Market Overview

Schneider National, Inc. Reports Second Quarter 2018 Results

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Portfolio of Services Drives Significant Year-over-Year Revenue
and Earnings Growth

  • Operating Revenues of $1.2 billion, an increase of 15% compared to
    second quarter 2017
  • Revenues (excluding fuel surcharge) of $1.1 billion, an increase of
    12% compared to second quarter 2017
  • Net Income of $65.8 million, an increase of 42% compared to second
    quarter 2017
  • Diluted Earnings Per Share of $0.37, compared to second quarter
    2017 of $0.27
  • Adjusted Diluted Earnings Per Share of $0.40, compared to second
    quarter 2017 of $0.23
  • Full year 2018 Adjusted Diluted Earnings Per Share updated guidance
    of $1.45 to $1.55

Schneider National, Inc. (NYSE:SNDR, "Schneider" or the "Company")), a
leading transportation and logistics services company, today announced
results for the quarter and six months ended June 30, 2018.

"Our portfolio of service offerings consisting of asset, asset-light,
and non-asset businesses delivered strong financial results for a couple
of key reasons," noted Chris Lofgren, Chief Executive Officer of
Schneider. "First, we provided our customers with a variety of valuable
alternatives in a highly driver-constrained environment as evidenced by
growth in our Intermodal and Logistics segments. Second, our Quest
technology platform delivered enhanced margins through driver and asset
productivity, in conjunction with yield management. Our Intermodal
segment improved its operating ratio by over 750 basis points compared
to the second quarter of 2017, and more than 250 basis points
sequentially compared to the first quarter of 2018, due to the benefits
of our 2017 chassis conversion, strong execution, market dynamics, and
the complete integration of our Quest platform. We continue to work with
our customers to ensure productivity in all aspects of their supply
chains. The foreseeable limited supply of driver capacity puts
productivity at a premium."

         

Results of Operations (unaudited)

 

The following table sets forth, for the periods indicated, the
Company's results of operations:

 
Three Months Ended June 30, Six Months Ended June 30,
(in millions, except ratios and per share amounts) 2018     2017 2018     2017
Operating revenues $ 1,236.3 $ 1,075.2 $ 2,375.3 $ 2,081.6
Revenues (excluding fuel surcharge) $ 1,103.2 $ 982.6 $ 2,124.4 $ 1,898.8
Income from operations $ 91.7 $ 79.0 $ 159.3 $ 122.5
Adjusted income from operations $ 97.5 $ 67.7 $ 165.1 $ 112.5
Operating ratio 92.6 % 92.7 % 93.3 % 94.1 %
Adjusted operating ratio 91.2 % 93.1 % 92.2 % 94.1 %
Net income $ 65.8 $ 46.5 $ 113.4 $ 69.1
Adjusted net income $ 70.1 $ 39.7 $ 117.7 $ 63.1
Diluted earnings per share $ 0.37 $ 0.27 $ 0.64 $ 0.42
Adjusted diluted earnings per share $ 0.40 $ 0.23 $ 0.66 $ 0.38
Weighted average diluted shares outstanding 177.2 174.5 177.2 165.4
 

Results of Operations – Enterprise

Enterprise operating revenues for the second quarter of 2018 were
$1,236.3 million, resulting in growth of $161.1 million, or 15%,
compared to the same quarter in 2017. Revenues (excluding fuel
surcharge) for the second quarter of 2018 were $1,103.2 million, growth
of $120.6 million, or 12%, compared to the same quarter in 2017. The
primary driver of the Company's revenue growth was a strong pricing and
demand environment, driven by tight industry-wide capacity throughout
the quarter.

Enterprise income from operations for the second quarter of 2018 was
$91.7 million, an increase of $12.7 million, or 16%, compared to the
same quarter in 2017, primarily driven by price, partially offset by
higher driver capacity related costs. Adjusted income from operations
for the second quarter of 2018 was $97.5 million, an increase of $29.8
million, or 44%, compared to the same quarter in 2017. In the second
quarter of 2018, the Company recorded in its Other segment $5.8 million
of expense related to a settlement of a lawsuit that challenged
Washington state labor law compliance. This expense was removed to
arrive at Enterprise adjusted income from operations.

