remaining available for

to be issued upon

Weighted-average

future issuances under

exercise of

exercise price of

equity compensation plans

outstanding options,

outstanding options,

(excluding securities

Plan Category

warrants and rights

warrants and rights

reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders

353,569

$

14.98

562,799

(1)

Equity compensation plans not approved by security holders

—

—

—

Total

353,569

$

14.98

562,799

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities —

Issuer Purchases of Equity Securities
														(d) Maximum
										(c) Total Number				Number (or
		(a) Total								of Shares (or				Approximate Dollar
		Number of				(b) Average				Units) Purchased				Value) of Shares (or
		Shares (or				Price Paid per				as Part of Publicly				Units) that May Yet
		Units)				Share (or				Announced Plans				be Purchased under
Period		Purchased				Unit)				or Programs				the Plans or Programs
October 1, 2007 through October 31, 2007			790	(2)		$	15.24	(2)			—	(1)			—	(1)
November 1, 2007 through November 30, 2007			16,890	(3)			13.31	(3)			—	(1)			—	(1)
December 1, 2007 through December 31, 2007			2,380	(4)			13.48	(4)			—	(1)			—	(1)
Total			20,060								—

Item 6. Selected Financial Data

The following table shows summary consolidated historical financial data of Saia and has been derived from, and should be read together with, the consolidated financial statements and accompanying notes and in conjunction with “Management’s Discussion and Analysis of Results of Operations and Financial Condition”. The summary financial information may not be indicative of the future performance of Saia.

		Year ended December 31,
		2007				2006				2005				2004				2003
		(In thousands except per share data and percentages)
Statement of operations:
Operating revenue — continuing operations		$	976,123			$	874,738			$	754,038			$	645,374			$	520,668
Operating income — continuing operations (1)			38,168				49,994				50,436				30,342				22,255
Income from continuing operations			17,085				25,873				25,158				13,222				7,828
Net income (loss)			18,342				(20,681	)			27,459				19,259				14,933
Diluted earnings per share — continuing operations			1.22				1.74				1.67				0.86				0.52
Diluted earnings (loss) per share			1.31				(1.39	)			1.82				1.26				0.99
Other financial data:
Net cash provided by operating activities			46,271				76,137				83,903				55,239				58,270
Net cash used in investing activities (2)			(91,429	)			(72,298	)			(53,701	)			(79,992	)			(49,830	)
Depreciation and amortization			38,685				32,550				28,849				27,898				23,986
Balance sheet data:
Cash and cash equivalents			6,656				10,669				16,865				7,499				29,975
Net property and equipment			368,772				314,832				246,634				223,625				192,733
Total assets			560,583				487,400				554,741				509,548				464,843
Total debt			172,845				109,984				114,913				122,810				116,510
Total shareholders’ equity			200,652				203,155				228,392				212,542				189,582
Measurements:
Operating ratio (3)			96.1	%			94.3	%			93.3	%			95.3	%			95.7	%

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

Executive Overview

The Company’s business is highly correlated to the general economy and, in particular, industrial production. The Company’s priorities are focused on increasing volume within existing geographies while managing both the mix and yield of business to achieve increased profitability. The Company’s business is labor intensive, capital intensive and service sensitive. The Company looks for opportunities to improve cost effectiveness, safety and asset utilization (primarily tractors and trailers). Technology is important to supporting both customer service and operating management. The Company grew operating revenue by 11.6 percent in 2007 over 2006. Revenue growth was primarily attributable to the acquisition of The Connection Company (the Connection) and Madison Freight Systems (Madison Freight) and improvement in yield (revenue per hundred weight), including the effects of higher fuel surcharges.

Consolidated operating income from continuing operations was $38.2 million for 2007 compared to $50.0 million in 2006. The 2007 results include $2.4 million of pre-tax integration charges due to the acquisition of the Connection and Madison Freight in February 2007. The 2006 results include $1.5 million of pre-tax integration charges due to the acquisition of the Connection in November 2006. In addition, the Company recorded a pre-tax charge of $2.6 million in 2006 related to the consolidation and relocation of the Company’s corporate headquarters to Johns Creek, Georgia. The 2007 operating income decrease resulted primarily from lower productivity, impacted by the weak economic environment, investments in new synergy lanes and increased accident severity. Diluted earnings per share from continuing operations were $1.22 per share, a decrease of 30 percent from the prior year.

The Company generated $46.3 million in cash from operating activities of continuing operations versus generating $55.6 million in the prior-year period. Cash flows from operating activities of discontinued operations were zero for 2007 versus $20.5 million for 2006. The Company had net cash used in investing activities from continuing operations of $91.4 million during 2007 for the purchase of property and equipment and the acquisition of Madison Freight. Cash used in financing activities during 2007 included $11.4 million in principal payments on long-term debt and $23.2 million in share repurchases only partially offset by proceeds from stock option exercises of $2.0 million. The Company had borrowings of $48.7 million on its credit agreement and a cash balance of $6.7 million as of December 31, 2007.

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., formerly SCS Transportation, Inc. (also referred to as “Saia” and the “Company”). 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.

The Company is a an asset-based transportation company providing regional and interregional LTL services and selected national LTL, and guaranteed expedited service solutions to a broad base of customers across 33 states. Our operating subsidiary is Saia Motor Freight Line, LLC (Saia Motor Freight), based in Johns Creek, Georgia. The Company integrated the operations of the Connection into Saia Motor Freight in February 2007. The Company integrated the operations of Madison Freight into Saia Motor Freight in March 2007.

Our business is highly correlated to the general economy and, in particular, industrial production. It also is impacted by a number of other factors as detailed in the Forward Looking Statements and Risk Factors sections of this Form 10-K. 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 (yield) and revenue per shipment; 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. Fuel surcharges have remained in effect in the LTL industry for several years and have become an increasingly significant component of revenue and pricing. Fuel surcharges are a more integral part of annual customer contract renewals, blurring the distinction between base price increases and recoveries under the fuel surcharge program. The fuel surcharge program is intended to reduce the Company’s exposure to rising diesel prices and other costs affected by increased fuel prices, such as purchased transportation. However, in recent years, given the significance of fuel surcharges, the negotiation of customer price increases has become commingled with fuel surcharges and fuel surcharges have more than offset higher diesel fuel costs. We have experienced cost increases in other operating costs as a result of increased fuel prices. However, the total impact of higher energy

prices on other non-fuel related expenses is difficult to determine. A rapid and significant decline in diesel fuel prices would reduce the Company’s revenue and yield until we made the appropriate adjustments to our pricing strategy.

