UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20202021
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-38054
Schneider National, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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| Wisconsin | | | | | | 39-1258315 |
| (State of Incorporation) | | | | | | (IRS Employer Identification No.) |
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| | 3101 South Packerland Drive | | |
| | Green Bay | Wisconsin | 54313 | | |
| | (Address of Registrant’s Principal Executive Offices and Zip Code) | | |
(920) 592-2000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | | Trading symbol | | Name of each exchange on which registered |
| Class B common stock, no par value | | SNDR | | New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
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| Non-accelerated filer | | ☐ (Do not check if a smaller reporting company) | | Smaller reporting company | | ☐ |
| | | |
| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of OctoberJuly 23, 2020,2021, the registrant had 83,029,500 shares of Class A common stock, no par value, outstanding and 94,311,65394,624,691 shares of Class B common stock, no par value, outstanding.
SCHNEIDER NATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended SeptemberJune 30, 20202021
TABLE OF CONTENTS
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| ITEM 1. | | | |
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| Note 1 | | | |
| Note 2 | | | |
| Note 3 | | | |
| Note 4 | | | |
| Note 35 | | | |
| Note 46 | | | |
| Note 57 | | | |
| Note 8 | | | |
| Note 69 | | | |
| Note 10 | | | |
| Note 711 | | | |
| Note 8 | | | |
| Note 9 | | | |
| Note 10 | | | |
| Note 11 | | | |
| Note 12 | | | |
| Note 13 | | | |
| Note 14 | | | |
| ITEM 2. | | | |
| ITEM 3. | | | |
| ITEM 4. | | | |
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| ITEM 1. | | | |
| ITEM 1A. | | | |
| ITEM 2. | | | |
| ITEM 3. | | | |
| ITEM 4. | | | |
| ITEM 5. | | | |
| ITEM 6. | | | |
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GLOSSARY OF TERMS
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| 3PL | Provider of outsourced logistics services. In logistics and supply chain management, it means a company’s use of third-party businesses, the 3PL(s), to outsource elements of the company’s distribution, fulfillment, and supply chain management services. |
| ASC | Accounting Standards Codification |
| ASU | Accounting Standards Update |
| CARES | Coronavirus Aid, Relief, and Economic Security |
| CODM | Chief Operating Decision Maker |
| COVID-19 | Coronavirus pandemicdisease 2019 |
FASB | Financial Accounting Standards Board |
| FTFM | First to Final Mile operating segment |
| GAAP | United States Generally Accepted Accounting Principles |
| IRS | Internal Revenue Service |
| KPI | Key Performance Indicator |
| LIBOR | London InterBank Offered Rate |
| MLSI | Mastery Logistics Systems, Inc. |
| NASDAQ | National Association of Securities Dealers Automated Quotations |
| PSI | Platform Science, Inc. |
| SaaS | Software as a Service |
| SEC | United States Securities and Exchange Commission |
| TuSimple | TuSimple Holdings, Inc. (formerly TuSimple (Cayman) Limited) |
| U.S. | United States |
| WSL | Watkins and Shepard Trucking, Inc. and Lodeso, Inc. These businesses were acquired simultaneously in June 2016. |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company'sCompany’s current expectations, beliefs, plans, or forecasts with respect to, among other things, future events and financial performance and trends in the business and industry. The words “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “prospects,” “potential,” “budget,” “forecast,” “continue,” “predict,” “seek,” “objective,” “goal,” “guidance,” “outlook,” “effort,” “target,” and similar words, expressions, terms, and phrases among others, generally identify forward-looking statements, which speak only as of the date the statements were made. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks, and uncertainties. Readers are cautioned that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement.
The risks, uncertainties, and other factors that could cause or contribute to actual results differing materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following:
•Our ability to successfully manage the demand, supply, and operational challenges and disruptions (including the impact of reduced freight volumes) associated with the ongoing COVID-19 pandemic and the associated responses of federal, state, and local governments and businesses;
•Economic and business risks inherent in the truckload and transportation industry, including competitive pressures pertaining to pricing, capacity, and service;
•Our ability to effectively manage tight truck capacity brought about by driver shortages and successfully execute our yield management strategies;
•Our ability to maintain key customer and supply arrangements (including Dedicateddedicated arrangements) and to manage disruption of our business due to factors outside of our control, such as natural disasters, acts of war or terrorism, disease outbreaks, or pandemics;
•Volatility in the market valuation of our investments in strategic partners and technologies;
•Our ability to manage and effectively implement effectively our growth and diversification strategies and cost saving initiatives;
•Our dependence on our reputation and the Schneider brand and the potential for adverse publicity, damage to our reputation, and the loss of brand equity;
•Risks related to demand for our service offerings;
•Risks associated with the loss of a significant customer or customers;
•Capital investments that fail to match customer demand or for which we cannot obtain adequate funding;
•Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments,agreements, and our ability to recover fuel costs through our fuel surcharge programs;
•Our ability to attract and retain qualified drivers and owner-operators;
•Our reliance on owner-operators to provide a portion of our truck fleet;
•Our dependence on railroads in the operation of our intermodal business;
•Service instability from third-party capacity providers used by our business;
•Changes in the outsourcing practices of our third-party logistics customers;
•Difficulty in obtaining material, equipment, goods, and services from our vendors and suppliers;
•Variability in insurance and claims expenses and the risks of insuring claims through our captive insurance company;
•The impact of laws and regulations that apply to our business, including those that relate to the environment, taxes, associates, owner-operators, and our captive insurance company; changes to those laws and regulations; and the increased costs of compliance with existing or future federal, state, and local regulations;
•Political, economic, and other risks from cross-border operations and operations in multiple countries;
•Risks associated with financial, credit, and equity markets, including our ability to service indebtedness and fund capital expenditures and strategic initiatives;
•Negative seasonal patterns generally experienced in the trucking industry during traditionally slower shipping periods and winter months;
•Risks associated with severe weather and similar events;
•Significant systems disruptions, including those caused by cybersecurity events;
•The potential that we will not successfully identify, negotiate, consummate, or integrate acquisitions;
•Exposure to claims and lawsuits in the ordinary course of business;
•Our ability to adapt to new technologies and new participants in the truckload and transportation industry; and
•Those risks and uncertainties discussed in (1) our most recently filed Annual Report on Form 10-K in (a) Part I, Item 1A. “Risk Factors,” (b) Part II, Item 7. “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and (c) Part II, Item 8. “Financial Statements and Supplementary Data: Note 16,14, Commitments and Contingencies;” (2) this Quarterly Report on Form 10-Q in (a) Part II, Item 1A. “Risk Factors,” (b) Part I, Item 2. “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and (c)(b) Part I, Item 1. “Financial Statements: Note 12,11, Commitments and Contingencies;Contingencies,” and (c) Part II, Item 1A. “Risk Factors;” and (3) other factors discussed in filings with the SEC by the Company.
The Company undertakes no obligation to publicly release any revision to its forward lookingforward-looking statements to reflect events or circumstances after the date of this Report.
WHERE TO FIND MORE INFORMATION
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that the Company files electronically with the SEC. These documents are also available to the public from commercial document retrieval services and our website at www.investors.schneider.com. Information disclosed or available on our website shall not be deemed incorporated into, or to be a part of, this Report.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHNEIDER NATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions, except per share data)
| | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
| Operating revenues | Operating revenues | $ | 1,135.7 | | | $ | 1,183.9 | | | $ | 3,287.6 | | | $ | 3,590.7 | | Operating revenues | $ | 1,360.8 | | | $ | 1,032.8 | | | $ | 2,589.4 | | | $ | 2,151.9 | |
| Operating expenses: | Operating expenses: | | | | | | | | Operating expenses: | | | | | | | |
| Purchased transportation | Purchased transportation | 501.0 | | | 511.7 | | | 1,417.7 | | | 1,488.8 | | Purchased transportation | 649.6 | | | 437.1 | | | 1,208.1 | | | 916.7 | |
| Salaries, wages, and benefits | Salaries, wages, and benefits | 259.2 | | | 257.3 | | | 771.4 | | | 856.6 | | Salaries, wages, and benefits | 275.6 | | | 247.8 | | | 542.7 | | | 512.2 | |
| Fuel and fuel taxes | Fuel and fuel taxes | 49.5 | | | 70.6 | | | 152.5 | | | 221.6 | | Fuel and fuel taxes | 70.0 | | | 42.1 | | | 133.8 | | | 103.0 | |
| Depreciation and amortization | Depreciation and amortization | 74.2 | | | 74.1 | | | 216.3 | | | 222.4 | | Depreciation and amortization | 73.2 | | | 72.3 | | | 146.3 | | | 142.1 | |
| Operating supplies and expenses | Operating supplies and expenses | 144.6 | | | 139.1 | | | 395.7 | | | 418.3 | | Operating supplies and expenses | 117.2 | | | 119.1 | | | 253.3 | | | 251.1 | |
| Insurance and related expenses | Insurance and related expenses | 17.4 | | | 24.4 | | | 74.9 | | | 78.0 | | Insurance and related expenses | 17.0 | | | 28.3 | | | 41.4 | | | 57.5 | |
| Other general expenses | Other general expenses | 26.0 | | | 27.3 | | | 78.0 | | | 90.3 | | Other general expenses | 32.4 | | | 22.5 | | | 61.8 | | | 52.0 | |
| Goodwill impairment charge | 0 | | | 0 | | | 0 | | | 34.6 | | |
| | Restructuring—net | Restructuring—net | 0.5 | | | 50.4 | | | (0.5) | | | 50.4 | | Restructuring—net | 0 | | | 0.2 | | | 0 | | | (1.0) | |
| Total operating expenses | Total operating expenses | 1,072.4 | | | 1,154.9 | | | 3,106.0 | | | 3,461.0 | | Total operating expenses | 1,235.0 | | | 969.4 | | | 2,387.4 | | | 2,033.6 | |
| Income from operations | Income from operations | 63.3 | | | 29.0 | | | 181.6 | | | 129.7 | | Income from operations | 125.8 | | | 63.4 | | | 202.0 | | | 118.3 | |
| Other expenses (income): | Other expenses (income): | | | | | | | | Other expenses (income): | | | | | | | |
| Interest income | Interest income | (0.6) | | | (2.0) | | | (2.9) | | | (6.6) | | Interest income | (0.4) | | | (0.5) | | | (1.2) | | | (2.3) | |
| Interest expense | Interest expense | 3.4 | | | 3.8 | | | 10.5 | | | 13.1 | | Interest expense | 3.0 | | | 3.3 | | | 6.4 | | | 7.1 | |
| Other expenses (income)—net | 0.4 | | | 0.5 | | | (7.1) | | | 1.2 | | |
| Total other expenses | 3.2 | | | 2.3 | | | 0.5 | | | 7.7 | | |
| Other income—net | | Other income—net | (19.6) | | | (2.1) | | | (18.8) | | | (7.5) | |
| Total other expenses (income) | | Total other expenses (income) | (17.0) | | | 0.7 | | | (13.6) | | | (2.7) | |
| Income before income taxes | Income before income taxes | 60.1 | | | 26.7 | | | 181.1 | | | 122.0 | | Income before income taxes | 142.8 | | | 62.7 | | | 215.6 | | | 121.0 | |
| Provision for income taxes | Provision for income taxes | 15.6 | | | 7.0 | | | 46.3 | | | 30.9 | | Provision for income taxes | 36.3 | | | 16.2 | | | 54.3 | | | 30.7 | |
| Net income | Net income | 44.5 | | | 19.7 | | | 134.8 | | | 91.1 | | Net income | 106.5 | | | 46.5 | | | 161.3 | | | 90.3 | |
| Other comprehensive income (loss): | Other comprehensive income (loss): | | Other comprehensive income (loss): | |
| Foreign currency translation gain (loss) | Foreign currency translation gain (loss) | 0.5 | | | (0.3) | | | (0.2) | | | (0.2) | | Foreign currency translation gain (loss) | 0.3 | | | 0.1 | | | 0.2 | | | (0.7) | |
| Net unrealized gain (loss) on marketable securities—net of tax | Net unrealized gain (loss) on marketable securities—net of tax | (0.1) | | | 0 | | | 0.1 | | | 0.7 | | Net unrealized gain (loss) on marketable securities—net of tax | 0.2 | | | 0.5 | | | (0.4) | | | 0.2 | |
| Total other comprehensive income (loss) | Total other comprehensive income (loss) | 0.4 | | | (0.3) | | | (0.1) | | | 0.5 | | Total other comprehensive income (loss) | 0.5 | | | 0.6 | | | (0.2) | | | (0.5) | |
| Comprehensive income | Comprehensive income | $ | 44.9 | | | $ | 19.4 | | | $ | 134.7 | | | $ | 91.6 | | Comprehensive income | $ | 107.0 | | | $ | 47.1 | | | $ | 161.1 | | | $ | 89.8 | |
| | Weighted average common shares outstanding | 177.3 | | | 177.1 | | | 177.2 | | | 177.1 | | |
| Weighted average shares outstanding | | Weighted average shares outstanding | 177.6 | | | 177.2 | | | 177.5 | | | 177.2 | |
| Basic earnings per share | Basic earnings per share | $ | 0.25 | | | $ | 0.11 | | | $ | 0.76 | | | $ | 0.51 | | Basic earnings per share | $ | 0.60 | | | $ | 0.26 | | | $ | 0.91 | | | $ | 0.51 | |
| | Weighted average diluted shares outstanding | Weighted average diluted shares outstanding | 177.7 | | | 177.3 | | | 177.5 | | | 177.3 | | Weighted average diluted shares outstanding | 177.9 | | | 177.5 | | | 177.8 | | | 177.4 | |
| Diluted earnings per share | Diluted earnings per share | $ | 0.25 | | | $ | 0.11 | | | $ | 0.76 | | | $ | 0.51 | | Diluted earnings per share | $ | 0.60 | | | $ | 0.26 | | | $ | 0.91 | | | $ | 0.51 | |
See notes to consolidated financial statements (unaudited).
SCHNEIDER NATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except share data)
| | | | September 30, | | December 31, | | June 30, | | December 31, |
| | 2020 | | 2019 | | 2021 | | 2020 |
| Assets | Assets | | | | Assets | | | |
| Current Assets: | Current Assets: | | Current Assets: | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 768.5 | | | $ | 551.6 | | Cash and cash equivalents | $ | 490.5 | | | $ | 395.5 | |
| Marketable securities | Marketable securities | 45.6 | | | 48.3 | | Marketable securities | 49.1 | | | 47.1 | |
Trade accounts receivable—net of allowance of $3.3 million and $3.4 million, respectively | 489.0 | | | 465.8 | | |
Trade accounts receivable—net of allowance of $4.1 million and $3.7 million, respectively | | Trade accounts receivable—net of allowance of $4.1 million and $3.7 million, respectively | 598.3 | | | 537.7 | |
| Other receivables | Other receivables | 21.8 | | | 28.9 | | Other receivables | 29.6 | | | 20.8 | |
Current portion of lease receivables—net of allowance of $0.9 million and $0.6 million, respectively | 96.7 | | | 121.5 | | |
Current portion of lease receivables—net of allowance of $0.8 million and $0.8 million, respectively | | Current portion of lease receivables—net of allowance of $0.8 million and $0.8 million, respectively | 101.6 | | | 96.8 | |
| Inventories | Inventories | 57.2 | | | 71.9 | | Inventories | 22.4 | | | 44.9 | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 104.2 | | | 117.7 | | Prepaid expenses and other current assets | 106.8 | | | 77.9 | |
| Total current assets | Total current assets | 1,583.0 | | | 1,405.7 | | Total current assets | 1,398.3 | | | 1,220.7 | |
| Noncurrent Assets: | Noncurrent Assets: | | | | Noncurrent Assets: | | | |
| Property and equipment: | Property and equipment: | | Property and equipment: | |
| Transportation equipment | Transportation equipment | 2,878.6 | | | 2,790.1 | | Transportation equipment | 2,896.2 | | | 2,880.2 | |
| Land, buildings, and improvements | Land, buildings, and improvements | 201.8 | | | 199.3 | | Land, buildings, and improvements | 203.0 | | | 202.3 | |
| Other property and equipment | Other property and equipment | 166.5 | | | 162.7 | | Other property and equipment | 167.7 | | | 166.8 | |
| Total property and equipment | Total property and equipment | 3,246.9 | | | 3,152.1 | | Total property and equipment | 3,266.9 | | | 3,249.3 | |
| Less: Accumulated depreciation | 1,423.2 | | | 1,300.5 | | |
| Less accumulated depreciation | | Less accumulated depreciation | 1,414.0 | | | 1,417.4 | |
| Net property and equipment | Net property and equipment | 1,823.7 | | | 1,851.6 | | Net property and equipment | 1,852.9 | | | 1,831.9 | |
| Lease receivables | Lease receivables | 118.6 | | | 109.4 | | Lease receivables | 153.5 | | | 131.3 | |
| Capitalized software and other noncurrent assets | Capitalized software and other noncurrent assets | 200.6 | | | 165.9 | | Capitalized software and other noncurrent assets | 234.8 | | | 204.2 | |
| Goodwill | Goodwill | 127.7 | | | 127.5 | | Goodwill | 128.3 | | | 128.1 | |
| Total noncurrent assets | Total noncurrent assets | 2,270.6 | | | 2,254.4 | | Total noncurrent assets | 2,369.5 | | | 2,295.5 | |
| Total Assets | Total Assets | $ | 3,853.6 | | | $ | 3,660.1 | | Total Assets | $ | 3,767.8 | | | $ | 3,516.2 | |
| Liabilities and Shareholders' Equity | | | | |
| Liabilities and Shareholders’ Equity | | Liabilities and Shareholders’ Equity | | | |
| Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
| Trade accounts payable | Trade accounts payable | $ | 288.3 | | | $ | 207.7 | | Trade accounts payable | $ | 337.2 | | | $ | 245.7 | |
| Accrued salaries, wages, and benefits | Accrued salaries, wages, and benefits | 77.2 | | | 63.8 | | Accrued salaries, wages, and benefits | 106.2 | | | 110.7 | |
| Claims accruals—current | Claims accruals—current | 39.0 | | | 42.0 | | Claims accruals—current | 67.7 | | | 36.4 | |
| Current maturities of debt and finance lease obligations | Current maturities of debt and finance lease obligations | 0.4 | | | 55.5 | | Current maturities of debt and finance lease obligations | 100.7 | | | 40.4 | |
| Dividends payable | 11.8 | | | 10.8 | | |
| | Other current liabilities | Other current liabilities | 99.9 | | | 85.4 | | Other current liabilities | 107.7 | | | 101.4 | |
| Total current liabilities | Total current liabilities | 516.6 | | | 465.2 | | Total current liabilities | 719.5 | | | 534.6 | |
| Noncurrent Liabilities: | Noncurrent Liabilities: | | | | Noncurrent Liabilities: | | | |
| Long-term debt and finance lease obligations | Long-term debt and finance lease obligations | 306.4 | | | 305.8 | | Long-term debt and finance lease obligations | 207.1 | | | 266.4 | |
| Claims accruals—noncurrent | Claims accruals—noncurrent | 142.1 | | | 118.7 | | Claims accruals—noncurrent | 97.1 | | | 129.9 | |
| Deferred income taxes | Deferred income taxes | 446.2 | | | 449.0 | | Deferred income taxes | 469.5 | | | 450.4 | |
| Other noncurrent liabilities | Other noncurrent liabilities | 99.8 | | | 85.0 | | Other noncurrent liabilities | 76.2 | | | 79.4 | |
| Total noncurrent liabilities | Total noncurrent liabilities | 994.5 | | | 958.5 | | Total noncurrent liabilities | 849.9 | | | 926.1 | |
| Total Liabilities | Total Liabilities | 1,511.1 | | | 1,423.7 | | Total Liabilities | 1,569.4 | | | 1,460.7 | |
| Commitments and Contingencies (Note 12) | | | | |
| Shareholders' Equity: | | |
| Commitments and Contingencies (Note 11) | | Commitments and Contingencies (Note 11) | | | |
| Shareholders’ Equity: | | Shareholders’ Equity: | |
| Class A common shares, 0 par value, 250,000,000 shares authorized, 83,029,500 shares issued and outstanding | Class A common shares, 0 par value, 250,000,000 shares authorized, 83,029,500 shares issued and outstanding | 0 | | | 0 | | Class A common shares, 0 par value, 250,000,000 shares authorized, 83,029,500 shares issued and outstanding | 0 | | | 0 | |
| Class B common shares, 0 par value, 750,000,000 shares authorized, 95,157,777 and 94,837,673 shares issued, and 94,309,795 and 94,088,025 shares outstanding, respectively | 0 | | | 0 | | |
| Class B common shares, 0 par value, 750,000,000 shares authorized, 95,697,730 and 95,159,635 shares issued, and 94,622,602 and 94,311,653 shares outstanding, respectively | | Class B common shares, 0 par value, 750,000,000 shares authorized, 95,697,730 and 95,159,635 shares issued, and 94,622,602 and 94,311,653 shares outstanding, respectively | 0 | | | 0 | |
| Additional paid-in capital | Additional paid-in capital | 1,548.8 | | | 1,542.7 | | Additional paid-in capital | 1,559.1 | | | 1,552.2 | |
| Retained earnings | Retained earnings | 793.7 | | | 693.6 | | Retained earnings | 638.7 | | | 502.5 | |
| Accumulated other comprehensive income | Accumulated other comprehensive income | 0 | | | 0.1 | | Accumulated other comprehensive income | 0.6 | | | 0.8 | |
| Total Shareholders' Equity | 2,342.5 | | | 2,236.4 | | |
| Total Liabilities and Shareholders' Equity | $ | 3,853.6 | | | $ | 3,660.1 | | |
| Total Shareholders’ Equity | | Total Shareholders’ Equity | 2,198.4 | | | 2,055.5 | |
| Total Liabilities and Shareholders’ Equity | | Total Liabilities and Shareholders’ Equity | $ | 3,767.8 | | | $ | 3,516.2 | |
See notes to consolidated financial statements (unaudited).