Net income for the second quarter of 2018 was $65.8 million, or $0.37 on
a weighted average diluted per share basis, an increase of $19.3
million, or 42%, compared to the same quarter in 2017. Adjusted net
income for the second quarter of 2018 was $70.1 million, or $0.40 on a
weighted average diluted per share basis, an increase of $30.4 million,
or 77%, compared to the same quarter in 2017. The effective income tax
rate was 25.5% in the second quarter of 2018, compared to 37.7% in the
second quarter of 2017. The Company estimates its annual effective tax
rate to be between 25.5% and 26.5%.

Results of Operations – Reportable Segments

Truckload

  • Revenues (excluding fuel surcharge): $568.7 million; growth of 5%
    compared to second quarter 2017
  • Income from operations: $62.3 million; an increase of 17% compared
    to second quarter 2017

Truckload revenues (excluding fuel surcharge) grew 5% in the second
quarter of 2018 compared to the same quarter in 2017. Revenue per truck
per week improved $239, or 7%, compared to the same quarter in 2017 and
$167, or 5%, sequentially compared to the first quarter of 2018,
primarily due to price, strong demand, and freight selection. Dedicated
standard and for-hire standard revenue per truck per week grew 13% and
11%, respectively, compared to the second quarter of 2017.

Truckload income from operations increased 17% in the second quarter of
2018 compared to the same quarter in 2017, primarily due to price,
partially offset by higher driver and purchased transportation costs,
and lower gains on equipment sales. The average number of trucks
decreased approximately 260 sequentially from the first quarter of 2018,
due in part to restructuring of the Company's Dedicated account
portfolio. The Company's First to Final Mile (FTFM) operating segment
sequentially improved operating results to a loss of approximately $4
million in the second quarter of 2018, and remains on pace towards
profitability. FTFM negatively impacted Truckload segment operating
ratio by approximately 210 basis points in the second quarter of 2018.

Intermodal

  • Revenues (excluding fuel surcharge): $227.9 million; growth of 17%
    compared to second quarter 2017
  • Income from operations: $30.8 million; an increase of 175% compared
    to second quarter 2017

Intermodal revenues (excluding fuel surcharge) grew 17% in the second
quarter of 2018 compared to the same quarter in 2017 due to a 7% growth
in orders and a $183, or 10%, improvement in revenue per order. Tight
industry-wide driver capacity resulted in conversion from over-the-road
to intermodal. In addition, Intermodal effectively introduced nearly
1,500 new containers into its operations in the second quarter and
sequentially improved container productivity compared to the first
quarter of 2018.

Intermodal income from operations increased 175% in the second quarter
of 2018 compared to the same quarter in 2017, due to volume growth,
strong price, effective execution, and an improved cost position as a
result of the 2017 conversion to owned chassis. Intermodal operating
ratio was 86.5%, an improvement of over 750 basis points compared to the
second quarter of 2017.

Logistics

  • Revenues (excluding fuel surcharge): $249.7 million;
    growth of 30% compared to second quarter 2017
  • Income from operations: $10.2 million; an increase of
    57% compared to second quarter 2017

Logistics revenues (excluding fuel surcharge) grew 30% in the second
quarter of 2018 compared to the same quarter in 2017, mainly due to
brokerage volume growth of 19% and pricing. Brokerage was 79% of
Logistics revenues (excluding fuel surcharge) for the second quarter of
2018 compared to 73% for the same quarter in 2017.

Logistics income from operations increased 57% in the second quarter of
2018 compared to the same quarter in 2017, due to volume growth in
brokerage, and effective net revenue management, as evidenced by a 60
basis point sequential improvement in Logistics operating ratio.

Business Outlook

Lofgren commented, "Our disciplined approach to pricing and dynamic
freight selection, based on market conditions, will remain critical to
successfully navigate in the robust market we see ahead. Seeing no
moderation to the supply-demand balance for the remainder of 2018,
coupled with strong performance by our Intermodal and Logistics
segments, we are increasing our full year 2018 adjusted diluted earnings
per share guidance to $1.45 - $1.55. Our deployment of capital will be
to the segments with the best return profiles given market conditions,
recognizing the tight driver market. We will continue to be flexible and
well positioned to invest in new opportunities in the more
driver-friendly dedicated and intermodal businesses. Our 2018 net
capital expenditures guidance remains at $325 million to $375 million."

