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Schneider National, Inc. - Quarter Report: 2021 September (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________________
 FORM 10-Q
_____________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38054 
_____________________________________________________________________________
Schneider National, Inc.
(Exact Name of Registrant as Specified in Its Charter)
_____________________________________________________________________________
Wisconsin 39-1258315
(State of Incorporation) (IRS Employer Identification No.)
3101 South Packerland Drive
Green BayWisconsin54313
(Address of Registrant’s Principal Executive Offices and Zip Code)
(920) 592-2000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Class B common stock, no par valueSNDRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes             No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes               No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-accelerated filer 
 
  Smaller reporting company 
   Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐



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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes              No   
As of October 22, 2021, the registrant had 83,029,500 shares of Class A common stock, no par value, outstanding and 94,626,740 shares of Class B common stock, no par value, outstanding.


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SCHNEIDER NATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended September 30, 2021
TABLE OF CONTENTS
 
  Page
ITEM 1.
  Page 
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10
Note 11
Note 12
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
 

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GLOSSARY OF TERMS
3PLProvider of outsourced logistics services. In logistics and supply chain management, it means a company’s use of third-party businesses, the 3PL(s), to outsource elements of the company’s distribution, fulfillment, and supply chain management services.
ASCAccounting Standards Codification
ASUAccounting Standards Update
CARESCoronavirus Aid, Relief, and Economic Security
CODMChief Operating Decision Maker
COVID-19Coronavirus disease 2019
FTFMFirst to Final Mile operating segment
GAAPUnited States Generally Accepted Accounting Principles
IRSInternal Revenue Service
KPIKey Performance Indicator
LIBORLondon InterBank Offered Rate
MLSIMastery Logistics Systems, Inc.
NASDAQNational Association of Securities Dealers Automated Quotations
PSIPlatform Science, Inc.
SECUnited States Securities and Exchange Commission
TuSimpleTuSimple Holdings, Inc. (formerly TuSimple (Cayman) Limited)
U.S.United States
WSLWatkins and Shepard Trucking, Inc. and Lodeso, Inc. These businesses were acquired simultaneously in June 2016.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. 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. The words “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “prospects,” “potential,” “budget,” “forecast,” “continue,” “predict,” “seek,” “objective,” “goal,” “guidance,” “outlook,” “effort,” “target,” and similar words, expressions, terms, and phrases among others, generally identify forward-looking statements, which speak only as of the date the statements were made. 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.

The 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:
Our ability to successfully manage the demand, supply, and operational challenges and disruptions (including the impact of reduced freight volumes) associated with the COVID-19 pandemic and the associated responses of federal, state, and local governments and businesses;
Economic and business risks inherent in the truckload and transportation industry, including competitive pressures pertaining to pricing, capacity, and service;
Our ability to effectively manage tight truck capacity brought about by driver shortages and successfully execute our yield management strategies;
Our ability to maintain key customer and supply arrangements (including dedicated arrangements) and to manage disruption of our business due to factors outside of our control, such as natural disasters, acts of war or terrorism, disease outbreaks, or pandemics;
Volatility in the market valuation of our investments in strategic partners and technologies;
Our ability to manage and effectively implement our growth and diversification strategies and cost saving initiatives;
Our dependence on our reputation and the Schneider brand and the potential for adverse publicity, damage to our reputation, and the loss of brand equity;
Risks related to demand for our service offerings;
Risks associated with the loss of a significant customer or customers;
Capital investments that fail to match customer demand or for which we cannot obtain adequate funding;
Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase agreements, and our ability to recover fuel costs through our fuel surcharge programs;
Our ability to attract and retain qualified drivers and owner-operators;
Our reliance on owner-operators to provide a portion of our truck fleet;
Our dependence on railroads in the operation of our intermodal business;
Service instability from third-party capacity providers used by our business;
Changes in the outsourcing practices of our third-party logistics customers;
Difficulty in obtaining material, equipment, goods, and services from our vendors and suppliers;
Variability in insurance and claims expenses and the risks of insuring claims through our captive insurance company;
The impact of laws and regulations that apply to our business, including those that relate to the environment, taxes, associates, owner-operators, and our 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;
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Risks associated with financial, credit, and equity markets, including our 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;
Exposure to claims and lawsuits in the ordinary course of business;
Our ability to adapt to new technologies and new participants in the truckload and transportation industry; and
Those risks and uncertainties discussed in (1) our most recently filed Annual Report on Form 10-K in (a) Part I, Item 1A. “Risk Factors,” (b) Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and (c) Part II, Item 8. “Financial Statements and Supplementary Data: Note 14, Commitments and Contingencies;” (2) this Quarterly Report on Form 10-Q in (a) Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (b) Part I, Item 1. “Financial Statements: Note 11, Commitments and Contingencies,” and (c) Part II, Item 1A. “Risk Factors;” and (3) other factors discussed in filings with the SEC by the Company.
The Company undertakes no obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that the Company files electronically with the SEC. These documents are also available to the public from commercial document retrieval services and our website at www.investors.schneider.com. Information disclosed or available on our website shall not be deemed incorporated into, or to be a part of, this Report.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHNEIDER NATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions, except per share data)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Operating revenues$1,444.5 $1,135.7 $4,033.9 $3,287.6 
Operating expenses:
Purchased transportation692.3 501.0 1,900.4 1,417.7 
Salaries, wages, and benefits290.2 259.2 832.9 771.4 
Fuel and fuel taxes70.3 49.5 204.1 152.5 
Depreciation and amortization74.2 74.2 220.5 216.3 
Operating supplies and expenses108.7 144.6 362.0 395.7 
Insurance and related expenses19.3 17.4 60.7 74.9 
Other general expenses35.8 26.0 97.6 78.0 
Restructuring—net— 0.5 — (0.5)
Total operating expenses1,290.8 1,072.4 3,678.2 3,106.0 
Income from operations153.7 63.3 355.7 181.6 
Other expenses (income):
Interest income(0.6)(0.6)(1.8)(2.9)
Interest expense3.3 3.4 9.7 10.5 
Other expense (income)—net4.0 0.4 (14.8)(7.1)
Total other expenses (income)—net 6.7 3.2 (6.9)0.5 
Income before income taxes147.0 60.1 362.6 181.1 
Provision for income taxes37.0 15.6 91.3 46.3 
Net income110.0 44.5 271.3 134.8 
Other comprehensive income (loss):
Foreign currency translation gains (losses)—net(0.1)0.5 0.1 (0.2)
Net unrealized gains (losses) on marketable securities—net of tax(0.2)(0.1)(0.6)0.1 
Total other comprehensive income (loss)—net(0.3)0.4 (0.5)(0.1)
Comprehensive income$109.7 $44.9 $270.8 $134.7 
Weighted average shares outstanding177.7 177.3 177.5 177.2 
Basic earnings per share$0.62 $0.25 $1.53 $0.76 
Weighted average diluted shares outstanding177.9 177.7 177.8 177.5 
Diluted earnings per share$0.62 $0.25 $1.53 $0.76 
See notes to consolidated financial statements (unaudited).
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SCHNEIDER NATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except share data)
September 30,December 31,
20212020
Assets
Current Assets:
Cash and cash equivalents$504.2 $395.5 
Marketable securities45.7 47.1 
Trade accounts receivable—net of allowance of $4.3 million and $3.7 million, respectively
650.5 537.7 
Other receivables23.2 20.8 
Current portion of lease receivables—net of allowance of $0.9 million and $0.8 million, respectively
109.7 96.8 
Inventories25.1 44.9 
Prepaid expenses and other current assets96.9 77.9 
Total current assets1,455.3 1,220.7 
Noncurrent Assets:
Property and equipment:
Transportation equipment2,900.9 2,880.2 
Land, buildings, and improvements204.6 202.3 
Other property and equipment169.3 166.8 
Total property and equipment3,274.8 3,249.3 
Less accumulated depreciation1,386.4 1,417.4 
Net property and equipment1,888.4 1,831.9 
Lease receivables166.1 131.3 
Capitalized software and other noncurrent assets232.0 204.2 
Goodwill128.3 128.1 
Total noncurrent assets2,414.8 2,295.5 
Total Assets$3,870.1 $3,516.2 
Liabilities and Shareholders’ Equity
Current Liabilities:
Trade accounts payable$356.7 $245.7 
Accrued salaries, wages, and benefits89.2 110.7 
Claims accruals—current61.6 36.4 
Current maturities of debt and finance lease obligations100.7 40.4 
Other current liabilities107.8 101.4 
Total current liabilities716.0 534.6 
Noncurrent Liabilities:
Long-term debt and finance lease obligations207.0 266.4 
Claims accruals—noncurrent100.6 129.9 
Deferred income taxes471.8 450.4 
Other noncurrent liabilities75.6 79.4 
Total noncurrent liabilities855.0 926.1 
Total Liabilities1,571.0 1,460.7 
Commitments and Contingencies (Note 11)
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, 95,699,819 and 95,159,635 shares issued, and 94,624,691 and 94,311,653 shares outstanding, respectively
— — 
Additional paid-in capital1,562.6 1,552.2 
Retained earnings736.2 502.5 
Accumulated other comprehensive income0.3 0.8 
Total Shareholders’ Equity
2,299.1 2,055.5 
Total Liabilities and Shareholders’ Equity
$3,870.1 $3,516.2 
See notes to consolidated financial statements (unaudited).
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SCHNEIDER NATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended September 30,
20212020
Operating Activities:
Net income$271.3 $134.8 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization220.5 216.3 
(Gains) losses on sales of property and equipment—net(48.0)5.4 
Proceeds from lease receipts54.7 53.2 
Deferred income taxes21.6 (2.8)
Long-term incentive and share-based compensation expense11.3 5.4 
Gains on investment in equity securities—net(17.1)(8.8)
Noncash restructuring—net— (0.6)
Other noncash items0.6 6.3 
Changes in operating assets and liabilities:
Receivables(112.3)(17.2)
Other assets(53.3)(32.9)
Payables68.0 49.6 
Claims reserves and other receivables—net1.1 16.6 
Other liabilities(22.4)43.8 
Net cash provided by operating activities396.0 469.1 
Investing Activities:
Purchases of transportation equipment(296.9)(131.7)
Purchases of other property and equipment(33.4)(38.7)
Proceeds from sale of property and equipment145.2 55.5 
Proceeds from sale of off-lease inventory13.2 17.9 
Purchases of lease equipment(72.8)(63.3)
Proceeds from marketable securities11.7 19.2 
Purchases of marketable securities(11.6)(16.9)
Investment in equity securities(5.0)(5.0)
Net cash used in investing activities(249.6)(163.0)
Financing Activities:
Payments of debt and finance lease obligations(0.5)(55.5)
Dividends paid(37.2)(33.7)
Net cash used in financing activities(37.7)(89.2)
Net increase in cash and cash equivalents108.7 216.9 
Cash and Cash Equivalents:
Beginning of period395.5 551.6 
End of period$504.2 $768.5 
Additional Cash Flow Information:
Noncash investing and financing activity:
Equipment and inventory purchases in accounts payable$43.7 $50.2 
Dividends declared but not yet paid14.0 11.8 
Cash paid during the period for:
Interest10.0 11.3 
Income taxes—net of refunds77.7 45.5 
See notes to consolidated financial statements (unaudited).
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SCHNEIDER NATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(in millions, except per share data)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive IncomeTotal
Balance—December 31, 2019$— $1,542.7 $693.6 $0.1 $2,236.4 
Net income— — 43.8 — 43.8 
Other comprehensive loss— — — (1.1)(1.1)
Share-based compensation expense— 1.9 — — 1.9 
Dividends declared at $0.065 per share of Class A and Class B common shares— — (11.7)— (11.7)
Share issuances— 0.1 — — 0.1 
Shares withheld for employee taxes— (0.9)— — (0.9)
Balance—March 31, 2020— 1,543.8 725.7 (1.0)2,268.5 
Net income— — 46.5 — 46.5 
Other comprehensive income— — — 0.6 0.6 
Share-based compensation expense— 1.1 — — 1.1 
Dividends declared at $0.065 per share of Class A and Class B common shares— — (11.4)— (11.4)
Share issuances— 0.1 — — 0.1 
Exercise of employee stock options— 0.4 — — 0.4 
Balance—June 30, 2020— 1,545.4 760.8 (0.4)2,305.8 
Net income— — 44.5 — 44.5 
Other comprehensive income— — — 0.4 0.4 
Share-based compensation expense— 2.2 — — 2.2 
Dividends declared at $0.065 per share of Class A and Class B common shares— — (11.6)— (11.6)
Exercise of employee stock options— 1.2 — — 1.2 
Balance—September 30, 2020$— $1,548.8 $793.7 $— $2,342.5 
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Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive IncomeTotal
Balance—December 31, 2020$— $1,552.2 $502.5 $0.8 $2,055.5 
Net income— — 54.8 — 54.8 
Other comprehensive loss— — — (0.7)(0.7)
Share-based compensation expense— 4.5 — — 4.5 
Dividends declared at $0.07 per share of Class A and Class B common shares— — (12.6)— (12.6)
Share issuances— 0.1 — — 0.1 
Exercise of employee stock options— 0.7 — — 0.7 
Shares withheld for employee taxes— (2.4)— — (2.4)
Balance—March 31, 2021— 1,555.1 544.7 0.1 2,099.9 
Net income— — 106.5 — 106.5 
Other comprehensive income— — — 0.5 0.5 
Share-based compensation expense— 3.3 — — 3.3 
Dividends declared at $0.07 per share of Class A and Class B common shares— — (12.5)— (12.5)
Share issuances— 0.7 — — 0.7 
Balance—June 30, 2021— 1,559.1 638.7 0.6 2,198.4 
Net income— — 110.0 — 110.0 
Other comprehensive loss— — — (0.3)(0.3)
Share-based compensation expense— 3.4 — — 3.4 
Dividends declared at $0.07 per share of Class A and Class B common shares— — (12.5)— (12.5)
Share issuances— 0.1 — — 0.1 
Balance—September 30, 2021$— $1,562.6 $736.2 $0.3 $2,299.1 
See notes to consolidated financial statements (unaudited).