SCHNEIDER NATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
| | | | Nine Months Ended
September 30, | | Six Months Ended
June 30, |
| | 2020 | | 2019 | | 2021 | | 2020 |
| Operating Activities: | Operating Activities: | | | | Operating Activities: | | | |
| Net income | Net income | $ | 134.8 | | | $ | 91.1 | | Net income | $ | 161.3 | | | $ | 90.3 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation and amortization | Depreciation and amortization | 216.3 | | | 222.4 | | Depreciation and amortization | 146.3 | | | 142.1 | |
| Goodwill impairment | 0 | | | 34.6 | | |
| Losses (gains) on sales of property and equipment—net | 5.4 | | | (2.6) | | |
| Impairment on assets held for sale | 3.9 | | | 11.8 | | |
| (Gains) losses on sales of property and equipment—net | | (Gains) losses on sales of property and equipment—net | (16.0) | | | 3.8 | |
| | Proceeds from lease receipts | Proceeds from lease receipts | 53.2 | | | 59.6 | | Proceeds from lease receipts | 35.3 | | | 35.7 | |
| Deferred income taxes | Deferred income taxes | (2.8) | | | (4.3) | | Deferred income taxes | 19.3 | | | 2.8 | |
| Long-term incentive and share-based compensation expense | Long-term incentive and share-based compensation expense | 5.4 | | | 3.4 | | Long-term incentive and share-based compensation expense | 8.2 | | | 3.4 | |
| Gains on investment in equity securities | | Gains on investment in equity securities | (20.2) | | | (8.8) | |
| Noncash restructuring—net | Noncash restructuring—net | (0.6) | | | 43.3 | | Noncash restructuring—net | 0 | | | (0.8) | |
| Other noncash items | Other noncash items | (6.4) | | | 2.9 | | Other noncash items | 1.6 | | | 5.7 | |
| Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
| Receivables | Receivables | (17.2) | | | 82.2 | | Receivables | (61.7) | | | 34.7 | |
| Other assets | Other assets | (32.9) | | | (31.1) | | Other assets | (50.6) | | | (36.5) | |
| Payables | Payables | 49.6 | | | 0.3 | | Payables | 40.7 | | | 12.1 | |
| Claims reserves and other receivables—net | Claims reserves and other receivables—net | 16.6 | | | (1.1) | | Claims reserves and other receivables—net | (1.0) | | | 8.6 | |
| Other liabilities | Other liabilities | 43.8 | | | (42.2) | | Other liabilities | (8.2) | | | 26.7 | |
| Net cash provided by operating activities | Net cash provided by operating activities | 469.1 | | | 470.3 | | Net cash provided by operating activities | 255.0 | | | 319.8 | |
| Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
| Purchases of transportation equipment | Purchases of transportation equipment | (131.7) | | | (308.6) | | Purchases of transportation equipment | (153.6) | | | (83.3) | |
| Purchases of other property and equipment | Purchases of other property and equipment | (38.7) | | | (42.8) | | Purchases of other property and equipment | (22.5) | | | (25.0) | |
| Proceeds from sale of property and equipment | Proceeds from sale of property and equipment | 55.5 | | | 38.8 | | Proceeds from sale of property and equipment | 76.6 | | | 29.6 | |
| Proceeds from sale of off-lease inventory | Proceeds from sale of off-lease inventory | 17.9 | | | 15.0 | | Proceeds from sale of off-lease inventory | 9.1 | | | 9.0 | |
| Purchases of lease equipment | Purchases of lease equipment | (63.3) | | | (62.7) | | Purchases of lease equipment | (36.5) | | | (41.7) | |
| Proceeds from marketable securities | Proceeds from marketable securities | 19.2 | | | 13.2 | | Proceeds from marketable securities | 8.6 | | | 10.2 | |
| Purchases of marketable securities | Purchases of marketable securities | (16.9) | | | (8.5) | | Purchases of marketable securities | (11.6) | | | (8.9) | |
| Investment in equity securities | Investment in equity securities | (5.0) | | | 0 | | Investment in equity securities | (5.0) | | | 0 | |
| Net cash used in investing activities | Net cash used in investing activities | (163.0) | | | (355.6) | | Net cash used in investing activities | (134.9) | | | (110.1) | |
| Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
| Payments of debt and finance lease obligations | Payments of debt and finance lease obligations | (55.5) | | | (5.7) | | Payments of debt and finance lease obligations | (0.3) | | | (25.3) | |
| Payments of deferred consideration related to acquisition | 0 | | | (18.7) | | |
| Dividends paid | Dividends paid | (33.7) | | | (31.9) | | Dividends paid | (24.8) | | | (22.2) | |
| Net cash used in financing activities | Net cash used in financing activities | (89.2) | | | (56.3) | | Net cash used in financing activities | (25.1) | | | (47.5) | |
| Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | 216.9 | | | 58.4 | | Net increase in cash and cash equivalents | 95.0 | | | 162.2 | |
| Cash and Cash Equivalents: | Cash and Cash Equivalents: | | Cash and Cash Equivalents: | |
| Beginning of period | Beginning of period | 551.6 | | | 378.7 | | Beginning of period | 395.5 | | | 551.6 | |
| End of period | End of period | $ | 768.5 | | | $ | 437.1 | | End of period | $ | 490.5 | | | $ | 713.8 | |
| Additional Cash Flow Information: | Additional Cash Flow Information: | | | | Additional Cash Flow Information: | | | |
| Noncash Investing and Financing Activity: | | |
| Noncash investing and financing activity: | | Noncash investing and financing activity: | |
| Equipment and inventory purchases in accounts payable | Equipment and inventory purchases in accounts payable | $ | 50.2 | | | $ | 15.5 | | Equipment and inventory purchases in accounts payable | $ | 51.5 | | | $ | 20.9 | |
| Dividends declared but not yet paid | Dividends declared but not yet paid | 11.8 | | | 10.9 | | Dividends declared but not yet paid | 13.9 | | | 11.8 | |
| | Cash Paid During the Period For: | | |
| Cash paid during the period for: | | Cash paid during the period for: | |
| Interest | Interest | 11.3 | | | 12.4 | | Interest | 5.8 | | | 6.6 | |
| Income taxes—net of refunds | Income taxes—net of refunds | 45.5 | | | 42.6 | | Income taxes—net of refunds | 39.5 | | | 2.6 | |
See notes to consolidated financial statements (unaudited).
SCHNEIDER NATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'SHAREHOLDERS’ EQUITY (Unaudited)
(in millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
|
| Balance—December 31, 2018 | | $ | 0 | | | $ | 1,544.0 | | | $ | 589.3 | | | $ | (1.0) | | | $ | 2,132.3 | |
| Net income | | 0 | | | 0 | | | 36.9 | | | 0 | | | 36.9 | |
| Other comprehensive income | | 0 | | | 0 | | | 0 | | | 0.7 | | | 0.7 | |
| Share-based compensation expense | | 0 | | | 2.0 | | | 0 | | | 0 | | | 2.0 | |
| Dividends declared at $0.06 per share of Class A and Class B common shares | | 0 | | | 0 | | | (10.7) | | | 0 | | | (10.7) | |
| | | | | | | | | | |
| Shares withheld for employee taxes | | 0 | | | (1.2) | | | 0 | | | 0 | | | (1.2) | |
| | | | | | | | | | |
| Balance—March 31, 2019 | | 0 | | | 1,544.8 | | | 615.5 | | | (0.3) | | | 2,160.0 | |
| Net income | | 0 | | | 0 | | | 34.5 | | | 0 | | | 34.5 | |
| Other comprehensive income | | 0 | | | 0 | | | 0 | | | 0.1 | | | 0.1 | |
| Share-based compensation expense | | 0 | | | 1.6 | | | 0 | | | 0 | | | 1.6 | |
| Dividends declared at $0.06 per share of Class A and Class B common shares | | 0 | | | 0 | | | (11.0) | | | 0 | | | (11.0) | |
| Share issuances | | 0 | | | 0.2 | | | 0 | | | 0 | | | 0.2 | |
| Balance—June 30, 2019 | | 0 | | | 1,546.6 | | | 639.0 | | | (0.2) | | | 2,185.4 | |
| Net income | | 0 | | | 0 | | | 19.7 | | | 0 | | | 19.7 | |
| Other comprehensive loss | | 0 | | | 0 | | | 0 | | | (0.3) | | | (0.3) | |
| Share-based compensation expense | | 0 | | | (2.2) | | | 0 | | | 0 | | | (2.2) | |
| Dividends declared at $0.06 per share of Class A and Class B common shares | | 0 | | | 0 | | | (10.5) | | | 0 | | | (10.5) | |
| Share issuances | | 0 | | | 0.1 | | | 0 | | | 0 | | | 0.1 | |
| Balance—September 30, 2019 | | $ | 0 | | | $ | 1,544.5 | | | $ | 648.2 | | | $ | (0.5) | | | $ | 2,192.2 | |
| | | | | | | | | | |
| | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total | |
| | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total |
| Balance—December 31, 2019 | Balance—December 31, 2019 | | $ | 0 | | | $ | 1,542.7 | | | $ | 693.6 | | | $ | 0.1 | | | $ | 2,236.4 | | Balance—December 31, 2019 | | $ | 0 | | | $ | 1,542.7 | | | $ | 693.6 | | | $ | 0.1 | | | $ | 2,236.4 | |
| Net income | Net income | | 0 | | | 0 | | | 43.8 | | | 0 | | | 43.8 | | Net income | | 0 | | | 0 | | | 43.8 | | | 0 | | | 43.8 | |
| Other comprehensive loss | Other comprehensive loss | | 0 | | | 0 | | | 0 | | | (1.1) | | | (1.1) | | Other comprehensive loss | | 0 | | | 0 | | | 0 | | | (1.1) | | | (1.1) | |
| Share-based compensation expense | Share-based compensation expense | | 0 | | | 1.9 | | | 0 | | | 0 | | | 1.9 | | Share-based compensation expense | | 0 | | | 1.9 | | | 0 | | | 0 | | | 1.9 | |
| Dividends declared at $0.065 per share of Class A and Class B common shares | Dividends declared at $0.065 per share of Class A and Class B common shares | | 0 | | | 0 | | | (11.7) | | | 0 | | | (11.7) | | Dividends declared at $0.065 per share of Class A and Class B common shares | | 0 | | | 0 | | | (11.7) | | | 0 | | | (11.7) | |
| Share issuances | Share issuances | | 0 | | | 0.1 | | | 0 | | | 0 | | | 0.1 | | Share issuances | | 0 | | | 0.1 | | | 0 | | | 0 | | | 0.1 | |
| Shares withheld for employee taxes | Shares withheld for employee taxes | | 0 | | | (0.9) | | | 0 | | | 0 | | | (0.9) | | Shares withheld for employee taxes | | 0 | | | (0.9) | | | 0 | | | 0 | | | (0.9) | |
| Balance—March 31, 2020 | Balance—March 31, 2020 | | 0 | | | 1,543.8 | | | 725.7 | | | (1.0) | | | 2,268.5 | | Balance—March 31, 2020 | | 0 | | | 1,543.8 | | | 725.7 | | | (1.0) | | | 2,268.5 | |
| Net income | Net income | | 0 | | | 0 | | | 46.5 | | | 0 | | | 46.5 | | Net income | | 0 | | | 0 | | | 46.5 | | | 0 | | | 46.5 | |
| Other comprehensive income | Other comprehensive income | | 0 | | | 0 | | | 0 | | | 0.6 | | | 0.6 | | Other comprehensive income | | 0 | | | 0 | | | 0 | | | 0.6 | | | 0.6 | |
| Share-based compensation expense | Share-based compensation expense | | 0 | | | 1.1 | | | 0 | | | 0 | | | 1.1 | | Share-based compensation expense | | 0 | | | 1.1 | | | 0 | | | 0 | | | 1.1 | |
| Dividends declared at $0.065 per share of Class A and Class B common shares | Dividends declared at $0.065 per share of Class A and Class B common shares | | 0 | | | 0 | | | (11.4) | | | 0 | | | (11.4) | | Dividends declared at $0.065 per share of Class A and Class B common shares | | 0 | | | 0 | | | (11.4) | | | 0 | | | (11.4) | |
| Share issuances | Share issuances | | 0 | | | 0.1 | | | 0 | | | 0 | | | 0.1 | | Share issuances | | 0 | | | 0.1 | | | 0 | | | 0 | | | 0.1 | |
| Exercise of employee stock options | Exercise of employee stock options | | 0 | | | 0.4 | | | 0 | | | 0 | | | 0.4 | | Exercise of employee stock options | | 0 | | | 0.4 | | | 0 | | | 0 | | | 0.4 | |
| Balance—June 30, 2020 | Balance—June 30, 2020 | | 0 | | | 1,545.4 | | | 760.8 | | | (0.4) | | | 2,305.8 | | Balance—June 30, 2020 | | $ | 0 | | | $ | 1,545.4 | | | $ | 760.8 | | | $ | (0.4) | | | $ | 2,305.8 | |
| | | Balance—December 31, 2020 | | Balance—December 31, 2020 | | $ | 0 | | | $ | 1,552.2 | | | $ | 502.5 | | | $ | 0.8 | | | $ | 2,055.5 | |
| Net income | | Net income | | 0 | | | 0 | | | 54.8 | | | 0 | | | 54.8 | |
| Other comprehensive loss | | Other comprehensive loss | | 0 | | | 0 | | | 0 | | | (0.7) | | | (0.7) | |
| Share-based compensation expense | | Share-based compensation expense | | 0 | | | 4.5 | | | 0 | | | 0 | | | 4.5 | |
| Dividends declared at $0.07 per share of Class A and Class B common shares | | Dividends declared at $0.07 per share of Class A and Class B common shares | | 0 | | | 0 | | | (12.6) | | | 0 | | | (12.6) | |
| Share issuances | | Share issuances | | 0 | | | 0.1 | | | 0 | | | 0 | | | 0.1 | |
| Exercise of employee stock options | | Exercise of employee stock options | | 0 | | | 0.7 | | | 0 | | | 0 | | | 0.7 | |
| Shares withheld for employee taxes | | Shares withheld for employee taxes | | 0 | | | (2.4) | | | 0 | | | 0 | | | (2.4) | |
| Balance—March 31, 2021 | | Balance—March 31, 2021 | | 0 | | | 1,555.1 | | | 544.7 | | | 0.1 | | | 2,099.9 | |
| Net income | Net income | | 0 | | | 0 | | | 44.5 | | | 0 | | | 44.5 | | Net income | | 0 | | | 0 | | | 106.5 | | | 0 | | | 106.5 | |
| Other comprehensive income | Other comprehensive income | | 0 | | | 0 | | | 0 | | | 0.4 | | | 0.4 | | Other comprehensive income | | 0 | | | 0 | | | 0 | | | 0.5 | | | 0.5 | |
| Share-based compensation expense | Share-based compensation expense | | 0 | | | 2.2 | | | 0 | | | 0 | | | 2.2 | | Share-based compensation expense | | 0 | | | 3.3 | | | 0 | | | 0 | | | 3.3 | |
| Dividends declared at $0.065 per share of Class A and Class B common shares | | 0 | | | 0 | | | (11.6) | | | 0 | | | (11.6) | | |
| Dividends declared at $0.07 per share of Class A and Class B common shares | | Dividends declared at $0.07 per share of Class A and Class B common shares | | 0 | | | 0 | | | (12.5) | | | 0 | | | (12.5) | |
| Share issuances | | Share issuances | | 0 | | | 0.7 | | | 0 | | | 0 | | | 0.7 | |
| | Exercise of employee stock options | | 0 | | | 1.2 | | | 0 | | | 0 | | | 1.2 | | |
| Balance—September 30, 2020 | | $ | 0 | | | $ | 1,548.8 | | | $ | 793.7 | | | $ | 0 | | | $ | 2,342.5 | | |
| | Balance—June 30, 2021 | | Balance—June 30, 2021 | | $ | 0 | | | $ | 1,559.1 | | | $ | 638.7 | | | $ | 0.6 | | | $ | 2,198.4 | |
See notes to consolidated financial statements (unaudited).
SCHNEIDER NATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. GENERAL
Nature of Operations
In this report, when we referWe are one of the largest providers of surface transportation and logistics solutions in North America. Schneider National, Inc. is a publicly held holding company that, through its wholly owned subsidiaries, provides safe, reliable, and innovative truckload, intermodal, and logistics services to “the Company,a diverse group of customers throughout the continental United States, Canada, and Mexico. Unless otherwise indicated by the context, “we,” “us,” “we,” “our,” “ours,” or “Schneider,the “Company,” we are referringand “Schneider” refer to Schneider National, Inc. and its consolidated subsidiaries. Schneider is a transportation service organization headquartered in Green Bay, Wisconsin and has three reportable segments focused on providing truckload, intermodal, and logistics solutions.
Principles of Consolidation and Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in conformity with GAAP and the rules and regulations of the SEC applicable to quarterly reports on Form 10-Q. Therefore, these consolidated financial statements and footnotes do not include all disclosures required by GAAP for annual financial statements. These consolidated financial statements and should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. Financial results for an interim period are not necessarily indicative of the results for a full year. All intercompany transactions have been eliminated in consolidation.
In the opinion of management, these statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for the fair presentation of our financial results for the interim periods presented.
COVID-19
The Company has taken steps to mitigate the potential risks posed by COVID-19. We provide an essential service to our customers and have taken additional measures to keep our associates safe and minimize unnecessary risk of exposure to COVID-19, including precautions for our associates and owner-operators who work in the field. We have implemented work from home policies where appropriate and imposed travel limitations on employees.
Management makes estimates and assumptions that affect reported amounts and disclosures included in its financial statements and accompanying notes and assesses certain accounting matters that require consideration of forecasted financial information.
Due to limited visibility into future freight demand and ongoing uncertainties, we are unable to predict the impact COVID-19 will have on our future financial position and operating results.
