Schneider National, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with the three months ended March 31, 2020 unless noted. Schneider provides truckload, intermodal, and logistics services across North America.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Operating revenue | $1,228.6 million | $1,119.1 million | Up $109.5 million, about 10% |
| Revenue excluding fuel surcharge | $1,138.4 million | $1,016.1 million | Up $122.3 million, about 12%; non-GAAP measure |
| Operating income | $76.2 million | $54.9 million | Up $21.3 million, about 39% |
| Operating ratio | 93.8% | 95.1% | Improved; lower is better |
| Adjusted operating ratio | 93.3% | 94.7% | Improved; non-GAAP measure |
| Net income | $54.8 million | $43.8 million | Up $11.0 million, about 25% |
| Diluted earnings per share | $0.31 | $0.25 | Up from prior year |
| Cash provided by operating activities | $101.1 million | $124.5 million | Down $23.4 million, about 19% |
| Cash used in investing activities | $11.9 million | $39.7 million | Lower use, primarily from reduced net capital spending |
| Cash used in financing activities | $12.5 million | $35.8 million | Lower use; prior-year period included $25.0 million debt repayment |
Revenue growth reflected a $116.3 million increase in Logistics and a $17.8 million increase in Intermodal, partly offset by a $17.7 million decline in Truckload. Operating income benefited from stronger pricing and revenue per order or truck, Logistics growth, and lower insurance costs. Increased purchased transportation costs were a significant expense headwind. Q1 2020 included a $6.1 million pre-tax gain on the PSI investment; there was no corresponding gain in 2021.
Segment results
| Segment | Revenue, Q1 2021 | Revenue, Q1 2020 | Operating income, Q1 2021 | Operating income, Q1 2020 |
|---|---|---|---|---|
| Truckload | $451.7 million | $469.4 million | $38.3 million | $36.6 million |
| Intermodal | $255.8 million | $238.0 million | $20.0 million | $16.3 million |
| Logistics | $355.9 million | $239.6 million | $15.9 million | $4.2 million |
| Other | $98.4 million | $99.4 million | $2.0 million | $(2.2) million |
Segment revenues include fuel surcharge and are reported as presented in the filing. Truckload revenue excluding fuel surcharge fell about 4%, as volume declined 12% amid driver capacity constraints and weather, partly offset by better pricing. Intermodal revenue excluding fuel surcharge rose about 7%, with orders up 2% and revenue per order up 6%. Logistics revenue excluding fuel surcharge rose about 49%, driven by higher revenue per order and volume growth.
Liquidity, debt, and balance sheet
- At March 31, 2021, cash and cash equivalents were $472.2 million and marketable securities were $49.4 million, for total cash, cash equivalents, and marketable securities of $521.6 million. The comparable total at December 31, 2020 was $442.6 million.
- Total debt, including finance leases, was $308.0 million; $100.7 million of debt and finance lease obligations was current. Senior note principal was $305.0 million. There were no borrowings under the $250.0 million revolving facility or the $200.0 million receivables facility.
- Unused credit capacity was $375.8 million. The company said it was in compliance with financial covenants and expects operating cash flow and available facilities to meet foreseeable needs.
- Cash increased $76.7 million during the quarter, from $395.5 million to $472.2 million. Operating cash flow declined year over year, primarily because of increased working-capital use, including higher other assets and receivables.
- Net capital expenditures were negative $3.4 million, versus positive expenditures of $15.4 million in Q1 2020, reflecting equipment-sale proceeds exceeding purchases during the quarter.
- The quarterly dividend declared in Q1 was $0.07 per share. The board declared a further $0.07-per-share dividend in April, payable July 8, 2021.
Outlook, risks, and unusual items
The filing provides no specific financial guidance or quantified full-year forecast. Management described the company’s liquidity position as strong and said it did not anticipate needing additional capital because of COVID-19. It noted the business is seasonal: revenue is generally lowest in the first quarter and highest in the fourth, while winter weather can raise operating costs.
- COVID-19 effects remained uncertain and dependent on the course of the pandemic, government responses, customer impacts, and vaccination rollout. Schneider continued safety measures and remote-work arrangements where appropriate.
- Key operating risks include driver shortages and tight truck capacity, demand and pricing changes, fuel-price volatility and surcharge recovery, severe weather, customer concentration or loss, third-party carrier and railroad reliance, and access to equipment and suppliers.
- Schneider had firm commitments to purchase transportation equipment totaling $372.2 million at March 31, 2021.
- A lawsuit by former owners of WSL seeks damages, including an additional $40.0 million earn-out payment. The company said it has strong defenses but noted an adverse judgment could materially affect results.
- The company’s appeal of an adverse IRS excise-tax ruling remained pending. It recorded $12.8 million of expense and paid $13.7 million in 2020 in connection with the dispute.
- Ordinary-course legal matters and claims are accrued when probable and estimable; management did not expect their outcomes to materially affect the business or financial statements. The company reported no material off-balance-sheet arrangements and no material quarterly change in contractual obligations.
- The $5.0 million investment in TuSimple was made in January. TuSimple completed its IPO in April; Schneider said its interest converted to Class A shares, with future share-price changes to be recorded in other income.
- Goodwill impairment testing is scheduled for October 31, 2021. The filing notes that rising interest rates could reduce estimated reporting-unit fair values.
Most important facts for investors to verify
- Whether Truckload driver capacity and volume improve, and whether stronger pricing can continue.
- Whether Logistics growth and segment profitability are sustainable, including the effects of purchased transportation costs and market conditions.
- Whether working-capital demands continue to weigh on operating cash flow despite higher net income.
- Upcoming equipment-purchase commitments, debt maturities, and the planned renewal of the receivables purchase agreement, which expires in September 2021.
- Developments in the WSL earn-out litigation and the IRS tax appeal, along with claims costs and insurance trends.
- COVID-19, weather, fuel, and equipment-supply effects on service, costs, and customer demand.