Results of Operations

Saia, Inc. and Subsidiaries
Selected Results of Continuing Operations and Operating Statistics
For the years ended December 31, 2007, 2006 and 2005
(in thousands, except ratios and revenue per hundredweight)

														Percent Variance
		2007				2006				2005				‘07 v. ’06				‘06 v. ’05
Operating Revenue		$	976,123			$	874,738			$	754,038				11.6	%			16.0	%
Operating Expenses:
Salaries, wages and employees’ benefits			524,599				473,956				413,710				10.7				14.6
Purchased transportation			76,123				70,029				62,557				8.7				11.9
Depreciation and amortization			38,685				32,550				28,849				18.8				12.8
Other operating expenses			298,548				248,209				198,486				20.3				25.1
Operating Income			38,168				49,994				50,436				(23.7	)			(0.9	)
Operating Ratio			96.1	%			94.3	%			93.3	%			1.9				1.0
Nonoperating Expenses			9,777				8,021				9,435				21.9				(15.0	)
Working Capital			25,083				7,043				10,973				256.1				(35.8	)
Operating Cash Flow from Continuing Operations			46,271				55,643				60,910				(16.8	)			(8.6	)
Net Acquisitions of Property & Equipment			89,085				90,748				33,305				(1.8	)			172.5
Saia Motor Freight Operating Statistics:
LTL Tonnage			3,794				3,460				3,144				9.7				10.1
Total Tonnage			4,527				4,150				3,802				9.1				9.2
LTL Shipments			6,888				6,177				5,637				11.5				9.6
Total Shipments			6,988				6,272				5,727				11.4				9.5
LTL Revenue Per Hundredweight			12.00				11.73				11.10				2.3				5.7
Total Revenue Per Hundredweight			10.79				10.54				9.92				2.4				6.2

Continuing Operations

Year ended December 31, 2007 vs. year ended December 31, 2006

Revenue and volume

Consolidated revenue increased 11.6 percent to $976.1 million as a result of the acquisitions of the Connection and Madison Freight, which led to increased volumes as both shipments and LTL tonnage were up over the prior year. We believe volume gains were primarily attributable to the acquisitions and market share gains into and out of Saia’s newer Midwest markets. While fuel costs increased during 2007, higher fuel surcharge revenues offset higher diesel fuel costs. We have experienced cost increases in other operating costs as a result of increased fuel prices. However, the total impact of higher energy prices on other non-fuel related expenses is difficult to determine.

Saia’s LTL revenue per hundredweight (a measure of yield) increased 2.3 percent to $12.00 per hundredweight for 2007 including the impact of fuel surcharges. Saia’s LTL tonnage was up 9.7 percent to 3.8 million tons and LTL shipments were up 11.5 percent to 6.9 million shipments. Approximately 70 percent of Saia Motor Freight’s revenue is subject to individual customer price adjustment negotiations that occur throughout the year. The remaining 30 percent of revenue is subject to an annual general rate increase. On April 2, 2007, Saia Motor Freight implemented a 4.95 percent general rate increase for customers comprising this 30 percent of revenue. Competitive

factors, customer turnover and mix changes, among other things, impact the extent to which customer rate increases are retained over time.

Operating expenses and margin

Consolidated operating income of $38.2 million in 2007 compared to $50.0 million in 2006. The 2007 results include $2.4 million of pre-tax integration charges from the acquisition of the Connection in November 2006 and Madison Freight in February 2007. The 2006 results include $1.5 million of pre-tax integration charges from the acquisition of the Connection in November 2006. In addition, the Company recorded a pre-tax charge in 2006 of $2.6 million related to the consolidation and relocation of the Company’s corporate headquarters to Johns Creek, Georgia. These restructuring charges are largely for severance benefits and stay incentives through the transition period. The 2007 operating ratio (operating expenses divided by operating revenue) was 96.1 compared to 94.3 for 2006. However, excluding the integration charges from 2007 and the restructuring and integration charges from 2006, the comparative operating ratios would have been 95.8 in 2007 versus 93.8 in 2006. Higher fuel prices, in conjunction with volume changes, caused $19.9 million of the increase in fuel, operating expenses and supplies. Year-over-year price and volume increases were more than offset by cost increases in wages, health care, accident expense and depreciation and maintenance. Increased revenues from the fuel surcharge program offset fuel price increases. Purchased transportation expenses increased 8.7 percent reflecting both increased utilization driven by volume increases and the opening of lanes to and from the acquired territories. During the current year accident expense was $8.3 million higher than prior year due to increased severity, although frequency has improved. The Company experiences volatility in accident expense as a result of its self insurance structure and $2.0 million retention limits per occurrence. Saia’s annual wage rate increases averaged 2.7 percent and were effective August 1, 2006. The annual wage rate increase for 2007 averaged 2.5 percent, however the Company delayed the increase from August until December. The Company recorded a pre-tax benefit of $3.0 million and a pre-tax charge of $3.0 million for equity-based compensation as a result of the stock price performance during 2007 and 2006, respectively. Equity-based compensation expense includes the expense for the cash-based awards under the Company’s long-term incentive plans, which is a function of the Company’s stock price performance versus a peer group, and the deferred compensation plan’s expense, which is tied to changes in the Company’s stock price.

Other

Substantially all the Company’s non-operating expenses represent interest expense. Interest costs were $10.1 million in 2007 versus $9.3 million in 2006, reflecting the increase in average outstanding indebtedness in 2007. The Company’s capital structure consists predominantly of longer-term, fixed rate instruments. The consolidated effective tax rate was 39.8 percent in 2007 compared to 38.4 percent in 2006. The 2006 effective tax rate included approximately $0.7 million of non-recurring tax credits. The notes to the consolidated financial statements provide an analysis of the income tax provision and the effective tax rate.