Accounting Standards Issued but Not YetRecently Adopted
In December 2019, the FASB issuedWe adopted ASU 2019-12, Simplifying the Accounting for Income Taxes, which reduces complexity in accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for usentities, as of January 1, 2021 with early adoption permitted.2021. We do not believeused the adoption of this ASU will have a material impact on our consolidated financial statements and related disclosures and plan to adopt as of January 1, 2021.
Accounting Standards Recently Adopted
We adopted ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,modified retrospective or prospective approach, which was effective as of March 12, 2020 through December 31, 2022,based on the specific amendment implemented, when the reference rate replacement activity is expected to be complete. This guidance offers optional expedients and exceptions for applying GAAP to transactions, including contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity affected by reference rate reform, if certain criteria are met.adopting this standard. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures.
We adopted ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350, as of January 1, 2020 on a prospective basis. This standard aligned the capitalization requirements for implementation costs incurred in a hosting arrangement that is a service contract with the existing capitalization requirements for implementation costs incurred to develop or obtain internal-use software. The adoption did not have a material impact on our consolidated financial statements or related disclosures.
We adopted ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which is codified in ASC 326, as of January 1, 2020. The guidance replaced the incurred loss model with a methodology that reflects expected credit losses over the life of the financial assets held at the reporting date based on historical experience, as well as considerations of current conditions and reasonable and supportable forecasts. This new model for estimating our expected credit losses was implemented for our trade accounts receivable (Note 2, Trade Accounts Receivable and Allowance), net investment in leases (Note 3, Leases), and available-for-sale debt securities (Note 6, Investments), and did not result in a material impact to our consolidated financial statements or disclosures upon adoption.
2. TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE
Our trade accounts receivable is recorded net of an allowance for doubtful accounts and revenue adjustments. The allowance is based on an aging analysis using historical experience, as well as any known and expected trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed at least quarterly, and reserves for receivables not expected to be collected are established. In circumstances where we are aware of a customer's inability to meet its financial obligations, a specific reserve is recorded to reduce the net receivable to the amount we reasonably expect to collect. Bad debt expense is included in other general expenses in the consolidated statements of comprehensive income.
The following table shows changes to our allowance for doubtful accounts for the three and nine months ended September 30, 2020. Excluded from the amounts below is the portion of the allowance recorded for revenue adjustments, as that portion is not credit-related nor due to a customer’s inability to meet its financial obligations.
| | | | | | | | | | | | | | |
| | Three Months
Ended | | Nine Months
Ended |
| (in millions) | | September 30, 2020 |
| Balance at beginning of period | | $ | 1.4 | | | $ | 0.9 | |
| Charges to expense | | 0.1 | | | 1.2 | |
| Write-offs | | (0.6) | | | (1.3) | |
| Recoveries | | 0.2 | | | 0.3 | |
| Balance at end of period | | $ | 1.1 | | | $ | 1.1 | |
3. LEASES
As Lessee
We lease real estate transportation equipment, and office equipment under operating and finance leases. Our real estate operating leases include operating centers, distribution warehouses, offices, and drop yards. Our non-real estate operating leases and finance leases include transportation, office, equipment,and warehouse equipment, andin addition to truck washes. The majority of our leases include an option to extend the lease, and a small number include an option to terminate the lease early, which may include a termination payment.
Additional information related to our leases is as follows:
| | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, |
| (in millions) | | 2020 | | 2019 |
| Cash paid for amounts included in the measurement of lease liabilities | | | | |
| Operating cash flows from operating leases | | $ | 26.3 | | | $ | 26.7 | |
| Operating cash flows from finance leases | | 0.1 | | | 0.2 | |
| Financing cash flows from finance leases | | 0.5 | | | 2.0 | |
| | | | |
| Right-of-use assets obtained in exchange for new lease liabilities | | | | |
| Operating leases | | $ | 21.6 | | | $ | 20.6 | |
| Finance leases | | 0.8 | | | 0 | |
| | | | | | | | | | | | | | |
| | Six Months Ended
June 30, |
| (in millions) | | 2021 | | 2020 |
| Cash paid for amounts included in the measurement of lease liabilities | | | | |
| Operating cash flows for operating leases | | $ | 15.3 | | | $ | 17.3 | |
| | | | |
| Financing cash flows for finance leases | | 0.3 | | | 0.3 | |
| | | | |
| Right-of-use assets obtained in exchange for new lease liabilities | | | | |
| Operating leases | | $ | 19.5 | | | $ | 21.6 | |
| Finance leases | | 1.2 | | | 0.7 | |
As Lessor
We finance various types of transportation-related equipment for independent third parties under lease contracts which are generally for one year to fivethree years and accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contract residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.
As of SeptemberJune 30, 20202021 and December 31, 2019, the2020, investments in lease receivables were as follows:
| | (in millions) | (in millions) | | September 30, 2020 | | December 31, 2019 | (in millions) | | June 30, 2021 | | December 31, 2020 |
| Future minimum payments to be received on leases | Future minimum payments to be received on leases | | $ | 144.5 | | | $ | 135.0 | | Future minimum payments to be received on leases | | $ | 184.1 | | | $ | 159.0 | |
| Guaranteed residual lease values | Guaranteed residual lease values | | 105.6 | | | 126.6 | | Guaranteed residual lease values | | 115.9 | | | 107.6 | |
| Total minimum lease payments to be received | Total minimum lease payments to be received | | 250.1 | | | 261.6 | | Total minimum lease payments to be received | | 300.0 | | | 266.6 | |
| Unearned income | Unearned income | | (34.8) | | | (30.7) | | Unearned income | | (44.9) | | | (38.5) | |
| Net investment in leases | Net investment in leases | | 215.3 | | | 230.9 | | Net investment in leases | | $ | 255.1 | | | $ | 228.1 | |
| | Current maturities of lease receivables | | 97.6 | | | 122.1 | | |
| Allowance for doubtful accounts | | (0.9) | | | (0.6) | | |
| Current portion of lease receivables—net of allowance | | 96.7 | | | 121.5 | | |
| | Lease receivables—noncurrent | | $ | 118.6 | | | $ | 109.4 | | |
BeforePrior to entering into a lease contract, we assess the credit quality of the potential lessee through the use ofusing credit checks and other relevant factors, ensuring that theirthe inherent credit risk is consistent with our existing lease portfolio. We monitorGiven our leases have fully guaranteed residual values and we can take possession of the transportation-related equipment in the event of default, we do not categorize net investment in leases by different credit quality ofindicators upon origination. We monitor our lease portfolio weekly by tracking amounts past due, days past due, and outstanding maintenance account balances, including running subsequent credit checks as needed. The following table presents ourOur net investment in leases with any portion past due as of June 30, 2021 was $37.4 million, which includes both current and future lease payments as of September 30, 2020 by amounts past due, our primary ongoing credit quality indicator, and lease origination year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Investment in Leases by Lease Origination Year (in millions) |
Amounts Past Due (in ones) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total |
| Greater than $3,000 | | $ | 3.5 | | | $ | 1.7 | | | $ | 0.9 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 6.1 | |
| Between $2,999 and $1,500 | | 4.9 | | | 2.1 | | | 1.3 | | | 0.5 | | | 0 | | | 0 | | | 8.8 | |
| Less than $1,499 | | 14.9 | | | 7.1 | | | 3.4 | | | 1.0 | | | 0.1 | | | 0.1 | | | 26.6 | |
| Total | | $ | 23.3 | | | $ | 10.9 | | | $ | 5.6 | | | $ | 1.5 | | | $ | 0.1 | | | $ | 0.1 | | | $ | 41.5 | |
Lease payments are generally due on a weekly basis and are classified as past due when the weekly payment is not received by theits due date. The following table presents an aging analysisAs of June 30, 2021, our lease payments owed to us and classified as past due as of September 30, 2020.
| | | | | | | | |
(in millions) | | September 30, 2020 |
1-29 days | | $ | 1.3 | |
30-59 days | | 0.5 | |
60-89 days | | 0.3 | |
90 days or greater | | 0.4 | |
Total past due | | $ | 2.5 | |
Our lease receivables are recorded net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to be uncollectible. The terms of the lease agreements generally give us the ability to take possession of the underlying asset in the event of default. We may incur credit losses in excess of recorded allowances if the full amount of anticipated proceeds from the sale or re-lease of the asset supporting the third party’s financial obligation, which can be impacted by economic conditions, is not realized.
Accrued interest on leases is included within lease receivables on the consolidated balance sheets and was not material as of September 30, 2020 and December 31, 2019. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or other instances management concludes collectability is not reasonably assured. The accrual of interest and other fees resumes when all payments are less than 60 days past due. At both September 30, 2020 and December 31, 2019, our net investment in leases on nonaccrual status were not material.$2.7 million.
The table below provides additional information on our sales-type leases. Revenue and cost of goods sold are recorded in operating revenues and operating supplies and expenses in the consolidated statements of comprehensive income, respectively.
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Revenue | Revenue | | $ | 50.8 | | | $ | 50.9 | | | $ | 150.2 | | | $ | 159.8 | | Revenue | | $ | 53.8 | | | $ | 44.7 | | | $ | 112.6 | | | $ | 99.4 | |
| Cost of goods sold | Cost of goods sold | | (45.8) | | | (46.8) | | | (135.5) | | | (144.0) | | Cost of goods sold | | (46.7) | | | (40.8) | | | (97.1) | | | (89.7) | |
| Operating profit | Operating profit | | $ | 5.0 | | | $ | 4.1 | | | $ | 14.7 | | | $ | 15.8 | | Operating profit | | $ | 7.1 | | | $ | 3.9 | | | $ | 15.5 | | | $ | 9.7 | |
| | Interest income on lease receivable | Interest income on lease receivable | | $ | 6.5 | | | $ | 7.0 | | | $ | 19.7 | | | $ | 20.4 | | Interest income on lease receivable | | $ | 7.8 | | | $ | 6.7 | | | $ | 15.1 | | | $ | 13.2 | |
|
4.3. REVENUE RECOGNITION
Disaggregated Revenues
The majority of our revenues are related to transportation and have similar characteristics. The following table summarizes our revenues by type of service.
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
Disaggregated Revenues (in millions) | Disaggregated Revenues (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | Disaggregated Revenues (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Transportation | Transportation | | $ | 1,036.5 | | | $ | 1,093.9 | | | $ | 3,015.9 | | | $ | 3,297.7 | | Transportation | | $ | 1,255.5 | | | $ | 951.1 | | | $ | 2,374.1 | | | $ | 1,979.4 | |
| Logistics management | | 41.3 | | | 32.3 | | | 102.2 | | | 120.1 | | |
| Logistics Management | | Logistics Management | | 46.8 | | | 29.8 | | | 93.3 | | | 60.9 | |
| Other | Other | | 57.9 | | | 57.7 | | | 169.5 | | | 172.9 | | Other | | 58.5 | | | 51.9 | | | 122.0 | | | 111.6 | |
| Total operating revenues | Total operating revenues | | $ | 1,135.7 | | | $ | 1,183.9 | | | $ | 3,287.6 | | | $ | 3,590.7 | | Total operating revenues | | $ | 1,360.8 | | | $ | 1,032.8 | | | $ | 2,589.4 | | | $ | 2,151.9 | |
Quantitative DisclosuresDisclosure
The following table provides information forrelated to transactions and expected timing of revenue recognition related tofor performance obligations that are fixed in nature and pertainrelate to contracts with terms greater than one year as of the date shown.
| | | | | | | | |
Remaining Performance Obligations (in millions) | | SeptemberJune 30, 20202021 |
| Expected to be recognized within one year | | |
| Transportation | | $ | 14.915.3 | |
Logistics managementManagement | | 10.911.1 | |
| Expected to be recognized after one year | | |
| Transportation | | 52.243.4 | |
Logistics managementManagement | | 13.111.6 | |
| Total | | $ | 91.181.4 | |
The information provided in the above tableThis disclosure does not include revenue related to performance obligations that are part of a contract whosewith an original expected duration isof one year or less. In addition, this disclosureless, nor does notit include expected consideration related to performance obligations for which the Company elects to recognize revenue in the amount it has a right to invoice (e.g., usage-based pricing terms).
The following table provides information related to contract balances associated with our contracts with customers as of the dates shown.
| Contract Balances (in millions) | Contract Balances (in millions) | | September 30, 2020 | | December 31, 2019 | | Contract Balances (in millions) | | June 30, 2021 | | December 31, 2020 |
| Other current assets - Contract assets | Other current assets - Contract assets | | $ | 28.5 | | | $ | 17.6 | | | Other current assets - Contract assets | | $ | 32.4 | | | $ | 21.5 | |
| Other current liabilities - Contract liabilities | Other current liabilities - Contract liabilities | | 0.6 | | | 0 | | | Other current liabilities - Contract liabilities | | 0.6 | | | 0.7 | |
We generally receive payment within 40 days of completing ourcompletion of performance obligations. Contract assets in the table above relate to revenue in transit at the end of the reporting period. Contract liabilities relate to amounts that customers paid in advance of the associated service.
5.4. FAIR VALUE
Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability, which is referred to as the exit price.liability. Inputs to valuation techniques used to measure fair value fall into three broad levels (Levels 1, 2, and 3) as follows:
Level 1—Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that we have the ability to access at the measurement date.
Level 2—Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities.
Level 3—Unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The table below sets forth the Company’s financial assets that are measured at fair value on a recurring, monthly basis in accordance with ASC 820.
| | | Fair Value | | Fair Value |
| (in millions) | (in millions) | | Level in Fair
Value Hierarchy | | September 30, 2020 | | December 31, 2019 | (in millions) | | Level in Fair
Value Hierarchy | | June 30, 2021 | | December 31, 2020 |
Marketable securities (1) | | 2 | | $ | 45.6 | | | $ | 48.3 | | |
Equity investment in TuSimple (1) | | Equity investment in TuSimple (1) | | 1 | | $ | 25.2 | | | $ | 0 | |
Marketable securities (2) | | Marketable securities (2) | | 2 | | 49.1 | | | 47.1 | |
(1)Our equity investment in TuSimple is classified as Level 1 in the fair value hierarchy as shares of TuSimple’s Class A common stock are traded on the NASDAQ. See Note 5, Investments, for additional information.
(2)Marketable securities are classified as Level 2 in the fair value hierarchy as they are valued based on quoted prices for similar assets in active markets or quoted prices for identical or similar assets in markets that are not active and are, therefore, classified as Level 2 in the fair value hierarchy. We measure our marketable securities on a recurring, monthly basis.active. See Note 6,5, Investments, for additional information on the fair value of our marketable securities.information.
The fair value of the Company'sCompany’s debt was $318.7$321.1 million and $368.5$316.9 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The carrying value of the Company'sCompany’s debt was $305.0 million and $360.0 million as of SeptemberJune 30, 20202021 and December 31, 2019, respectively.2020. The fair value of our debt was calculated using a fixed-ratefixed rate debt portfolio with similar terms and maturities, which is based on the borrowing rates available to us in the applicable year. This valuation used Level 2 inputs.
The recorded valuevalues of cash, trade accounts receivable, lease receivables, and trade accounts payable approximatesapproximate fair value.values.
Our ownership interests in PSI and MLSI discussed in Note 6,5, Investments, do not have readily determinable fair values and arewere accounted for using the measurement alternative in ASC 321-10-35-2.321-10-35-2 as of June 30, 2021.
6.5. INVESTMENTS
Marketable Securities
Our marketable securities are classified as available-for-sale and carried at fair value in current assets on the consolidated balance sheets. While our intent is to hold our securities to maturity, sudden changes in the market or our liquidity needs may cause us to sell certain securities in advance of their maturity date.
With the adoption of ASU 2016-13, the guidance on reporting credit losses for available-for-sale debt securities was amended. Under this new guidance, credit losses are to be recorded through an allowance for credit losses rather than as a direct write-down to the security. As a result, anyAny unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on the consolidated balance sheets, unless we determine that the amortized cost basis is not recoverable. If we determine that the amortized cost basis of the impaired security is not recoverable, we recognize the credit loss by increasing the allowance for those losses. We did 0t have an allowance for credit losses on our marketable securities as of June 30, 2021 or December 31, 2020. Cost basis is determined using the specific identification method.
When adopting this standard, we elected to continue to present the accrued interest receivable balance associated with our investments in marketable securities separate from the marketable securities line in the consolidated balance sheets. As of September 30, 2020, accrued interest receivable associated with our investments in marketable securities was not material and is included within other receivables on the consolidated balance sheets. We have elected the practical expedient provided under the guidance to exclude the applicable accrued interest from the amortized cost basis disclosure of our marketable securities. We have also elected not to measure an allowance for credit losses on our accrued interest receivable and to write off accrued interest receivable by reversing interest income when it is not considered collectible.
The following table presents the maturities and values of our marketable securities as of the dates shown.
| | | | | September 30, 2020 | | December 31, 2019 | | | June 30, 2021 | | December 31, 2020 |
| (in millions, except maturities in months) | (in millions, except maturities in months) | | Maturities | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | (in millions, except maturities in months) | | Maturities | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| U.S. treasury and government agencies | U.S. treasury and government agencies | | 6 to 94 | | $ | 13.7 | | | $ | 13.8 | | | $ | 16.5 | | | $ | 17.0 | | U.S. treasury and government agencies | | 29 to 116 | | $ | 16.9 | | | $ | 16.8 | | | $ | 12.6 | | | $ | 12.7 | |
| Asset-backed securities | | — | | 0 | | | 0 | | | 0.1 | | | 0.1 | | |
| | Corporate debt securities | Corporate debt securities | | 11 to 84 | | 20.3 | | | 21.1 | | | 15.1 | | | 15.4 | | Corporate debt securities | | 2 to 75 | | 21.3 | | | 21.7 | | | 21.4 | | | 22.2 | |
| State and municipal bonds | State and municipal bonds | | 17 to 66 | | 10.4 | | | 10.7 | | | 11.6 | | | 11.8 | | State and municipal bonds | | 4 to 57 | | 10.3 | | | 10.6 | | | 11.9 | | | 12.2 | |
| Other U.S. and non-U.S. government bonds | | — | | 0 | | | 0 | | | 4.0 | | | 4.0 | | |
| | Total marketable securities | Total marketable securities | | $ | 44.4 | | | $ | 45.6 | | | $ | 47.3 | | | $ | 48.3 | | Total marketable securities | | $ | 48.5 | | | $ | 49.1 | | | $ | 45.9 | | | $ | 47.1 | |
Gross realized gains and losses and net unrealized gains and losses, net of tax,Excluded from the amortized cost basis disclosures above is the accrued interest on our investments in marketable securities were not material for the three and nine months ended Septembersecurities. As of June 30, 2020 and 2019. Additionally, we did not have an allowance for credit losses on our marketable securities as of September 30, 2020 or any other-than-temporary impairments as of December 31, 2019, and our total unrealized gains and losses were not material as of September 30, 20202021 and December 31, 2019.2020, accrued interest receivable associated with our investments in marketable securities was not material and included within other receivables on the consolidated balance sheets.
Ownership Interest in Equity Investments without Readily Determinable Fair Values
Platform Science, Inc.
In 2018, the Company made a strategic decision to invest in PSI and acquired an ownership interest in exchange for granting them a non-exclusive license to our proprietary telematics mobile software that was developed to enable enhanced driver productivity and ensure regulatory compliance. Our ownership interest is being accounted for under ASC 321, Investments - Equity Securities, using the measurement alternative and is recorded in other noncurrent assets on the consolidated balance sheets. During the first half of 2020, remeasurement events occurred which required the Company to revalue its interest in PSI.alternative. In the three and six months ended SeptemberJune 30, 2020, 0 events have occurred that would indicate that the value of our ownership interest in PSI has changed. The Company recognized pre-tax gains of $2.7 million and $8.8 million, respectively, on its investment in PSI in the nine months ended September 30, 2020, which were recorded within other income on the consolidated statements of comprehensive income. The fairAs of December 31, 2020, the value of our ownership interest as of September 30, 2020 and December 31, 2019 was $12.3 million, and $3.5 million, respectively, and our non-controlling ownership percentage was 12.6% as. NaN events have occurred in the three and six months ended June 30, 2021 that would indicate that the value of September 30, 2020.our investment in PSI has changed.