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SCHNEIDER NATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. GENERAL

Nature of Operations

We are one of the largest providers of surface transportation and logistics solutions in North America. Schneider National, Inc. is a publicly held holding company that, through its wholly owned subsidiaries, provides safe, reliable, and innovative truckload, intermodal, and logistics services to a diverse group of customers throughout the continental United States, Canada, and Mexico. Unless otherwise indicated by the context, “we,” “us,” “our,” “ours,” the “Company,” and “Schneider” refer to Schneider National, Inc. and its consolidated subsidiaries.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in conformity with GAAP and the rules and regulations of the SEC applicable to quarterly reports on Form 10-Q. Therefore, these consolidated financial statements and footnotes do not include all disclosures required by GAAP for annual financial statements and should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. Financial results for an interim period are not necessarily indicative of the results for a full year. All intercompany transactions have been eliminated in consolidation.

In the opinion of management, these statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for the fair presentation of our financial results for the interim periods presented.

Accounting Standards Recently Adopted

As of January 1, 2021, we adopted ASU 2019-12, Simplifying the Accounting for Income Taxes, which reduces complexity in accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance to improve consistent application among reporting entities. We used the modified retrospective or prospective approach, which was based on the specific amendment implemented, when adopting this standard. The adoption of this standard did not have a material impact on our consolidated financial statements or related disclosures.

2. LEASES

As Lessee

We lease real estate and equipment under operating and finance leases. Our real estate operating leases include operating centers, distribution warehouses, offices, and drop yards. Our non-real estate operating leases and finance leases include transportation, office, yard, and warehouse equipment, in addition to truck washes. The majority of our leases include an option to extend the lease, and a small number include an option to terminate the lease early, which may include a termination payment.

Additional information related to our leases is as follows:
Nine Months Ended
September 30,
(in millions)20212020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases$23.3 $26.3 
Operating cash flows for finance leases— 0.1 
Financing cash flows for finance leases0.5 0.5 
Right-of-use assets obtained in exchange for new lease liabilities
Operating leases$23.7 $21.6 
Finance leases1.2 0.8 

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As Lessor

We finance various types of transportation-related equipment for independent third parties under lease contracts which are generally for one to three years and accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contract residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.

As of September 30, 2021 and December 31, 2020, investments in lease receivables were as follows:
(in millions)September 30, 2021December 31, 2020
Future minimum payments to be received on leases$201.6 $159.0 
Guaranteed residual lease values123.3 107.6 
Total minimum lease payments to be received324.9 266.6 
Unearned income(49.1)(38.5)
Net investment in leases$275.8 $228.1 

Prior to entering a lease contract, we assess the credit quality of the potential lessee using credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. Given our leases have fully guaranteed residual values and we can take possession of the transportation-related equipment in the event of default, we do not categorize net investment in leases by different credit quality indicators upon origination. We monitor our lease portfolio weekly by tracking amounts past due, days past due, and outstanding maintenance account balances, including performing subsequent credit checks as needed. Our net investment in leases with any portion past due as of September 30, 2021 was $38.1 million, which includes both current and future lease payments.

Lease payments are generally due on a weekly basis and are classified as past due when the weekly payment is not received by its due date. As of September 30, 2021, our lease payments past due were $2.8 million.

