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Schneider National(SNDR) - 2021 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements Overview This section outlines forward-looking statements, emphasizing inherent estimates, expectations, risks, and uncertainties that could cause actual results to differ - Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks, and uncertainties, and are not guarantees of future performance12 - Key risks include managing COVID-19 challenges, economic and business risks in the transportation industry, competitive pressures, driver shortages, maintaining customer and supply arrangements, volatility in strategic investments, and regulatory changes1318 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements, including comprehensive income, balance sheets, cash flows, and equity, along with detailed notes Consolidated Statements of Comprehensive Income (Unaudited) This statement presents the company's unaudited consolidated comprehensive income for the three and six months ended June 30, 2021 and 2020 | Metric | 3 Months Ended June 30, 2021 (Millions) | 3 Months Ended June 30, 2020 (Millions) | 6 Months Ended June 30, 2021 (Millions) | 6 Months Ended June 30, 2020 (Millions) | | :----------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Operating revenues | $1,360.8 | $1,032.8 | $2,589.4 | $2,151.9 | | Income from operations | $125.8 | $63.4 | $202.0 | $118.3 | | Net income | $106.5 | $46.5 | $161.3 | $90.3 | | Basic earnings per share | $0.60 | $0.26 | $0.91 | $0.51 | | Diluted earnings per share | $0.60 | $0.26 | $0.91 | $0.51 | Consolidated Balance Sheets (Unaudited) This statement provides the company's unaudited consolidated balance sheets as of June 30, 2021, and December 31, 2020 | Metric | June 30, 2021 (Millions) | December 31, 2020 (Millions) | | :----------------------------- | :----------------------- | :--------------------------- | | Total Assets | $3,767.8 | $3,516.2 | | Total Current Assets | $1,398.3 | $1,220.7 | | Total Liabilities | $1,569.4 | $1,460.7 | | Total Current Liabilities | $719.5 | $534.6 | | Total Shareholders' Equity | $2,198.4 | $2,055.5 | Consolidated Statements of Cash Flows (Unaudited) This statement presents the company's unaudited consolidated cash flows for the six months ended June 30, 2021 and 2020 | Metric | 6 Months Ended June 30, 2021 (Millions) | 6 Months Ended June 30, 2020 (Millions) | | :-------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net cash provided by operating activities | $255.0 | $319.8 | | Net cash used in investing activities | $(134.9) | $(110.1) | | Net cash used in financing activities | $(25.1) | $(47.5) | | Net increase in cash and cash equivalents | $95.0 | $162.2 | | Cash and cash equivalents, end of period | $490.5 | $713.8 | Consolidated Statements of Shareholders' Equity (Unaudited) This statement details the company's unaudited consolidated shareholders' equity for the period from December 31, 2020, to June 30, 2021 | Metric | Balance - December 31, 2020 (Millions) | Balance - June 30, 2021 (Millions) | | :----------------------------- | :------------------------------------- | :--------------------------------- | | Additional Paid In Capital | $1,552.2 | $1,559.1 | | Retained Earnings | $502.5 | $638.7 | | Accumulated Other Comprehensive Income | $0.8 | $0.6 | | Total Shareholders' Equity | $2,055.5 | $2,198.4 | Notes to Consolidated Financial Statements (Unaudited) This section provides detailed notes explaining the accounting policies and specific financial statement line items Note 1 General This note describes Schneider National, Inc.'s business as a transportation and logistics provider and outlines the basis of presentation for its unaudited interim financial statements - Schneider National, Inc. provides safe, reliable, and innovative truckload, intermodal, and logistics services across North America26 - The company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes, on January 1, 2021, with no material impact on its consolidated financial statements29 Note 2 Leases This note details the company's lease arrangements as both a lessee and a lessor, including cash flows and investment balances | Metric (in millions) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Cash paid for operating leases | $15.3 | $17.3 | | Right-of-use assets obtained (Operating leases) | $19.5 | $21.6 | | Net investment in leases (as of period end) | $255.1 (June 30, 2021) | $228.1 (Dec 31, 2020) | | Revenue from sales-type leases (6 months) | $112.6 | $99.4 | | Operating profit from sales-type leases (6 months)| $15.5 | $9.7 | - As a lessor, the company finances transportation-related equipment under sales-type leases, generally for one to three years, with fully guaranteed residual values32 Note 3 Revenue Recognition This note disaggregates the company's revenues by service type and provides information on remaining performance obligations and contract balances | Disaggregated Revenues (in millions) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Transportation | $1,255.5 | $951.1 | $2,374.1 | $1,979.4 | | Logistics Management | $46.8 | $29.8 | $93.3 | $60.9 | | Other | $58.5 | $51.9 | $122.0 | $111.6 | | Total operating revenues | $1,360.8 | $1,032.8 | $2,589.4 | $2,151.9 | - Remaining performance obligations for contracts with terms greater than one year totaled $81.4 million as of June 30, 2021, with $26.4 million expected within one year39 Note 4 Fair Value This note describes the fair value measurement hierarchy and presents the fair value of the company's financial assets and debt | Financial Asset (in millions) | Fair Value Hierarchy Level | June 30, 2021 | December 31, 2020 | | :---------------------------- | :------------------------- | :------------ | :---------------- | | Equity investment in TuSimple | 1 | $25.2 | — | | Marketable securities | 2 | $49.1 | $47.1 | - The fair value of the company's debt was $321.1 million as of June 30, 2021, compared to a carrying value of $305.0 million, calculated using Level 2 inputs47 Note 5 Investments This note details the company's marketable securities and equity investments in strategic partners, including gains recognized from the TuSimple IPO | Marketable Securities (in millions) | June 30, 2021 Fair Value | December 31, 2020 Fair Value | | :---------------------------------- | :----------------------- | :--------------------------- | | U.S. treasury and government agencies | $16.8 | $12.7 | | Corporate debt securities | $21.7 | $22.2 | | State and municipal bonds | $10.6 | $12.2 | | Total marketable securities | $49.1 | $47.1 | - The company recognized pre-tax gains of $20.2 million on its investment in TuSimple in the three and six months ended June 30, 2021, following its initial public offering in April 202155 - Equity investments in Platform Science, Inc. (PSI) and Mastery Logistics Systems, Inc. (MLSI) are accounted for using the measurement alternative, with no indicated change in value for the current periods5354 Note 6 Goodwill This note presents the company's goodwill balances by segment and reports accumulated impairment charges | Segment (in millions) | Balance at December 31, 2020 | Balance at June 30, 2021 | | :-------------------- | :--------------------------- | :----------------------- | | Truckload | $103.6 | $103.6 | | Logistics | $14.2 | $14.2 | | Other | $10.3 | $10.5 | | Total | $128.1 | $128.3 | - Accumulated goodwill impairment charges remained at $42.6 million as of June 30, 202158 Note 7 Debt and Credit Facilities This note outlines the company's debt structure, including unsecured senior notes and available credit facilities | Debt (in millions) | June 30, 2021 | December 31, 2020 | | :----------------- | :------------ | :---------------- | | Unsecured senior notes | $305.0 | $305.0 |\ | Current maturities | $(100.0) | $(40.0) |\ | Long-term debt | $204.9 | $264.8 | - The company has a $250.0 million revolving credit facility and a $200.0 million Receivables Purchase Agreement, with no outstanding borrowings under either facility as of June 30, 20215960 Note 8 Income Taxes This note provides the company's effective income tax rates and details regarding deferred employer social security taxes | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective income tax rate | 25.4% | 25.8% | 25.2% | 25.4% | - The company deferred $30.7 million in employer social security taxes under the CARES Act, which are anticipated to be paid in 202162 Note 9 Common Equity This note details the computation of basic and diluted earnings per share and reports the declaration of quarterly cash dividends | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic earnings per common share | $0.60 | $0.26 | $0.91 | $0.51 | | Diluted earnings per common share | $0.60 | $0.26 | $0.91 | $0.51 | - In July 2021, the Board of Directors declared a quarterly cash dividend of $0.07 per share for Class A and Class B common stock, payable on October 8, 202167 Note 10 Share-Based Compensation This note outlines the company's share-based compensation plans and reports the associated expense and unrecognized costs | Metric (in millions) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Share-based compensation expense | $2.9 | $0.8 | $7.1 | $2.5 | - As of June 30, 2021, the company had $25.2 million of pre-tax unrecognized compensation cost related to outstanding share-based awards, expected to be recognized over a weighted average period of 2.4 years69 Note 11 Commitments and Contingencies This note describes the company's legal proceedings, firm commitments for equipment purchases, and potential impacts from pending lawsuits - Firm commitments to purchase transportation equipment totaled $415.2 million as of June 30, 202172 - A lawsuit claiming an additional $40.0 million payment related to the WSL acquisition could have a material adverse effect if a judgment is rendered against the company73 - The company is appealing an adverse tax ruling with the IRS over excise taxes on refurbished tractors, which resulted in $12.8 million expense and $13.7 million paid in 202074 Note 12 Segment Reporting This note provides a breakdown of the company's financial performance by its three reportable segments: Truckload, Intermodal, and Logistics | Metric (in millions) | Segment | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------------------- | :-------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | Truckload | $475.2 | $451.1 | $926.9 | $920.5 | | | Intermodal| $274.0 | $219.0 | $529.8 | $457.0 | | | Logistics | $430.7 | $230.9 | $786.6 | $470.5 | | Income from Operations | Truckload | $73.6 | $40.5 | $111.9 | $77.1 | | | Intermodal| $34.9 | $11.0 | $54.9 | $27.3 | | | Logistics | $17.0 | $8.2 | $32.9 | $12.4 | | Depreciation & Amortization | Truckload | $52.4 | $52.5 | $105.0 | $103.5 | | | Intermodal| $11.6 | $11.7 | $23.1 | $22.5 | | | Logistics | $0.1 | — | $0.1 | — | - For segment reporting, fuel surcharge revenues are recorded as a reduction of the segment's fuel expenses75 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a comprehensive analysis of the company's financial condition and results of operations, including an overview, recent developments, and liquidity INTRODUCTION This introduction provides an overview of Schneider National, Inc.'s diversified transportation and logistics services, its capital allocation strategy, and ongoing COVID-19 mitigation efforts - Schneider offers a diversified portfolio of truckload (dedicated and network), intermodal (rail and dray), and logistics (brokerage, supply chain, warehousing) services across North America82838485 - The business is seasonal, with revenues typically lowest in the first quarter and highest in the fourth quarter, and operating expenses higher in winter months87 - The company continues to implement measures to mitigate COVID-19 risks, including work-from-home policies and travel limitations, while transitioning associates back to a primarily on-premise work environment89 RESULTS OF OPERATIONS This section details the company's financial performance, including non-GAAP measures, enterprise summaries, and comparative analysis of results by period and segment Non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures to provide a clearer understanding of core operating performance by adjusting for non-recurring items and fuel price fluctuations - Non-GAAP measures are used to assist investors in understanding core operating performance by removing the impact of items that do not reflect core operations and isolating the effects of fluctuating fuel prices9293 - Management relies primarily on GAAP results in addition to non-GAAP measures, acknowledging their limitations as analytical tools94 Enterprise Summary This summary provides key GAAP and non-GAAP financial measures for the consolidated enterprise, showing significant improvements in operating revenues, income, and operating ratios | Metric (in millions, except ratios) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating revenues | $1,360.8 | $1,032.8 | $2,589.4 | $2,151.9 | | Revenues (excluding fuel surcharge) | $1,250.6 | $964.1 | $2,389.0 | $1,980.2 | | Income from operations | $125.8 | $63.4 | $202.0 | $118.3 | | Adjusted income from operations | $125.8 | $63.6 | $202.0 | $117.3 | | Operating ratio | 90.8 % | 93.9 % | 92.2 % | 94.5 % | | Adjusted operating ratio | 89.9 % | 93.4 % | 91.5 % | 94.1 % | | Net income | $106.5 | $46.5 | $161.3 | $90.3 | | Adjusted net income | $106.5 | $46.7 | $161.3 | $89.6 | Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 This section analyzes the company's financial performance for the second quarter of 2021 compared to the same period in 2020, highlighting revenue and income drivers Enterprise Results Summary This summary highlights the significant increase in enterprise net income and income from operations for Q2 2021, partly driven by investment gains - Enterprise net income increased by $60.0 million (129%) to $106.5 million in Q2 2021, primarily due to a $62.4 million increase in income from operations103 - A $20.2 million pre-tax gain on the TuSimple investment contributed to the Q2 2021 increase, compared to a $2.7 million gain on PSI in Q2 2020103 Components of Enterprise Net Income This section details the changes in enterprise operating revenues and income from operations, attributing growth to strong segment performance and improved operating ratios - Enterprise operating revenues increased by $328.0 million (32%) to $1,360.8 million in Q2 2021105 - Revenues (excluding fuel surcharge) increased by $286.5 million (30%), driven by Logistics (+$199.8 million), Intermodal (+$55.0 million), and Truckload (+$24.1 million)106110 - Income from operations increased by $62.4 million (98%) to $125.8 million, due to improved net revenue per order/truck, favorable equipment dispositions, and lower