Working capital/capital expenditures

Working capital at December 31, 2007 was $25.1 million, which increased from working capital at December 31, 2006 of $7.0 million due to higher accounts receivable and lower accrued payroll. Cash flows from operating activities were $46.3 million for 2007 versus cash flows from operations of $76.1 million for 2006. Cash flows from operating activities in 2007 and 2006 included zero and $20.5 million from discontinued operations, respectively. For 2007 cash used in investing activities was $91.4 million versus $72.3 million in the prior year, which included the proceeds from the sale of Jevic at June 30, 2006. The 2007, acquisition of property and equipment includes investments in real estate for terminals, purchase of growth and replacement units of revenue equipment, and investment in technology and software. Cash from financing activities was $41.1 million in 2007 versus cash used in financing activities of $10.0 million for the prior year. Current year financing activities included $48.7 million net borrowings on the revolving credit facility and $25.0 million in proceeds from new senior notes partially offset by $23.2 million for share repurchases.

Year ended December 31, 2006 vs. year ended December 31, 2005

Revenue and volume

Consolidated revenue increased 16.0 percent to $874.7 million as a result of improved pricing and increased volumes as both shipments and LTL tonnage were up over the prior year along with the $7.2 million of revenue from the acquisition of the Connection in November 2006. Management believes volume gains were attributable to market share gains into and out of Saia’s newer Midwest markets, continued high quality service, industry consolidation, and Company specific initiatives partially offset by a slowing economy in the third and fourth quarters of 2006. While fuel costs increased during 2006, higher fuel surcharge revenues have more than offset higher diesel fuel costs. We have experienced cost increases in other operating costs as a result of increased fuel

prices. However, the total impact of higher energy prices on other non-fuel related expenses is difficult to determine.

Saia Motor Freight’s LTL revenue per hundredweight (a measure of yield) increased 5.7 percent to $11.73 per hundredweight for 2006. Saia Motor Freight experienced stronger price increases in 2006 over 2005, especially in the first half of 2006. Growth during 2006 was stronger during the first half of 2006 versus the second half of 2006 due to the slowing of the economy. Saia Motor Freight LTL tonnage was up 10.1 percent to 3.5 million tons and LTL shipments were up 9.6 percent to 6.2 million shipments. Management believes that Saia Motor Freight continued to grow volume by providing high quality service for its customers, continued market share gains from its 2004 Midwest expansion, industry consolidation in its market segments, sales initiatives in specific market segments and our Xtreme Guarantee program. Approximately 70 percent of Saia Motor Freight’s revenue is subject to individual customer price adjustment negotiations that occur throughout the year. The remaining 30 percent of revenue is subject to an annual general rate increase. On April 3, 2006, Saia Motor Freight implemented a 5.9 percent general rate increase for customers comprising this 30 percent of revenue. Competitive factors, customer turnover and mix changes, among other things, impact the extent to which customer rate increases are retained over time.

Operating expenses and margin

Consolidated operating income of $50.0 million in 2006 compared to $50.4 million in 2005. The 2005 results included a $7.0 million pre-tax real estate gain. The 2006 results include $1.5 million of pre-tax integration charges from the acquisition of the Connection in November 2006. In addition, the Company recorded a pre-tax charge in 2006 of $2.6 million related to the consolidation and relocation of the Company’s corporate headquarters to Johns Creek, Georgia. These restructuring charges are largely for severance benefits and stay incentives through the transition period. The 2006 operating ratio (operating expenses divided by operating revenue) was 94.3 compared to 93.3 for 2005. However, excluding the restructuring and integration charges from 2006 and the real estate gain from 2005, the comparative operating ratios would have been 93.8 in 2006 versus 94.2 in 2005. Higher fuel prices, in conjunction with volume changes, caused $24.3 million of the increase in fuel, operating expenses and supplies. Year-over-year price and volume increases were partially offset by cost increases in wages, health care, workers’ compensation, claims expense and deprecation and maintenance. Increased revenues from the fuel surcharge program offset fuel price increases. Purchased transportation expenses increased 11.9 percent reflecting both increased utilization driven by volume increases and increased cost per mile largely driven by both capacity constraints and fuel price increases. The Company recorded a pre-tax charge of $3.0 million and $0.6 million in 2006 and 2005, respectively for equity-based compensation as a result of the stock price performance during each year. Equity-based compensation and restructuring charges totaled approximately $0.29 per diluted share in 2006 compared to $0.02 per diluted share in 2005.

The Company’s annual wage rate increases averaged 2.7 percent and were effective August 1, 2006. During the third quarter of 2005, the Company experienced two hurricanes that caused property damage and disrupted operations. The Company reached a settlement in the third quarter of 2006 on its insurance claims related to the hurricanes; the remaining insurance recovery was recognized upon finalizing this negotiated settlement for the remaining claims. In the fourth quarter of 2005, the Company recorded a partial insurance recovery of $1.0 million for losses attributable to Hurricane Katrina. An additional net benefit of $1.1 million was recognized in connection with these claims during the third quarter of 2006.

Other

Substantially all the Company’s non-operating expenses represent interest expense. Interest costs were $9.3 million in 2006 versus $9.8 million in 2005. Average outstanding indebtedness decreased between 2006 and 2005 while interest rates rose in 2006 on the smaller variable rate portion of the Company’s debt. The Company’s capital structure consists predominantly of longer-term, fixed rate instruments. The consolidated effective tax rate was 38.4 percent in 2006 compared to 38.6 percent in 2005. The 2006 effective tax rate included approximately $0.7 million of non-recurring tax credits. The 2005 effective tax rate was lower due to a $0.4 million tax benefit related to the favorable settlement of various tax issues. The notes to the consolidated financial statements provide an analysis of the income tax provision and the effective tax rate.

