Schneider National, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report; the supplied filing does not provide a clear standalone Q4 income statement or Q4 financial results. Schneider provides truckload, intermodal, and logistics services across North America.
Financial performance
| Metric | 2020 | 2019 |
|---|---|---|
| Operating revenue | $4,552.8 million | $4,747.0 million |
| Revenue excluding fuel surcharge (non-GAAP) | $4,234.5 million | $4,281.0 million |
| Income from operations | $286.7 million | $207.8 million |
| Net income | $211.7 million | $147.0 million |
| Diluted EPS | $1.19 | $0.83 |
| Operating ratio | 93.7% | 95.6% |
| Adjusted operating ratio (non-GAAP) | 92.9% | 92.8% |
| Adjusted net income (non-GAAP) | $222.0 million | $220.2 million |
| Cash from operating activities | $618.2 million | $636.3 million |
| Net capital expenditures | $237.1 million | $306.9 million |
At year-end, cash, cash equivalents, and marketable securities totaled $442.6 million; total debt, including finance leases, was $307.0 million, of which $40.4 million was current. Available capacity under credit facilities was $375.8 million. The company reported compliance with financial covenants. Current assets were $1,220.7 million and current liabilities were $534.6 million.
Changes versus 2019
- Revenue fell 4%; revenue excluding fuel surcharge declined about 1%. Lower Truckload and Intermodal revenue and reduced fuel-surcharge revenue were partly offset by Logistics growth.
- Truckload revenue excluding fuel surcharge declined about 11%, reflecting lower volume, driver-capacity constraints, COVID-19 effects, and the 2019 shutdown of First to Final Mile (FTFM). Truckload operating income rose to $187.8 million from $59.0 million, substantially reflecting the absence of 2019 FTFM losses and shutdown charges.
- Intermodal revenue declined about 3% and operating income fell about 30%, amid COVID-related demand disruption, rail service issues, shorter haul lengths, and higher driver incentives and rail storage costs.
- Logistics revenue excluding fuel surcharge increased about 21%, with brokerage volume and revenue per order improving; operating income increased to $43.1 million from $37.3 million.
- GAAP operating income rose 38%, but adjusted operating income declined about 2%. GAAP improvement reflected, among other factors, $34.6 million of FTFM goodwill impairment and $63.7 million of net restructuring charges in 2019, as well as FTFM operating losses.
- Operating cash flow decreased about 3%. Financing cash outflow increased substantially, chiefly due to a $2.00-per-share special dividend.
Outlook, commentary, and risks
- Management said freight demand began normalizing in the third quarter of 2020 and reported no significant negative COVID-19 operational or financial impacts later in the year; it did not anticipate significant future impacts, while emphasizing uncertainty around the pandemic.
- Management expects 2021 net capital expenditures of approximately $425 million. It anticipates an ongoing effective tax rate of 25.2%–25.7%, subject to tax-law changes. A quarterly dividend of $0.07 per share was declared for Q1 2021; future dividends remain at the Board’s discretion.
- Key risks include economic and freight-market volatility, intense pricing competition, driver recruitment and retention, fuel-cost recovery, reliance on railroads and third-party carriers, and possible changes to independent-contractor classification rules, including California AB 5.
- Other material exposures include self-insured accident and workers’ compensation claims, cybersecurity and operational technology disruption, environmental regulation, potential asset impairment, and the concentrated family voting structure. Claims accruals net of reinsurance were $144.2 million at year-end.
- Unusual items included a $12.8 million expense related to an adverse IRS excise-tax ruling, which the company appealed; an $8.8 million pre-tax gain on its Platform Science investment; and a pending former-WSL-owner lawsuit seeking, among other relief, an additional $40 million earn-out payment. The company said it believed it had strong defenses; an adverse judgment could materially affect results.
- The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. Claims accruals were identified as a critical audit matter because of estimation uncertainty.
Important facts for investors to verify
- Whether the earnings improvement is sustainable after separating ongoing results from the prior-year FTFM shutdown and other unusual items; compare GAAP and non-GAAP measures.
- Whether Truckload capacity, pricing, and driver availability recover, and whether Intermodal rail service and margins improve.
- Whether Logistics growth translates into improved profitability, given its lower asset intensity and 96.2% segment operating ratio in 2020.
- Execution of the planned 2021 capital spending and its effects on free cash generation, liquidity, and fleet utilization.
- Developments in the IRS appeal, the WSL earn-out litigation, self-insured claims, and any resulting cash or earnings exposure.
- Terms and renewal of the receivables facility, future debt maturities, and the sustainability of dividends after the special 2020 distribution.