The table below provides additional information on our sales-type leases. Revenue and cost of goods sold are recorded in operating revenues and operating supplies and expenses in the consolidated statements of comprehensive income, respectively.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Revenue$57.2 $50.8 $169.8 $150.2 
Cost of goods sold(49.0)(45.8)(146.1)(135.5)
Operating profit$8.2 $5.0 $23.7 $14.7 
Interest income on lease receivable$8.5 $6.5 $23.6 $19.7 

3. REVENUE RECOGNITION

Disaggregated Revenues

The majority of our revenues are related to transportation and have similar characteristics. The following table summarizes our revenues by type of service.
Three Months Ended
September 30,
Nine Months Ended
September 30,
Disaggregated Revenues (in millions)
2021202020212020
Transportation$1,326.3 $1,036.5 $3,700.4 $3,015.9 
Logistics Management56.4 41.3 149.7 102.2 
Other61.8 57.9 183.8 169.5 
Total operating revenues$1,444.5 $1,135.7 $4,033.9 $3,287.6 
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Quantitative Disclosure

The following table provides information related to transactions and expected timing of revenue recognition for performance obligations that are fixed in nature and relate to contracts with terms greater than one year as of the date shown.
Remaining Performance Obligations (in millions)
September 30, 2021
Expected to be recognized within one year
Transportation$15.3 
Logistics Management10.9 
Expected to be recognized after one year
Transportation40.2 
Logistics Management9.5 
Total$75.9 

This disclosure does not include revenue related to performance obligations that are part of a contract with an original expected duration of one year or less, nor does it include expected consideration related to performance obligations for which the Company elects to recognize revenue in the amount it has a right to invoice (e.g., usage-based pricing terms).

The following table provides information related to contract balances associated with our contracts with customers as of the dates shown.
Contract Balances (in millions)
September 30, 2021December 31, 2020
Other current assets - Contract assets$35.7 $21.5 
Other current liabilities - Contract liabilities2.5 0.7 

We generally receive payment within 40 days of completion of performance obligations. Contract assets in the table above relate to revenue in transit at the end of the reporting period. Contract liabilities relate to amounts that customers paid in advance of the associated services.

4. FAIR VALUE

Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability. Inputs to valuation techniques used to measure fair value fall into three broad levels (Levels 1, 2, and 3) as follows:

Level 1—Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that we have the ability to access at the measurement date.

Level 2—Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities.

Level 3—Unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The table below sets forth the Company’s financial assets that are measured at fair value on a recurring, monthly basis in accordance with ASC 820.
Fair Value
(in millions)Level in Fair
 Value Hierarchy
September 30, 2021December 31, 2020
Equity investment in TuSimple (1)
1$13.1 $— 
Marketable securities (2)
245.7 47.1 
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(1)Our equity investment in TuSimple is classified as Level 1 in the fair value hierarchy as shares of TuSimple’s Class A common stock are traded on the NASDAQ. See Note 5, Investments, for additional information.
(2)Marketable securities are classified as Level 2 in the fair value hierarchy as they are valued based on quoted prices for similar assets in active markets or quoted prices for identical or similar assets in markets that are not active. See Note 5, Investments, for additional information.

The fair value of the Company’s debt was $318.5 million and $316.9 million as of September 30, 2021 and December 31, 2020, respectively. The carrying value of the Company’s debt was $305.0 million as of September 30, 2021 and December 31, 2020. The fair value of our debt was calculated using a fixed rate debt portfolio with similar terms and maturities, which is based on the borrowing rates available to us in the applicable year. This valuation used Level 2 inputs.

The recorded values of cash, trade accounts receivable, lease receivables, and trade accounts payable approximate fair values.

Our investments in PSI and MLSI discussed in Note 5, Investments, do not have readily determinable fair values and were accounted for using the measurement alternative in ASC 321-10-35-2 as of September 30, 2021.

5. INVESTMENTS

Marketable Securities

Our marketable securities are classified as available-for-sale and carried at fair value in current assets on the consolidated balance sheets. While our intent is to hold our securities to maturity, sudden changes in the market or our liquidity needs may cause us to sell certain securities in advance of their maturity date.

Any unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on the consolidated balance sheets, unless we determine that the amortized cost basis is not recoverable. If we determine that the amortized cost basis of the impaired security is not recoverable, we recognize the credit loss by increasing the allowance for those losses. We did not have an allowance for credit losses on our marketable securities as of September 30, 2021 or December 31, 2020. Cost basis is determined using the specific identification method.

The following table presents the maturities and values of our marketable securities as of the dates shown.
 September 30, 2021December 31, 2020
(in millions, except maturities in months)MaturitiesAmortized CostFair ValueAmortized CostFair Value
U.S. treasury and government agencies26 to 113$15.9 $15.8 $12.6 $12.7 
Corporate debt securities1 to 7220.2 20.5 21.4 22.2 
State and municipal bonds1 to 549.1 9.4 11.9 12.2 
Total marketable securities$45.2 $45.7 $45.9 $47.1 

Excluded from the amortized cost basis disclosures above is the accrued interest on marketable securities. As of September 30, 2021 and December 31, 2020, accrued interest receivable associated with marketable securities was not material and included within other receivables on the consolidated balance sheets.

Equity Investments without Readily Determinable Fair Values

The Company’s strategic equity investments without readily determinable fair values include PSI, a provider of telematics and fleet management tools, and MLSI, a transportation technology development company. These investments are being accounted for under ASC 321, Investments - Equity Securities, using the measurement alternative, and their values as of September 30, 2021 and December 31, 2020 were $31.3 million and $22.3 million, respectively. During the three months ended September 30, 2021, a remeasurement event occurred, and the Company recognized a $9.0 million pre-tax gain. Our updated investment value was determined using the backsolve method, a valuation approach that uses an option pricing model to value shares based on the price paid for recently issued shares. No gains or losses were recorded in the three months ended September 30, 2020. In the nine months ended September 30, 2021 and 2020, the Company recognized $9.0 million and $8.8 million in pre-tax gains, respectively. As of September 30, 2021 our cumulative pre-tax gains totaled $21.3 million.



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Equity Investments with Readily Determinable Fair Values

On January 12, 2021, the Company purchased a $5.0 million non-controlling interest in TuSimple, a global self-driving technology company. Upon completion of its initial public offering in April 2021, our investment in TuSimple was converted into Class A common shares and is now being accounted for under ASC 321, Investments - Equity Securities. In the three and nine months ended September 30, 2021, the Company recognized a pre-tax net loss of $12.1 million and a pre-tax net gain of $8.1 million, respectively, on its investment in TuSimple. See Note 4, Fair Value, for additional information on the fair value of our investment in TuSimple.

All of our equity investments are included in other noncurrent assets on the consolidated balance sheets with subsequent gains or losses recognized within other expense (income)—net on the consolidated statements of comprehensive income.

6. GOODWILL

Goodwill represents the excess of the purchase price of acquisitions over the fair value of the identifiable net assets acquired. The following table shows changes to our goodwill balances by segment during the period ended September 30, 2021.
(in millions)TruckloadLogisticsOtherTotal
Balance at December 31, 2020$103.6 $14.2 $10.3 $128.1 
Foreign currency translation gain— — 0.2 0.2 
Balance at September 30, 2021$103.6 $14.2 $10.5 $128.3 

At September 30, 2021 and December 31, 2020, we had accumulated goodwill impairment charges of $42.6 million, which consisted of $34.6 million and $8.0 million in our Truckload segment and Other, respectively.

7. DEBT AND CREDIT FACILITIES

As of September 30, 2021 and December 31, 2020, debt included the following:
(in millions)September 30, 2021December 31, 2020
Unsecured senior notes: principal maturities ranging from 2021 through 2025; interest payable in semiannual installments through the same timeframe; weighted average interest rate of 3.53% and 3.64% for 2021 and 2020, respectively
$305.0 $305.0 
Current maturities(100.0)(40.0)
Debt issuance costs— (0.2)
Long-term debt$205.0 $264.8 

Our Credit Agreement (the “2018 Credit Facility”) provides borrowing capacity of $250.0 million and allows us to request an increase in total commitment up to $150.0 million, for a total potential commitment of $400.0 million through August 2023. The agreement also provides a sublimit of $100.0 million to be used for the issuance of letters of credit. We had no outstanding borrowings under this agreement as of September 30, 2021 or December 31, 2020. Standby letters of credit under this agreement amounted to $3.9 million at September 30, 2021 and December 31, 2020 and were primarily related to the requirements of certain of our real estate leases.

On July 30, 2021, we entered into Amendment No. 3 to our Amended and Restated Receivables Purchase Agreement (the “2021 Receivables Purchase Agreement”), which allows us to borrow funds against qualifying trade receivables at rates based on one-month LIBOR up to $150.0 million and provides for the issuance of standby letters of credit through July 2024. We had no outstanding borrowings under this facility at September 30, 2021 or December 31, 2020. At September 30, 2021 and December 31, 2020, standby letters of credit under this agreement amounted to $70.3 million and were primarily related to the requirements of certain of our insurance obligations.

8. INCOME TAXES

Our effective income tax rate was 25.2% and 26.0% for the three months ended September 30, 2021 and 2020, respectively, and 25.2% and 25.6% for the nine months ended September 30, 2021 and 2020, respectively. In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, and best estimates of nontaxable and nondeductible income and expense items.

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On March 27, 2020, President Trump signed the CARES Act into U.S. federal law aimed at providing emergency assistance and health care for individuals, families, and businesses affected by COVID-19 and generally supporting the U.S. economy. The CARES Act included a provision for the deferment of the employer portion of social security taxes through December 31, 2020, among other things, which the Company elected. As of September 30, 2021, the deferred employer social security taxes have been paid, which totaled $30.7 million at December 31, 2020.