Non-GAAP Financial Measures

The Company has presented certain non-GAAP financial measures, including
revenues (excluding fuel surcharge), adjusted income from operations,
adjusted operating ratio, adjusted net income, and adjusted diluted
earnings per share. Management believes the use of non-GAAP measures
assists investors in understanding the business, as further described
below. The non-GAAP information provided is used by Company management
and may not be comparable to similar measures disclosed by other
companies. The non-GAAP measures used herein have limitations as
analytical tools, and you should not consider them in isolation or as
substitutes for analysis of results as reported under GAAP.

A reconciliation of net income per share to adjusted diluted earnings
per share as projected for 2018 is not provided. Schneider does not
forecast net income per share as the Company cannot, without
unreasonable effort, estimate or predict with certainty various
components of net income. The components of net income that cannot be
predicted include expenses for items that do not relate to core
operating performance, such as costs related to potential future
acquisitions, as well as the related tax impact of these items. Further,
in the future, other items with similar characteristics to those
currently included in adjusted net income, that have a similar impact on
the comparability of periods, and which are not known at this time, may
exist and impact adjusted net income.

About Schneider National, Inc.

Schneider National is a leading transportation and logistics services
company providing a broad portfolio of premier truckload, intermodal and
logistics solutions and operating one of the largest for-hire trucking
fleets in North America. The Company believes it has developed a
differentiated business model that is difficult to replicate due to its
scale, breadth of complementary service offerings, and proprietary
technology platform. Its highly flexible and balanced business combines
asset-based truckload services with asset-light intermodal and non-asset
logistics offerings, enabling the Company to serve customers' diverse
transportation needs. Since its founding in 1935, the Company believes
it has become an iconic and trusted brand within the transportation
industry by adhering to a culture of safety "first and always" and
upholding its responsibility to associates, customers, and the
communities that the Company serves.

Special Note Regarding Forward-Looking Statements

This earnings release contains forward-looking statements, within the
meaning of the United States Private Securities Litigation Reform Act of
1995, which are intended to come within the safe harbor protection
provided by such Act. These forward-looking statements reflect the
Company's current expectations, beliefs, plans, or forecasts with
respect to, among other things, future events and financial performance
and trends in the business and industry. Forward-looking statements are
often characterized by words or phrases such as "may," "will," "could,"
"should," "would," "anticipate," "estimate," "expect," "project,"
"intend," "plan," "believe," "target," "prospects," "potential" and
"forecast," and other words, terms, and phrases of similar meaning.
Forward-looking statements involve estimates, expectations, projections,
goals, forecasts, assumptions, risks, and uncertainties. Readers are
cautioned that a forward-looking statement is not a guarantee of future
performance and that actual results could differ materially from those
contained in the forward-looking statement.

Such risks and uncertainties include, among others, those discussed in
Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form
10-K filed on February 27, 2018, as such may be amended or supplemented
in Part II, Item 1A, "Risk Factors," of subsequently filed Quarterly
Reports on Form 10-Q, as well as those discussed in the consolidated
financial statements, related notes, and other information appearing
elsewhere in the aforementioned reports and other filings with the SEC.
In addition to any such risks, uncertainties, and other factors
discussed elsewhere herein, risks, uncertainties, and other factors that
could cause or contribute to actual results differing materially from
those expressed or implied by the forward-looking statements include,
but are not limited to, the following:

  • Economic and business risks inherent in the truckload and
    transportation industry, including competitive pressures pertaining to
    pricing, capacity, and service;
  • The Company's ability to manage and implement effectively its growth
    and diversification strategies and cost saving initiatives;
  • The Company's dependence on its reputation and the Schneider brand and
    the potential for adverse publicity, damage to the Company reputation,
    and the loss of brand equity;
  • Risks related to demand for the Company's service offerings;
  • Risks associated with the loss of a significant customer or customers;
  • Capital investments that fail to match customer demand or for which
    the Company cannot obtain adequate funding;
  • Fluctuations in the price or availability of fuel, the volume and
    terms of diesel fuel purchase commitments, and the Company's ability
    to recover fuel costs through its fuel surcharge programs;
  • The Company's ability to attract and retain qualified drivers,
    including owner-operators;
  • The Company's use of owner-operators to provide a portion of its truck
    fleet;
  • The Company's dependence on railroads in the operation of its
    intermodal business;
  • Service instability from third-party capacity providers used by the
    logistics brokerage business;
  • Changes in the outsourcing practices of third-party logistics
    customers;
  • Difficulty in obtaining material, equipment, goods, and services from
    vendors and suppliers;
  • The Company's ability to recruit, develop, and retain key associates;
  • Labor relations;
  • Variability in insurance and claims expenses and the risks of insuring
    claims through the Company's captive insurance company;
  • The impact of laws and regulations that apply to the business,
    including those that relate to the environment, taxes, employees,
    owner-operators, and the captive insurance company; changes to those
    laws and regulations; and the increased costs of compliance with
    existing or future federal, state, and local regulations;
  • Political, economic, and other risks from cross-border operations and
    operations in multiple countries;
  • Risks associated with financial, credit, and equity markets, including
    the Company's ability to service indebtedness and fund capital
    expenditures and strategic initiatives;
  • Negative seasonal patterns generally experienced in the trucking
    industry during traditionally slower shipping periods and winter
    months;
  • Risks associated with severe weather and similar events;
  • Significant systems disruptions, including those caused by
    cybersecurity events;
  • The potential that the Company will not successfully identify,
    negotiate, consummate, or integrate acquisitions;
  • Exposure to claims and lawsuits in the ordinary course of business; and
  • The Company's ability to adapt to new technologies and new
    participants in the truckload and transportation industry.