Working capital/capital expenditures

The decrease in working capital is predominantly the result of higher accounts payable at December 31, 2006 due to approximately $4.2 million in property and equipment received late in 2006 and higher wage and employee benefit accruals along with the funds from the sale of Jevic being used to purchase the Connection in November 2006 and repurchase shares in the fourth quarter of 2006. The 2006 capital investments for continuing operations were $93.2 million on a gross basis and $90.7 million on a net basis. Net capital expenditures of $90.7 million include

approximately $11.3 million investment in real estate and $79.4 million for the purchase of revenue equipment for growth and replacement units and investment in technology equipment and software.

Discontinued Operations

On June 30, 2006, the Company completed the sale of all of the outstanding stock of Jevic Transportation, Inc., its hybrid less-than-truckload and truckload trucking carrier business to a private investment firm in a cash transaction of $42.2 million less a working capital adjustment of $0.9 million. The Company and Jevic finalized the working capital adjustment and in accordance with the agreement the Company received $0.1 million during the fourth quarter of 2006. Transaction fees and expenses totaled approximately $1.3 million. In addition, the transaction was structured as an asset sale for tax purposes under Section 338(h)(10) of the Code that resulted in an estimated $11.2 million income tax benefit from the transaction. The Company utilized the tax benefit from the transaction in the third and fourth quarter of 2006. The accompanying consolidated Statements of Operations for all periods presented have been adjusted to classify Jevic Transportation, Inc. operations as discontinued operations. The Company recorded a non-cash after-tax charge on the sale of Jevic Transportation of $43.8 million, net of income tax benefits or $2.94 per share. The Company also recorded loss from discontinued operations for the year ended December 31, 2006 of $2.8 million compared to income from discontinued operations of $2.3 million for the year ended December 31, 2005. In 2007, the Company recorded a tax benefit as a result of filing all of the state income tax returns for 2006 allowing the Company to have all of the necessary information to finalize the amount of tax benefit associated with the loss on the sale of Jevic.

Outlook

Our business remains highly correlated to the success of Company specific improvement initiatives as well as a variety of external factors, including the general economy. Given the volume trends in 2007 and early 2008, there remains uncertainty as to the direction of the economy for the balance of 2008. For 2008, we plan to continue to focus on providing top quality service and improving safety performance while building density within our existing geography. Saia continues to evaluate opportunities to grow and further increase profitability.

The Company plans to continue to pursue revenue and cost initiatives to improve profitability. Planned revenue initiatives include, but are not limited to, building density and improving performance in our current geography, targeted marketing initiatives to grow revenue in more profitable segments, as well as pricing and yield management. The extent of success of these revenue initiatives is impacted by what proves to be the underlying economic trends, competitor initiatives and other factors discussed under Risk Factors.

Planned cost management initiatives include, but are not limited to, seeking gains in productivity and asset utilization that collectively are designed to offset anticipated inflationary unit cost increases in salaries and wage rates, healthcare, workers’ compensation, fuel and all the other expense categories. Specific cost initiatives include linehaul routing optimization, reduction in costs of purchased transportation, expansion of wireless dock technology and an enhanced weight and inspection process. If the Company builds market share, there are numerous operating leverage cost benefits. Conversely should the economy soften from present levels, the Company plans to attempt to match resources and capacity to shifting volume levels to lessen unfavorable operating leverage. The success of cost improvement initiatives is also impacted by the cost and availability of drivers and purchased transportation, fuel, insurance claims, regulatory changes, successful implementation of profit improvement initiatives and other factors discussed under Risk Factors.

See “Risk Factors” and “Forward-Looking Statements” for a more complete discussion of potential risks and uncertainties that could materially affect our future performance.

New Accounting Pronouncements

See Note 1 to the accompanying consolidated financial statements for further discussion of recent accounting pronouncements.

Financial Condition

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

On September 20, 2002, Saia issued $100 million in Senior Notes under a $125 million (amended to $150 million in April 2005) Master Shelf Agreement with Prudential Investment Management, Inc. and certain of its affiliates. Saia issued another $25 million in Senior Notes under the same Master Shelf Agreement on November 30, 2007.

The initial $100 million Senior Notes are unsecured and have a fixed interest rate of 7.38 percent. Payments due under the $100 million Senior Notes were interest only until June 30, 2006 and at that time semi-annual principal payments began with the final payment due December 2013. The $25 million Senior Notes are unsecured and have a fixed interest rate of 6.14 percent. Payments due under the $25 million Senior Notes will be interest only until June 30, 2011 and at that time semi-annual principal payments will begin with the final payment due January 1, 2018. Under the terms of the Senior Notes, Saia must maintain certain financial covenants including a maximum ratio of total indebtedness to earnings before interest, taxes, depreciation, amortization and rent (EBITDAR), a minimum interest coverage ratio and a minimum tangible net worth, among others. At December 31, 2007 and 2006, the Company was in compliance with these covenants.

At December 31, 2007 Saia also had a $110 million Agented Revolving Credit Agreement (the Credit Agreement) with Bank of Oklahoma, N.A., as agent. The Credit Agreement was unsecured with an interest rate based on LIBOR or prime at the Company’s option, plus an applicable spread, in certain instances, and had a maturity date of January 2009. At December 31, 2007, Saia had $48.7 million of borrowings under the Credit Agreement, $49.2 million in letters of credit outstanding under the Credit Agreement and availability of $12.0 million. The available portion of the Credit Agreement may be used for future capital expenditures, working capital and letter of credit requirements as needed. Under the terms of the Credit Agreement, Saia must maintain several financial covenants including a maximum ratio of total indebtedness to EBITDAR, a minimum interest coverage ratio and a minimum tangible net worth, among others. At December 31, 2007, Saia was in compliance with these covenants. On January 28, 2008, Saia amended and restated the Credit Agreement, increasing it to $160 million, extending the maturity to January 28, 2013 and adjusting the interest rate schedule. In addition, the financial covenants were revised to a fixed charge coverage ratio, leverage ratio and adjusted leverage ratio, removing the minimum tangible net worth test.