9. COMMON EQUITY

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020, respectively.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions, except per share data)2021202020212020
Numerator:
Net income available to common shareholders$110.0 $44.5 $271.3 $134.8 
Denominator:
Weighted average common shares outstanding177.7 177.3 177.5 177.2 
Dilutive effect of share-based awards and options outstanding0.2 0.3 0.3 0.3 
Weighted average diluted common shares outstanding (1)
177.9 177.7 177.8 177.5 
Basic earnings per common share$0.62 $0.25 $1.53 $0.76 
Diluted earnings per common share0.62 0.25 1.53 0.76 
(1)Weighted average diluted common shares outstanding may not sum due to rounding.

The calculation of diluted earnings per share excluded 0.8 million share-based awards and options that had an anti-dilutive effect for the three and nine months ended September 30, 2021 and 0.5 million and 0.6 million share-based awards and options that had an anti-dilutive effect for the three and nine months ended September 30, 2020, respectively.

Subsequent Event - Dividends Declared

In October of 2021, the Board of Directors declared a quarterly cash dividend for the fourth fiscal quarter of 2021 in the amount of $0.07 per share to holders of our Class A and Class B common stock. The dividend is payable to shareholders of record at the close of business on December 10, 2021 and will be paid on January 10, 2022.

10. SHARE-BASED COMPENSATION

We grant various equity-based awards relating to Class B common stock to employees under our 2017 Omnibus Incentive Plan (“the Plan”). These awards consist of restricted shares, restricted stock units (“RSUs”), performance-based restricted shares (“performance shares”), performance-based restricted stock units (“PSUs”), and non-qualified stock options. Performance shares and PSUs granted prior to 2021 are earned based on attainment of threshold performance of earnings and return on capital targets. Beginning with grants in 2021, in addition to achievement of earnings and return on capital targets, a multiplier will be applied to performance share and PSU achievement based on relative total shareholder return (“rTSR”) against peers over the performance period.

Share-based compensation expense was $3.1 million and $1.9 million for the three months ended September 30, 2021 and 2020, respectively, and $10.2 million and $4.4 million for the nine months ended September 30, 2021 and 2020, respectively. We recognize share-based compensation expense over the awards’ vesting period. As of September 30, 2021, we had $22.0 million of pre-tax unrecognized compensation cost related to outstanding share-based compensation awards expected to be recognized over a weighted average period of 2.3 years.
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11. COMMITMENTS AND CONTINGENCIES

In the ordinary course of conducting our business, we become involved in certain legal matters and investigations including liability claims, taxes other than income taxes, contract disputes, employment, and other litigation matters. We accrue for anticipated costs to resolve matters that are probable and estimable. We believe the outcomes of these matters will not have a material impact on our business or our consolidated financial statements.

We record liabilities for claims against the Company based on our best estimate of expected losses. The primary claims arising for the Company through its trucking, intermodal, and logistics operations consist of accident-related claims for personal injury, collision, and comprehensive compensation, in addition to workers’ compensation, property damage, cargo, and wage and benefit claims. We maintain excess liability insurance with licensed insurance carriers for liability in excess of amounts we self-insure, which serves to largely offset the Company’s liability associated with these claims, with the exception of wage and benefit claims for which we self-insure. We review our accruals periodically to ensure that the aggregate amounts of our accruals are appropriate at any period after consideration of available insurance coverage. Although we expect that our claims accruals will continue to vary based on future developments, assuming that we are able to continue to obtain and maintain excess liability insurance coverage for such claims, we do not anticipate that such accruals will, in any period, materially impact our operating results.

At September 30, 2021, our firm commitments to purchase transportation equipment totaled $365.0 million.

A representative of the former owners of WSL has filed a lawsuit in the Delaware Court of Chancery which primarily alleges that we have not fulfilled certain obligations under the purchase and sale agreement related to the post-closing operations of the business, and as a result, the former owners claim they are entitled to damages including an additional payment of $40.0 million under an earn-out arrangement which was a component of the purchase price in the transaction. The Delaware Court of Chancery completed a remote trial in January 2021. Post trial briefs have been filed, and the Court’s decision is pending. A judgment by the Court against us in this matter could have a material adverse effect on our operating results. We believe we have presented strong defenses to this claim.

In 2020, the Company recorded $12.8 million of expense and paid $13.7 million as a result of an adverse tax ruling in a dispute with the IRS over the applicability of excise taxes on certain tractors refurbished during tax years 2011 through 2013 and no longer in service. In December 2020, the Company filed an appeal with the U.S. Court of Appeals for the Seventh Circuit, and in August 2021, the Seventh Circuit reversed the District Court and ruled in the Company’s favor on all matters. A final resolution is expected in the fourth quarter of 2021.

12. SEGMENT REPORTING

We have three reportable segments – Truckload, Intermodal, and Logistics – which are based primarily on the services each segment provides.

The CODM reviews revenues for each segment without the inclusion of fuel surcharge revenues. For segment purposes, any fuel surcharge revenues earned are recorded as a reduction of the segment’s fuel expenses. Income from operations at the segment level reflects the measure presented to the CODM for each segment.

Separate balance sheets are not prepared by segment, and as a result, assets are not separately identifiable by segment. All transactions between reportable segments are eliminated in consolidation.

Substantially all of our revenues and assets were generated or located within the U.S.

The following tables summarize our segment information. Inter-segment revenues were immaterial for all segments, with the exception of Other, which included revenues from insurance premiums charged to other segments for workers’ compensation, auto, and other types of insurance. Inter-segment revenues included in Other revenues below were $16.0 million and $11.9 million for the three months ended September 30, 2021 and 2020, respectively, and $46.1 million and $59.1 million for the nine months ended September 30, 2021 and 2020, respectively.
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Revenues by SegmentThree Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Truckload$484.4 $460.2 $1,411.3 $1,380.7 
Intermodal295.7 248.4 825.5 705.4 
Logistics474.6 284.4 1,261.2 754.9 
Other98.0 85.5 284.9 274.7 
Fuel surcharge114.4 73.0 314.8 244.7 
Inter-segment eliminations(22.6)(15.8)(63.8)(72.8)
Operating revenues$1,444.5 $1,135.7 $4,033.9 $3,287.6 

Income (Loss) from Operations by Segment Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Truckload$85.1 $45.6 $197.0 $122.7 
Intermodal45.7 23.0 100.6 50.3 
Logistics22.1 9.1 55.0 21.5 
Other0.8 (14.4)3.1 (12.9)
Income from operations$153.7 $63.3 $355.7 $181.6 

Depreciation and Amortization by SegmentThree Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Truckload$52.1 $53.6 $157.1 $157.1 
Intermodal12.4 11.9 35.5 34.4 
Logistics0.1 0.1 0.2 0.1 
Other9.6 8.6 27.7 24.7 
Depreciation and amortization$74.2 $74.2 $220.5 $216.3 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and related notes and our Annual Report on Form 10-K for the year ended December 31, 2020.

INTRODUCTION

Company Overview

We are a transportation and logistics services company providing a broad portfolio of truckload, intermodal, and logistics solutions and operating one of the largest for-hire trucking fleets in North America. Our diversified portfolio of complementary service offerings combines truckload services with intermodal and logistics offerings, enabling us to serve our customers’ varied transportation needs. Our broad portfolio of services provides us with a greater opportunity to allocate capital in a manner designed to maximize returns across all market cycles and economic conditions. We continually monitor our
performance and market conditions to ensure appropriate allocation of capital and resources to grow our businesses, while optimizing returns across reportable segments. Our strong balance sheet enables us to carry out an acquisition strategy that strengthens our overall portfolio. We are positioned to leverage our scalable platform and experienced operations team to acquire high-quality businesses that meet our disciplined selection criteria to enhance our service offerings and broaden our customer base.

Our truckload services consist of freight transported and delivered by our company-employed drivers in company trucks and by owner-operators. These services are executed through either dedicated or network contracts and include standard long-haul and regional shipping services primarily using dry van, bulk, temperature-controlled, and flat-bed equipment, as well as cross dock and customized solutions for high-value and time-sensitive loads with coverage throughout North America.

Our intermodal service consists of door-to-door container on flat car (“COFC”) service through a combination of rail and dray transportation, in association with our rail carrier partners. Our intermodal service uses company-owned containers, chassis, and trucks with primarily company dray drivers, augmented by third-party dray capacity.

Our logistics services consist of freight brokerage (including Power Only which leverages our nationwide trailer pools to match capacity with demand), supply chain (including 3PL), warehousing, and import/export services. Our logistics business provides value-added services using both our assets and third-party capacity, augmented by our trailing assets, to manage and move our customers’ freight.

Our success depends on our ability to balance our transportation network and efficiently and effectively manage our resources in the delivery of truckload, intermodal, and logistics services to our customers. Resource requirements vary with customer demand, which may be subject to seasonal or general economic conditions. We believe that our ability to properly select freight and adapt to changes in customer transportation needs allows us to efficiently deploy resources and make capital investments in trucks, trailers, containers, and chassis or obtain qualified third-party capacity at a reasonable price.

