Schneider National, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Schneider provides truckload, intermodal, and logistics services across North America. Unless otherwise noted, amounts are in millions of dollars.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $1,444.5 | $1,135.7 | $4,033.9 | $3,287.6 |
| Income from operations | $153.7 | $63.3 | $355.7 | $181.6 |
| Net income | $110.0 | $44.5 | $271.3 | $134.8 |
| Diluted EPS | $0.62 | $0.25 | $1.53 | $0.76 |
| Operating ratio (GAAP) | 89.4% | 94.4% | 91.2% | 94.5% |
| Adjusted operating ratio | 88.4% | 92.8% | 90.4% | 93.6% |
Q3 revenue rose 27%, operating income 143%, and net income 147% year over year. For the first nine months, revenue rose 23% and net income 101%. Revenue excluding fuel surcharge, a company-defined non-GAAP measure, was $1,330.1 in Q3, up 25%, and $3,719.1 year to date, up 22%.
Q3 segment operating income was $85.1 for Truckload (versus $45.6), $45.7 for Intermodal (versus $23.0), and $22.1 for Logistics (versus $9.1). Truckload revenue per truck per week increased 15%, while average truck count declined 9%. Intermodal revenue per order increased 20%; Logistics revenue excluding fuel surcharge grew 67%, with brokerage volume up 24%.
Cash, debt, and liquidity
- Cash and cash equivalents were $504.2 at September 30, 2021, versus $395.5 at year-end 2020; marketable securities were $45.7. Cash, equivalents, and securities totaled $549.9.
- Total debt and finance lease obligations were $307.7, including $100.7 current; senior notes principal was $305.0. No borrowings were outstanding under the revolving credit or receivables facilities. Reported unused credit capacity was $325.8, and the company was in compliance with financial covenants.
- Nine-month operating cash flow was $396.0, down from $469.1. Investing cash outflow was $249.6, including $185.1 net capital expenditures; financing cash outflow was $37.7. Cash increased $108.7 during the period.
- The board declared a Q4 2021 dividend of $0.07 per share, payable January 10, 2022.
Drivers, outlook, and risks
- Management attributed stronger results mainly to favorable freight-market pricing, revenue and network management, Logistics growth, and improved equipment-sale proceeds. Used-equipment dispositions benefited operating income by $33.6 in Q3 and $53.4 year to date.
- Driver shortages constrained Truckload volumes and increased driver pay and recruitment costs. Intermodal faced rail-network disruption, container dwell, and related costs; Logistics faced higher purchased-carrier costs. Fuel-price increases lifted fuel surcharges as well as fuel expense.
- The company said operating cash flow and available facilities should meet foreseeable requirements; it did not provide specific financial guidance in the supplied filing text. It noted seasonality, with revenue generally lowest in Q1 and highest in Q4, and higher winter operating costs.
- TuSimple’s publicly traded investment had a fair value of $13.1 at quarter-end and generated a $12.1 Q3 pre-tax loss; management cautioned that valuation volatility may materially affect results. Strategic investments without readily determinable fair values had a $9.0 Q3 pre-tax gain.
- A lawsuit by former WSL owners seeks, among other relief, an additional $40.0 earn-out payment; the court’s decision was pending, and an adverse judgment could materially affect results. The company also had $365.0 of firm commitments to purchase transportation equipment.
- The Seventh Circuit ruled in the company’s favor in an IRS excise-tax dispute; final resolution was expected in Q4 2021. The filing states ordinary-course legal matters are not expected to materially affect results. Goodwill impairment testing was planned for October 31, 2021.
Most important facts for investors to verify
- Whether driver availability and rail-network fluidity improve, and how those constraints affect volumes, costs, and service.
- Whether favorable pricing and used-equipment resale conditions persist, and whether operating-ratio improvements are sustainable.
- How working-capital needs, elevated equipment purchases, and the $365.0 equipment commitment affect cash generation and capital spending.
- Future fluctuations in TuSimple and other strategic investment valuations, including their effect on reported earnings.
- Outcomes of the WSL litigation and IRS matter, and the results of the planned goodwill impairment review.