Schneider National, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Schneider provides truckload, intermodal, and logistics services across North America. Financial statements are unaudited and prepared under GAAP.
Financial performance
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Operating revenue | $1,746.9 million | $1,360.8 million | $3,367.4 million | $2,589.4 million |
| Revenue excluding fuel surcharge | $1,497.9 million | $1,250.6 million | $2,952.4 million | $2,389.0 million |
| Operating income | $176.6 million | $125.8 million | $311.7 million | $202.0 million |
| Net income | $129.8 million | $106.5 million | $221.9 million | $161.3 million |
| Diluted EPS | $0.73 | $0.60 | $1.24 | $0.91 |
| GAAP operating ratio | 89.9% | 90.8% | 90.7% | 92.2% |
| Adjusted operating ratio | 88.3% | 89.9% | 89.1% | 91.5% |
Q2 revenue increased 28% year over year, including a $138.8 million increase in fuel surcharges; revenue excluding fuel surcharge rose 20%. Q2 operating income increased 40% and net income 22%. For the first half, operating income grew 54% and net income 38%. Adjusted measures are non-GAAP and exclude specified unusual items.
Segment trends: Q2 operating income rose to $80.7 million in Truckload (from $73.6 million), $42.3 million in Intermodal (from $34.9 million), and $47.3 million in Logistics (from $17.0 million). Truckload benefited from pricing and dedicated volumes, including MLS; network volumes were constrained by driver capacity. Intermodal benefited from higher revenue per order and orders, while rail costs and network fluidity remained pressures. Logistics benefited from improved net revenue per order and 12% brokerage order growth.
Cash, debt, and liquidity
- Six-month operating cash flow was $353.7 million, compared with $255.0 million a year earlier. Investing cash outflow was $180.3 million and financing cash outflow was $87.2 million.
- Cash and cash equivalents were $331.0 million at June 30, 2022; marketable securities were $46.4 million. Total cash, cash equivalents, and marketable securities were $377.4 million.
- Total debt, including finance leases, was $211.8 million, versus $270.3 million at year-end 2021. The company repaid $60.0 million of private placement notes in March. No borrowings were outstanding under either its revolving credit facility or receivables facility; available capacity under the facilities was $322.8 million. Schneider reported compliance with debt covenants.
- Net capital expenditures were $110.0 million for the first half. Firm commitments to purchase transportation equipment totaled $417.2 million at June 30.
Material changes, unusual items, and outlook
- Schneider acquired dedicated carrier deBoer on June 7 for approximately $34.6 million, expanding tractor, trailer, and driver capacity. The company was transitioning deBoer equipment and employees; deBoer operations were expected to cease after the transition. MLS, acquired at year-end 2021, also contributed to Truckload growth.
- First-half results included a $50.9 million net gain on the sale of the Canadian facility and a $57.0 million settlement with former owners of WSL. The settlement was paid in July; the Q2 results included a $2.0 million benefit after revising the prior estimate. A separate $5.2 million charge related to a state sales-tax audit assessment is under appeal.
- Q2 other expenses included a $1.8 million pre-tax loss on the TuSimple investment, compared with a $20.2 million gain in Q2 2021. The first-half loss was $10.1 million. Its fair value was $2.6 million at June 30, down from $12.7 million at year-end.
- Management said higher rates and effective network and revenue management supported results, while driver costs, rail costs, inflation, equipment rental and maintenance, and fewer equipment sales were headwinds. The filing does not provide numerical earnings guidance. Management expected cash from operations and available facilities to meet foreseeable requirements.
- Key risks include driver availability and cost, inflation and fuel-price changes, weaker freight volumes, port congestion and potential West Coast labor disruption, and the transition from BNSF to Union Pacific as the primary western intermodal rail provider by January 2023. Management also identified rising interest rates as a factor that could reduce goodwill valuations.
Important facts for investors to verify
- Whether pricing and yield management can offset softer freight demand, driver constraints, and rising operating costs.
- Execution and service effects of the planned BNSF-to-UP transition and any West Coast port labor disruption.
- Final acquisition accounting for deBoer and MLS, and integration results from the dedicated-carrier acquisitions.
- Outcomes of the sales-tax appeal and any remaining financial effects of the WSL settlement.
- Changes in the value of strategic investments, particularly TuSimple, and the effect of equipment purchase commitments on future cash needs.