Consistent with the transportation industry, our business is seasonal across each of our segments which generally translates to our reported revenues being the lowest in the first quarter and highest in the fourth quarter. Operating expenses tend to be higher in the winter months, primarily due to colder weather, which causes higher maintenance expense and higher fuel consumption from increased idle time.

Recent Developments

COVID-19

COVID-19 was declared a pandemic by the World Health Organization in March 2020. In response to the pandemic, the Company has taken steps to mitigate the potential risks it poses.

We have taken additional measures to keep our associates safe and minimize unnecessary risk of exposure to COVID-19, including taking precautions for our associates and owner-operators, implementing work from home policies, and imposing travel limitations on employees, where appropriate, as we’ve continued to provide an essential service. Associates who worked remotely during the pandemic are being transitioned to a primarily on-premise work environment, and physical and cyber-security measures implemented to ensure our systems are capable of serving our operational needs and providing uninterrupted service to our customers remain in place.
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Schneider continues to monitor the situation, including the proposed federal vaccine mandate, and will take further actions as may be required by federal, state, or local governmental authorities, or that we determine are in the best interests of our associates, customers, and shareholders.

Additional information concerning the impact COVID-19 may have to our future business and results of operations is provided in Part I, Item 1A. “Risk Factors” of the Company's 2020 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Non-GAAP Financial Measures

In this section of our report, we present the following non-GAAP financial measures: (1) revenues (excluding fuel surcharge), (2) adjusted income from operations, (3) adjusted operating ratio, and (4) adjusted net income. We also provide 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 (1) removing the impact of items from our operating results that, in our opinion, do not reflect our core operating performance, (2) providing investors with the same information our management uses internally to assess our core operating performance, and (3) presenting comparable financial results between periods. In addition, in the case of revenues (excluding fuel surcharge), we believe the measure is useful to investors because it isolates volume, price, and cost changes directly related to industry demand and the way we operate our business from the external factor of fluctuating fuel prices and the programs we have 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 we believe 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 report in isolation or as substitutes for, or alternatives to, analysis of our results as reported under GAAP. The exclusion of unusual or infrequent 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 infrequent 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.

Enterprise Summary

The following table includes key GAAP and non-GAAP financial measures for the consolidated enterprise. 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.
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions, except ratios)2021202020212020
Operating revenues$1,444.5 $1,135.7 $4,033.9 $3,287.6 
Revenues (excluding fuel surcharge) (1)
1,330.1 1,062.7 3,719.1 3,042.9 
Income from operations153.7 63.3 355.7 181.6 
Adjusted income from operations (2)
153.7 76.9 355.7 194.2 
Operating ratio89.4 %94.4 %91.2 %94.5 %
Adjusted operating ratio (3)
88.4 %92.8 %90.4 %93.6 %
Net income$110.0 $44.5 $271.3 $134.8 
Adjusted net income (4)
110.0 54.6 271.3 144.2 
(1)We define “revenues (excluding fuel surcharge)” as operating revenues less fuel surcharge revenues, which are excluded from revenues at the segment level. Included below is a reconciliation of operating revenues, the most closely comparable GAAP financial measure, to revenues (excluding fuel surcharge).
(2)We define “adjusted income from operations” as income from operations, adjusted to exclude material items that do not reflect our core operating performance. Included below is a reconciliation of income from operations, which is the most directly comparable GAAP measure, to adjusted income from operations. Excluded items for the periods shown are explained in the table and notes below. 
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(3)We define “adjusted operating ratio” as operating expenses, adjusted to exclude material items that do not reflect our core operating performance, divided by revenues (excluding fuel surcharge). Included below is a reconciliation of operating ratio, which is the most directly comparable GAAP measure, to adjusted operating ratio. Excluded items for the periods shown are explained below under our explanation of “adjusted income from operations.”
(4)We define “adjusted net income” as net income, adjusted to exclude material items that do not reflect our core operating performance. Included below is a reconciliation of net income, which is the most directly comparable GAAP measure, to adjusted net income. Excluded items for the periods shown are explained below under our explanation of “adjusted income from operations.”

Revenues (excluding fuel surcharge)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Operating revenues$1,444.5 $1,135.7 $4,033.9 $3,287.6 
Less: Fuel surcharge revenues114.4 73.0 314.8 244.7 
Revenues (excluding fuel surcharge)$1,330.1 $1,062.7 $3,719.1 $3,042.9 

Adjusted income from operations
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Income from operations$153.7 $63.3 $355.7 $181.6 
Litigation (1)
— 13.1 — 13.1 
Restructuring—net (2)
— 0.5 — (0.5)
Adjusted income from operations$153.7 $76.9 $355.7 $194.2 
(1)Contested prior period federal excise taxes, including court awarded costs and interest, as a result of an adverse tax ruling in 2020 related to an IRS dispute over the applicability of excise taxes on certain tractors refurbished during tax years 2011 through 2013 and no longer in service. Refer to Note 11, Commitments and Contingencies, for more information.
(2)Activity associated with the shutdown of the FTFM service offering.

Adjusted operating ratio
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions, except ratios)2021202020212020
Total operating expenses$1,290.8 $1,072.4 $3,678.2 $3,106.0 
Divide by: Operating revenues1,444.5 1,135.7 4,033.9 3,287.6 
Operating ratio89.4 %94.4 %91.2 %94.5 %
Total operating expenses$1,290.8 $1,072.4 $3,678.2 $3,106.0 
Adjusted for:
Fuel surcharge revenues(114.4)(73.0)(314.8)(244.7)
Litigation— (13.1)— (13.1)
Restructuring—net— (0.5)— 0.5 
Adjusted total operating expenses$1,176.4 $985.8 $3,363.4 $2,848.7 
Operating revenues$1,444.5 $1,135.7 $4,033.9 $3,287.6 
Less: Fuel surcharge revenues114.4 73.0 314.8 244.7 
Revenues (excluding fuel surcharge)$1,330.1 $1,062.7 $3,719.1 $3,042.9 
Adjusted operating ratio88.4 %92.8 %90.4 %93.6 %

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Adjusted net income
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2021202020212020
Net income$110.0 $44.5 $271.3 $134.8 
Litigation— 13.1 — 13.1 
Restructuring—net— 0.5 — (0.5)
Income tax effect of non-GAAP adjustments (1)
— (3.5)— (3.2)
Adjusted net income$110.0 $54.6 $271.3 $144.2 
(1)Our estimated tax rate on non-GAAP items is determined annually using the applicable consolidated federal and state effective tax rate, modified to remove the impact of tax credits and adjustments that are not applicable to the specific items. Due to differences in the tax treatment of items excluded from non-GAAP income, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP items may differ from our GAAP tax rate and from our actual tax liabilities.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Enterprise Results Summary

Enterprise net income increased $65.5 million, approximately 147%, in the third quarter of 2021 compared to the same quarter in 2020, primarily due to a $90.4 million increase in income from operations, partially offset by the corresponding increase in income taxes.

Adjusted net income increased $55.4 million, approximately 101%.

Components of Enterprise Net Income

Enterprise Revenues

Enterprise operating revenues increased $308.8 million, approximately 27%, in the third quarter of 2021 compared to the same quarter in 2020.

Factors contributing to the increase were as follows:
a $190.2 million increase in Logistics segment revenues (excluding fuel surcharge) driven by increased revenue per order and volume growth;
a $47.3 million increase in Intermodal segment revenues (excluding fuel surcharge) due to an improvement in revenue per order and an increase in orders despite network fluidity constraints;
a $41.4 million increase in fuel surcharge revenues resulting from an increase in fuel prices in the third quarter of 2021 compared to the same quarter in 2020 (for example, based on information reported by the U.S. Department of Energy, the average diesel price per gallon in the U.S. increased by 38% between such periods), partially offset by a decrease in Truckload volumes; and
a $24.2 million increase in Truckload segment revenues (excluding fuel surcharge) resulting from improved revenue per truck per week, partially offset by lower volumes due to driver capacity constraints.

Enterprise revenues (excluding fuel surcharge) increased $267.4 million, approximately 25%.

Enterprise Income from Operations and Operating Ratio

Enterprise income from operations increased $90.4 million, approximately 143%, in the third quarter of 2021 compared to the same quarter in 2020, primarily due to an increase in revenue per truck per week in Truckload, revenue per order in Intermodal, and net revenue per order in Logistics largely driven by strong freight market conditions and effective network and revenue management. A $33.6 million improvement in equipment dispositions and $13.1 million of costs incurred in 2020 related to an adverse tax ruling also contributed to improved income from operations. The above factors were partially offset by an increase in driver costs resulting from additional costs incurred to attract and retain drivers due to industry-wide capacity constraints, as well as higher rail costs.
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Adjusted income from operations increased $76.8 million, approximately 100%.

Enterprise operating ratio improved on both a GAAP and adjusted basis when compared to the third quarter of 2020. Among other factors, our operating ratio can be negatively impacted by changes in portfolio mix when our higher operating ratio, less asset-focused Logistics segment grows faster than our lower operating ratio, capital-intensive Truckload segment.