At December 31, 2007, Yellow provided guarantees on behalf of Saia primarily for open workers’ compensation claims and casualty claims incurred prior to March 1, 2000. Under the Master Separation and Distribution Agreement entered into in connection with the Spin-off, Saia pays Yellow’s actual cost of any collateral it provides to insurance underwriters in support of these claims at cost plus 100 basis points through October 2008. At December 31, 2007, the portion of collateral allocated by Yellow to Saia in support of these claims was $1.6 million.

Projected net capital expenditures for 2008 are approximately $56 million including approximately $39 million for several strategic real estate opportunities within Saia’s existing network. This represents an approximately $33 million decrease from 2007 net capital expenditures for property and equipment. Approximately $34.0 million of the 2008 capital budget was committed at December 31, 2007. Net capital expenditures pertain primarily to replacement of revenue equipment and additional investments in information technology, land and structures.

The Company has historically generated cash flows from operations that have funded its capital expenditure requirements. Cash flows from operations were $46.3 million for the year ended December 31, 2007, which funded over half of the $89.0 million of net capital expenditures for acquisition of property and equipment. Cash flows from operating activities in 2007 decreased $29.8 million primarily as a result of no longer including the cash flow from discontinued operations of $20.5 million in 2006. The remaining decrease of $11.3 million is primarily due to increased accounts receivable. The timing of capital expenditures can largely be managed around the seasonal working capital requirements of the Company. In addition, during 2007, the Company repurchased $23.2 million in common stock, completing a $25 million authorized program. The Company made payments of $11.4 million during 2007 towards its outstanding indebtedness, while borrowing an additional $73.7 million through the Master Shelf Agreement and the Credit Agreement. The Company has adequate sources of capital to meet short-term liquidity needs through its cash ($6.7 million at December 31, 2007), and availability under its revolving credit facility ($12.0 million at December 31, 2007) plus an additional $50 million under the Amended and Restated Credit Agreement in January 2008. In addition to these sources of liquidity, the Company issued $25 million in senior notes under the Master Shelf Agreement in January 2008 to fund longer-term strategic investments in real estate, utilizing the remaining capacity under the Master Shelf Agreement. 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 has the ability to adjust its capital expenditures in the event of a shortfall in anticipated operating cash flows. The Company believes its current capital structure and availability under its borrowing facilities along with anticipated cash flows from future operations will be sufficient to fund planned replacements of revenue equipment and investments in technology. Additional sources of capital may be needed to fund future long-term strategic growth initiatives.

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

		Year ended
		2007				2006				2005
Land and structures:
Additions		$	42.4			$	11.8			$	11.3
Sales			(4.4	)			(0.4	)			(9.5	)
Revenue equipment, net			40.9				72.5				27.5
Technology and other			10.2				6.8				4.4
			89.1				90.7				33.7
Connection acquisition			—				17.5				—
Madison Freight acquisition			2.3				—				—
Discontinued operations			—				(35.9	)			20.0
Total		$	91.4			$	72.3			$	53.7

In addition to the amounts disclosed in the table above, the Company had an additional $0.5 million in capital expenditures for revenue equipment that was received but not paid for prior to December 31, 2007.

In accordance with accounting principles generally accepted in the United States, our operating leases are not recorded in our balance sheet; however, the minimum lease payments related to these leases are disclosed in the notes to our audited consolidated financial statements included in this Form 10-K, and in “Contractual Cash Obligations” table below. In addition to the principal amounts disclosed in the tables below, the Company has estimated interest obligations of approximately $12.8 million for 2008 and decreasing for each year thereafter, based on borrowings outstanding at December 31, 2006.

Contractual Cash Obligations

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of December 31, 2007 (in millions):

		Payments due by year
		2008				2009				2010				2011				2012				Thereafter				Total
Contractual cash obligations:
Long-term debt obligations:
Revolving line of credit (1)		$	—				48.7			$	—			$	—			$	—			$	—				48.7
Long-term debt (1)			12.8				18.9				18.9				20.4				20.4				32.7				124.1
Operating leases			12.4				8.3				5.1				3.1				1.6				1.4				31.9
Purchase obligations (2)			41.2				—				—				—				—				—				41.2
Total contractual obligations		$	66.4			$	75.9			$	24.0			$	23.5			$	22.0			$	34.1			$	245.9

		Amount of commitment expiration by year
		2008				2009				2010				2011				2012				Thereafter				Total
Other commercial commitments:
Available line of credit		$	—			$	12.0			$	—			$	—			$	—			$	—			$	12.0
Letters of credit			50.2				0.6				—				—				—				—				50.8
Surety bonds			5.1				0.6				—				—				—				—				5.7
Total commercial commitments		$	55.3			$	13.2			$	—			$	—			$	—			$	—			$	68.5

The Company has unrecognized tax benefits of approximately $3.3 million and accrued interest and penalties of $1.2 million related to the unrecognized tax benefits as of December 31, 2007. The Company cannot reasonably estimate the timing of cash settlement with respective taxing authorities beyond one year and accordingly has not included the amounts within the above contractual cash obligation and other commercial commitment tables.

Critical Accounting Policies and Estimates

Saia 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 Saia include:

