Schneider National, Inc. Reports Second Quarter 2018 Results
GREEN BAY, Wis.--(BUSINESS WIRE)--Aug 2, 2018--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 – 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
TruckloadRevenues (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.
IntermodalRevenues (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.
LogisticsRevenues (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.
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.
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