Schneider National, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; unaudited. Schneider provides truckload, intermodal, and logistics services across North America.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Change |
|---|---|---|---|
| Operating revenue | $1,360.8 million | $1,032.8 million | +32% |
| Revenue excluding fuel surcharge | $1,250.6 million | $964.1 million | +30% |
| Income from operations | $125.8 million | $63.4 million | +98% |
| Net income | $106.5 million | $46.5 million | +129% |
| Diluted EPS | $0.60 | $0.26 | Up $0.34 |
| Operating ratio / adjusted operating ratio | 90.8% / 89.9% | 93.9% / 93.4% | Improved |
For the first six months, revenue was $2,589.4 million (+20%), operating income $202.0 million (+71%), net income $161.3 million (+79%), and diluted EPS $0.91 versus $0.51. Six-month operating ratio improved to 92.2% from 94.5%; adjusted operating ratio was 91.5% versus 94.1%.
Q2 operating income rose across Truckload ($73.6 million versus $40.5 million), Intermodal ($34.9 million versus $11.0 million), and Logistics ($17.0 million versus $8.2 million). The quarter’s $20.2 million pre-tax TuSimple investment gain contributed to other income; Q2 2020 included a $2.7 million gain on PSI.
Cash flow, balance sheet, and liquidity
- Six-month operating cash flow was $255.0 million, down from $319.8 million, principally reflecting working-capital use, including higher receivables and timing of tax payments.
- Net capital expenditures were $99.5 million versus $78.7 million; purchases of transportation equipment increased, partly offset by higher equipment-sale proceeds. Investing cash outflow was $134.9 million; financing cash outflow was $25.1 million.
- At June 30, cash and cash equivalents were $490.5 million and marketable securities were $49.1 million, totaling $539.6 million. Total debt and finance leases were $307.9 million, including $100.7 million current. No borrowings were outstanding under the revolving credit or receivables facilities.
- Unused credit capacity was $375.8 million. The company reported compliance with financial covenants and expects operating cash flow and available facilities to meet foreseeable needs.
- Firm commitments to purchase transportation equipment totaled $415.2 million. The company also anticipates paying $30.7 million of deferred employer Social Security taxes during 2021.
Material changes and management commentary
- Logistics was the largest growth contributor: Q2 segment revenue increased $199.8 million, driven by brokerage volume growth and higher revenue per order. Intermodal revenue rose $55.0 million with more orders and improved revenue per order.
- Truckload revenue excluding fuel surcharge increased $24.1 million, although volume declined 8%; revenue per truck per week increased 16%. Management cited improved pricing and continuing driver-capacity constraints.
- Higher purchased transportation costs reflected Logistics growth and higher carrier costs, as well as increased Intermodal rail costs. Driver pay, fuel, and onboarding costs also increased. Favorable equipment dispositions and lower insurance costs partly offset these pressures.
- COVID-19 remained an operating consideration, though the company said it had funded liquidity needs to date and did not anticipate needing additional capital because of the pandemic. Remote employees were transitioning toward primarily on-premise work.
Outlook, risks, and unusual items
The filing provides no quantified earnings or revenue guidance. Management cited favorable freight-market pricing and demand, alongside driver shortages, capacity and network-fluidity constraints, port congestion, and supply-chain inefficiencies. Results are subject to seasonal patterns, fuel-price changes, weather, customer demand, and competitive conditions.
- TuSimple shares were valued at $25.2 million at quarter-end; the $20.2 million Q2 pre-tax gain is subject to equity-price volatility. A hypothetical 10% share-price decline would reduce the investment’s value by approximately $2.5 million.
- A lawsuit by former WSL owners seeks, among other relief, an additional $40.0 million earn-out payment. The company says it has strong defenses, but an adverse judgment could materially affect results.
- The company recorded and paid $12.8 million of expense and $13.7 million, respectively, in 2020 in an IRS excise-tax dispute; its appeal remained pending.
- Management said ordinary-course legal matters were not expected to have a material impact overall. The annual goodwill impairment evaluation was scheduled for October 31, 2021; higher interest rates could reduce estimated reporting-unit values.
Important facts for investors to verify
- Whether pricing and Logistics growth can persist, and whether Truckload volumes recover as driver-capacity constraints ease.
- How much earnings depend on the TuSimple fair-value gain and future changes in its share price.
- Cash conversion and working-capital trends, particularly receivables, alongside planned fleet purchases and the $415.2 million equipment commitment.
- Outcome and potential financial exposure from the WSL earn-out litigation and the pending IRS appeal.
- Near-term debt maturities, deferred payroll-tax payments, and renewal of the receivables purchase agreement, which was due to expire in September 2021.