Ownership Interest in Mastery Logistics Systems, Inc.
On July 2,In 2020, Schneiderthe Company entered into a strategic partnership with MLSI, a transportation technology development company, which included an agreement that allows the Company to purchase a non-controlling interest in MLSI in two tranches.company. Schneider and MLSI are collaborating to develop a Transportation Management System using MLSI'sMLSI’s SaaS technology which Schneider has also agreed to license. In the three months ended September 30, 2020, we paid MLSI $5.0 million for the initial tranche, and, in return, received shares of preferred stock of MLSI which represents a 5.3% ownership in MLSI. This investment is being accounted for under ASC 321, Investments - Equity Securities, using the measurement alternativealternative. The value of our ownership interest as of December 31, 2020 was $10.0 million, and is recorded in other noncurrent assets onour non-controlling ownership percentage was 10.1%. In the consolidated balance sheet. As of Septemberthree and six months ended June 30, 2020, no2021, 0 events have occurred that would indicate that the value of our investment in MLSI has changed.
Subsequent Event - Additional Investment in Mastery Logistics Systems,Equity Investments with Readily Determinable Fair Values
TuSimple Holdings, Inc.
On October 14, 2020,January 12, 2021, the Company invested an additionalpurchased a $5.0 million non-controlling interest in MLSITuSimple, a global self-driving technology company. Upon completion of its initial public offering in exchange for preferred stock of MLSI. This additional investment completed the second tranche of the agreement and increasedApril 2021, our total investment in MLSI to $10.0TuSimple was converted into Class A common shares and is now being accounted for under ASC 321, Investments - Equity Securities, with subsequent changes in share price recorded in other income on the consolidated statements of comprehensive income. In the three and six months ended June 30, 2021, the Company recognized pre-tax gains of $20.2 million andon its investment in TuSimple. See Note 4, Fair Value, for additional information on the fair value of our non-controlling ownership interest to 10.1%.investment in TuSimple.
All of our equity investments are included in other noncurrent assets on the consolidated balance sheets.
7.6. GOODWILL
Goodwill represents the excess of the purchase price of acquisitions over the fair value of the identifiable net assets acquired. The following table shows changes to our goodwill balances by reportable segment during the period ended SeptemberJune 30, 2020.2021.
| | (in millions) | (in millions) | | Truckload | | Logistics | | Other | | Total | (in millions) | | Truckload | | Logistics | | Other | | Total |
| Balance at December 31, 2019 | | $ | 103.6 | | | $ | 14.2 | | | $ | 9.7 | | | $ | 127.5 | | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | | $ | 103.6 | | | $ | 14.2 | | | $ | 10.3 | | | $ | 128.1 | |
| | Foreign currency translation gain | Foreign currency translation gain | | 0 | | | 0 | | | 0.2 | | | 0.2 | | Foreign currency translation gain | | 0 | | | 0 | | | 0.2 | | | 0.2 | |
| Balance at September 30, 2020 | | $ | 103.6 | | | $ | 14.2 | | | $ | 9.9 | | | $ | 127.7 | | |
| Balance at June 30, 2021 | | Balance at June 30, 2021 | | $ | 103.6 | | | $ | 14.2 | | | $ | 10.5 | | | $ | 128.3 | |
At SeptemberJune 30, 20202021 and December 31, 2019,2020, we had accumulated goodwill impairment charges of $42.6 million.
8.7. DEBT AND CREDIT FACILITIES
As of SeptemberJune 30, 20202021 and December 31, 2019,2020, debt included the following:
| | (in millions) | (in millions) | | September 30, 2020 | | December 31, 2019 | (in millions) | | June 30, 2021 | | December 31, 2020 |
| Unsecured senior notes: principal payable at maturities ranging from 2021 through 2025; interest payable in semiannual installments through the same timeframe; weighted-average interest rate of 3.62% and 3.42% for 2020 and 2019, respectively. | | $ | 305.0 | | | $ | 360.0 | | |
| Unsecured senior notes: principal maturities ranging from 2021 through 2025; interest payable in semiannual installments through the same timeframe; weighted average interest rate of 3.61% and 3.64% for 2021 and 2020, respectively | | Unsecured senior notes: principal maturities ranging from 2021 through 2025; interest payable in semiannual installments through the same timeframe; weighted average interest rate of 3.61% and 3.64% for 2021 and 2020, respectively | | $ | 305.0 | | | $ | 305.0 | |
| | Current maturities | Current maturities | | 0 | | | (55.0) | | Current maturities | | (100.0) | | | (40.0) | |
| Debt issuance costs | Debt issuance costs | | (0.2) | | | (0.4) | | Debt issuance costs | | (0.1) | | | (0.2) | |
| Long-term debt | Long-term debt | | $ | 304.8 | | | $ | 304.6 | | Long-term debt | | $ | 204.9 | | | $ | 264.8 | |
Our Credit Agreement (the “2018 Credit Facility”) provides borrowing capacity of $250.0 million and allows us to request an increase in total commitment of up to $150.0 million, for a total potential commitment of $400.0 million through August 2023. The agreement also provides a sublimit of $100.0 million to be used for the issuance of letters of credit. We had 0 outstanding borrowings under this agreement as of SeptemberJune 30, 20202021 or December 31, 2019.2020. Standby letters of credit under this agreement amounted to $3.9 million and $3.8 million at SeptemberJune 30, 20202021 and December 31, 2019, respectively,2020 and were primarily related to the requirements of certain of our real estate leases.
We also have a Receivables Purchase Agreement (the “2018 Receivables Purchase Agreement”) that allows us to borrow funds against qualifying trade receivables at rates based on one-month LIBOR up to $200.0 million and provides for the issuance of standby letters of credit through September 2021. We had 0 outstanding borrowings under this facility at SeptemberJune 30, 20202021 or December 31, 2019.2020. At SeptemberJune 30, 20202021 and December 31, 2019,2020, standby letters of credit under this agreement amounted to $70.3 million andand were primarily related to the requirements of certain of our insurance obligations. The Company plans to renew the 2018 Receivables Purchase Agreement prior to its expiration date.
9.8. INCOME TAXES
Our effective income tax rate was 26.0%25.4% and 26.2%25.8% for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and 25.6%25.2% and 25.3%25.4% for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, and best estimates of nontaxable and nondeductible items of income and expense.
On March 27, 2020, President Trump signed the CARES Act into U.S. federal law the CARES Act aimed at providing emergency assistance and health care for individuals, families, and businesses affected by COVID-19 and generally supporting the U.S. economy. The CARES Act among other things, includes provisions related to refundable payroll tax credits,included a provision for the deferment of the employer portion of social security payments, net operating loss carryback periods, modifications totaxes through December 31, 2020, among other things, of which the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The Company took advantage ofadvantage. We anticipate paying the cash deferral program available for payment of federal and state income taxes through the second quarter of 2020 and continues to take advantage of the cash deferral program available for payment ofdeferred employer social security taxes.taxes in 2021 which were $30.7 million at both June 30, 2021 and December 31, 2020.
On December 27, 2020, the Consolidated Appropriations Act 2021 was signed into law which includes certain business tax provisions. The deferredCompany does not expect this act to have a material impact on our effective tax rate or income tax payments were paid toexpense for the respective tax authorities in the third quarter of 2020. On August 8, 2020, President Trump signed an executive order, “Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster,” which gives employers the option to defer the employee portion of social security payments for certain individuals. Schneider is currently not electing to use the deferral option under this executive order.year ended December 31, 2021.
10.9. COMMON EQUITY
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019.2020.
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions, except per share data) | (in millions, except per share data) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions, except per share data) | | 2021 | | 2020 | | 2021 | | 2020 |
| Numerator: | Numerator: | | | | | | | | | Numerator: | | | | | | | | |
| Net income available to common shareholders | Net income available to common shareholders | | $ | 44.5 | | | $ | 19.7 | | | $ | 134.8 | | | $ | 91.1 | | Net income available to common shareholders | | $ | 106.5 | | | $ | 46.5 | | | $ | 161.3 | | | $ | 90.3 | |
| | Denominator: | Denominator: | | Denominator: | |
| Weighted average common shares outstanding | Weighted average common shares outstanding | | 177.3 | | | 177.1 | | | 177.2 | | | 177.1 | | Weighted average common shares outstanding | | 177.6 | | | 177.2 | | | 177.5 | | | 177.2 | |
| Dilutive effect of share-based awards and options outstanding | Dilutive effect of share-based awards and options outstanding | | 0.3 | | | 0.2 | | | 0.3 | | | 0.2 | | Dilutive effect of share-based awards and options outstanding | | 0.3 | | | 0.2 | | | 0.3 | | | 0.2 | |
Weighted average diluted common shares outstanding (1) | Weighted average diluted common shares outstanding (1) | | 177.7 | | | 177.3 | | | 177.5 | | | 177.3 | | Weighted average diluted common shares outstanding (1) | | 177.9 | | | 177.5 | | | 177.8 | | | 177.4 | |
| | Basic earnings per common share | Basic earnings per common share | | $ | 0.25 | | | $ | 0.11 | | | $ | 0.76 | | | $ | 0.51 | | Basic earnings per common share | | $ | 0.60 | | | $ | 0.26 | | | $ | 0.91 | | | $ | 0.51 | |
| Diluted earnings per common share | Diluted earnings per common share | | 0.25 | | | 0.11 | | | 0.76 | | | 0.51 | | Diluted earnings per common share | | 0.60 | | | 0.26 | | | 0.91 | | | 0.51 | |
(1)Weighted average diluted common shares outstanding may not sum due to rounding.
The calculation of diluted earnings per share for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 excluded an immaterial amountnumber of share-based awards and options that had an anti-dilutive effect.
Subsequent EventsEvent - Special and Quarterly Dividends Declared
In OctoberJuly of 2020,2021, the Board of Directors approved both a special dividend of $2.00 per share anddeclared a quarterly cash dividend for the third fiscal quarter of $0.0652021 in the amount of $0.07 per share to holders of our Class A and Class B common stock. The special dividend is payable in cash to shareholders of record at the close of business on November 9, 2020 and will be paid on November 19, 2020. The quarterly cash dividend for the fourth fiscal quarter of 2020 is payable to shareholders of record at the close of business on December 11, 2020September 10, 2021 and will be paid on January 11,October 8, 2021.
11.10. SHARE-BASED COMPENSATION
We grant various equity-based awards relating to Class B Common Stockcommon stock to employees under our 2017 Omnibus Incentive Plan (“the Plan”). These awards consist of the following: restricted shares, restricted stock units (“RSUs”), performance-based restricted shares (“Performance Shares”performance shares”), performance-based restricted stock units (“PSUs”), and non-qualified stock options. Performance shares and PSUs granted prior to 2021 are earned based on attainment of threshold performance of earnings and return on capital targets. Beginning with grants in 2021, in addition to achievement of earnings and earnings targets.return on capital targets, a multiplier will be applied to performance share and PSU achievement based on relative total shareholder return (“rTSR”) against peers over the performance period.
Share-based compensation expense was $1.9$2.9 million and $4.4$0.8 million for the three and nine months ended SeptemberJune 30, 2021 and 2020, respectively. Duringrespectively, and $7.1 million and $2.5 million for the threesix months ended SeptemberJune 30, 2019, we recognized a net benefit of $2.4 million. There was 0 share-based compensation expense for the nine months ended September 30, 2019.2021 and 2020, respectively. We recognize share-based compensation expense over the awards'awards’ vesting period. As of SeptemberJune 30, 2020,2021, we had $15.3$25.2 million of pre-tax unrecognized compensation cost related to outstanding share-based compensation awards expected to be recognized over a weighted-averageweighted average period of 2.62.4 years.
12.11. COMMITMENTS AND CONTINGENCIES
In the ordinary course of conducting our business, we become involved in certain legal matters and investigations including liability claims, taxes other than income taxes, contract disputes, employment, and other litigation matters. We accrue for anticipated costs to resolve matters that are probable and estimable. We believe the outcomes of these matters will not have a material impact on our business or our consolidated financial statements.
We record liabilities for claims against the Company based on our best estimate of expected losses. The primary claims arising for the Company through its trucking, intermodal, and logistics operations consist of accident-related claims for personal injury, collision, and comprehensive compensation, in addition to workers'workers’ compensation, property damage, cargo, and wage and benefit claims. We maintain excess liability insurance with licensed insurance carriers for liability in excess of amounts we self-insure, which serves to largely offset the Company’s liability associated with these claims, with the exception of wage and benefit claims for which we self-insure. We review our accruals periodically to ensure that the aggregate amounts of our accruals are appropriate at any period after consideration of available insurance coverage. Although we expect that our claims accruals will continue to vary based on future developments, assuming that we are able to continue to obtain and maintain excess liability insurance coverage for such claims, we do not anticipate that such accruals will, in any period, materially impact our results of operations.
At SeptemberJune 30, 2020,2021, our firm commitments to purchase transportation equipment totaled $139.1$415.2 million.
In October 2017, theA representative of the former owners of WSL has filed a lawsuit in the Delaware Court of Chancery which primarily alleges that we have not fulfilled certain obligations under the purchase and sale agreement relatingrelated to the post-closing operations of the business, and as a result, the former owners claim they are entitled to damages including an additional payment of $40.0 million. A under an earn-out arrangement which was a component of the purchase price in the transaction. The Delaware Court of Chancery conducted a remote trial date has been set forin January 2021. We believe that we have strong defenses to this claim. A judgment by the Court against us in this matter could have a material adverse effect on our results of operations.
In September 2020, the Company recorded a $13.1$12.8 million chargeof expense and paid $13.7 million as a result of an adverse tax ruling in a dispute with the IRS over the applicability of excise taxes on certain tractors refurbished during tax years 2011 through 2013 and no longer in service. The charge includes interest andIn December 2020, the Company filed an appeal which is included within operating supplies and expenses oncurrently pending with the consolidated statementsU.S. Court of comprehensive incomeAppeals for the three and nine months ended September 30, 2020.Seventh Circuit.
13.12. SEGMENT REPORTING
We have 3 reportable segments – Truckload, Intermodal, and Logistics – which are based primarily on the services each segment provides.
The CODM reviews revenuesrevenue for each segment exclusivewithout the inclusion of fuel surcharge revenues.revenue. For segment purposes, any fuel surcharge revenues earned are recorded as a reduction of the segment’s fuel expenses. Income from operations at the segment level reflects the measure presented to the CODM for each segment.
Separate balance sheets are not prepared by segment, and as a result, assets are not separately identifiable by segment. All transactions between reportable segments are eliminated in consolidation.
Substantially all of our revenues and assets were generated or located within the U.S.
The following tables summarize our segment information. IntersegmentInter-segment revenues were immaterial for all segments, with the exception of Other, which includesincluded revenues from insurance premiums charged to other segments for workers’ compensation, auto, and other types of insurance. IntersegmentInter-segment revenues included in Other revenues below were $11.9$12.1 million and $20.8$22.5 million for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $59.1$30.2 million and $66.8$47.2 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues by Segment | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (in millions) | | 2020 | | 2019 | | 2020 | | 2019 |
| Truckload | | $ | 460.2 | | | $ | 515.6 | | | $ | 1,380.7 | | | $ | 1,582.3 | |
| Intermodal | | 248.4 | | | 249.2 | | | 705.4 | | | 746.6 | |
| Logistics | | 284.4 | | | 236.1 | | | 754.9 | | | 707.0 | |
| Other | | 85.5 | | | 94.3 | | | 274.7 | | | 290.0 | |
| Fuel surcharge | | 73.0 | | | 114.2 | | | 244.7 | | | 350.2 | |
| Inter-segment eliminations | | (15.8) | | | (25.5) | | | (72.8) | | | (85.4) | |
| Operating revenues | | $ | 1,135.7 | | | $ | 1,183.9 | | | $ | 3,287.6 | | | $ | 3,590.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income (Loss) from Operations by Segment | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (in millions) | | 2020 | | 2019 | | 2020 | | 2019 |
| Truckload | | $ | 45.6 | | | $ | (12.5) | | | $ | 122.7 | | | $ | 18.6 | |
| Intermodal | | 23.0 | | | 25.1 | | | 50.3 | | | 75.5 | |
| Logistics | | 9.1 | | | 9.9 | | | 21.5 | | | 29.4 | |
| Other | | (14.4) | | | 6.5 | | | (12.9) | | | 6.2 | |
| Income from operations | | $ | 63.3 | | | $ | 29.0 | | | $ | 181.6 | | | $ | 129.7 | |
| | Depreciation and Amortization Expense by Segment | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| Revenues by Segment | | Revenues by Segment | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Truckload | Truckload | | $ | 53.6 | | | $ | 53.2 | | | $ | 157.1 | | | $ | 161.5 | | Truckload | | $ | 475.2 | | | $ | 451.1 | | | $ | 926.9 | | | $ | 920.5 | |
| Intermodal | Intermodal | | 11.9 | | | 11.3 | | | 34.4 | | | 33.2 | | Intermodal | | 274.0 | | | 219.0 | | | 529.8 | | | 457.0 | |
| Logistics | Logistics | | 0.1 | | | 0.2 | | | 0.1 | | | 0.5 | | Logistics | | 430.7 | | | 230.9 | | | 786.6 | | | 470.5 | |
| Other | Other | | 8.6 | | | 9.4 | | | 24.7 | | | 27.2 | | Other | | 88.5 | | | 89.8 | | | 186.9 | | | 189.2 | |
| Depreciation and amortization expense | | $ | 74.2 | | | $ | 74.1 | | | $ | 216.3 | | | $ | 222.4 | | |
| Fuel surcharge | | Fuel surcharge | | 110.2 | | | 68.7 | | | 200.4 | | | 171.7 | |
| Inter-segment eliminations | | Inter-segment eliminations | | (17.8) | | | (26.7) | | | (41.2) | | | (57.0) | |
| Operating revenues | | Operating revenues | | $ | 1,360.8 | | | $ | 1,032.8 | | | $ | 2,589.4 | | | $ | 2,151.9 | |
14. RESTRUCTURING | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income from Operations by Segment | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Truckload | | $ | 73.6 | | | $ | 40.5 | | | $ | 111.9 | | | $ | 77.1 | |
| Intermodal | | 34.9 | | | 11.0 | | | 54.9 | | | 27.3 | |
| Logistics | | 17.0 | | | 8.2 | | | 32.9 | | | 12.4 | |
| Other | | 0.3 | | | 3.7 | | | 2.3 | | | 1.5 | |
| Income from operations | | $ | 125.8 | | | $ | 63.4 | | | $ | 202.0 | | | $ | 118.3 | |
On July 29, 2019, the Company’s Board of Directors approved a structured shutdown of its FTFM service offering within its Truckload reportable segment which was substantially complete as of August 31, 2019. The restructuring activity was recorded within our Truckload reportable segment. Pre-tax losses of our FTFM service offering were $8.9 million for the three months ended September 30, 2019 and $34.2 million for the nine months ended September 30, 2019.
The activity associated with the shutdown is presented separately on the consolidated statements of comprehensive income within restructuring—net and is summarized below on a cumulative basis since July 29, 2019. Restructuring activity for the three and nine months ended September 30, 2020 was not material.
| | | | | | | | |
(in millions) | | Cumulative |
Impairment charges and losses on asset disposals—net | | $ | 45.5 | |
Receivable write-downs—net | | 3.1 | |
Other costs | | 14.6 | |
Total restructuring—net | | $ | 63.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and Amortization by Segment | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Truckload | | $ | 52.4 | | | $ | 52.5 | | | $ | 105.0 | | | $ | 103.5 | |
| Intermodal | | 11.6 | | | 11.7 | | | 23.1 | | | 22.5 | |
| Logistics | | 0.1 | | | 0 | | | 0.1 | | | 0 | |
| Other | | 9.1 | | | 8.1 | | | 18.1 | | | 16.1 | |
| Depreciation and amortization | | $ | 73.2 | | | $ | 72.3 | | | $ | 146.3 | | | $ | 142.1 | |
As of September 30, 2020 and December 31, 2019, FTFM restructuring liabilities were classified as current liabilities on the consolidated balance sheets as follows:
| | | | | | | | |
(in millions) | | Restructuring Liabilities |
Balance at December 31, 2018 | | $ | 0 | |
Restructuring—net | | 13.7 | |
Cash payments | | (8.6) | |
Balance at December 31, 2019 | | 5.1 | |
Restructuring—net | | 0.9 | |
Cash payments | | (1.5) | |
Balance at September 30, 2020 | | $ | 4.5 | |
The required criteria, as defined by ASC 360, Property, Plant and Equipment, was satisfied as part of the shutdown of our FTFM service offering for reclassification of related transportation equipment into assets held for sale. As of September 30, 2020 and December 31, 2019, assets held for sale, net of impairment, within our Truckload segment were $23.5 million and $63.5 million, respectively, of which $14.0 million and $33.4 million related to the shutdown of our FTFM service offering, respectively. Assets held for sale, net of impairment, are included in prepaid expenses and other current assets in the consolidated balance sheets.