•		Claims and Insurance Accruals. The Company has self-insured retention limits generally ranging from $250,000 to $2,000,000 per claim for medical, workers’ compensation, auto liability, casualty and cargo claims. For only the policy year March 2003 through February 2004, the Company has an aggregate exposure limited to an additional $2,000,000 above its $1,000,000 per claim deductible under its auto liability program. The liabilities associated with the risk retained by the Company are estimated in part based on historical experience, third-party actuarial analysis, demographics, nature and severity and other assumptions. The liabilities for self-funded retention are included in claims and insurance reserves based on claims incurred, with liabilities for unsettled claims and claims incurred but not yet reported being actuarially determined with respect to workers’ compensation claims and with respect to all other liabilities, estimated based on management’s evaluation of the nature and severity of individual claims and historical experience. However, these estimated accruals could be significantly affected if the actual costs of the Company differ from these assumptions. A significant number of these claims typically take several years to develop and even longer to ultimately settle. These estimates tend to be reasonably accurate over time; however, assumptions regarding severity of claims, medical cost inflation, as well as specific case facts can create short-term volatility in estimates.
•		Revenue Recognition and Related Allowances. Revenue is recognized on a percentage-of-completion basis for shipments in transit while expenses are recognized as incurred. In addition, estimates included in the recognition of revenue and accounts receivable include estimates of shipments in transit and estimates of future adjustments to revenue and accounts receivable for billing adjustments and collectibility.
		Revenue is recognized in a systematic process whereby estimates of shipments in transit are based upon actual shipments picked up, scheduled day of delivery and current trend in average rates charged to customers. Since the cycle for pick up and delivery of shipments is generally 1-3 days, typically less than 5 percent of a total month’s revenue is in transit at the end of any month. Estimates for credit losses and billing adjustments are based upon historical experience of credit losses, adjustments processed and trends of collections. Billing adjustments are primarily made for discounts and billing corrections. These estimates are continuously evaluated and updated; however, changes in economic conditions, pricing arrangements and other factors can significantly impact these estimates.
•		Depreciation and Capitalization of Assets. Under the Company’s accounting policy for property and equipment, management establishes appropriate depreciable lives and salvage values for the Company’s revenue equipment (tractors and trailers) based on their estimated useful lives and estimated fair values to be received when the equipment is sold or traded in. These estimates are routinely evaluated and updated when circumstances warrant. However, actual depreciation and salvage values could differ from these assumptions based on market conditions and other factors.
•		Recovery of Goodwill. In connection with its acquisition of Clark Bros. in 2004, the Connection in 2006 and Madison Freight in 2007, the Company allocated purchase price based on independent appraisals of intangible assets and real property and management’s estimates of valuations of other tangible assets. Annually, the Company assesses goodwill impairment by applying a fair value based test. This fair value based test involves assumptions regarding the long-term future performance of the Company, fair value of the assets and liabilities of the Company, cost of capital rates and other assumptions. However, actual recovery of remaining goodwill could differ from these assumptions based on market conditions and other factors. In the event remaining goodwill is determined to be impaired a charge to earnings would be required.
•		Equity-based Incentive Compensation. The Company maintains long-term incentive compensation arrangements in the form of stock options, cash-based awards and stock-based awards. The criteria for the cash-based and stock-based awards are total shareholder return versus a peer group of companies over a three year performance period. The Company accrues for cash-based award expenses based on performance criteria from the beginning of the performance period through the reporting date. This results in the potential for significant adjustments from period to period that cannot be predicted. The Company accounts for stock-based awards in accordance with Financial Accounting Standards Board Statement No. 123R with the expense amortized over the three year vesting period based on the Monte Carlo fair value at the date the stock-based awards are granted. The Company accounts for stock options in accordance with Financial

Accounting Standards Board Statement No. 123R with option expense amortized over the three year vesting period based on the Black-Scholes-Merton fair value at the date the options are granted. See discussion of adoption of Statement No. 123R in Note 9 to the consolidated financial statements contained herein.

These accounting policies, and others, are described in further detail in the notes to our audited consolidated financial statements included in this Form 10-K.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the 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 financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

Forward-Looking Statements

Certain statements in this Form 10-K, including those contained in Item 1 and Item 7 “Outlook” and “Financial Condition”, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of Saia. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “predict,” “believe,” “seek” and similar words or expressions are intended to identify forward-looking statements. We use such forward-looking statements regarding our future financial condition and results of operations and our business operations in this Form 10-K. Investors should not place undue reliance on such forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements reflect the present expectation of future events of our management 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 the forward-looking statements. These factors and risks include, but are not limited to, general economic conditions; integration risks; indemnification obligations associated with the sale of Jevic; the effect of ongoing litigation including class action lawsuits; cost and availability of qualified drivers, fuel, purchased transportation, property, revenue equipment and other operating assets; governmental regulations, including but not limited to Hours of Service, engine emissions, compliance with legislation requiring companies to evaluate their internal control over financial reporting and Homeland Security; dependence on key employees; inclement weather; labor relations; effectiveness of company-specific performance improvement initiatives; competitive initiatives and pricing pressures; terrorism risks; self-insurance claims, equity-based compensation and other expense volatility; and 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 Item 1A: Risk Factors of this 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.

Management’s Report on Internal Control Over Financial Reporting

The management of Saia, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this assessment, management has concluded that as of December 31, 2007, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm, KPMG LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears on page 29 of this Form 10-K.

		Richard D. O’Dell		President and Chief Executive Officer
		James A. Darby		Vice President and Chief Financial Officer (Principal Financial Officer)
		Stephanie R. Maschmeier		Controller (Principal Accounting Officer)

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Saia is exposed to a variety of market risks, including the effects of interest rates and fuel prices. The detail of Saia’s debt structure is more fully described in the notes to the consolidated financial statements. To mitigate our risk to rising fuel prices, Saia Motor Freight has implemented fuel surcharge programs. These programs are well established within the industry and customer acceptance of fuel surcharges remains high. Since the amount of fuel surcharge is based on average national diesel fuel prices and is reset weekly, exposure of Saia to fuel price volatility is significantly reduced.

The following table provides information about Saia third-party financial instruments as of December 31, 2007 with comparative information for December 31, 2006. The table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. The fair value of the fixed rate debt was estimated based upon the borrowing rates currently available to the Company for debt with similar terms and remaining maturities.

