Schneider National, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request identifies 2021 Q4, this filing reports the full fiscal year; it does not provide a standalone fourth-quarter results summary.
Business context
Schneider provides truckload, intermodal, and logistics services across North America, with leasing and insurance operations also included in its results. Its business is seasonal, with revenues generally lowest in Q1 and highest in Q4. The company served approximately 8,500 customers in 2021.
Financial performance
| Metric | 2021 | 2020 |
|---|---|---|
| Operating revenue | $5,608.7 million | $4,552.8 million |
| Revenue excluding fuel surcharges (non-GAAP) | $5,163.9 million | $4,234.5 million |
| Income from operations | $533.7 million | $286.7 million |
| Net income | $405.4 million | $211.7 million |
| Diluted EPS | $2.28 | $1.19 |
| Operating ratio | 90.5% | 93.7% |
| Adjusted operating ratio (non-GAAP) | 89.7% | 92.9% |
| Cash provided by operating activities | $566.1 million | $618.2 million |
Revenue increased 23%, while net income rose approximately 91%. Management attributed operating improvement mainly to stronger freight pricing and revenue management, partly offset by driver-related costs, reduced Truckload volumes, higher rail costs, and inflationary pressures. Non-GAAP adjusted net income was $407.2 million versus $222.0 million.
- Truckload: Revenue excluding fuel surcharges increased 5% to $1,934.9 million; operating income increased to $284.7 million. Revenue per truck per week rose 13%, but volume fell 10%, primarily amid driver-capacity constraints.
- Intermodal: Revenue increased 17% to $1,143.1 million; operating income rose to $155.2 million. Orders increased 4%, despite rail network and container-dwell challenges.
- Logistics: Revenue increased 60% to $1,808.7 million, supported by brokerage growth and improved revenue per order; operating income increased to $92.4 million.
Liquidity, debt, and capital
- Year-end cash, cash equivalents, and marketable securities totaled $294.1 million, down from $442.6 million in 2020.
- Total debt, including finance leases, was $270.3 million, versus $307.0 million. Debt included $265.0 million of senior notes; $61.4 million of debt and finance lease obligations was current.
- Unused capacity under the revolving credit and receivables facilities was $325.8 million. The company reported compliance with financial covenants and expected operating cash flow and available facilities to meet foreseeable needs.
- Cash used in investing activities was $626.4 million, including $271.3 million paid at closing for MLS. Net capital expenditures were $271.1 million. Management estimated 2022 net capital expenditures at approximately $450 million.
- Cash used in financing activities was $90.4 million. The 2021 dividend was $0.28 per share; the 2020 total of $2.26 included a $2.00 special dividend. The board declared a $0.08-per-share dividend for Q1 2022.
Material changes and unusual items
- Schneider acquired dedicated carrier Midwest Logistics Systems (MLS) on December 31, 2021, for approximately $274.5 million in total consideration. MLS contributed no 2021 operating results; its results were to be included in Truckload from Q1 2022. The preliminary allocation included $122.7 million of goodwill and remains subject to measurement-period adjustments.
- A favorable appeals-court ruling in a federal excise-tax dispute led to a $13.5 million refund receivable in 2021, following a $12.8 million expense recorded in 2020.
- The company recorded a $10.6 million impairment, writing off the remaining goodwill of its Asia reporting unit.
- Net gains on equipment sales were $63.9 million in 2021, compared with net losses of $6.7 million in 2020. The company said strong used-equipment pricing contributed to the improvement.
- Net gains on equity investments were $21.6 million in 2021, including a $7.7 million pretax gain on TuSimple. The year-end fair value of that investment was $12.7 million.
Outlook, risks, and contingencies
- Management anticipated a 25.0%–25.5% ongoing effective tax rate and approximately $450 million of net capital expenditures in 2022. The filing gives no specific revenue or earnings guidance.
- Management cited persistent driver shortages, wage and other cost inflation, fuel-price volatility, supply-chain constraints, and truck-delivery delays. Fuel surcharges may lag or fail to offset fuel-cost changes fully.
- Intermodal faces a planned transition from BNSF to Union Pacific as the primary western rail provider, to be completed by January 2023. West Coast port congestion and labor-contract negotiations were also identified as disruption risks.
- At year-end, firm commitments to purchase transportation equipment totaled $337.3 million. Self-insured claims accruals, net of reinsurance receivables, were $158.3 million, compared with $144.2 million a year earlier; estimation of claims reserves was the auditor’s critical audit matter.
- A lawsuit by former WSL owners seeks, among other relief, an additional $40 million earn-out payment; the court’s decision was pending. The company said ordinary-course legal matters were not expected to have a material adverse effect, while noting the WSL outcome could materially affect operating results.
- In February 2022, a third-party equipment firmware defect disrupted systems for two business days, requiring manual operations. The company reported lost revenue and operating profit but did not expect a material impact on annual results.
- Other risks include intense competition, customer and third-party carrier dependence, cybersecurity and technology interruptions, potential owner-operator reclassification, insurance-cost and severe-claims exposure, environmental regulation, and concentrated family voting control.
Most important facts for investors to verify
- Whether Truckload driver capacity and volume constraints ease, and whether higher rates continue to offset wage and operating-cost inflation.
- Whether Logistics’ rapid growth and profitability are sustainable as brokerage volumes, purchased-transportation costs, and market conditions change.
- MLS integration, final purchase accounting, and the acquired business’s post-acquisition contribution to Truckload results.
- Actual 2022 capital spending, cash generation, debt repayments, and progress on the western rail-provider transition.
- Developments in the WSL earn-out litigation, claims reserves and insurance coverage, and any material effects from the February 2022 systems interruption.
The independent auditor issued an unqualified opinion on the financial statements and internal controls; the acquired MLS business was excluded from the 2021 internal-control assessment.