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and related notes and our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
INTRODUCTION
Recent Events
COVID-19
Schneider continues to monitor the the impact of COVID-19 and take steps to mitigate risks posed by the virus. The impact COVID-19 will have on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the efforts of governments at the national, state, and local levels to manage the outbreak, and the impact of the pandemic and governmental actions on our customers, which are uncertain and not fully predictable.
The Company provides an essential service to its customers and has taken additional measures to keep our associates safe and to minimize unnecessary risk of exposure to COVID-19, including precautions for our associates and owner-operators who work in the field. We have implemented work from home policies where appropriate and imposed travel limitations on employees.
The Company continues to implement and maintain strong physical and cyber-security measures to ensure our systems remain functional in order to serve our operational needs with a remote workforce and ensure uninterrupted service to our customers.
The Company’s operational and financial performance was impacted by a decrease in demand during the second quarter of 2020 resulting, in part, from government imposed stay-at-home orders and the related closure of particular customers as a result of COVID-19. In the third quarter of 2020 freight demand began to normalize, and we did not experience significant negative operational or financial impacts from COVID-19. We believe that the largest impacts of COVID-19 on our business were incurred in the second quarter, and we expect to continue to experience improvements in the fourth quarter; however, we are unable to predict with any certainty the impact that COVID-19 may continue to have on our operational and financial performance.
We have implemented cost reduction efforts to help mitigate the impact reduced revenues have had, and may continue to have, on our full-year 2020 income from operations; however, these reductions have not, and are not expected to, fully offset the decline in revenues and incremental COVID-19 and related costs that were experienced. While we are working diligently to manage costs throughout the organization, we have incurred additional expenses related to the safe onboarding of company drivers, the purchase of personal protective equipment, emergency sick leave benefits, and additional cleaning services. We anticipate these added costs will continue to be incurred as the year progresses in order to ensure the safety of our associates, owner-operators, and customers.
We continue to actively monitor the situation and take further actions that alter our business operations as may be required by federal, state, or local governmental authorities, or that we determine are in the best interests of our associates, customers, and shareholders. In this time of uncertainty resulting from COVID-19, we are continuing to serve our customers while taking precautions to provide a safe work environment for our associates, owner-operators, and customers.
Business Overview
We are a leading transportation and logistics services company providing a broad portfolio of premier truckload, intermodal, and logistics solutions and operating one of the largest for-hire trucking fleets in North America. Our highly flexible and balanced businessdiversified portfolio of complementary service offerings combines asset-based truckload services with asset-light intermodal and non-asset logistics offerings, enabling us to serve our customers’ diversevaried transportation needs. Our broad portfolio of services provides us with a greater opportunity to allocate capital within our portfolio of services in a manner designed to maximize returns across all market cycles and economic conditions. We continually monitor our performance and market conditions to ensure appropriate allocation of capital and resources to grow our businesses, and to optimizewhile optimizing returns across reportable segments. Our strong balance sheet enables us to carry out an acquisition strategy that strengthens our overall portfolio. We are positioned to leverage our scalable technology platform and experienced operations team to acquire high-quality businesses that meet our disciplined selection criteria to broadenenhance our service offerings and broaden our customer base.
Our truckload services consist of freight transported and delivered by our company-employed drivers in company trucks and by owner-operators. These services are executed through either dedicated or network contracts and include standard long-haul and regional shipping services primarily using dry van, bulk, temperature-controlled, and flat-bed equipment, as well as cross dock and customized solutions for high-value and time-sensitive loads to offer vastwith coverage throughthroughout North America, including Mexico and Canada. These services are executed through either dedicated or network contracts. FTFM residential and retail store delivery services were provided into the third quarter of 2019, when that service offering was shut down.America.
Our intermodal service consists of door-to-door container on flat car (“COFC”) service bythrough a combination of rail and over-the-roaddray transportation, in association with our rail carrier partners. Our intermodal service uses company-owned containers, chassis, and trucks with primarily company dray drivers, augmented by third-party dray capacity to offer vast coverage throughout North America, including cross border.capacity.
Our logistics offeringsservices consist of non-asset freight brokerage (including Power Only which leverages our nationwide trailer pools to match capacity with demand), supply chain (including 3PL), warehousing, and import/export services. Our logistics business typically provides value-added services using both our assets and third-party capacity, augmented by our trailing assets, to manage and move our customers’ freight.
Our success depends on our ability to balance our transportation network and efficiently and effectively manage our resources in the delivery of truckload, intermodal, and logistics services to our customers. Resource requirements vary with customer demand, which may be subject to seasonal or general economic conditions. We believe that our ability to properly select freight and adapt to changes in customer transportation needs allows us to efficiently deploy resources and make capital investments in trucks, trailers, containers, and chassis or obtain qualified third-party capacity at a reasonable price for our logistics segment.
Consistent with the transportation industry, our resultsbusiness is seasonal across each of operationsour segments which generally show a seasonal pattern. The strongest volumes are typicallytranslates to our reported revenues being the lowest in the late thirdfirst quarter and highest in the fourth quarters.quarter. Operating expenses tend to be higher in the winter months, primarily due to colder weather, which causes higher maintenance expense and higher fuel consumption from increased idle time.
Recent Developments
COVID-19
COVID-19 was declared a pandemic by the World Health Organization in March 2020. In response to the pandemic, the Company has taken steps to mitigate the potential risks it poses.
We have taken additional measures to keep our associates safe and minimize unnecessary risk of exposure to COVID-19 including taking precautions for our associates and owner-operators, implementing work from home policies, and imposing travel limitations on employees where appropriate as we’ve continued to provide an essential service. Associates who worked remotely during the pandemic are being transitioned to a primarily on-premise work environment, and physical and cyber-security measures implemented to ensure our systems are capable of serving our operational needs and providing uninterrupted service to our customers remain in place.
Schneider continues to monitor the situation and will take further actions as may be required by federal, state, or local governmental authorities, or that we determine are in the best interests of our associates, customers, and shareholders.
RESULTS OF OPERATIONS
Non-GAAP Financial Measures
In this section of our report, we present the following non-GAAP financial measures: (1) revenues (excluding fuel surcharge), (2) adjusted income from operations, (3) adjusted operating ratio, and (4) adjusted net income. We also provide reconciliations of these measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Management believes the use of each of these non-GAAP measures assists investors in understanding our business by (1) removing the impact of items from our operating results that, in our opinion, do not reflect our core operating performance, (2) providing investors with the same information our management uses internally to assess our core operating performance, and (3) presenting comparable financial results between periods. In addition, in the case of revenues (excluding fuel surcharge), we believe the measure is useful to investors because it isolates volume, price, and cost changes directly related to industry demand and the way we operate our business from the external factor of fluctuating fuel prices and the programs we have in place to manage fuel price fluctuations. Fuel-related costs and their impact on our industry are important to our results of operations, but they are often independent of other, more relevant factors affecting our results of operations and our industry.
Although we believe these non-GAAP measures are useful to investors, they have limitations as analytical tools and may not be comparable to similar measures disclosed by other companies. You should not consider the non-GAAP measures in this report in isolation or as substitutes for, or alternatives to, analysis of our results as reported under GAAP. The exclusion of unusual or infrequent items or other adjustments reflected in the non-GAAP measures should not be construed as an inference that our future results will not be affected by unusual or infrequent items or by other items similar to such adjustments. Our management compensates for these limitations by relying primarily on our GAAP results in addition to using the non-GAAP measures.
Enterprise Summary
The following table includes key GAAP and non-GAAP financial measures for the consolidated enterprise. Adjustments to arrive at non-GAAP measures are made at the enterprise level, with the exception of fuel surcharge revenues, which are not included in segment revenues.
| | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions, except ratios) | (in millions, except ratios) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions, except ratios) | | 2021 | | 2020 | | 2021 | | 2020 |
| Operating revenues | Operating revenues | | $ | 1,135.7 | | | $ | 1,183.9 | | | $ | 3,287.6 | | | $ | 3,590.7 | | Operating revenues | | $ | 1,360.8 | | | $ | 1,032.8 | | | $ | 2,589.4 | | | $ | 2,151.9 | |
Revenues (excluding fuel surcharge) (1) | Revenues (excluding fuel surcharge) (1) | | 1,062.7 | | | 1,069.7 | | | 3,042.9 | | | 3,240.5 | | Revenues (excluding fuel surcharge) (1) | | 1,250.6 | | | 964.1 | | | 2,389.0 | | | 1,980.2 | |
| Income from operations | Income from operations | | 63.3 | | | 29.0 | | | 181.6 | | | 129.7 | | Income from operations | | 125.8 | | | 63.4 | | | 202.0 | | | 118.3 | |
Adjusted income from operations (2) | Adjusted income from operations (2) | | 76.9 | | | 79.4 | | | 194.2 | | | 214.7 | | Adjusted income from operations (2) | | 125.8 | | | 63.6 | | | 202.0 | | | 117.3 | |
| Operating ratio | Operating ratio | | 94.4 | % | | 97.6 | % | | 94.5 | % | | 96.4 | % | Operating ratio | | 90.8 | % | | 93.9 | % | | 92.2 | % | | 94.5 | % |
Adjusted operating ratio (3) | Adjusted operating ratio (3) | | 92.8 | % | | 92.6 | % | | 93.6 | % | | 93.4 | % | Adjusted operating ratio (3) | | 89.9 | % | | 93.4 | % | | 91.5 | % | | 94.1 | % |
| Net income | Net income | | $ | 44.5 | | | $ | 19.7 | | | $ | 134.8 | | | $ | 91.1 | | Net income | | $ | 106.5 | | | $ | 46.5 | | | $ | 161.3 | | | $ | 90.3 | |
Adjusted net income (4) | Adjusted net income (4) | | 54.6 | | | 57.2 | | | 144.2 | | | 154.4 | | Adjusted net income (4) | | 106.5 | | | 46.7 | | | 161.3 | | | 89.6 | |
(1)We define “revenues (excluding fuel surcharge)” as operating revenues less fuel surcharge revenues, which are excluded from revenues at the segment level. Included below is a reconciliation of operating revenues, the most closely comparable GAAP financial measure, to revenues (excluding fuel surcharge).
(2)We define “adjusted income from operations” as income from operations, adjusted to exclude material items that do not reflect our core operating performance. Included below is a reconciliation of income from operations, which is the most directly comparable GAAP measure, to adjusted income from operations. Excluded items for the periods shown are explained in the table and notes below.
(3)We define “adjusted operating ratio” as operating expenses, adjusted to exclude material items that do not reflect our core operating performance, divided by revenues (excluding fuel surcharge). Included below is a reconciliation of operating ratio, which is the most directly comparable GAAP measure, to adjusted operating ratio. Excluded items for the periods shown are explained below under our explanation of “adjusted income from operations.”
(4)We define “adjusted net income” as net income, adjusted to exclude material items that do not reflect our core operating performance. Included below is a reconciliation of net income, which is the most directly comparable GAAP measure, to adjusted net income. Excluded items for the periods shown are explained below under our explanation of “adjusted income from operations.”
Revenues (excluding fuel surcharge)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (in millions) | | 2020 | | 2019 | | 2020 | | 2019 |
| Operating revenues | | $ | 1,135.7 | | | $ | 1,183.9 | | | $ | 3,287.6 | | | $ | 3,590.7 | |
| Less: Fuel surcharge revenues | | 73.0 | | | 114.2 | | | 244.7 | | | 350.2 | |
| Revenues (excluding fuel surcharge) | | $ | 1,062.7 | | | $ | 1,069.7 | | | $ | 3,042.9 | | | $ | 3,240.5 | |
Adjusted income from operations
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (in millions) | | 2020 | | 2019 | | 2020 | | 2019 |
| Income from operations | | $ | 63.3 | | | $ | 29.0 | | | $ | 181.6 | | | $ | 129.7 | |
Litigation (1) | | 13.1 | | | — | | | 13.1 | | | — | |
Goodwill impairment (2) | | — | | | — | | | — | | | 34.6 | |
Restructuring—net (3) | | 0.5 | | | 50.4 | | | (0.5) | | | 50.4 | |
| Adjusted income from operations | | $ | 76.9 | | | $ | 79.4 | | | $ | 194.2 | | | $ | 214.7 | |
(1)Costs, including interest, as a result of an adverse tax ruling in September 2020 related to a dispute with the IRS over the applicability of excise taxes on certain tractors refurbished during tax years 2011 through 2013 and no longer in service.
(2)A triggering event occurred during the second quarter of 2019, as results from our FTFM reporting unit were considerably less than projected, resulting in full impairment of FTFM's goodwill.
(3)Activity associated with the shutdown of the FTFM service offering. Refer to Note 14, Restructuring, for additional details.
Revenues (excluding fuel surcharge)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Operating revenues | | $ | 1,360.8 | | | $ | 1,032.8 | | | $ | 2,589.4 | | | $ | 2,151.9 | |
| Less: Fuel surcharge revenues | | 110.2 | | | 68.7 | | | 200.4 | | | 171.7 | |
| Revenues (excluding fuel surcharge) | | $ | 1,250.6 | | | $ | 964.1 | | | $ | 2,389.0 | | | $ | 1,980.2 | |
Adjusted income from operations
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Income from operations | | $ | 125.8 | | | $ | 63.4 | | | $ | 202.0 | | | $ | 118.3 | |
| | | | | | | | |
| | | | | | | | |
Restructuring—net (1) | | — | | | 0.2 | | | — | | | (1.0) | |
| Adjusted income from operations | | $ | 125.8 | | | $ | 63.6 | | | $ | 202.0 | | | $ | 117.3 | |
(1)Activity associated with the shutdown of the FTFM service offering.
Adjusted operating ratio
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| (in millions, except ratios) | (in millions, except ratios) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions, except ratios) | | 2021 | | 2020 | | 2021 | | 2020 | |
| Total operating expenses | Total operating expenses | | $ | 1,072.4 | | | $ | 1,154.9 | | | $ | 3,106.0 | | | $ | 3,461.0 | | Total operating expenses | | $ | 1,235.0 | | | $ | 969.4 | | | $ | 2,387.4 | | | $ | 2,033.6 | | |
| Divide by: Operating revenues | Divide by: Operating revenues | | 1,135.7 | | | 1,183.9 | | | 3,287.6 | | | 3,590.7 | | Divide by: Operating revenues | | 1,360.8 | | | 1,032.8 | | | 2,589.4 | | | 2,151.9 | | |
| Operating ratio | Operating ratio | | 94.4 | % | | 97.6 | % | | 94.5 | % | | 96.4 | % | Operating ratio | | 90.8 | % | | 93.9 | % | | 92.2 | % | | 94.5 | % | |
| | Total operating expenses | Total operating expenses | | $ | 1,072.4 | | | $ | 1,154.9 | | | $ | 3,106.0 | | | $ | 3,461.0 | | Total operating expenses | | $ | 1,235.0 | | | $ | 969.4 | | | $ | 2,387.4 | | | $ | 2,033.6 | | |
| Adjusted for: | Adjusted for: | | Adjusted for: | | |
| Fuel surcharge revenues | Fuel surcharge revenues | | (73.0) | | | (114.2) | | | (244.7) | | | (350.2) | | Fuel surcharge revenues | | (110.2) | | | (68.7) | | | (200.4) | | | (171.7) | | |
| Litigation | | (13.1) | | | — | | | (13.1) | | | — | | |
| Goodwill impairment | | — | | | — | | | — | | | (34.6) | | |
| | Restructuring—net | Restructuring—net | | (0.5) | | | (50.4) | | | 0.5 | | | (50.4) | | Restructuring—net | | — | | | (0.2) | | | — | | | 1.0 | | |
| Adjusted total operating expenses | Adjusted total operating expenses | | $ | 985.8 | | | $ | 990.3 | | | $ | 2,848.7 | | | $ | 3,025.8 | | Adjusted total operating expenses | | $ | 1,124.8 | | | $ | 900.5 | | | $ | 2,187.0 | | | $ | 1,862.9 | | |
| | Operating revenues | Operating revenues | | $ | 1,135.7 | | | $ | 1,183.9 | | | $ | 3,287.6 | | | $ | 3,590.7 | | Operating revenues | | $ | 1,360.8 | | | $ | 1,032.8 | | | $ | 2,589.4 | | | $ | 2,151.9 | | |
| Less: Fuel surcharge revenues | Less: Fuel surcharge revenues | | 73.0 | | | 114.2 | | | 244.7 | | | 350.2 | | Less: Fuel surcharge revenues | | 110.2 | | | 68.7 | | | 200.4 | | | 171.7 | | |
| Revenues (excluding fuel surcharge) | Revenues (excluding fuel surcharge) | | $ | 1,062.7 | | | $ | 1,069.7 | | | $ | 3,042.9 | | | $ | 3,240.5 | | Revenues (excluding fuel surcharge) | | $ | 1,250.6 | | | $ | 964.1 | | | $ | 2,389.0 | | | $ | 1,980.2 | | |
| | Adjusted operating ratio | Adjusted operating ratio | | 92.8 | % | | 92.6 | % | | 93.6 | % | | 93.4 | % | Adjusted operating ratio | | 89.9 | % | | 93.4 | % | | 91.5 | % | | 94.1 | % | |
Adjusted net income
| | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Net income | Net income | | $ | 44.5 | | | $ | 19.7 | | | $ | 134.8 | | | $ | 91.1 | | Net income | | $ | 106.5 | | | $ | 46.5 | | | $ | 161.3 | | | $ | 90.3 | |
| Litigation | | 13.1 | | | — | | | 13.1 | | | — | | |
| Goodwill impairment | | — | | | — | | | — | | | 34.6 | | |
| | Restructuring—net | Restructuring—net | | 0.5 | | | 50.4 | | | (0.5) | | | 50.4 | | Restructuring—net | | — | | | 0.2 | | | — | | | (1.0) | |
| Income tax effect of non-GAAP adjustments (1) | Income tax effect of non-GAAP adjustments (1) | | (3.5) | | | (12.9) | | | (3.2) | | | (21.7) | | Income tax effect of non-GAAP adjustments (1) | | — | | | — | | | — | | | 0.3 | |
| Adjusted net income | Adjusted net income | | $ | 54.6 | | | $ | 57.2 | | | $ | 144.2 | | | $ | 154.4 | | Adjusted net income | | $ | 106.5 | | | $ | 46.7 | | | $ | 161.3 | | | $ | 89.6 | |
(1)Our estimated tax rate on non-GAAP items is determined annually using the applicable consolidated federal and state effective tax rate,rate, modified to remove the impact of tax credits and adjustments that are not applicable to the specific items. Due to differences in the tax treatment of items excluded from non-GAAP income, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP items may differ from our GAAP tax rate and from our actual tax liabilities.