		Expected maturity date																								2007								2006
																						There-								Fair								Fair
		2008				2009				2010				2011				2012				after				Total				Value				Total				Value
Fixed rate debt		$	12.8			$	18.9			$	18.9			$	20.4			$	20.4			$	32.7			$	124.1			$	133.1			$	109.1			$	111.1
Average interest rate			7.33	%			7.34	%			7.35	%			7.15	%			7.10	%			6.51	%
Variable rate debt		$	—			$	48.7			$	—			$	—			$	—			$	—			$	48.7			$	48.7			$	0.9			$	0.9
Average interest rate			—				7.25	%			—				—				—				—

Item 8. Financial Statements and Supplementary Data

FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm			29
Consolidated Balance Sheets—December 31, 2007 and 2006			31
Consolidated Statements of Operations—Years ended December 31, 2007, 2006 and 2005			32
Consolidated Statements of Shareholders’ Equity—Years ended December 31, 2007, 2006 and 2005			33
Consolidated Statements of Cash Flows—Years ended December 31, 2007, 2006 and 2005			34
Notes to Consolidated Financial Statements			35

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Saia, Inc.:

We have audited the accompanying consolidated balance sheets of Saia, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Saia, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 11 to the Consolidated Financial Statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Saia, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Atlanta, Georgia
February 28, 2008

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Saia, Inc.:

We have audited Saia, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over finan cial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting as set forth in Item 7 of Saia, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Saia, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007 based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Saia, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 28, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Atlanta, Georgia
February 28, 2008

Saia, Inc. and Subsidiaries

		2007				2006
Assets
Current Assets:
Cash and cash equivalents		$	6,656			$	10,669
Accounts receivable, less allowance of $5,935 and $3,912 in 2007 and 2006, respectively			107,116				95,779
Prepaid expenses			7,316				9,251
Income tax receivable			7,213				—
Deferred income taxes			17,062				11,781
Other current assets			6,246				6,204
Total current assets			151,609				133,684
Property and Equipment, at cost			596,357				518,052
Less-accumulated depreciation			227,585				203,220
Net property and equipment			368,772				314,832
Goodwill, net			35,470				36,406
Other Identifiable Intangibles, net			3,860				1,096
Other Noncurrent Assets			872				1,382
Total assets		$	560,583			$	487,400
Liabilities and Shareholders’ Equity
Current Liabilities:
Checks outstanding		$	7,827			$	9,098
Accounts payable			34,905				30,291
Wages, vacations and employees’ benefits			32,862				45,752
Claims and insurance accruals			20,085				15,856
Accrued liabilities			18,053				14,171
Current portion of long-term debt			12,793				11,356
Current liabilities of discontinued operations			—				117
Total current liabilities			126,525				126,641
Other Liabilities:
Long-term debt			160,052				98,628
Deferred income taxes			55,961				45,259
Claims, insurance and other			17,393				13,717
Total other liabilities			233,406				157,604
Commitments and Contingencies
Shareholders’ Equity:
Preferred stock, $0.001 par value, 50,000 shares authorized, none issued and outstanding			—				—
Common stock, $0.001 par value, 50,000,000 shares authorized, 13,448,602 and 14,761,072 shares issued and outstanding in 2007 and 2006, respectively			13				15
Additional paid-in-capital			170,260				199,257
Treasury stock, zero and 336,400 shares at cost in 2007 and 2006, respectively			—				(8,861	)
Deferred compensation trust, 144,507 and 106,247 shares of common stock at cost in 2007 and 2006, respectively			(2,584	)			(1,877	)
Retained earnings			32,963				14,621
Total shareholders’ equity			200,652				203,155
Total liabilities and shareholders’ equity		$	560,583			$	487,400

See accompanying notes to consolidated financial statements.

Saia, Inc. and Subsidiaries

		2007				2006				2005
Operating Revenue		$	976,123			$	874,738			$	754,038
Operating Expenses:
Salaries, wages and employees’ benefits			524,599				473,956				413,710
Purchased transportation			76,123				70,029				62,557
Fuel, operating expenses and supplies			227,198				188,606				155,207
Operating taxes and licenses			34,474				28,853				25,857
Claims and insurance			36,754				28,089				24,987
Depreciation and amortization			38,685				32,550				28,849
Operating gains, net			(2,305	)			(1,416	)			(7,565	)
Restructuring charges			—				2,587				—
Integration charges			2,427				1,490				—
Total operating expenses			937,955				824,744				703,602
Operating Income			38,168				49,994				50,436
Nonoperating Expenses:
Interest expense			10,135				9,288				9,773
Interest income			(86	)			(970	)			(341	)
Other, net			(272	)			(297	)			3
Nonoperating expenses, net			9,777				8,021				9,435
Income Before Income Taxes			28,391				41,973				41,001
Income Tax Provision			11,306				16,100				15,843
Income from Continuing Operations			17,085				25,873				25,158
Discontinued Operations, net of tax
Income (loss) on operations			—				(2,760	)			2,301
Loss on disposal			1,257				(43,794	)			—
Net Income (Loss)		$	18,342			$	(20,681	)		$	27,459
Weighted average common shares outstanding — basic			13,823				14,536				14,707
Weighted average common shares outstanding — diluted			14,038				14,841				15,048
Basic Earnings Per Share — continuing operations		$	1.24			$	1.78			$	1.71
Basic Earnings (Loss) Per Share — discontinued operations			0.09				(3.20	)			0.16
Basic Earnings (Loss) Per Share		$	1.33			$	(1.42	)		$	1.87
Diluted Earnings Per Share — continuing operations		$	1.22			$	1.74			$	1.67
Diluted Earnings (Loss) Per Share — discontinued operations			0.09				(3.14	)			0.15
Diluted Earnings (Loss) Per Share		$	1.31			$	(1.39	)		$	1.82

See accompanying notes to consolidated financial statements.