The Company does not intend, and undertakes no obligation, to update any
of its forward-looking statements after the date of this release to
reflect actual results or future events or circumstances. Given these
risks and uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements.

         

SCHNEIDER NATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in millions, except per share data)

 
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
OPERATING REVENUES $ 1,236.3 $ 1,075.2 $ 2,375.3 $ 2,081.6
OPERATING EXPENSES:
Purchased transportation 485.7 387.5 910.7 754.8
Salaries, wages, and benefits 314.7 304.9 626.0 602.6
Fuel and fuel taxes 88.2 71.2 172.9 144.4
Depreciation and amortization 71.9 68.6 143.6 136.5
Operating supplies and expenses 121.6 127.6 240.7 233.9
Insurance and related expenses 22.2 20.3 45.3 42.1
Other general expenses, net 40.3   16.1   76.8   44.8  
Total operating expenses 1,144.6   996.2   2,216.0   1,959.1  
INCOME FROM OPERATIONS 91.7   79.0   159.3   122.5  
OTHER EXPENSES (INCOME):
Interest expense—net 3.9 4.6 7.4 10.1
Other expenses (income)—net (0.5 ) (0.2 ) (0.9 ) (0.1 )
Total other expenses 3.4   4.4   6.5   10.0  
INCOME BEFORE INCOME TAXES 88.3 74.6 152.8 112.5
PROVISION FOR INCOME TAXES 22.5   28.1   39.4   43.4  
NET INCOME $ 65.8   $ 46.5   $ 113.4   $ 69.1  
 
 
Weighted average common shares outstanding 177.0 174.4 177.0 165.4
Basic earnings per share $ 0.37 $ 0.27 $ 0.64 $ 0.42
Weighted average diluted shares outstanding 177.2 174.5 177.2 165.4
Diluted earnings per share $ 0.37 $ 0.27 $ 0.64 $ 0.42
Dividends per share of common stock $ 0.06 $ 0.05 $ 0.12 $ 0.10
 
         

SCHNEIDER NATIONAL, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions, except share data)

 
June 30, 2018 December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 333.7 $ 238.5
Marketable securities 39.2 41.6
Trade accounts receivable—net of allowance of $7.0 and $5.2,
respectively
568.0 527.9
Other receivables 19.6 22.4
Current portion of lease receivables—net of allowance of $0.7 and
$1.7, respectively
122.1 104.9
Inventories 70.3 83.1
Prepaid expenses and other current assets 108.5   75.6
Total current assets 1,261.4   1,094.0
NONCURRENT ASSETS:
Property and equipment:
Transportation equipment 2,803.9 2,770.1
Land, buildings, and improvements 174.4 183.8
Other property and equipment 159.1   175.7
Total property and equipment 3,137.4 3,129.6
Accumulated depreciation 1,275.8   1,271.5
Net property and equipment 1,861.6 1,858.1
Lease receivables 129.2 138.9
Capitalized software and other noncurrent assets 76.6 74.7
Goodwill 164.6   164.8
Total noncurrent assets 2,232.0   2,236.5
TOTAL $ 3,493.4   $ 3,330.5
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 289.2 $ 230.4
Accrued salaries and wages 75.4 85.8
Claims accruals - current 62.5 48.3
Current maturities of debt and capital lease obligations 9.5 19.1
Dividends payable 10.7 8.8
Other current liabilities 76.3   69.6
Total current liabilities 523.6   462.0
NONCURRENT LIABILITIES:
Long-term debt and capital lease obligations 415.2 420.6
Claims accruals - noncurrent 97.8 102.5
Deferred income taxes 416.7 386.6
Other 47.6   68.6
Total noncurrent liabilities 977.3   978.3
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY

Class A common shares, no par value, 250,000,000 shares
authorized, 83,029,500 shares issued and outstanding

Class B common shares, no par value, 750,000,000 shares authorized,
94,586,654 shares issued, and 93,966,180 shares outstanding
Additional paid-in capital 1,537.6 1,534.6
Retained earnings 455.1 355.6
Accumulated other comprehensive income (0.2 )
Total shareholders' equity 1,992.5   1,890.2
TOTAL $ 3,493.4   $ 3,330.5
 

 

     

SCHNEIDER NATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)

 
Six Months Ended June 30,
2018     2017
OPERATING ACTIVITIES:
Net income $ 113.4 $ 69.1
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 143.6 136.5
Gains on sales of property and equipment (1.7 ) (6.1 )
Deferred income taxes 27.7 36.3
WSL contingent consideration adjustment (12.9 )
Long-term incentive compensation expense 10.4 11.1
Other noncash items (3.2 ) (0.3 )
Changes in operating assets and liabilities:
Receivables (37.3 ) 15.0
Other assets (17.9 ) (11.8 )
Payables 36.9 2.0
Other liabilities (16.9 ) (12.2 )
Net cash provided by operating activities 255.0   226.7  
INVESTING ACTIVITIES:
Purchases of transportation equipment (143.1 ) (163.0 )
Purchases of other property and equipment (14.4 ) (18.3 )
Proceeds from sale of property and equipment 47.6 34.6
Proceeds from lease receipts and sale of off-lease inventory 36.8 29.9
Purchases of lease equipment (34.7 ) (52.0 )
Sales of marketable securities 1.9   7.2  
Net cash used in investing activities (105.9 ) (161.6 )
FINANCING ACTIVITIES:
Payments under revolving credit agreements (135.0 )
Payments of debt and capital lease obligations (15.1 ) (114.8 )
Payments of deferred consideration related to acquisition (19.3 ) (19.4 )
Proceeds from IPO, net of issuance costs 341.1
Dividends paid (19.5 ) (7.8 )
Redemptions of redeemable common shares   (0.1 )
Net cash (used in) provided by financing activities (53.9 ) 64.0  
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 95.2   $ 129.1  
CASH AND CASH EQUIVALENTS:
Beginning of period $ 238.5   $ 130.8  
End of period $ 333.7   $ 259.9  
ADDITIONAL CASH FLOW INFORMATION:
Noncash investing and financing activity:
Equipment purchases in accounts payable $ 31.5 $ 49.4
Dividends declared but not yet paid $ 10.7 $ 8.8
Investment in Platform Science, Inc. $ 2.5 $
Costs in accounts payable related to our IPO $ $ 0.4
Cash paid (refunded) during the period for:
Interest $ 7.8 $ 11.1
Income taxes—net of refunds $ 19.7 $ (13.5 )
 
         

Schneider National, Inc.

Revenues and Income from Operations by Segment

(unaudited)

 

Revenues by Segment

 
(in millions)       Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Truckload $ 568.7 $ 543.0 $ 1,120.0 $ 1,065.1
Intermodal 227.9 194.3 428.9 375.4
Logistics 249.7 191.7 470.5 375.6
Other 82.7 78.9 157.3 129.2
Fuel surcharge 133.1 92.6 250.9 182.8
Inter-segment eliminations (25.8 ) (25.3 ) (52.3 ) (46.5 )
Operating revenues $ 1,236.3   $ 1,075.2   $ 2,375.3   $ 2,081.6  
         

Income from Operations by Segment

 
(in millions)       Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Truckload $ 62.3 $ 53.3 $ 109.7 $ 91.8
Intermodal 30.8 11.2 52.6 17.8
Logistics 10.2 6.5 17.9 11.7
Other (11.6 ) 8.0   (20.9 ) 1.2
Income from operations $ 91.7   $ 79.0   $ 159.3   $ 122.5
 
         

Schneider National, Inc.