insurance costs, partially offset by higher driver costs and reduced Truckload freight volumes107 - Enterprise operating ratio improved to 90.8% (GAAP) and 89.9% (adjusted) in Q2 202196108 Enterprise Operating Expenses This section analyzes the changes in enterprise operating expenses, highlighting increases in purchased transportation, salaries, and fuel, alongside a decrease in insurance costs - Purchased transportation increased by $212.5 million (49%) due to higher third-party carrier costs in Logistics and increased rail costs in Intermodal111 - Salaries, wages, and benefits increased by $27.8 million (11%) due to higher Logistics salaries, driver pay, and performance-based incentive compensation111 - Fuel and fuel taxes for company trucks increased by $27.9 million (66%) due to higher cost per gallon116 - Insurance and related expenses decreased by $11.3 million (40%) due to favorability in auto liability resulting from decreased claims severity and frequency116 Total Other Expenses (Income) This section explains the increase in total other income for Q2 2021, primarily driven by a significant pre-tax gain on the TuSimple investment - Total other income increased by $17.7 million in Q2 2021, mainly due to a $20.2 million pre-tax gain on the TuSimple investment113 Income Tax Expense This section details the increase in income tax expense for Q2 2021, reflecting higher taxable income and a slightly lower effective tax rate - Provision for income taxes increased by $20.1 million (124%) in Q2 2021 due to higher taxable income114 - The effective income tax rate was 25.4% for Q2 2021, compared to 25.8% for Q2 2020114 Revenues and Income from Operations by Segment This section provides a detailed breakdown of revenues and income from operations for each reportable segment during Q2 2021 Truckload Truckload revenues (excluding fuel surcharge) increased by 5% in Q2 2021 due to higher rates, despite lower volumes, leading to an 82% increase in income from operations | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenues (excluding fuel surcharge) | $475.2 million | $451.1 million | 5% | | Average trucks | 9,287 | 10,241 | -9.3% | | Revenue per truck per week | $3,985 | $3,434 | 16% | | Operating ratio | 84.5% | 91.0% | -6.5 pp | | Income from operations | $73.6 million | $40.5 million | 81.7% | - Revenue per truck per week increased by 16% due to a 16% increase in rate per loaded mile, driven by higher spot and contracted rates119 Intermodal Intermodal revenues (excluding fuel surcharge) increased by 25% in Q2 2021 due to improved revenue per order and higher order volumes, resulting in a 217% increase in income from operations | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenues (excluding fuel surcharge) | $274.0 million | $219.0 million | 25% | | Orders | 113,894 | 98,362 | 16% | | Revenue per order | $2,399 | $2,145 | 12% | | Operating ratio | 87.3% | 95.0% | -7.7 pp | | Income from operations | $34.9 million | $11.0 million | 217.3% | Logistics Logistics revenues (excluding fuel surcharge) surged by 87% in Q2 2021, driven by increased revenue per order and volume growth, leading to a 107% increase in income from operations | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenues (excluding fuel surcharge) | $430.7 million | $230.9 million | 87% | | Operating ratio | 96.1% | 96.4% | -0.3 pp | | Income from operations | $17.0 million | $8.2 million | 107.3% | - Volume growth of 23% within the brokerage business contributed to the increase in Logistics revenues128 Other Other income from operations decreased by 92% in Q2 2021, primarily due to higher performance-based incentive compensation, partially offset by increased leasing income - Other income from operations decreased by $3.4 million (92%) to $0.3 million in Q2 2021, mainly due to an increase in performance-based incentive compensation130 Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 This section analyzes the company's financial performance for the first six months of 2021 compared to the same period in 2020, detailing revenue and income drivers Enterprise Results Summary This summary highlights the significant increase in enterprise net income and income from operations for H1 2021, partly driven by investment gains - Enterprise net income increased by $71.0 million (79%) to $161.3 million in H1 2021, primarily due to an $83.7 million increase in income from operations131 - A $20.2 million pre-tax gain on the TuSimple investment contributed to the H1 2021 increase, compared to an $8.8 million gain on PSI in H1 2020131 Components of Enterprise Net Income This section details the changes in enterprise operating revenues and income from operations, attributing growth to strong segment performance and improved operating ratios - Enterprise operating revenues increased by $437.5 million (20%) to $2,589.4 million in H1 2021133 - Revenues (excluding fuel surcharge) increased by $408.8 million (21%), driven by