Saia, Inc. and Subsidiaries

						Additional								Deferred
		Common				Paid-in				Treasury				Compensation				Retained
		Stock				Capital				Stock				Trust				Earnings				Total
Balance at December 31, 2004		$	15			$	205,800			$	—			$	(1,116	)		$	7,843			$	212,542
Stock compensation for options			—				122				—				—				—				122
Repurchase of shares outstanding			—				—				(12,903	)			—				—				(12,903	)
Retire treasury shares			(1	)			(12,902	)			12,903				—				—				—
Exercise of stock options, including tax benefits of $729			—				1,348				—				—				—				1,348
Purchase of shares by deferred compensation trust			—				—				—				(399	)			—				(399	)
Sale of shares by deferred compensation trust			—				30				—				193				—				223
Net income			—				—				—				—				27,459				27,459
Balance at December 31, 2005			14				194,398				—				(1,322	)			35,302				228,392
Stock compensation for options			—				313				—				—				—				313
Shares issued for director compensation			—				39				—				—				—				39
Director deferred shares for annual deferral elections			—				604				—				—				—				604
Repurchase of shares outstanding			—				—				(8,861	)			—				—				(8,861	)
Exercise of stock options, including tax benefits of $2,373			1				3,825				—				—				—				3,826
Purchase of shares by deferred compensation trust			—				—				—				(612	)			—				(612	)
Sale of shares by deferred compensation trust			—				78				—				57				—				135
Net loss			—				—				—				—				(20,681	)			(20,681	)
Balance at December 31, 2006			15				199,257				(8,861	)			(1,877	)			14,621				203,155
Stock compensation for options and long term incentives			—				645				—				—				—				645
Shares issued for director compensation			—				30				—				—				—				30
Repurchase of shares outstanding			—				—				(23,226	)			—				—				(23,226	)
Retirement of shares			(2	)			(32,085	)			32,087				—				—				—
Director deferred shares for annual deferral elections			—				352				—				—				—				352
Exercise of stock options, including tax benefits of $1,084			—				2,048				—				—				—				2,048
Purchase of shares by deferred compensation trust			—				—				—				(752	)			—				(752	)
Sale of shares by deferred compensation trust			—				13				—				45				—				58
Net loss			—				—				—				—				18,342				18,342
Balance at December 31, 2007		$	13			$	170,260			$	—			$	(2,584	)		$	32,963			$	200,652

Saia, Inc. and Subsidiaries

		2007				2006				2005
Operating Activities:
Net income (loss)		$	18,342			$	(20,681	)		$	27,459
Noncash items included in net income:
Depreciation and amortization			38,685				32,550				28,849
Loss (income) on discontinued operations			(1,257	)			46,554				(2,301	)
Provision for doubtful accounts			4,254				1,815				1,951
Deferred income taxes			(4,424	)			1,560				248
Gain from property disposals, net			(2,305	)			(1,416	)			(7,565	)
Stock-based compensation			1,027				641				122
Changes in assets and liabilities, net:
Accounts receivable			(13,906	)			(4,262	)			(17,138	)
Accounts payable and checks outstanding			4,177				(2,307	)			9,625
Other working capital items			(699	)			3,019				19,526
Claims, insurance and other			3,482				(325	)			1,185
Other, net			(1,105	)			(1,505	)			(1,051	)
Net investment in discontinued operations			—				20,494				22,993
Net cash from operating activities			46,271				76,137				83,903
Investing Activities:
Acquisition of property and equipment			(95,486	)			(93,235	)			(44,007	)
Proceeds from disposal of property and equipment			6,401				2,487				10,702
Acquisitions of businesses, net of cash received			(2,344	)			(17,496	)			—
Proceeds from sale of subsidiary			—				41,305				—
Net investment in discontinued operations			—				(5,359	)			(20,396	)
Net cash used in investing activities			(91,429	)			(72,298	)			(53,701	)
Financing Activities:
Proceeds from long-term debt			73,724				—				—
Repayment of long-term debt			(11,402	)			(5,000	)			(8,002	)
Proceeds of stock option exercises (including excess tax benefits in 2007 and 2006)			2,049				3,826				619
Repurchase of shares outstanding			(23,226	)			(8,861	)			(12,903	)
Net cash provided by (used in) financing activities			41,145				(10,035	)			(20,286	)
Net Increase (Decrease) in Cash and Cash Equivalents			(4,013	)			(6,196	)			9,916
Cash and cash equivalents, beginning of year			10,669				16,865				6,949
Cash and cash equivalents, end of year		$	6,656			$	10,669			$	16,865
Noncash Transactions:
Retire treasury shares		$	32,087			$	—			$	12,903
Supplemental Cash Flow Information:
Income taxes paid, net			8,680				2,427				12,236
Interest paid			10,259				10,964				7,937

See accompanying notes to consolidated financial statements.

Saia, Inc. and Subsidiaries

1. Description of Business and Summary of Accounting Policies

Description of Business

Saia, Inc. and Subsidiaries (Saia or the Company) (formerly SCS Transportation, Inc.), headquartered in Johns Creek, Georgia, is a leading transportation company providing regional and interregional less than truckload (LTL) services and selected national LTL and time-definite services across the United States through its wholly owned subsidiary, Saia Motor Freight Line, LLC (Saia Motor Freight). Saia Motor Freight provides delivery in 33 states across the South, Southwest, West, Midwest and Pacific Northwest United States and employs approximately 8,200 employees.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. As described in Note 13, on June 30, 2006, the Company completed the sale of the outstanding common stock of Jevic Transportation, Inc. (Jevic) and accordingly, the financial position and results of operations of Jevic have been reflected as discontinued operations for all periods presented. The consolidated financial statements include the financial position and results of operations of the Connection since its acquisition date of November 18, 2006 and Madison Freight since its acquisition date of February 1, 2007. (See Note 2).

Use of Estimates

Management makes estimates and assumptions when preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States. These estimates and assumptions affect the amounts reported in the consolidated financial statements and footnotes. Actual results could differ from those estimates.

Summary of accounting policies

Major accounting policies and practices used in the preparation of the accompanying consolidated financial statements not covered in other notes to the consolidated financial statements are as follows:

Cash Equivalents: 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 market.

Inventories: fuel and operating supplies: Inventories are carried at average cost and included in other current assets. To mitigate the Company’s risk to rising fuel prices, the Company has implemented fuel surcharge programs and considered effects of these fuel surcharge programs in customer pricing negotiations. Since the amount of fuel surcharge billed to customers is based on average national diesel fuel prices and is reset weekly, exposure of Saia to fuel price volatility is significantly reduced.

Property and Equipment Including Repairs and Maintenance: Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on the following service lives:

		Years
Structures			20 to 25
Tractors			8 to 10
Trailers			10 to 14
Other revenue equipment			10 to 14
Technology equipment and software			3 to 5
Other			3 to 10