Enterprise Operating Expenses

Key operating expense fluctuations are described below.
Purchased transportation increased $191.3 million, or 38%, quarter over quarter, primarily resulting from increased third party carrier costs attributable to higher purchased transportation costs per order and volume growth within Logistics, as well as higher rail purchased transportation resulting from an increase in both rail costs and orders within Intermodal.
Salaries, wages, and benefits increased $31.0 million, or 12%, quarter over quarter, primarily due to increases in Truckload and Intermodal driver pay, Logistics salaries and wages, and performance-based incentive compensation. The increases in driver pay were largely the result of pay increases and actions to address driver capacity constraints, while the increase in Logistics salaries and wages was primarily due to an increase in sales commissions and headcount.
Fuel and fuel taxes for company trucks increased $20.8 million, or 42%, quarter over quarter, driven primarily by an increase in cost per gallon. A significant portion of fuel costs are recovered through our fuel surcharge programs.
Operating supplies and expenses decreased $35.9 million, or 25%, quarter over quarter, largely a result of a $33.6 million favorable change in equipment dispositions driven by a strong used equipment market and the strength of our nationwide maintenance network in facilitating equipment sales and $13.1 million of costs incurred in 2020 related to an adverse tax ruling. These factors were partially offset by an increase in equipment rental expense due to port congestion and higher customer dwell time and additional rail storage expenses caused by network fluidity constraints.
Other general expenses increased $9.8 million, or 38%, quarter over quarter, primarily due to higher driver onboarding costs resulting from increased costs to attract and retain drivers due to constrained industry-wide capacity levels. The remaining increase was largely related to costs associated with software development and professional services.

Total Other Expenses (Income)

Total other expense increased $3.5 million, approximately 109%, in the third quarter of 2021 compared to the same quarter in 2020. This change mainly resulted from a $3.1 million pre-tax net loss on our equity investments in the third quarter of 2021. See Note 5, Investments, for more information on our equity investments.

Income Tax Expense

Our provision for income taxes increased $21.4 million, approximately 137%, in the third quarter of 2021 compared to the same quarter in 2020 due to higher taxable income. The effective income tax rate was 25.2% for the three months ended September 30, 2021 compared to 26.0% for the same quarter last year. Our provision for income taxes may fluctuate in future periods to the extent there are changes to tax laws and regulations.

Revenues and Income (Loss) from Operations by Segment

The following tables summarize revenues and income (loss) from operations by segment.
Three Months Ended
September 30,
Revenues by Segment (in millions)
20212020
Truckload$484.4 $460.2 
Intermodal295.7 248.4 
Logistics474.6 284.4 
Other98.0 85.5 
Fuel surcharge114.4 73.0 
Inter-segment eliminations(22.6)(15.8)
Operating revenues$1,444.5 $1,135.7 
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Three Months Ended
September 30,
Income (Loss) from Operations by Segment (in millions)
20212020
Truckload$85.1 $45.6 
Intermodal45.7 23.0 
Logistics22.1 9.1 
Other0.8 (14.4)
Income from operations153.7 63.3 
Adjustments:
Litigation— 13.1 
Restructuring—net— 0.5 
Adjusted income from operations$153.7 $76.9 

We monitor and analyze a number of KPIs in order to manage our business and evaluate our financial and operating performance. Below are our KPIs by segment.

Truckload

The following table presents the KPIs for our Truckload segment for the periods indicated, consistent with how revenues and expenses are reported internally for segment purposes. Descriptions of the two operations that make up our Truckload segment are as follows:
Dedicated - Transportation services with equipment devoted to customers under long-term contracts.
Network - Transportation services of one-way shipments.
 Three Months Ended
September 30,
 20212020
Dedicated
Revenues (excluding fuel surcharge) (1)
$204.0 $177.8 
Average trucks (2) (3)
4,240 3,944 
Revenue per truck per week (4)
$3,706 $3,483 
Network
Revenues (excluding fuel surcharge) (1)
$279.9 $281.5 
Average trucks (2) (3)
4,942 6,108 
Revenue per truck per week (4)
$4,364 $3,561 
Total Truckload
Revenues (excluding fuel surcharge) (5)
$484.4 $460.2 
Average trucks (2) (3)
9,182 10,052 
Revenue per truck per week (4)
$4,060 $3,530 
Average company trucks (3)
6,875 7,250 
Average owner-operator trucks (3)
2,307 2,802 
Trailers (6)
36,434 36,672 
Operating ratio (7)
82.4 %90.1 %
(1)Revenues (excluding fuel surcharge), in millions, exclude revenue in transit.
(2)Includes company and owner-operator trucks.
(3)Calculated based on beginning and end of month counts and represents the average number of trucks available to haul freight over the specified timeframe.
(4)Calculated excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes, using weighted workdays.
(5)Revenues (excluding fuel surcharge), in millions, include revenue in transit at the operating segment level and, therefore does not sum with amounts presented above.
(6)Includes entire fleet of owned trailers, including trailers with leasing arrangements between Truckload and Logistics.
(7)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.
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Truckload revenues (excluding fuel surcharge) increased $24.2 million, approximately 5%, in the third quarter of 2021 compared to the same quarter in 2020, driven by price improvements, largely offset by a 12% decline in volume. Revenue per truck per week increased $530, or 15%, quarter over quarter, as a result of a 22% increase in rate per loaded mile driven by favorable price conditions and network management, partially offset by lower productivity largely resulting from freight mix. Despite strong market demand, freight volumes decreased quarter over quarter mainly due to continued driver capacity constraints.

Truckload income from operations increased $39.5 million, approximately 87%, in the third quarter of 2021 compared to the same quarter in 2020, primarily due to a favorable price environment and network management, in addition to a $30.3 million favorable change in equipment dispositions. These items were partially offset by the earnings impact of reduced volumes, noted above, and an increase in driver-related costs as a result of pay increases and actions taken to attract and retain drivers in response to industry-wide driver capacity constraints.

Intermodal

The following table presents the KPIs for our Intermodal segment for the periods indicated.
 Three Months Ended
September 30,
 20212020
Orders (1)
111,801 110,633 
Containers23,796 21,744 
Trucks (2)
1,569 1,582 
Revenue per order (3)
$2,624 $2,194 
Operating ratio (4)
84.5 %90.7 %
(1)Based on delivered rail orders.
(2)Includes company and owner-operator trucks at the end of the period.
(3)Calculated using rail revenues excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes.
(4)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Intermodal revenues (excluding fuel surcharge) increased $47.3 million, approximately 19%, in the third quarter of 2021 compared to the same quarter in 2020, primarily due to a $430, or 20%, improvement in revenue per order. Strong market conditions favorably impacted revenue per order and allowed for improvements in price and increased premium opportunities, which were partially offset by growth in the East, which has a shorter length of haul and therefore, typically lower revenue per order. Despite continued challenges related to supply chain inefficiencies resulting in extended container dwell times and rail network disruptions, orders increased 1%.

Intermodal income from operations increased $22.7 million, approximately 99%, in the third quarter of 2021 compared to the same quarter in 2020, driven by the factors impacting revenue discussed above, partially offset by higher rail and driver-related costs mainly due to network fluidity challenges and actions taken to attract and retain drivers to mitigate industry-wide driver capacity constraints.

Logistics

The following table presents the KPI for our Logistics segment for the periods indicated.
 Three Months Ended
September 30,
 20212020
Operating ratio (1)
95.3 %96.8 %
(1)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Logistics revenues (excluding fuel surcharge) increased $190.2 million, approximately 67%, in the third quarter of 2021 compared to the same quarter in 2020. This increase was primarily driven by an increase in revenue per order and 24% volume growth within our brokerage business due to supportive market conditions, in addition to the expansion of our Power Only offering and digital platform.

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Logistics income from operations increased $13.0 million, approximately 143%, in the third quarter of 2021 compared to the same quarter in 2020. Contributing to the increase in income from operations quarter over quarter were both net revenue per order improvements within our brokerage business and the volume growth cited above.

Other

Included in Other was income from operations of $0.8 million in the third quarter of 2021 compared to a loss of $14.4 million in the same quarter in 2020. Factors contributing to the change include $13.1 million of costs incurred in 2020 as a result of an adverse tax ruling, in addition to an increase in income from operations within our leasing business, partially offset by an increase in performance-based incentive compensation quarter over quarter.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Enterprise Results Summary

Enterprise net income increased $136.5 million, approximately 101%, in the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to a $174.1 million increase in income from operations, partially offset by the corresponding increase in income taxes. In addition, the nine months ended September 30, 2021 and 2020 included pre-tax net investment gains of $17.1 million and $8.8 million, respectively.

Adjusted net income increased $127.1 million, approximately 88%.

Components of Enterprise Net Income

Enterprise Revenues

Enterprise operating revenues increased $746.3 million, approximately 23%, in the nine months ended September 30, 2021 compared to the same period in 2020.