Logistics (+$316.1 million), Intermodal (+$72.8 million), and Truckload (+$6.4 million)134137 - Income from operations increased by $83.7 million (71%) to $202.0 million, due to improved net revenue per order/truck, favorable equipment dispositions, and lower insurance costs, partially offset by higher driver costs and reduced Truckload freight volumes135 - Enterprise operating ratio improved to 92.2% (GAAP) and 91.5% (adjusted) in H1 202196136 Enterprise Operating Expenses This section analyzes the changes in enterprise operating expenses, highlighting increases in purchased transportation, salaries, and fuel, alongside a decrease in insurance costs - Purchased transportation costs increased by $291.4 million (32%) due to increased third-party carrier costs in Logistics and higher rail costs in Intermodal137 - Salaries, wages, and benefits increased by $30.5 million (6%) due to higher Logistics salaries, performance-based incentive compensation, and driver pay142 - Fuel and fuel taxes for company trucks increased by $30.8 million (30%) due to higher cost per gallon142 - Insurance and related expenses decreased by $16.1 million (28%) due to favorability in auto liability resulting from decreased claims severity and frequency142 Total Other Expenses (Income) This section explains the increase in total other income for H1 2021, primarily driven by a significant pre-tax gain on the TuSimple investment - Total other income increased by $10.9 million in H1 2021, primarily from a $20.2 million pre-tax gain on the TuSimple investment139 Income Tax Expense This section details the increase in income tax expense for H1 2021, reflecting higher taxable income and a slightly lower effective tax rate - Provision for income taxes increased by $23.6 million (77%) in H1 2021 due to higher taxable income140 - The effective income tax rate was 25.2% for H1 2021, compared to 25.4% for H1 2020140 Revenues and Income from Operations by Segment This section provides a detailed breakdown of revenues and income from operations for each reportable segment during H1 2021 Truckload Truckload revenues (excluding fuel surcharge) increased by 1% in H1 2021 due to higher rates, despite lower volumes, leading to a 45% increase in income from operations | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenues (excluding fuel surcharge) | $926.9 million | $920.5 million | 1% | | Average trucks | 9,412 | 10,223 | -7.9% | | Revenue per truck per week | $3,845 | $3,497 | 10% | | Operating ratio | 87.9% | 91.6% | -3.7 pp | | Income from operations | $111.9 million | $77.1 million | 45.1% | - Revenue per truck per week increased by 10% due to a 13% improvement in rate per loaded mile, partially offset by reduced productivity from Q1 weather147 Intermodal Intermodal revenues (excluding fuel surcharge) increased by 16% in H1 2021 due to improved revenue per order and higher order volumes, resulting in a 101% increase in income from operations | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenues (excluding fuel surcharge) | $529.8 million | $457.0 million | 16% | | Orders | 222,679 | 204,949 | 9% | | Revenue per order | $2,351 | $2,160 | 9% | | Operating ratio | 89.6% | 94.0% | -4.4 pp | | Income from operations | $54.9 million | $27.3 million | 101.1% | Logistics Logistics revenues (excluding fuel surcharge) increased by 67% in H1 2021, driven by increased revenue per order and volume growth, leading to a 165% increase in income from operations | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenues (excluding fuel surcharge) | $786.6 million | $470.5 million | 67% | | Operating ratio | 95.8% | 97.4% | -1.6 pp | | Income from operations | $32.9 million | $12.4 million | 165.3% | - Volume growth of 17% within the brokerage business contributed to the increase in Logistics revenues155 Other Other income from operations increased by 53% in H1 2021, primarily due to increased income from the leasing business, partially offset by higher performance-based incentive compensation - Other income from operations increased by $0.8 million (53%) to $2.3 million in H1 2021, mainly due to increased income from the leasing business157 LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's cash uses, sources of liquidity, debt structure, cash flow activities, and overall liquidity position Debt This section outlines the company's debt structure, primarily consisting of senior notes and finance leases, and confirms compliance with financial covenants | Debt (in millions) | June 30, 2021 | December 31, 2020 | | :----------------- | :------------ | :---------------- | | Senior notes | $305.0 | $305.0 | | Finance leases | $2.9 | $2.0 | | Total debt | $307.9 | $307.0 | - As of June 30, 2021, the company was in compliance with all financial covenants under its credit agreements and senior notes163 Cash Flows This section analyzes the company's cash flow activities from operations, investing, and financing for the six months