Key Performance Indicators by Segment

(unaudited)

 
Truckload       Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Dedicated standard
Revenues (excluding fuel surcharge) (1) $ 80.0 $ 71.6 $ 156.5 $ 143.3
Average trucks (2) (3) 1,597 1,615 1,613 1,635
Revenue per truck per week (4) $ 3,897 $ 3,448 $ 3,790 $ 3,423
Dedicated specialty
Revenues (excluding fuel surcharge) (1) $ 99.4 $ 104.6 $ 204.7 $ 200.6
Average trucks (2) (3) 2,267 2,228 2,333 2,178
Revenue per truck per week (4) $ 3,409 $ 3,649 $ 3,427 $ 3,598
For-hire standard
Revenues (excluding fuel surcharge) (1) $ 303.9 $ 285.8 $ 594.9 $ 563.8
Average trucks (2) (3) 6,034 6,287 6,090 6,332
Revenue per truck per week (4) $ 3,917 $ 3,535 $ 3,816 $ 3,478
For-hire specialty
Revenues (excluding fuel surcharge) (1) $ 85.4 $ 81.0 $ 163.9 $ 157.4
Average trucks (2) (3) 1,599 1,574 1,590 1,619
Revenue per truck per week (4) $ 4,154 $ 4,003 $ 4,028 $ 3,799
Total Truckload
Revenues (excluding fuel surcharge) (1) $ 568.7 $ 543.0 $ 1,120.0 $ 1,065.1
Average trucks (2) (3) 11,496 11,704 11,626 11,764
Revenue per truck per week (4) $ 3,847 $ 3,608 $ 3,763 $ 3,537
Average company trucks (3) 8,789 8,980 8,911 9,016
Average owner-operator trucks (3) 2,707 2,724 2,715 2,748
Trailers 38,089 37,790 38,089 37,790
Operating ratio (5) 89.1 % 90.2 % 90.2 % 91.4 %
 
(1)   Revenues (excluding fuel surcharge) in millions
(2) Includes company trucks and owner-operator trucks
(3) Calculated based on beginning and ending month counts and represents
the average number of trucks available to haul freight over the
specified time frame
(4) Calculated excluding fuel surcharge, consistent with how revenue is
reported internally for segment purposes, using weighted workdays
(5) Calculated as segment operating expenses divided by segment revenues
(excluding fuel surcharge)
 

Intermodal

      Three Months Ended June 30,     Six Months Ended June 30,
      2018     2017 2018     2017
Orders 111,700 104,532 213,078 200,622
Containers 19,484 17,577 19,484 17,577
Trucks (1) 1,371 1,231 1,371 1,231
Revenue per order (2) $ 2,041 $ 1,858 $ 2,013 $ 1,871
Operating ratio (3) 86.5 % 94.2 % 87.7 % 95.2 %
 
(1)   Includes company trucks and owner-operator trucks at the end of the
period
(2) Calculated excluding fuel surcharge, consistent with how revenue is
reported internally for segment purposes
(3) Calculated as segment operating expenses divided by segment revenues
(excluding fuel surcharge)
 
Logistics       Three Months Ended June 30,     Six Months Ended June 30,
      2018     2017 2018     2017
Operating ratio (1) 95.9 % 96.6 % 96.2 % 96.9 %
 
(1)   Calculated as segment operating expenses divided by segment revenues
(excluding fuel surcharge)
 

Schneider National, Inc.
Reconciliation of Non - GAAP
Financial Measures

(unaudited)

In this earnings release, the Company presents the following non-GAAP
financial measures: (1) revenues (excluding fuel surcharge), (2)
adjusted income from operations, (3) adjusted operating ratio, (4)
adjusted net income, and (5) adjusted diluted earnings per share. The
Company also provides below reconciliations of these measures to the
most directly comparable financial measures calculated and presented in
accordance with GAAP. Management believes the use of each of these
non-GAAP measures assists investors in understanding our business by (a)
removing the impact of items from our operating results that, in our
opinion, do not reflect our core operating performance, (b) providing
investors with the same information our management uses internally to
assess our core operating performance and (c) presenting comparable
financial results between periods. Adjustments to arrive at non-GAAP
measures are made at the enterprise level, with the exception of fuel
surcharge revenues, which are not included in segment revenues.