Three Months Ended SeptemberJune 30, 20202021 Compared to Three Months Ended SeptemberJune 30, 20192020
Enterprise Results Summary
Enterprise net income increased $24.8$60.0 million, approximately 126%129%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019,2020, primarily due to a $49.9$62.4 million decreaseincrease in net restructuring charges associated with the FTFM shutdown in 2019, an $11.5 million decrease in impairment of held for sale assets, and the benefit associated with the FTFM shutdown, as FTFM's lossincome from operations, in the third quarter of 2019 was $8.9 million. The positive impact of these items was partially offset by a decline in Truckload freight volumes resulting primarily from driver capacity constraints, a $13.1 million adverse outcome for an excise tax audit in the third quarter of 2020, and ancorresponding increase in income taxes relatedtaxes. In addition, the second quarter of 2021 included a $20.2 million pre-tax gain on our ownership interest in TuSimple compared to higher taxable income.a $2.7 million pre-tax gain on our ownership interest in PSI in the second quarter of 2020.
Adjusted net income decreased $2.6increased $59.8 million, approximately 5%128%.
Components of Enterprise Net Income
Enterprise Revenues
Enterprise operating revenues decreased $48.2increased $328.0 million, approximately 4%32%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019.2020.
Factors contributing to the decreaseincrease were as follows:
•a $55.4$199.8 million increase in Logistics segment revenues (excluding fuel surcharge) due to an increase in revenue per order and volume growth;
•a $55.0 million increase in Intermodal segment revenues (excluding fuel surcharge) due to an improvement in revenue per order and an increase in orders despite network fluidity constraints;
•a $41.5 million increase in fuel surcharge revenues resulting from an increase in fuel prices in the second quarter of 2021 compared to the same quarter in 2020 (for example, based on information reported by the U.S. Department of Energy, the average diesel price per gallon in the U.S. increased by 31% between such periods) and an increase in Intermodal volumes, partially offset by a decrease in Truckload volumes; and
•a $24.1 million increase in Truckload segment revenues (excluding fuel surcharge) resulting from an overall decrease in Truckload volume driven by driver capacity constraints, and the shutdown of our FTFM service offering in August 2019 which generated $14.0 million of revenues in the third quarter of 2019; and
•a $41.2 million decrease in fuel surcharge revenues primarily resulting from a 19% decline in average diesel priceimproved revenue per gallon in the U.S. as reported by the Department of Energy, a decline in Truckload volumes, and a $2.6 million reduction related to the FTFM shutdown.
The above factors weretruck per week, partially offset by a $48.3 million increase in Logistics revenues (excluding fuel surcharge)lower volumes due to volume growth and an increase in revenue per order.driver capacity constraints.
Enterprise revenues (excluding fuel surcharge) decreased $7.0increased $286.5 million, approximately 1%30%.
Enterprise Income from Operations and Operating Ratio
Enterprise income from operations increased $34.3$62.4 million, approximately 118%98%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019,2020, primarily due to a $49.9 million decreasean increase in net restructuring charges associated withrevenue per order in Logistics, revenue per truck per week in Truckload, and revenue per order in Intermodal; as well as favorability in equipment dispositions and insurance costs. Increases in revenue per truck per week in Truckload and revenue per order in Intermodal resulted from favorable 2021 market conditions compared to the FTFM shutdown in 2019, an $11.5 million decrease in impairmentunfavorable impacts of held for sale assets, and the benefit associated with the FTFM shutdown, as FTFM's loss from operationsCOVID-19 in the third quarter of 2019 was $8.9 million. Continued cost savings attributable to a reduction in headcount, favorability in insurance costs, and lower healthcare costs also contributed to the increase in income from operations. Thoseprior year. The above factors were partially offset by an increase in driver costs and a reduction in Truckload freight volumes primarily due to driver capacity constraints, a $15.7 million increase in performance-based incentive compensation, and $13.1 million of costs related to an adverse excise tax audit ruling in the third quarter of 2020.constraints.
Adjusted income from operations decreased $2.5increased $62.2 million, approximately 3%98%.
Enterprise operating ratio improved on both a GAAP basis but weakened on anand adjusted basis when compared to thirdthe second quarter of 2019.2020. Among other factors, our operating ratio can be negatively impacted by changes in portfolio mix when our higher operating ratio, less asset-focused Logistics segment grows faster than our lower operating ratio, capital-intensive Truckload segment.
Enterprise Operating Expenses
Key operating expense fluctuations are described below.
•Purchased transportation costs decreased $10.7increased $212.5 million, or 2%49%, quarter over quarter, primarily due to reduced owner-operator and third party carrier costs within Truckload resulting from a decrease in volumes, shift in business mix, and rate compression due to market conditions, as well as a $5.3 million reduction attributable to the FTFM shutdown. Intermodal purchased transportation was also favorable quarter over quarter due to a decline in rail cost per mile resulting from mix changes and market conditions. These decreases were partially offset by an increase inincreased third party carrier costs within Logistics dueattributable to volume growth and higher purchased transportation per order.order and volume growth and, within Intermodal, higher rail purchased transportation resulting from an increase in both rail orders and costs.
•Salaries, wages, and benefits increased $1.9$27.8 million, or 1%11%, quarter over quarter, primarily due to a $15.7 millionan increase in Logistics salaries and wages, driver pay, and performance-based incentive compensation, partially offset by the benefit associated with the FTFM shutdown, as FTFM'scompensation. The increase in Logistics salaries and wages and benefits were $7.6 millionwas primarily due to an increase in the third quarter of 2019, reduced health insurance costs of $4.7 million driven by favorable claims experience and fewer plan participants,sales commissions and headcount, reductions acrosswhile the organization.increase in driver pay was largely the result of pay increases and actions to mitigate driver capacity constraints.
•Fuel and fuel taxes for company trucks decreased $21.1increased $27.9 million, or 30%66%, quarter over quarter, driven primarily by a decreasean increase in cost per gallon and less company driver miles within our Truckload segment.gallon. A significant portion of fuel costs are recovered through our fuel surcharge programs.
•Operating supplies and expenses increased $5.5decreased $1.9 million, or 4%2%, quarter over quarter, largely a result of a $15.1 million favorable change in equipment dispositions driven by a $13.1 million adverse tax ruling related to a dispute withstrong used equipment market and the IRS over the applicabilitystrength of excise taxes on certain tractors refurbished during tax years 2011 through 2013 and no longerour nationwide maintenance network in service and an increasefacilitating equipment sales. Favorability in maintenance costs,equipment dispositions was partially offset by an $11.5 million decreaseincrease in impairmentequipment rental expense due to port congestion, higher cost of held for sale assets.goods sold as a result of increased lease activity by our leasing business, and additional rail storage expenses caused by network fluidity constraints.
•Insurance and related expenses decreased $7.0$11.3 million, or 29%40%, quarter over quarter, primarily due to favorability in auto liability resulting from a decrease in claims severity and frequency, partially offset by an increase in insurance premiums.frequency.
•Restructuring—net was $49.9Other general expenses increased $9.9 million, favorableor 44%, quarter over quarter, primarily due to higher initialdriver onboarding costs resulting from a constrained driver pool compared to favorable driver turnover in 2020 during the pandemic. The remaining increase was largely related to impairment charges, receivable write-downs,costs associated with software development and other shut down costs recorded in the third quarter of 2019 when the FTFM business was shut down. Refer to Note 14, Restructuring, for additional details.professional services.
Total Other Expenses (Income)
Other expenseTotal other income increased $0.9$17.7 million approximately 39%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019 due primarily2020, mainly resulting from a $20.2 million pre-tax gain on our ownership interest in TuSimple in the second quarter of 2021 compared to a $1.4$2.7 million decreasepre-tax gain on our ownership interest in interest income as interest rates have declinedPSI in the second quarter over quarter, partially offset by a $0.4 million decreaseof 2020. See Note 5, Investments, for more information on our investments in interest expense as a result of lower outstanding debt balances quarter over quarter.TuSimple and PSI.
Income Tax Expense
Our provision for income taxes increased $8.6$20.1 million, approximately 123%124%, in the thirdsecond quarter of 20202021 compared to the same quarter in 20192020 due to higher taxable income. The effective income tax rate was 26.0%25.4% for the three months ended SeptemberJune 30, 20202021 compared to 26.2%25.8% for the same quarter last year. Our provision for income taxes may fluctuate in future periods to the extent there are changes to tax laws and regulations.
Revenues and Income (Loss) from Operations by Segment
The following tables summarize revenuerevenues and income (loss) from operations by segment:segment.
| | | Three Months Ended
September 30, | | Three Months Ended
June 30, |
Revenues by Segment (in millions) | Revenues by Segment (in millions) | | 2020 | | 2019 | Revenues by Segment (in millions) | | 2021 | | 2020 |
| Truckload | Truckload | | $ | 460.2 | | | $ | 515.6 | | Truckload | | $ | 475.2 | | | $ | 451.1 | |
| Intermodal | Intermodal | | 248.4 | | | 249.2 | | Intermodal | | 274.0 | | | 219.0 | |
| Logistics | Logistics | | 284.4 | | | 236.1 | | Logistics | | 430.7 | | | 230.9 | |
| Other | Other | | 85.5 | | | 94.3 | | Other | | 88.5 | | | 89.8 | |
| Fuel surcharge | Fuel surcharge | | 73.0 | | | 114.2 | | Fuel surcharge | | 110.2 | | | 68.7 | |
| Inter-segment eliminations | Inter-segment eliminations | | (15.8) | | | (25.5) | | Inter-segment eliminations | | (17.8) | | | (26.7) | |
| Operating revenues | Operating revenues | | $ | 1,135.7 | | | $ | 1,183.9 | | Operating revenues | | $ | 1,360.8 | | | $ | 1,032.8 | |
| | | | | | | | | | | | | | |
| | Three Months Ended
September 30, |
Income (Loss) from Operations by Segment (in millions) | | 2020 | | 2019 |
| Truckload | | $ | 45.6 | | | $ | (12.5) | |
| Intermodal | | 23.0 | | | 25.1 | |
| Logistics | | 9.1 | | | 9.9 | |
| Other | | (14.4) | | | 6.5 | |
| Income from operations | | 63.3 | | | 29.0 | |
| Adjustments: | | | | |
| Litigation | | 13.1 | | | — | |
| | | | |
| Restructuring—net | | 0.5 | | | 50.4 | |
| Adjusted income from operations | | $ | 76.9 | | | $ | 79.4 | |
| | | | | | | | | | | | | | |
| | Three Months Ended
June 30, |
Income from Operations by Segment (in millions) | | 2021 | | 2020 |
| Truckload | | $ | 73.6 | | | $ | 40.5 | |
| Intermodal | | 34.9 | | | 11.0 | |
| Logistics | | 17.0 | | | 8.2 | |
| Other | | 0.3 | | | 3.7 | |
| Income from operations | | 125.8 | | | 63.4 | |
| Adjustments: | | | | |
| | | | |
| | | | |
| Restructuring—net | | — | | | 0.2 | |
| Adjusted income from operations | | $ | 125.8 | | | $ | 63.6 | |
We monitor and analyze a number of KPIs in order to manage our business and evaluate our financial and operating performance. Below are our KPIs by segment.
Truckload
The following table presents the KPIs for our Truckload segment for the periods indicated, consistent with how revenues and expenses are reported internally for segment purposes. Prior to 2020, we reported KPIs within our Truckload segment by quadrant. Going forward, KPIs will be reported for our dedicated and network operations only. This presentation change does not impact KPIs at the segment level. Descriptions of the two operations that make up our Truckload segment are as follows:
•Dedicated - Transportation services with equipment devoted to customers under long-term contracts.
•Network - Transportation services of one-way shipments, formerly called for-hire.shipments.
| | | | Three Months Ended
September 30, | | | Three Months Ended
June 30, |
| | | 2020 | | 2019 | | | 2021 | | 2020 |
| Dedicated | Dedicated | | | | Dedicated | | | | |
Revenues (excluding fuel surcharge) (1) | Revenues (excluding fuel surcharge) (1) | $ | 177.8 | | | $ | 175.7 | | Revenues (excluding fuel surcharge) (1) | | $ | 198.5 | | | $ | 172.2 | |
Average trucks (2) (3) | Average trucks (2) (3) | 3,944 | | | 3,907 | | Average trucks (2) (3) | | 4,156 | | | 3,891 | |
Revenue per truck per week (4) | Revenue per truck per week (4) | $ | 3,483 | | | $ | 3,471 | | Revenue per truck per week (4) | | $ | 3,719 | | | $ | 3,448 | |
| Network | Network | | Network | |
Revenues (excluding fuel surcharge) (1) | Revenues (excluding fuel surcharge) (1) | $ | 281.5 | | | $ | 340.3 | | Revenues (excluding fuel surcharge) (1) | | $ | 276.8 | | | $ | 279.3 | |
Average trucks (2) (3) | Average trucks (2) (3) | 6,108 | | | 7,012 | | Average trucks (2) (3) | | 5,131 | | | 6,350 | |
Revenue per truck per week (4) | Revenue per truck per week (4) | $ | 3,561 | | | $ | 3,746 | | Revenue per truck per week (4) | | $ | 4,201 | | | $ | 3,426 | |
| Total Truckload | Total Truckload | | Total Truckload | |
Revenues (excluding fuel surcharge) (5) | Revenues (excluding fuel surcharge) (5) | $ | 460.2 | | | $ | 515.6 | | Revenues (excluding fuel surcharge) (5) | | $ | 475.2 | | | $ | 451.1 | |
Average trucks (2) (3) | Average trucks (2) (3) | 10,052 | | | 10,919 | | Average trucks (2) (3) | | 9,287 | | | 10,241 | |
Revenue per truck per week (4) | Revenue per truck per week (4) | $ | 3,530 | | | $ | 3,648 | | Revenue per truck per week (4) | | $ | 3,985 | | | $ | 3,434 | |
Average company trucks (3) | Average company trucks (3) | 7,250 | | | 7,998 | | Average company trucks (3) | | 6,930 | | | 7,366 | |
Average owner-operator trucks (3) | Average owner-operator trucks (3) | 2,802 | | | 2,921 | | Average owner-operator trucks (3) | | 2,357 | | | 2,875 | |
Trailers | Trailers | 36,672 | | | 35,612 | | Trailers | | 36,519 | | | 36,141 | |
Operating ratio (6)(7) | Operating ratio (6)(7) | 90.1 | % | | 102.4 | % | Operating ratio (6)(7) | | 84.5 | % | | 91.0 | % |
(1)Revenues (excluding fuel surcharge), in millions, exclude revenue in transit.
(2)Includes company trucks and owner-operator trucks.
(3)Calculated based on beginning and end of month counts and represents the average number of trucks available to haul freight over the specified timeframe.
(4)Calculated excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes, using weighted workdays.
(5)Revenues (excluding fuel surcharge), in millions, include revenue in transit at the operating segment level and, therefore does not sum with amounts presented above.
(6)Includes entire fleet of owned trailers, including trailers with leasing arrangements between Truckload and Logistics.
(7)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
Truckload revenues (excluding fuel surcharge) decreased $55.4increased $24.1 million, approximately 11%5%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019, driven by a 6% reduction in volumes2020. The increase was primarily due to capacity constraints resulting,an improvement in part, from the impacts of COVID-19. The shutdown of our FTFM service offering in August 2019, which generated $14.0 million of revenues in the third quarter of 2019, and price, deterioration in the remaining dedicated and network business also contributed to the revenue decline. Price decreased 2% compared to the same quarter in 2019 due to lower contracted freight rates, partially offset by improvementsan 8% decline in the spot market, and was the main contributor of the $118, or 3%, decrease in revenuevolume. Revenue per truck per week increased $551, or 16%, quarter over quarter.quarter, as a result of a 16% increase in rate per loaded mile driven by higher spot and contracted rates. Volume decreased mainly due to continued driver capacity constraints within our network business, partially offset by growth within our dedicated business.
Truckload income from operations increased $58.1$33.1 million, approximately 82%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019,2020, primarily due mainlyto spot market opportunities and contract renewals, in addition to a decrease$13.5 million favorable change in net restructuring activity of $49.9 million,equipment dispositions and a reduction in impairment charges on assets held for sale of $11.5 million, and the benefit associated with the FTFM shutdown, as FTFM's loss from operations in the third quarter of 2019 was $8.9 million.auto liability costs. These items were partially offset by the unfavorable earnings impact of reduced volume, and price noted above, and an increase in equipment maintenance, performance-based incentive compensation, and equipment dispositiondriver-related costs.
Intermodal
The following table presents the KPIs for our Intermodal segment for the periods indicated.
In support of a few key customers, we provide dray-only service utilizing our drivers and chassis. The length of haul and revenue characteristics of dray-only service are much different than rail. Prior to 2020, we reported orders and revenue per order inclusive of dray-only activity. Due to increased dray-only activity, orders and revenue per order presented below for both 2020 and 2019 exclude dray-only shipments to not distort period over period comparisons in our core-rail KPIs.
| | | | Three Months Ended
September 30, | | | Three Months Ended
June 30, |
| | | 2020 | | 2019 | | | 2021 | | 2020 |
Orders (1) | Orders (1) | 110,633 | | | 108,663 | | Orders (1) | | 113,894 | | | 98,362 | |
| Containers | Containers | 21,744 | | | 23,014 | | Containers | | 22,179 | | | 21,172 | |
Trucks (2) | Trucks (2) | 1,582 | | | 1,544 | | Trucks (2) | | 1,729 | | | 1,508 | |
Revenue per order (3) | Revenue per order (3) | $ | 2,194 | | | $ | 2,296 | | Revenue per order (3) | | $ | 2,399 | | | $ | 2,145 | |
Operating ratio (4) | Operating ratio (4) | 90.7 | % | | 89.9 | % | Operating ratio (4) | | 87.3 | % | | 95.0 | % |
(1)Based on delivered rail orders.
(2)Includes company trucks and owner-operator trucks at the end of the period.
(3)Calculated using rail revenues excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes.
(4)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
Intermodal revenues (excluding fuel surcharge) decreased $0.8increased $55.0 million, approximately 25%, in the thirdsecond quarter of 20202021 compared to the same quarter in 20192020. The increase was primarily attributabledue to a $102,$254, or 4%12%, decrease in revenue per order. The decreaseimprovement in revenue per order was due to continuedresulting mainly from favorable customer rate renewals and premium opportunities, partially offset by growth of volume in the East, which has a shorter length of haul, partially offset by anhaul. Also contributing to the increase in price. Orders increased 2%,revenues was a 16% increase in orders driven by favorable market demand conditions, despite network disruptions and dray capacity constraints helping to partially offset revenue decreases from the geographical shift in volume mix noted above.and supply chain inefficiencies.
Intermodal income from operations decreased $2.1increased $23.9 million approximately 8%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019. Factors2020, driven by the factors affecting revenue discussed above, partially offset by higher rail and an increase in performance-based incentive compensation both contributeddriver-related costs mainly due to the decrease in income from operations within Intermodal.network fluidity and capacity challenges.
Logistics
The following table presents the KPI for our Logistics segment for the periods indicated.
| | | | | | | | | | | |
| | Three Months Ended
September 30, |
| | 2020 | | 2019 |
Operating ratio (1) | 96.8 | % | | 95.8 | % |
| | | |
| | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, |
| | | 2021 | | 2020 |
Operating ratio (1) | | 96.1 | % | | 96.4 | % |
| | | | |
(1)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
Logistics revenues (excluding fuel surcharge) increased $48.3$199.8 million, approximately 20%87%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019,2020, primarily resulting from volume growth anddriven by an increase in revenue per order.order and volume growth of 23% within our brokerage business due to favorable market conditions and expansion of our digital platform.
Logistics income from operations decreased $0.8increased $8.8 million, approximately 8%107%, in the thirdsecond quarter of 20202021 compared to the same quarter in 2019, primarily due2020. Net revenue per order improvements within our brokerage business and the volume growth cited above both contributed to compressed net revenue resultingthe increase in income from higher purchased transportation costs.operations quarter over quarter.
Other
Included in Other was a lossincome from operations of $14.4decreased $3.4 million, approximately 92%, in the thirdsecond quarter of 2020,2021 compared to income of $6.5 million in the same quarter in 2019.2020. The changedecrease was primarily driven by $13.1 million of costs as a result of an adverse tax ruling in the third quarter of 2020 and an $11.0 million increase in performance-based incentive compensation. Increased costs werecompensation, partially offset by a $1.3 millionan increase in income from operations from our leasing business.business due to increased lease activity quarter over quarter.
