Business context and reporting period
Schneider National, Inc. provides truckload, intermodal and logistics services across North America. This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the first quarter of 2021. The company completed its acquisition of dedicated carrier MLS on December 31, 2021; MLS results are included in Truckload beginning in 2022.
Financial performance
Amounts are in millions except per-share data and ratios.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Operating revenue | $1,620.5 | $1,228.6 |
| Revenue excluding fuel surcharge | $1,454.5 | $1,138.4 |
| Operating income | $135.1 | $76.2 |
| Adjusted operating income | $148.4 | $76.2 |
| Net income | $92.1 | $54.8 |
| Adjusted net income | $102.1 | $54.8 |
| Diluted EPS | $0.52 | $0.31 |
| Operating ratio | 91.7% | 93.8% |
| Adjusted operating ratio | 89.8% | 93.3% |
| Cash from operations | $135.6 | $101.1 |
Revenue grew 32%; revenue excluding fuel surcharge increased 28%. Management attributed growth to stronger pricing and volume in Logistics, improved revenue per truck in Truckload, higher Intermodal revenue per order, fuel surcharges and the MLS acquisition. Net income rose about 68%; adjusted net income rose about 86%. The effective tax rate was 25.4%, versus 24.7%.
Operating cash flow was $135.6 million. Investing activities used $34.4 million and financing activities used $73.4 million, including repayment of $60.0 million of notes. Net capital expenditures were $9.9 million. Cash and cash equivalents were $272.6 million, with $48.5 million in marketable securities. Total debt, including finance leases, was $211.7 million; the company reported no borrowings under its revolving credit or receivables facilities and said it was in compliance with financial covenants. Available capacity under those facilities was $322.8 million.
Segment results
| Segment | Revenue, Q1 2022 | Operating income, Q1 2022 | Q1 2021 operating income |
|---|---|---|---|
| Truckload | $548.4 | $119.4 | $38.3 |
| Intermodal | $302.1 | $38.9 | $20.0 |
| Logistics | $545.7 | $41.9 | $15.9 |
| Other | $85.3 | $(65.1) | $2.0 |
Material changes and unusual items
- Truckload revenue excluding fuel surcharge rose 21%, including MLS, higher pricing and a 5% volume increase. Network volumes were affected by driver capacity constraints and reduced productivity early in the quarter.
- Intermodal revenue excluding fuel surcharge increased 18%, mainly from a 16% increase in revenue per order; network fluidity and higher rail and dray costs remained challenges.
- Logistics revenue excluding fuel surcharge increased 53%, with brokerage order volume up 24%, reflecting stronger rates, digital-platform use, Power Only growth and port dray activity.
- Operating results included a $59.0 million charge for an adverse WSL litigation judgment, a $5.2 million charge for a state sales-tax audit assessment under appeal, and a $50.9 million net gain associated with sale of the Canadian facility. Management’s adjusted measures exclude these items.
- Other expense included an $8.4 million pre-tax loss on the TuSimple investment. Its market value was $4.3 million at quarter-end, down from $12.7 million at December 31, 2021.
- On April 25, 2022, after quarter-end, a court entered judgment for the former WSL owners. The company estimated damages, interest and attorneys’ fees of approximately $59.0 million, recorded in the quarter’s results and balance sheet, and was evaluating appeal options.
Outlook, risks and contingencies
The filing provides no specific earnings or revenue guidance. Management said operating cash generation and available credit facilities should be sufficient for foreseeable needs. It cited strong freight-market pricing and effective revenue and network management, while noting capacity constraints, driver costs, inflation, fuel and rail costs, port congestion, and operational disruption as pressures. The company also flagged volatility in strategic investments, especially TuSimple, potential goodwill impairment if assumptions or interest rates change, and the planned transition from BNSF to Union Pacific as its primary intermodal rail provider by January 2023. Firm commitments to purchase transportation equipment totaled $408.7 million. Management said ordinary-course legal matters were not expected to materially affect results; the WSL judgment is a significant specific contingency. The company reported effective disclosure controls and no material change in internal control during the quarter.
Important facts for investors to verify
- How the WSL judgment and any appeal or subsequent developments affect cash, liabilities and future results.
- Whether operating growth and adjusted margin improvement persist after separating fuel surcharges, acquisition effects and unusual items.
- Execution of the MLS integration and the impact of driver availability, pay and productivity on Truckload capacity.
- Progress and costs associated with intermodal network fluidity and the planned rail-provider transition.
- Exposure to further changes in TuSimple’s value and the assumptions used in the company’s goodwill impairment assessment.