Factors contributing to the increase were as follows:
a $506.3 million increase in Logistics segment revenues (excluding fuel surcharge) due to an increase in revenue per order and volume growth;
a $120.1 million increase in Intermodal segment revenues (excluding fuel surcharge) driven by an improvement in revenue per order and an increase in orders despite network fluidity constraints;
a $70.1 million increase in fuel surcharge revenues resulting from an increase in fuel prices in the first nine months of 2021 compared to the same period in 2020 (for example, based on information reported by the U.S. Department of Energy, the average diesel price per gallon in the U.S. increased by 20% between such periods) and an increase in Intermodal volumes, partially offset by a decrease in Truckload volumes; and
a $30.6 million increase in Truckload segment revenues (excluding fuel surcharge) driven by improved revenue per truck per week, partially offset by lower volumes due to driver capacity constraints.

Enterprise revenues (excluding fuel surcharge) increased $676.2 million, approximately 22%.

Enterprise Income from Operations and Operating Ratio

Enterprise income from operations increased $174.1 million, approximately 96%, in the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to an increase in revenue per truck per week in Truckload, revenue per order in Intermodal, and net revenue per order in Logistics largely driven by strong freight market conditions compared to the unfavorable impacts of COVID-19 in the prior year and effective network and revenue management. A $53.4 million improvement in equipment dispositions, a reduction in insurance costs due to a decrease in claims severity and frequency, and $13.1 million of costs incurred in 2020 related to an adverse tax ruling also contributed to improved income from operations. The above factors were partially offset by an increase in driver costs and a reduction in Truckload freight volumes resulting from additional costs incurred to attract and retain drivers and industry-wide driver capacity constraints, respectively, as well as higher rail costs.

Adjusted income from operations increased $161.5 million, approximately 83%.

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Enterprise operating ratio improved on both a GAAP and adjusted basis when compared to the same period of 2020. Among other factors, our operating ratio can be negatively impacted by changes in portfolio mix when our higher operating ratio, less asset-focused Logistics segment grows faster than our lower operating ratio, capital-intensive Truckload segment.

Enterprise Operating Expenses

Key operating expense fluctuations are described below. 
Purchased transportation costs increased $482.7 million, or 34%, period over period, primarily resulting from increased third party carrier costs due to higher purchased transportation costs per order and volume growth within Logistics, as well as higher rail purchased transportation resulting from an increase in both rail costs and orders in Intermodal. These items were partially offset by reduced owner-operator costs within Truckload largely due to fewer owner-operators despite an increase in owner-operator pay.
Salaries, wages, and benefits increased $61.5 million, or 8%, period over period, primarily due to increases in Truckload and Intermodal driver pay, Logistics salaries and wages, and performance-based incentive compensation. The increases in driver pay were largely the result of pay increases and actions to address driver capacity constraints, while the increase in Logistics salaries and wages was primarily due to an increase in headcount and sales commissions.
Fuel and fuel taxes for company trucks increased $51.6 million, or 34%, period over period, driven primarily by an increase in cost per gallon, partially offset by a decrease in company driver miles resulting from industry-wide capacity constraints. A significant portion of fuel costs are recovered through our fuel surcharge programs.
Operating supplies and expenses decreased $33.7 million, or 9%, period over period, a result of a $53.4 million favorable change in equipment dispositions driven by a strong used equipment market and the strength of our nationwide maintenance network in facilitating equipment sales and $13.1 million of costs incurred in 2020 related to an adverse tax ruling. These factors were partially offset by an increase in equipment rental expense due to port congestion and higher customer dwell times, additional rail storage expenses caused by network fluidity constraints, and an increase in a variety of other operating-related areas that were individually immaterial.
Insurance and related expenses decreased $14.2 million, or 19%, period over period, primarily due to favorability in auto liability resulting from a decrease in claims severity and frequency.
Other general expenses increased $19.6 million, or 25%, period over period, primarily due to an increase in costs associated with software development and professional services. The remaining increase is attributable to higher driver onboarding costs resulting from increased costs to attract and retain drivers due to constrained industry-wide capacity levels compared to favorable driver turnover in 2020 during the pandemic.

Total Other Expenses (Income)

Total other income increased $7.4 million in the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to an $8.3 million increase in pre-tax net gains on our equity investments. In the nine months ended September 30, 2021 we recorded a $17.1 million pre-tax net gain on investments compared to an $8.8 million pre-tax gain on investments in the same period in 2020. See Note 5, Investments, for more information on our equity investments.

Income Tax Expense

Our provision for income taxes increased $45.0 million, approximately 97%, in the nine months ended September 30, 2021 compared to the same period in 2020 due to higher taxable income. The effective income tax rate was 25.2% for the nine months ended September 30, 2021 compared to 25.6% for the same period last year. Our provision for income taxes may fluctuate in future periods to the extent there are changes to tax laws and regulations.

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Revenues and Income (Loss) from Operations by Segment

The following tables summarize revenues and income (loss) from operations by segment.
Nine Months Ended
September 30,
Revenues by Segment (in millions)
20212020
Truckload$1,411.3 $1,380.7 
Intermodal825.5 705.4 
Logistics1,261.2 754.9 
Other284.9 274.7 
Fuel surcharge314.8 244.7 
Inter-segment eliminations(63.8)(72.8)
Operating revenues$4,033.9 $3,287.6 
Nine Months Ended
September 30,
Income (Loss) from Operations by Segment (in millions)
20212020
Truckload$197.0 $122.7 
Intermodal100.6 50.3 
Logistics55.0 21.5 
Other3.1 (12.9)
Income from operations355.7 181.6 
Adjustments:
Litigation— 13.1 
Restructuring—net— (0.5)
Adjusted income from operations$355.7 $194.2 

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We monitor and analyze a number of KPIs in order to manage our business and evaluate our financial and operating performance. Below are our KPIs by segment.

Truckload

The following table presents the KPIs for our Truckload segment for the periods indicated, consistent with how revenues and expenses are reported internally for segment purposes. Descriptions of the two operations that make up our Truckload segment are as follows:
Dedicated - Transportation services with equipment devoted to customers under long-term contracts.
Network - Transportation services of one-way shipments.
 Nine Months Ended
September 30,
 20212020
Dedicated
Revenues (excluding fuel surcharge) (1)
$587.3 $526.1 
Average trucks (2) (3)
4,182 3,912 
Revenue per truck per week (4)
$3,643 $3,478 
Network
Revenues (excluding fuel surcharge) (1)
$821.6 $852.6 
Average trucks (2) (3)
5,159 6,242 
Revenue per truck per week (4)
$4,133 $3,533 
Total Truckload
Revenues (excluding fuel surcharge) (5)
$1,411.3 $1,380.7 
Average trucks (2) (3)
9,341 10,154 
Revenue per truck per week (4)
$3,914 $3,512 
Average company trucks (3)
6,960 7,298 
Average owner-operator trucks (3)
2,381 2,856 
Trailers (6)
36,434 36,672 
Operating ratio (7)
86.0 %91.1 %
(1)Revenues (excluding fuel surcharge), in millions, exclude revenue in transit.
(2)Includes company and owner-operator trucks.
(3)Calculated based on beginning and end of month counts and represents the average number of trucks available to haul freight over the specified timeframe.
(4)Calculated excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes, using weighted workdays.
(5)Revenues (excluding fuel surcharge), in millions, include revenue in transit at the operating segment level and, therefore does not sum with amounts presented above.
(6)Includes entire fleet of owned trailers, including trailers with leasing arrangements between Truckload and Logistics.
(7)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Truckload revenues (excluding fuel surcharge) increased $30.6 million, approximately 2%, in the nine months ended September 30, 2021 compared to the same period in 2020 as an improvement in price was largely offset by an 11% decline in volume. Revenue per truck per week increased $402, or 11%, period over period, due to a 16% increase in rate per loaded mile driven by higher contract and spot rates, partially offset by reduced productivity largely due to weather in the first quarter of 2021 and freight mix. While growth was experienced within our dedicated business, the overall reduction in order volumes was primarily driven by continued driver capacity constraints.

Truckload income from operations increased $74.3 million, approximately 61%, in the nine months ended September 30, 2021 compared to the same period in 2020, primarily attributable to contract renewals and spot market opportunities, in addition to a $47.5 million favorable change in equipment dispositions and a reduction in auto liability costs. These items were partially offset by the earnings impact of reduced volumes, noted above, and an increase in driver-related costs as a result of pay increases and actions taken to attract and retain drivers in response to industry-wide driver capacity constraints.

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Intermodal

The following table presents the KPIs for our Intermodal segment for the periods indicated.
 Nine Months Ended
September 30,
 20212020
Orders (1)
334,480 315,582 
Containers23,796 21,744 
Trucks (2)
1,569 1,582 
Revenue per order (3)
$2,442 $2,172 
Operating ratio (4)
87.8 %92.9 %
(1)Based on delivered rail orders.
(2)Includes company and owner-operator trucks at the end of the period.
(3)Calculated using rail revenues excluding fuel surcharge and revenue in transit, consistent with how revenue is reported internally for segment purposes.
(4)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Intermodal revenues (excluding fuel surcharge) increased $120.1 million, approximately 17%, in the nine months ended September 30, 2021 compared to the same period in 2020. Contributing to the increase was a $270, or 12%, improvement in revenue per order, driven primarily by strong market conditions leading to improvements in price and increased premium opportunities, partially offset by growth in the East which has a shorter length of haul and therefore, typically lower revenue per order. Orders also increased 6% due to favorable market demand conditions, despite challenges related to supply chain inefficiencies resulting in extended container dwell times and rail network disruptions.