In the case of revenues (excluding fuel surcharge), the Company believes
the measure is useful to investors because it isolates volume, price,
and cost changes directly related to industry demand and the way the
Company operates its business from the external factor of fluctuating
fuel prices and the programs in place to manage fuel price fluctuations.
Fuel-related costs and their impact on our industry are important to our
results of operations, but they are often independent of other, more
relevant factors affecting our results of operations and our industry.

Although the Company believes these non-GAAP measures are useful to
investors, they have limitations as analytical tools and may not be
comparable to similar measures disclosed by other companies. You should
not consider the non-GAAP measures in this release in isolation or as
substitutes for, or alternatives to, analysis of our results as reported
under GAAP. The exclusion of unusual or non-recurring items or other
adjustments reflected in the non-GAAP measures should not be construed
as an inference that our future results will not be affected by unusual
or non-recurring items or by other items similar to such adjustments.
Our management compensates for these limitations by relying primarily on
our GAAP results in addition to using the non-GAAP measures.

         

Revenues (excluding fuel surcharge)

 
(in millions)       Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Operating revenues $ 1,236.3 $ 1,075.2 $ 2,375.3 $ 2,081.6
Less: Fuel surcharge revenues 133.1   92.6   250.9   182.8
Revenues (excluding fuel surcharge) $ 1,103.2   $ 982.6   $ 2,124.4   $ 1,898.8
 
         

Adjusted income from operations

 
(in millions)       Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Income from operations $ 91.7 $ 79.0 $ 159.3 $ 122.5
Duplicate chassis costs (1) 1.6 2.9
WSL contingent consideration adjustment (2) (12.9 ) (12.9 )
Litigation (3) 5.8     5.8    
Adjusted income from operations $ 97.5   $ 67.7   $ 165.1   $ 112.5  
 
(1)   As of December 31, 2017, the Company completed its migration to an
owned chassis model, which required the replacement of rental
chassis with owned chassis. Accordingly, the Company adjusted its
income from operations for rental costs related to idle chassis as
rented units were replaced.
(2) In the second quarter of 2017, the Company recorded a $12.9 million
fair value adjustment to the contingent consideration related to the
acquisition of WSL.
(3) Costs associated with the settlement of a lawsuit that challenged
Washington State labor law compliance.
 

Adjusted operating ratio

         
(in millions, except ratios)       Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Total operating expenses $ 1,144.6 $ 996.2 $ 2,216.0 $ 1,959.1
Divide by: Operating revenues 1,236.3   1,075.2   2,375.3   2,081.6  
Operating ratio 92.6 % 92.7 % 93.3 % 94.1 %
 
Operating revenues $ 1,236.3 $ 1,075.2 $ 2,375.3 $ 2,081.6
Less: Fuel surcharge revenues 133.1   92.6   250.9   182.8  
Revenues (excluding fuel surcharge) $ 1,103.2 $ 982.6 $ 2,124.4 $ 1,898.8
 
Total operating expenses $ 1,144.6 $ 996.2 $ 2,216.0 $ 1,959.1
 
Adjusted for:
Fuel surcharge revenues (133.1 ) (92.6 ) (250.9 ) (182.8 )
Duplicate chassis costs (1.6 ) (2.9 )
WSL contingent consideration adjustment 12.9 12.9
Litigation (5.8 )   (5.8 )  
Adjusted total operating expenses $ 1,005.7   $ 914.9   $ 1,959.3   $ 1,786.3  
       
Adjusted operating ratio 91.2 % 93.1 % 92.2 % 94.1 %
 

Adjusted net income

         

(in millions)

      Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Net income $ 65.8 $ 46.5 $ 113.4 $ 69.1
Duplicate chassis costs 1.6 2.9
WSL contingent consideration adjustment (12.9 ) (12.9 )
Litigation 5.8 5.8
Income tax effect of non-GAAP adjustments (1.5 ) 4.5   (1.5 ) 4.0  
Adjusted net income $ 70.1   $ 39.7   $ 117.7   $ 63.1  
 

Adjusted diluted earnings per share (1)

         
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Diluted earnings per share $ 0.37 $ 0.27 $ 0.64 $ 0.42
Non-GAAP adjustments, tax effected 0.02   (0.04 ) 0.02   (0.04 )
Adjusted diluted earnings per share $ 0.40   $ 0.23   $ 0.66   $ 0.38  
 
(1)   Table may not sum due to rounding.
 

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