ended June 30, 2021 and 2020 | Cash Flow Activity (in millions) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Operating activities | $255.0 | $319.8 | -20.2% | | Investing activities | $(134.9) | $(110.1) | 22.5% | | Financing activities | $(25.1) | $(47.5) | -47.2% | - Cash provided by operating activities decreased by $64.8 million (20%) in H1 2021, primarily due to an increase in cash used for working capital, particularly trade accounts receivable166 - Cash used in financing activities decreased by $22.4 million (47%) in H1 2021, mainly due to a $25.0 million repayment of private placement notes in March 2020170 Capital Expenditures This section details the company's capital expenditures, highlighting increased investment in transportation equipment for fleet replacement and age reduction | Capital Expenditures (in millions) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | | :------------------------------- | :--------------------------- | :--------------------------- | :----- | | Transportation equipment | $153.6 | $83.3 | $70.3 | | Proceeds from sale of property and equipment | $(76.6) | $(29.6) | $(47.0)| | Net capital expenditures | $99.5 | $78.7 | $20.8 | - Net capital expenditures increased by $20.8 million in H1 2021, driven by a $70.3 million increase in transportation equipment purchases for fleet replacement and age reduction, partially offset by a $47.0 million increase in proceeds from equipment sales169 Other Considerations that Could Affect Our Results, Liquidity, or Capital Resources This section discusses potential impacts on the company's financial condition from market volatility of strategic investments and highlights its strong liquidity position - The $25.2 million equity investment in TuSimple is susceptible to market price volatility, which could materially affect the company's financial condition and results of operations171180 - The company maintains a strong liquidity position with $539.6 million in cash, cash equivalents, and marketable securities, and $375.8 million of unused credit capacity as of June 30, 2021172 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's market risks, noting the addition of equity price risk related to its investment in TuSimple - The equity investment in TuSimple, valued at $25.2 million as of June 30, 2021, is subject to market price risk; a hypothetical 10% decrease in its share price would reduce the investment's value by approximately $2.5 million180 ITEM 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2021181 - There were no material changes in internal control over financial reporting during the fiscal quarter182 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings This section states that the company is involved in various lawsuits in the ordinary course of business, with further details provided in Note 11 - The company is party to various lawsuits in the ordinary course of business, with details referenced in Note 11, Commitments and Contingencies184 ITEM 1A. Risk Factors This section notes no material changes to risk factors from the Annual Report on Form 10-K, except for the added risk related to the volatility of strategic investments - The market valuation of strategic investments, especially the publicly traded TuSimple, is subject to substantial price volatility, which could materially and adversely affect the company's financial condition and results of operations186 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that the company did not repurchase any equity securities and outlines dividend payment limitations under its credit facility - The company did not repurchase any equity securities during the three months ended June 30, 2021, and does not have a share repurchase program187 - The 2018 Credit Facility includes covenants limiting the company's ability to pay dividends if a default exists or would be caused by such dividend188 ITEM 3. Defaults Upon Senior Securities This section reports that no defaults upon senior securities occurred during the period - No defaults upon senior securities were reported189 ITEM 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company190 ITEM 5. Other Information This section indicates that no other information was reported for the period - No other information was reported191 ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL-related documents - Exhibits include certifications pursuant to Rule 13a-14(a) or 15d-14(a) (Section 302) and 18 U.S.C. Section 1350 (Section 906) of the Sarbanes-Oxley Act of 2002193 - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Labels Linkbase, and Presentation Linkbase Documents are filed193 Signature This section confirms the official signing of the report on behalf of Schneider National, Inc. by its Executive Vice President and Chief Financial Officer - The report was signed by Stephen L. Bruffett, Executive Vice President and Chief Financial Officer of Schneider National, Inc., on July 29, 2021199