NineSix Months Ended SeptemberJune 30, 20202021 Compared to NineSix Months Ended SeptemberJune 30, 20192020
Enterprise Results Summary
Enterprise net income increased $43.7$71.0 million, approximately 48%79%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 20192020, primarily due to a $50.9an $83.7 million decreaseincrease in net restructuring charges associated with the FTFM shutdown in 2019, the $34.6 million FTFM goodwill impairment recorded in 2019, and the benefit associated with the FTFM shutdown, as FTFM’s lossincome from operations, partially offset by the corresponding increase in income taxes. In addition, the first ninesix months of 2019 was $34.2 million. Also contributing to favorable net income period over period was an $8.8ended June 30, 2021 included a $20.2 million pre-tax gain on our ownership interest in PSI. These items were partially offset by a decline in Truckload and Intermodal freight volumes, a reduction in price across all of our service offerings, an increase in income taxes related to higher taxable income, and $13.1 million of costs relatedTuSimple compared to an adverse outcome for an excise tax audit$8.8 million pre-tax gain on our ownership interest in PSI in the third quarter ofsix months ended June 30, 2020.
Adjusted net income decreased $10.2increased $71.7 million, approximately 7%80%.
Components of Enterprise Net Income
Enterprise Revenues
Enterprise operating revenues decreased $303.1increased $437.5 million, approximately 8%20%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019.2020.
Factors contributing to the decreaseincrease were as follows:
•a $201.6$316.1 million increase in Logistics segment revenues (excluding fuel surcharge) due to an increase in revenue per order and volume growth;
•a $72.8 million increase in Intermodal segment revenues (excluding fuel surcharge) due to an improvement in revenue per order and an increase in orders despite network fluidity constraints;
•a $28.7 million increase in fuel surcharge revenues resulting from an increase in fuel prices in the first half of 2021 compared to the same period in 2020 (for example, based on information reported by the U.S. Department of Energy, the average diesel price per gallon in the U.S. increased by 13% between such periods) and an increase in Intermodal volumes, partially offset by a decrease in Truckload volumes; and
•a $6.4 million increase in Truckload segment revenues (excluding fuel surcharge) resulting from a decrease in both Truckload volume and priceimproved revenue per truck per week, partially offset by lower volumes due to the impact of COVID-19 on market conditions and constrained driver capacity as well as the shutdown of our FTFM service offering in August 2019 which generated $77.4 million of revenues in theconstraints and first nine months of 2019;
•a $105.5 million decrease in fuel surcharge revenues resulting from a 15% decline in average diesel price per gallon in the U.S. as reported by the Department of Energy, a decline in Truckload and Intermodal volumes, and a $13.1 million reduction related to the FTFM shutdown; and
•a $41.2 million decrease in Intermodal segment revenues (excluding fuel surcharge) primarily due to a decrease in both volume and price driven primarily by COVID-19 induced network disruptions, shorter length of haul, and freight mix.quarter weather conditions.
The above factors were partially offset by a $47.9 million increase in Logistics revenues (excluding fuel surcharge) due to volume growth, partially offset by a reduction in revenue per order.
Enterprise revenues (excluding fuel surcharge) decreased $197.6increased $408.8 million, approximately 6%21%.
Enterprise Income from Operations and Operating Ratio
Enterprise income from operations increased $51.9$83.7 million, approximately 40%71%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019,2020, primarily due to a $50.9 million decreasean increase in net restructuring charges associated withrevenue per order in Logistics, revenue per truck per week in Truckload, and revenue per order in Intermodal; as well as favorability in equipment dispositions and insurance costs. Increases in revenue per truck per week in Truckload and revenue per order in Intermodal resulted from favorable 2021 market conditions compared to the FTFM shutdown in 2019, the $34.6 million FTFM goodwill impairment recorded in 2019, and the benefit associated with the FTFM shutdown, as FTFM’s loss from operationsunfavorable impacts of COVID-19 in the first nine months of 2019 was $34.2 million. Continued cost savings attributable to a reduction in headcount, lower healthcare costs, reductions in other operating expenses, and favorable driver onboarding expenses also contributed to the increase in income from operations. Those increasesprior year. The above factors were partially offset by an increase in driver costs and a reduction in Truckload and Intermodal freight volumes primarily due to COVID-19 market disruptions and driver capacity constraints lower price across all of our service offerings, a $13.9 million increase in performance-based incentive compensation, and $13.1 million of costs related to an adverse excise tax audit judgment in the thirdfirst quarter of 2020.weather conditions.
Adjusted income from operations decreased $20.5increased $84.7 million, approximately 10%72%.
Enterprise operating ratio improved on both a GAAP basis but weakened on anand adjusted basis when compared to the same period of 2019. Our2020. Among other factors, our operating ratio can be negatively impacted by changes in portfolio mix when our higher operating ratio, less asset-focused Logistics segment grows faster than our lower operating ratio, capital-intensive Truckload segment.
Enterprise Operating Expenses
Key operating expense fluctuations are described below.
•Purchased transportation costs decreased $71.1increased $291.4 million, or 5%32%, period over period, primarily due to a decrease in Truckload and Intermodal volumes, reduced owner-operator andincreased third party carrier costs within Truckload resulting from business mix and rate compressionLogistics due to market conditions, and a $24.7 million reduction in purchased transportation costs related to the FTFM shutdown. This was partially offset by an increase in third party carrier costs within our Logistics segment due to volume growth and higher purchased transportation per order.order and volume growth and, in Intermodal, higher rail purchased transportation resulting from an increase in both rail orders and costs. These items were partially offset by reduced owner-operator costs within Truckload primarily resulting from fewer owner-operators.
•Salaries, wages, and benefits decreased $85.2increased $30.5 million, or 10%6%, period over period, largely due to the benefit associated with the FTFM shutdown and warehouse management operations insourced by an import/export customer in April 2019, as well as headcount reductions across the organization, a $13.0 million reduction in healthcare costs primarily due to favorable claims experience and fewer plan participants, and a decrease in workers' compensation expense of $2.0 million. These decreases were partially offset by a $13.9 millionan increase in Logistics salaries and wages, performance-based incentive compensation.compensation, and driver pay. The increase in Logistics salaries and wages was primarily due to an increase in sales commissions and headcount, while the increase in driver pay was largely the result of pay increases and actions to mitigate driver capacity constraints.
•Fuel and fuel taxes for company trucks decreased $69.1increased $30.8 million, or 31%30%, period over period, driven primarily by a decreasean increase in cost per gallon, less company driver miles within our Truckload segment, and a $10.6 million reduction in fuel and fuel taxes attributable to the FTFM shutdown.gallon. A significant portion of fuel costs are recovered through our fuel surcharge programs.
•Depreciation and amortization decreased $6.1increased $4.2 million, or 3%, period over period, primarily driven by the FTFM shutdown.an increase in amortization related to capitalized software.
•Operating supplies and expenses decreased $22.6increased $2.2 million, or 5%1%, period over period, driven by a $12.1 million decreasean increase in facility, utility, and other costs primarilyequipment rental expense due to temporary facility closures associated with COVID-19, reduced volumes, the FTFM shutdown,port congestion, as well as higher rail storage and various other cost savings initiatives, a $7.9 million decrease in impairment of held for sale assets, a $7.9 million decline inmaintenance expenses resulting from network fluidity constraints and poor first quarter weather conditions. Higher cost of goods sold due to a decreasean increase in equipment sales under sales-type leaseslease activity by our leasing business a $5.5 million reduction in temporary worker pay due to insourcing by one of our import/export customers, and reductionsimmaterial increases in a variety of other operating-related areas also contributed to the increase in operating supplies and expenses that were individually immaterial.period over period. These decreasesitems were partially offset by $13.1favorability of $19.8 million of costs for an adverse tax ruling relatedin equipment dispositions due to a dispute withstrong used equipment market and the IRS over the applicabilitystrength of excise taxes on certain tractors refurbished during tax years 2011 through 2013 and no longerour nationwide maintenance network in service and an $8.0 million change infacilitating equipment dispositions. In the first nine months of 2020, we recorded $5.4 million of net equipment losses compared to $2.6 million of net equipment gains for the same period last year.sales.
•Insurance and related expenses decreased $3.1$16.1 million, or 4%28%, period over period. The decrease was predominatelyperiod, primarily due to favorability in auto liability resulting from a reductiondecrease in cargoclaims severity and collision losses.frequency.
•Other general expenses decreased $12.3increased $9.8 million, or 14%19%, period over period, as a result of reduced travel expensesprimarily due to an increase in costs associated with software development and professional services. The remaining increase is attributable to higher driver onboarding costs resulting from Company enforced travel bans relateda constrained driver pool compared to COVID-19, as well as a decline in driver recruiting and training costs due to lower companyfavorable driver turnover and cost savings initiatives. Additional costs were incurred in the driver recruiting and training space to safely onboard new drivers during COVID-19; however, these costs were more than offset by savings from lower company driver turnover and fewer hires. We expect our travel expenses to continue to be incurred at a reduced level for the remainder of 2020 as a result of COVID-19. While driver recruiting and training costs remain favorable year-to-date, driver capacity constraints have begun to put pressure on these costs in the second half of the year.
•Goodwill impairment charges decreased $34.6 million, period over period, due to the FTFM goodwill impairment charge of $34.6 million in the second quarter of 2019.
•Restructuring—net was $50.9 million favorable, period over period, due to net gains on equipment sales and bad debt recoveries in 2020 compared to impairment charges, receivable write-downs, and other costs recorded induring the third quarter of 2019 when the FTFM business was shut down. Refer to Note 14, Restructuring, for additional details.pandemic.
Total Other Expenses (Income)
Other expense decreased $7.2Total other income increased $10.9 million approximately 94%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019,2020, primarily from a $20.2 million pre-tax gain on our ownership interest in TuSimple in the six months ended June 30, 2021 compared to an $8.8 million pre-tax gain recognized on our ownership interest in PSI and a $2.6 million decrease in interest expense as a result of lower outstanding debt balances period over period.the six months ended June 30, 2020. See Note 6,5, Investments, for more information on PSI. These items were partially offset by a $3.7 million decreaseour investments in interest income attributed to a decline in interest rates.TuSimple and PSI.
Income Tax Expense
Our provision for income taxes increased $15.4$23.6 million, approximately 50%77%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 20192020 due to higher taxable income. The effective income tax rate was 25.6%25.2% for the ninesix months ended SeptemberJune 30, 20202021 compared to 25.3%25.4% for the same period last year. Our provision for income taxes may fluctuate in future periods to the extent there are changes to tax laws and regulations.
Revenues and Income (Loss) from Operations by Segment
The following tables summarize revenue and income (loss) from operations by segment.
| | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, |
Revenues by Segment (in millions) | | 2020 | | 2019 |
| Truckload | | $ | 1,380.7 | | | $ | 1,582.3 | |
| Intermodal | | 705.4 | | | 746.6 | |
| Logistics | | 754.9 | | | 707.0 | |
| Other | | 274.7 | | | 290.0 | |
| Fuel surcharge | | 244.7 | | | 350.2 | |
| Inter-segment eliminations | | (72.8) | | | (85.4) | |
| Operating revenues | | $ | 3,287.6 | | | $ | 3,590.7 | |
| | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, |
Income (Loss) from Operations by Segment (in millions) | | 2020 | | 2019 |
| Truckload | | $ | 122.7 | | | $ | 18.6 | |
| Intermodal | | 50.3 | | | 75.5 | |
| Logistics | | 21.5 | | | 29.4 | |
| Other | | (12.9) | | | 6.2 | |
| Income from operations | | 181.6 | | | 129.7 | |
| Adjustments: | | | | |
| Litigation | | 13.1 | | | — | |
| Goodwill impairment | | — | | | 34.6 | |
| Restructuring—net | | (0.5) | | | 50.4 | |
| Adjusted income from operations | | $ | 194.2 | | | $ | 214.7 | |
| | | | | | | | | | | | | | |
| | Six Months Ended
June 30, |
Revenues by Segment (in millions) | | 2021 | | 2020 |
| Truckload | | $ | 926.9 | | | $ | 920.5 | |
| Intermodal | | 529.8 | | | 457.0 | |
| Logistics | | 786.6 | | | 470.5 | |
| Other | | 186.9 | | | 189.2 | |
| Fuel surcharge | | 200.4 | | | 171.7 | |
| Inter-segment eliminations | | (41.2) | | | (57.0) | |
| Operating revenues | | $ | 2,589.4 | | | $ | 2,151.9 | |
| | | | | | | | | | | | | | |
| | Six Months Ended
June 30, |
Income from Operations by Segment (in millions) | | 2021 | | 2020 |
| Truckload | | $ | 111.9 | | | $ | 77.1 | |
| Intermodal | | 54.9 | | | 27.3 | |
| Logistics | | 32.9 | | | 12.4 | |
| Other | | 2.3 | | | 1.5 | |
| Income from operations | | 202.0 | | | 118.3 | |
| Adjustments: | | | | |
| | | | |
| | | | |
| Restructuring—net | | — | | | (1.0) | |
| Adjusted income from operations | | $ | 202.0 | | | $ | 117.3 | |
We monitor and analyze a number of KPIs in order to manage our business and evaluate our financial and operating performance. Below are our KPIs by segment.
Truckload
The following table presents the KPIs for our Truckload segment for the periods indicated, consistent with how revenues and expenses are reported internally for segment purposes. Prior to 2020, we reported KPIs within our Truckload segment by quadrant. Going forward, KPIs will be reported for our dedicated and network operations only. This presentation change does not impact KPIs at the segment level. Descriptions of the two operations that make up our Truckload segment are as follows:
•Dedicated - Transportation services with equipment devoted to customers under long-term contracts.
•Network - Transportation services of one-way shipments, formerly called for-hire.shipments.
| | | | Nine Months Ended
September 30, | | | Six Months Ended
June 30, |
| | | 2020 | | 2019 | | | 2021 | | 2020 |
| Dedicated | Dedicated | | | | Dedicated | | | | |
Revenues (excluding fuel surcharge) (1) | Revenues (excluding fuel surcharge) (1) | $ | 526.1 | | | $ | 532.7 | | Revenues (excluding fuel surcharge) (1) | | $ | 383.3 | | | $ | 348.3 | |
Average trucks (2) (3) | Average trucks (2) (3) | 3,912 | | | 3,938 | | Average trucks (2) (3) | | 4,140 | | | 3,898 | |
Revenue per truck per week (4) | Revenue per truck per week (4) | $ | 3,478 | | | $ | 3,514 | | Revenue per truck per week (4) | | $ | 3,622 | | | $ | 3,475 | |
| Network | Network | | Network | |
Revenues (excluding fuel surcharge) (1) | Revenues (excluding fuel surcharge) (1) | $ | 852.6 | | | $ | 1,048.3 | | Revenues (excluding fuel surcharge) (1) | | $ | 541.7 | | | $ | 571.1 | |
Average trucks (2) (3) | Average trucks (2) (3) | 6,242 | | | 7,383 | | Average trucks (2) (3) | | 5,272 | | | 6,325 | |
Revenue per truck per week (4) | Revenue per truck per week (4) | $ | 3,533 | | | $ | 3,688 | | Revenue per truck per week (4) | | $ | 4,020 | | | $ | 3,511 | |
| Total Truckload | Total Truckload | | Total Truckload | |
Revenues (excluding fuel surcharge) (5) | Revenues (excluding fuel surcharge) (5) | $ | 1,380.7 | | | $ | 1,582.3 | | Revenues (excluding fuel surcharge) (5) | | $ | 926.9 | | | $ | 920.5 | |
Average trucks (2) (3) | Average trucks (2) (3) | 10,154 | | | 11,321 | | Average trucks (2) (3) | | 9,412 | | | 10,223 | |
Revenue per truck per week (4) | Revenue per truck per week (4) | $ | 3,512 | | | $ | 3,628 | | Revenue per truck per week (4) | | $ | 3,845 | | | $ | 3,497 | |
Average company trucks (3) | Average company trucks (3) | 7,298 | | | 8,433 | | Average company trucks (3) | | 6,995 | | | 7,339 | |
Average owner-operator trucks (3) | Average owner-operator trucks (3) | 2,856 | | | 2,888 | | Average owner-operator trucks (3) | | 2,417 | | | 2,884 | |
Trailers | Trailers | 36,672 | | | 35,612 | | Trailers | | 36,519 | | | 36,141 | |
Operating ratio (6)(7) | Operating ratio (6)(7) | 91.1 | % | | 98.8 | % | Operating ratio (6)(7) | | 87.9 | % | | 91.6 | % |
(1)Revenues (excluding fuel surcharge), in millions, exclude revenue in transit.
(2)Includes company trucks and owner-operator trucks.
(3)Calculated based on beginning and end of month counts and represents the average number of trucks available to haul freight over the specified timeframe.
(4)Calculated excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes, using weighted workdays.
(5)Revenues (excluding fuel surcharge), in millions, include revenue in transit at the operating segment level and, therefore does not sum with amounts presented above.
(6)Includes entire fleet of owned trailers, including trailers with leasing arrangements between Truckload and Logistics.
(7)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
Truckload revenues (excluding fuel surcharge) decreased $201.6 million, approximately 13%, in the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to a decline in both volume and price, and the shutdown of our FTFM service offering in August 2019 which generated $77.4 million of revenues in the nine months ended September 30, 2019. Volume and price declined 5% and 3%, respectively, from the same period in 2019, as a result of early 2020 soft market conditions being compounded by the shutdown of non-essential businesses in response to COVID-19 and capacity constraints resulting, in part, from the impacts of COVID-19. Revenue per truck per week decreased $116, or 3%, period over period as lower price was partially offset by productivity improvements.
Truckload income from operations increased $104.1 million in the nine months ended September 30, 2020 compared to the same period in 2019, due mainly to a decrease in net restructuring activity of $50.9 million, the $34.6 million FTFM goodwill impairment recorded in 2019, the benefit associated with the FTFM shutdown, as FTFM's loss from operations in the nine months ended September 30, 2019 was $34.2 million, and a reduction in impairment charges on assets held for sale of $8.3 million. These items were partially offset by the unfavorable earnings impact of reduced volume and price noted above, increased equipment disposition costs resulting from used equipment market conditions in 2020, and increased performance-based incentive compensation costs.
Truckload revenues (excluding fuel surcharge) increased $6.4 million, approximately 1%, in the six months ended June 30, 2021 compared to the same period in 2020 as an improvement in price was partially offset by a 10% decline in volume. Revenue per truck per week increased $348, or 10%, period over period, due to a 13% improvement in rate per loaded mile driven by higher spot and contracted rates, partially offset by reduced productivity largely due to weather in the first quarter of 2021. While growth was experienced within our dedicated business, continued driver capacity constraints and weather contributed to the overall reduction in order volumes.
Truckload income from operations increased $34.8 million, approximately 45%, in the six months ended June 30, 2021 compared to the same period in 2020. The increase period over period was primarily due to spot market opportunities and contract renewals, in addition to a $17.3 million favorable change in equipment dispositions and a reduction in auto liability costs, despite the earnings impact of reduced volume noted above.
Intermodal
The following table presents the KPIs for our Intermodal segment for the periods indicated.
In support of a few key customers, we provide dray-only service utilizing our drivers and chassis. The length of haul and revenue characteristics of dray-only service are much different than rail. Prior to 2020, we reported orders and revenue per order inclusive of dray-only activity. Due to an increase in dray-only activity, orders and revenue per order presented below for both 2020 and 2019 exclude dray-only shipments to not distort period over period comparisons in our core-rail KPIs.
| | | | Nine Months Ended
September 30, | | | Six Months Ended
June 30, |
| | | 2020 | | 2019 | | | 2021 | | 2020 |
Orders (1) | Orders (1) | 315,582 | | | 324,946 | | Orders (1) | | 222,679 | | | 204,949 | |
| Containers | Containers | 21,744 | | | 23,014 | | Containers | | 22,179 | | | 21,172 | |
Trucks (2) | Trucks (2) | 1,582 | | | 1,544 | | Trucks (2) | | 1,729 | | | 1,508 | |
Revenue per order (3) | Revenue per order (3) | $ | 2,172 | | | $ | 2,285 | | Revenue per order (3) | | $ | 2,351 | | | $ | 2,160 | |
Operating ratio (4) | Operating ratio (4) | 92.9 | % | | 89.9 | % | Operating ratio (4) | | 89.6 | % | | 94.0 | % |
(1)Based on delivered rail orders.
(2)Includes company trucks and owner-operator trucks at the end of the period.
(3)Calculated using rail revenues excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes.
(4)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
Intermodal revenues (excluding fuel surcharge) decreased $41.2increased $72.8 million, approximately 6%16%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019, primarily driven by2020. Contributing to the increase was a 3% decrease in orders due to COVID-19 induced network demand disruptions and dray capacity constraints, partially offset by growth in the East. A 5% decrease$191, or 9%, improvement in revenue per order, driven primarily by customer rate renewals and premium opportunities, partially offset by growth in the East which has a decline inshorter length of haul,haul. Orders also contributedincreased 9% due to favorable market demand conditions, despite capacity constraints, supply chain inefficiencies, and weather impacts experienced in the overall decline in revenue within Intermodal.first quarter of 2021.
Intermodal income from operations decreased $25.2increased $27.6 million, approximately 33%101%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019. Revenue declines, higher equipment disposition2020, mainly the result of factors affecting revenue discussed above, partially offset by the impact of network fluidity and impairment costs due to used equipment market conditions,capacity challenges on rail and increases in safety premiums and maintenance costs drove the decline in income from operations.driver-related costs.
Logistics
The following table presents the KPI for our Logistics segment for the periods indicated.
| | | | | | | | | | | |
| | Nine Months Ended
September 30, |
| | 2020 | | 2019 |
Operating ratio (1) | 97.2 | % | | 95.8 | % |
| | | | | | | | | | | | | | |
| | | Six Months Ended
June 30, |
| | | 2021 | | 2020 |
Operating ratio (1) | | 95.8 | % | | 97.4 | % |
(1)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
Logistics revenues (excluding fuel surcharge) increased $47.9$316.1 million, approximately 7%67%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019,2020, primarily due toresulting from an increase in volume despite one of the Company's import/export customers insourcing their warehouse management function in April 2019. The increase in volume was partially offset by a decrease in revenue per order in the first halfand volume growth of 2020 compared17% within our brokerage business due to the same period in 2019 as a resultfavorable market conditions and expansion of compressed rates.our digital platform.
Logistics income from operations decreased $7.9increased $20.5 million approximately 27%, in the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019. Compressed2020, primarily due to net revenue inper order improvements within our brokerage business in addition to the customer insourcing noted above, both contributed to the decline in income from operations.and volume growth, as cited above.
Other
Included in Other was a lossincome from operations of $12.9increased $0.8 million, approximately 53%, in the ninesix months ended SeptemberJune 30, 2020,2021, compared to income of $6.2 million in the same period in 2019. Factors contributing2020. The change was primarily driven by an increase in income from operations from our leasing business due to the change include $13.1 million of costs as a result ofincreased lease activity, partially offset by an adverse tax ruling in the third quarter of 2020 and a $9.2 million increase in performance-based incentive compensation.compensation period over period.
LIQUIDITY AND CAPITAL RESOURCES
Our primary uses of cash are working capital requirements, capital expenditures, dividend payments, and debt service requirements. Additionally, we may use cash for acquisitions and other investing and financing activities. Working capital is required principally to ensure we are able to run the business and have sufficient funds to satisfy maturing short-term debt and operational expenses. Our capital expenditures consist primarily of transportation equipment and information technology.
Historically, our primary source of liquidity has been cash flow from operations. In addition, we have a $250.0 million revolving credit facility and a $200.0 million accounts receivable facility, for which our available capacity as of SeptemberJune 30, 20202021 was $375.8 million. We anticipate that cash generated from operations, together with amounts available under our credit facilities, will be sufficient to meet our requirements for the foreseeable future. To the extent additional funds are necessary to meet our long-term liquidityliquidity needs as we continue to execute our business strategy, or because the COVID-19 crisis lasts longer than anticipated, and/or the revenue declines experienced are more severe than predicted, we anticipate that we will obtain these funds through additional indebtedness, additionalborrowings, equity offerings, or a combination of these potential sources of funds.liquidity. Our ability to fund future operating expenses and capital expenditures, as well as our ability to meet future debt service obligations or refinance our indebtedness, will depend on our future operating performance, which will be affected by general economic, financial, and other factors beyond our control.
The following table presents our cash and cash equivalents, marketable securities, and outstanding debt as of the dates shown.
| | (in millions) | (in millions) | | September 30, 2020 | | December 31, 2019 | (in millions) | | June 30, 2021 | | December 31, 2020 |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 768.5 | | | $ | 551.6 | | Cash and cash equivalents | | $ | 490.5 | | | $ | 395.5 | |
| Marketable securities | Marketable securities | | 45.6 | | | 48.3 | | Marketable securities | | 49.1 | | | 47.1 | |
| Total cash, cash equivalents, and marketable securities | Total cash, cash equivalents, and marketable securities | | $ | 814.1 | | | $ | 599.9 | | Total cash, cash equivalents, and marketable securities | | $ | 539.6 | | | $ | 442.6 | |
| | Debt: | Debt: | | Debt: | |
| Senior notes | Senior notes | | $ | 305.0 | | | $ | 360.0 | | Senior notes | | $ | 305.0 | | | $ | 305.0 | |
| Finance leases | Finance leases | | 2.0 | | | 1.7 | | Finance leases | | 2.9 | | | 2.0 | |
Total debt (1) | Total debt (1) | | $ | 307.0 | | | $ | 361.7 | | Total debt (1) | | $ | 307.9 | | | $ | 307.0 | |
(1)Debt on the consolidated balance sheets is presented net of deferred financing costs.
Debt
At SeptemberJune 30, 2020,2021, we were in compliance with all financial covenants and financial ratios under our credit agreements and the indenturesagreements governing our senior notes. See Note 8,7, Debt and Credit Facilities, for information about our short-term and long-term financing arrangements.
Cash Flows
The following table summarizes for the periods indicated, the changes to our cash flows provided by (used in) operating, investing, and financing activities.activities for the periods indicated.
| | | | | | | | | | | | | | | | | |
| | | Nine Months Ended
September 30, |
| (in millions) | | 2020 | | 2019 |
| Net cash provided by operating activities | | $ | 469.1 | | | $ | 470.3 | |
| Net cash used in investing activities | | (163.0) | | | (355.6) | |
| Net cash used in financing activities | | (89.2) | | | (56.3) | |
| | | | | | | | | | | | | | | | | |
| | | Six Months Ended
June 30, |
| (in millions) | | 2021 | | 2020 |
| Cash provided by operating activities | | $ | 255.0 | | | $ | 319.8 | |
| Cash used in investing activities | | (134.9) | | | (110.1) | |
| Cash used in financing activities | | (25.1) | | | (47.5) | |
NineSix Months Ended SeptemberJune 30, 20202021 Compared to NineSix Months Ended SeptemberJune 30, 20192020
Operating Activities
Cash provided by operating activities decreased $1.2$64.8 million, approximately 20%, in the first ninesix months of 20202021 compared to the same period in 2019.2020. The decrease was driven by an increase in cash used for working capital, partially offset by an increase in net income adjusted for various noncash charges. Working capital changes which decreased net cash provided by operating activities were primarily an increase in trade accounts receivable, which increased proportionate to revenue growth, and a decrease in net income after adjustments for various noncash charges, partially offset by a net increase in cash provided by working capital. Improvements in payables, claims reserves and other receivables - net, and other liabilities primarily related to the timing of $153.0 million collectively, were partially offset by a $99.4 million reduction in accounts receivable cash flows.tax payments during the six months ended June 30, 2021 compared to 2020.
Investing Activities
Cash used in investing activities decreased $192.6increased $24.8 million, approximately 54%23%, in the first ninesix months of 20202021 compared to the same period in 2019.2020. The decreaseincrease in cash used was primarily driven by a decreasean increase in net capital expenditures.
Capital Expenditures
The following table sets forth our net capital expenditures for the periods indicated.
| | | | | Nine Months Ended
September 30, | | | Six Months Ended
June 30, |
| (in millions) | (in millions) | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 |
| Transportation equipment | Transportation equipment | | $ | 131.7 | | | $ | 308.6 | | Transportation equipment | | $ | 153.6 | | | $ | 83.3 | |
| Other property and equipment | Other property and equipment | | 38.7 | | | 42.8 | | Other property and equipment | | 22.5 | | | 25.0 | |
| Proceeds from sale of property and equipment | Proceeds from sale of property and equipment | | (55.5) | | | (38.8) | | Proceeds from sale of property and equipment | | (76.6) | | | (29.6) | |
| Net capital expenditures | Net capital expenditures | | $ | 114.9 | | | $ | 312.6 | | Net capital expenditures | | $ | 99.5 | | | $ | 78.7 | |
Net capital expenditures decreased $197.7increased $20.8 million in the first ninesix months of 20202021 compared to the same period in 2019.2020. The decreaseincrease was driven by a $176.9$70.3 million decreaseincrease in expenditures forpurchases of transportation equipment resulting mainly from decreased tractor purchases due to replacement capital and reduced manufacturer capacity in the beginning of 2020, combined withfleet age, partially offset by a $16.7$47.0 million increase in proceeds from the sale of property and equipment primarily resulting from increased tractor and trailer sales including units that were part of the 2019 shutdown of the FTFM service offering. See Note 12, Commitments and Contingencies, for information on our firm commitments to purchase transportation equipment.an increase in proceeds per unit.
Financing Activities
Cash used in financing activities increased $32.9decreased $22.4 million, approximately 58%47%, in the first ninesix months of 20202021 compared to the same period in 2019.2020. The main driversdriver of the increasedecrease in cash used werewas the $25.0 million and $30.0 million repaymentsrepayment of private placement notes in March and September of 2020, respectively, partially offset by the final guaranteed payment associated with the 2016 WSL acquisition in 2019.2020.
Other Considerations that Could Affect Our Results, Liquidity, or Capital Resources
Investment in TuSimple
On January 12, 2021, the Company purchased a $5.0 million non-controlling interest in TuSimple. Upon completion of its initial public offering in April 2021, our investment in TuSimple was converted into Class A common shares and is being accounted for under ASC 321, Investments - Equity Securities, with subsequent changes in share price recorded in other income on the consolidated statements of comprehensive income. In the three and six months ended June 30, 2021, the Company recognized pre-tax gains of $20.2 million on its investment in TuSimple. Due to the volatility of the global markets and the potential for high volatility of public equity prices of technology-related companies, we expect the value of our investment to fluctuate which could materially affect our financial condition and results of operations.
COVID-19
Despite disruptions in the financial markets due to COVID-19, we have been able to fund our liquidity needs to date. We believe we are in a strong liquidity position with a cash, cash equivalents, and marketable securities balance of $814.1$539.6 million and $375.8 million of unused credit capacity.capacity as of June 30, 2021. Our outstanding debt as of the end of the quarter was $307.0$307.9 million, of which only $0.4$100.7 million related to finance leases is short-term in nature. We are compliant with all financial covenants under our credit agreements and do not anticipate the need to seek additional capital as a result of COVID-19.
Driver Capacity and Wage Cost
Our professional driver workforce is one of our most valuable assets. Recruiting and retaining sufficient numbers of qualified drivers is challenging in an increasingly competitive driver market and has a significant impact on our operating costs and ability to serve our customers. Changes in the demographic composition of the workforce, alternative employment opportunities that become available in the economy, and individual drivers’ desire to be home more frequently can affect availability of drivers and increase the wages our drivers require.
Factors that Could Result in a Goodwill Impairment
Goodwill is tested for impairment at least annually using the discounted cash flow, guideline public company, and guideline merged and acquired company methods in calculating the fair values of our reporting units. Key inputs used in the discounted cash flow approach include growth rates for sales and operating profit, perpetuity growth assumptions, and discount rates. As interest rates rise, the calculated fair values of our reporting units will decrease, which could impact the results of our goodwill impairment tests.
We will perform our annual evaluation of goodwill for impairment as of October 31, 2020,2021, with such analysis expected to be finalized during the fourth quarter. As part of our annual process of updating our goodwill impairment evaluation, we will assess the impact of current operating results and our resulting management actions to determine whether they have an impact on the long-term valuation of reporting units and the related recoverability of our goodwill. See further discussion in Note 7,6, Goodwill.
Off-Balance Sheet Arrangements
As of SeptemberJune 30, 20202021, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.
Contractual Obligations
See the disclosure under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations” in theour Annual Report on Form 10-K for the year ended December 31, 20192020 for our contractual obligations as of December 31, 2019.2020. There were no material changes to our contractual obligations during the ninesix months ended SeptemberJune 30, 2020.2021.
CRITICAL ACCOUNTING ESTIMATES
We have reviewed our critical accounting policies and considered whether any new critical accounting estimates or other significant changes to our accounting policies require any additional disclosures. We have found that the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 20192020 are still current and that there have been no significant changes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
OurOther than as described below, our market risks have not changed significantly from the market risks discussed in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 as filed with the SEC on February 19, 2020.2021.
Equity Price Risk
Our equity investment in TuSimple is susceptible to market price risk arising from uncertainties in the future market value, and a fluctuation in TuSimple’s share price could have an adverse impact on the fair value of our investment and results of operations. At June 30, 2021 the fair value of our investment in TuSimple was $25.2 million. A hypothetical 10% decrease in TuSimple’s share price would reduce the value of our equity investment by approximately $2.5 million.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this report. Based upon thattheir evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various lawsuits in the ordinary course of its business. For information relating to legal proceedings, see Note 12,11, Commitments and Contingencies, which is incorporated herein by reference.
ITEM 1A. RISK FACTORS
There are no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019,2020, other than the risksrisk described below.
COVID-19 has adversely affected,Risks Related to Our Business, Industry, and is expected to continue to adversely affect, our operations, supply chains, and workforce, and we have experienced, and expect to continue to experience, volatility in freight volumes and demand for certain of our service offerings.
COVID-19 has spread rapidly throughout the U.S., prompting state and local governments and businesses to take unprecedented measures in response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelter-in-place orders. COVID-19 has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets.
There is uncertainty around the duration, breadth, and economic impacts of COVID-19, and, as a result, the ultimate impact on our business, operations, or operating results cannot be reasonably estimated at this time. Government and public health officials have recommended and mandated precautions to mitigate the spread of COVID-19, including prohibitions on congregating in large groups, the closing of businesses and operations to the extent such businesses or operations are not considered an “essential service”, and shelter-in-place orders or similar measures. Consequently, our customers, suppliers, third-party business partners, and contractors have been and will be disrupted in multiple ways, including worker absenteeism, quarantines and other restrictions on associates’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions.Strategy
The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevant authorities. The full extentvaluation of the impactCompany’s investments in strategic partners and technologies is subject to volatility.
The market valuation of COVID-19our strategic investments, especially as it relates to our investment in TuSimple which is publicly traded, may experience substantial price volatility which, when accounted for under GAAP, could have a material adverse affect on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on demand for the Company’s services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategic plans; the Company's ability to hire and retain drivers; and the Company’s profitability and cost structure. To the extent COVID-19 adversely affects the Company’s business, results of operations, financial condition, and stock price, it may also have the effect of heightening many of the other risks described in Part I, Item 1A of the 2019 Form 10-K under the heading “Risk Factors.”
COVID-19 and the measures taken by the U.S. government, as well as state and local governments, in response to the pandemic have adversely affected and could in the future materially adversely impact the Company’s business, results of operations, financial condition, and stock price. To date, the Company has experienced a decrease in demand in varying degrees across its portfolio of services. The mandated precautions to mitigate the spread of COVID-19 and other related disruptions have had, and may continue to have, an impact on the Company’s freight volumes, adversely affecting our revenues and earnings. We have experienced declines in freight volumes in our Truckload and Intermodal segments and certain of our customers have closed portions of their operations and/or deferred decisions to award freight. Additionally, we have expanded our paid time off policy and are covering the cost of health insurance premiums to help alleviate some of the challenges our associates may be facing as a result of COVID-19. While no one can predict with any certainty the scale or length of disruption from COVID-19, it is possible that our results of operations could be negatively affected by the impact of the virus on global economic, health, or market conditions. The many unknowns regarding the impact of COVID-19 on our results of operations include the impact to the Company’s associates, customers, and suppliers of further governmental, regulatory, fiscal, and public health responses.
The COVID-19 outbreak and the resulting impact on our operating performance has also affected, and may continue to affect, the estimates and assumptions made by management. Such estimates and assumptions include among other things, the Company’s goodwill, long-lived, and held for sale asset valuations; current expected credit losses; healthcare reserves; and measurement of compensation cost for certain share-based awards and annual incentive plans. While we expect the impacts of COVID-19 to have an adverse effect on our business, financial condition and results of operations, we are unableoperations. Refer to predict the extent of these impacts at this time.
We have transitioned a significant subset of our employee population to remote work environments in an effort to mitigate the spread of COVID-19 which may exacerbate the cybersecurity risks, to our business, including an increased demandconsolidated financial statements for information technology resources, increased risk of phishing,on our strategic investments. Those investments can be negatively affected by market and economic factors including liquidity, credit deterioration, financial results, interest rate fluctuations, or other cybersecurity attacks.
In response to COVID-19, we have been temporarily allowing a significant portion of our workforce which can work from home to work from home and have provided associates with expanded remote network access options which enable them to work outside of our corporate infrastructure and, in some cases, use their own personal devices, which exposes the Company to additional cybersecurity risks. The United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (“CISA”) has warned that cybercriminals will take advantage of the uncertainty created by COVID-19 and federal and state mandated quarantines to launch attacks which will further disrupt operations. Specifically, our associates working remotely expose the Company to cybersecurity risks in the following ways: (1) unauthorized access to sensitive information asfactors. As a result, of increased remote access, including associates use of company-ownedfuture fluctuations in their value could result in significant losses and personal devices and videoconferencing functions and applications to remotely handle, access, discuss, or transmit confidential financial data, (2) increased exposure to phishing and other scams as cybercriminals use the fear and uncertainty surrounding the international COVID-19 outbreak to further manipulate associates through phishing schemes to, among other things, install malicious software on Company systems and equipment and surrender sensitive information, and (3) violation of international, federal, or state-specific privacy laws. We believe that the increased number of associates working remotely as a result of the COVID-19 outbreak has incrementally increased our cyber risk profile, but we are unable to predict the extent or impacts of those risks at this time. A significant disruption of our information technology systems, unauthorized access to or loss of confidential information, or legal claims resulting from our violation of privacy laws could each have a material adverse effectimpact on our business.the Company’s financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company does not have a share repurchase program and did not repurchase any equity securities during the three months ended SeptemberJune 30, 2020. 2021.
Limitation Upon Payment of Dividends
The 2018 Credit Facility includes covenants limiting our ability to pay dividends or make distributions on our capital stock if a default exists under the 2018 Credit Facility or would be caused by giving effect to such dividend.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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Exhibit Number | | Exhibit Description |
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| 31.1* | | |
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| 31.2* | | |
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| 32.1** | | |
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| 32.2** | | |
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| 101.INS* | | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
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| 101.SCH* | | XBRL Taxonomy Extension Schema Document |
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| 101.CAL* | | XBRL Taxonomy Calculation Linkbase Document |
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| 101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB* | | XBRL Taxonomy Extension Labels Linkbase Document |
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| 101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104* | | The cover page from the Company'sCompany’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2020,2021, formatted in Inline XBRL |
* Filed herewith.
** Furnished herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Schneider National, Inc., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | SCHNEIDER NATIONAL, INC. |
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| Date: | OctoberJuly 29, 20202021 | /s/ Stephen L. Bruffett |
| | Stephen L. Bruffett |
| | Executive Vice President and Chief Financial Officer |
| | (Duly Authorized Officer and Principal Financial Officer) |