Intermodal income from operations increased $50.3 million, approximately 100%, in the nine months ended September 30, 2021 compared to the same period in 2020, mainly the result of factors impacting revenues discussed above, partially offset by the impact of network fluidity and capacity challenges on rail and driver-related costs.

Logistics

The following table presents the KPI for our Logistics segment for the periods indicated.
 Nine Months Ended
September 30,
 20212020
Operating ratio (1)
95.6 %97.2 %
(1)Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Logistics revenues (excluding fuel surcharge) increased $506.3 million, approximately 67%, in the nine months ended September 30, 2021 compared to the same period in 2020. This increase was mainly the result of an increase in revenue per order and 20% volume growth within our brokerage business driven by supportive market conditions, in addition to expansion of our Power Only offering and digital platform.

Logistics income from operations increased $33.5 million, approximately 156%, in the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to net revenue per order improvements within our brokerage business and volume growth, as cited above.

Other

Included in Other was income from operations of $3.1 million in the nine months ended September 30, 2021, compared to a loss of $12.9 million in the same period in 2020. The change was primarily driven by an increase in income from operations within our leasing business due to increased lease activity and $13.1 million of costs incurred in 2020 as a result of an adverse tax ruling, partially offset by an increase in performance-based incentive compensation period over period.

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LIQUIDITY AND CAPITAL RESOURCES

Our primary uses of cash are working capital requirements, capital expenditures, dividend payments, and debt service requirements. Additionally, we may use cash for acquisitions and other investing and financing activities. Working capital is required principally to ensure we are able to run the business and have sufficient funds to satisfy maturing short-term debt and operational expenses. Our capital expenditures consist primarily of transportation equipment and information technology.

Historically, our primary source of liquidity has been cash flow from operations. In addition, we have a $250.0 million revolving credit facility and a $150.0 million accounts receivable facility, for which our available capacity as of September 30, 2021 was $325.8 million. We anticipate that cash generated from operations, together with amounts available under our credit facilities, will be sufficient to meet our requirements for the foreseeable future. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that we will obtain these funds through additional borrowings, equity offerings, or a combination of these potential sources of liquidity. Our ability to fund future operating expenses and capital expenditures, as well as our ability to meet future debt service obligations or refinance our indebtedness, will depend on our future operating performance, which will be affected by general economic, financial, and other factors beyond our control.

The following table presents our cash and cash equivalents, marketable securities, and outstanding debt as of the dates shown.
(in millions)September 30, 2021December 31, 2020
Cash and cash equivalents$504.2 $395.5 
Marketable securities45.7 47.1 
Total cash, cash equivalents, and marketable securities$549.9 $442.6 
Debt:
Senior notes$305.0 $305.0 
Finance leases2.7 2.0 
Total debt (1)
$307.7 $307.0 
(1)Debt on the consolidated balance sheets is presented net of deferred financing costs.

Debt

At September 30, 2021, we were in compliance with all financial covenants under our credit agreements and the agreements governing our senior notes. See Note 7, Debt and Credit Facilities, for information about our financing arrangements.

Cash Flows

The following table summarizes the changes to our cash flows provided by (used in) operating, investing, and financing activities for the periods indicated. 
 Nine Months Ended
September 30,
(in millions)20212020
Cash provided by operating activities$396.0 $469.1 
Cash used in investing activities(249.6)(163.0)
Cash used in financing activities(37.7)(89.2)

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Operating Activities

Cash provided by operating activities decreased $73.1 million, approximately 16%, in the first nine months of 2021 compared to the same period in 2020. The decrease was the result of an increase in cash used for working capital, partially offset by an increase in net income adjusted for various noncash charges. Working capital changes which decreased net cash provided by operating activities were driven by an increase in trade accounts receivable, which increased proportionate to revenue growth, and a decrease in other liabilities primarily related to the $30.7 million payment of payroll taxes deferred under the CARES Act during the nine months ended September 30, 2021.
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Investing Activities

Cash used in investing activities increased $86.6 million, approximately 53%, in the first nine months of 2021 compared to the same period in 2020. The increase in cash used was primarily driven by an increase in net capital expenditures and purchases of lease equipment.

Capital Expenditures

The following table sets forth our net capital expenditures for the periods indicated.
 Nine Months Ended
September 30,
(in millions)20212020
Transportation equipment$296.9 $131.7 
Other property and equipment33.4 38.7 
Proceeds from sale of property and equipment(145.2)(55.5)
Net capital expenditures$185.1 $114.9 

Net capital expenditures increased $70.2 million in the first nine months of 2021 compared to the same period in 2020. The increase was driven by a $165.2 million increase in purchases of transportation equipment mainly due to replacement capital and reduced fleet age, partially offset by an $89.7 million increase in proceeds from the sale of property and equipment primarily resulting from higher proceeds per unit and increased tractor and trailer sales.

Financing Activities

Cash used in financing activities decreased $51.5 million, approximately 58%, in the first nine months of 2021 compared to the same period in 2020. The main drivers of the decrease in cash used were the $25.0 million and $30.0 million repayments of private placement notes in March and September of 2020, respectively.

Other Considerations that Could Affect Our Results, Liquidity, or Capital Resources

Investment in TuSimple

On January 12, 2021, the Company purchased a $5.0 million non-controlling interest in TuSimple. Upon completion of its initial public offering in April 2021, our investment in TuSimple was converted into Class A common shares and is being accounted for under ASC 321, Investments - Equity Securities, with subsequent changes in share price recorded in other income on the consolidated statements of comprehensive income. In the three and nine months ended September 30, 2021, the Company recognized a pre-tax net loss of $12.1 million and a pre-tax net gain of $8.1 million on its investment in TuSimple, respectively. Due to the volatility of the global markets and the potential for high volatility of public equity prices of technology-related companies, we expect the value of our investment to fluctuate which could materially affect our financial condition and results of operations.

COVID-19

Despite disruptions in the financial markets due to COVID-19, we have been able to fund our liquidity needs to date. We believe we are in a strong liquidity position with a cash, cash equivalents, and marketable securities balance of $549.9 million and $325.8 million of unused credit capacity as of September 30, 2021. Our outstanding debt as of the end of the quarter was $307.7 million, of which $100.7 million is short-term in nature. We are compliant with all financial covenants under our credit agreements and do not anticipate the need to seek additional capital as a result of COVID-19.

Factors that Could Result in a Goodwill Impairment

Goodwill is tested for impairment at least annually using the discounted cash flow, guideline public company, and guideline merged and acquired company methods in calculating the fair values of our reporting units. Key inputs used in the discounted cash flow approach include growth rates for sales and operating profit, perpetuity growth assumptions, and discount rates. As interest rates rise, the calculated fair values of our reporting units will decrease, which could impact the results of our goodwill impairment tests.

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We will perform our annual evaluation of goodwill for impairment as of October 31, 2021, with such analysis expected to be finalized during the fourth quarter. As part of our annual process of updating our goodwill impairment evaluation, we will assess the impact of current operating results and our resulting management actions to determine whether they have an impact on the long-term valuation of reporting units and the related recoverability of our goodwill.

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Contractual Obligations

See the disclosure under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2020 for our contractual obligations as of December 31, 2020. There were no material changes to our contractual obligations during the nine months ended September 30, 2021.

CRITICAL ACCOUNTING ESTIMATES

We have reviewed our critical accounting policies and considered whether new critical accounting estimates or other significant changes to our accounting policies require additional disclosures. We have found that the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2020 are still current and that there have been no significant changes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Other than as described below, our market risks have not changed significantly from the market risks discussed in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC on February 19, 2021.

Equity Price Risk

Our equity investment in TuSimple is susceptible to market price risk arising from uncertainties in the future market value, and a fluctuation in TuSimple’s share price could have an adverse impact on the fair value of our investment and results of operations. At September 30, 2021 the fair value of our investment in TuSimple was $13.1 million. A hypothetical 10% decrease in TuSimple’s share price would reduce the value of our equity investment by approximately $1.3 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this report. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is party to various lawsuits in the ordinary course of its business. For information relating to legal proceedings, see Note 11, Commitments and Contingencies, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, other than the risk described below.

Risks Related to Our Business, Industry, and Strategy

The valuation of the Company’s investments in strategic partners and technologies is subject to volatility.
The market valuation of our strategic investments, especially as it relates to our investment in TuSimple which is publicly traded, may experience substantial price volatility which, when accounted for under GAAP, could have a material adverse affect on the Company’s financial condition and results of operations. Refer to Note 5, Investments, to our consolidated financial statements for information on our strategic investments. Those investments can be negatively affected by market and economic factors including liquidity, credit deterioration, financial results, interest rate fluctuations, or other factors. As a result, future fluctuations in their value could result in significant losses and could have a material adverse impact on the Company’s financial condition and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information regarding the purchases of our equity securities made by or on behalf of us or any affiliated purchaser (as defined in Exchange Act Rule 10b-18) during the three months ended September 30, 2021. 
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2021 - July 31, 202139 $21.39 — $— 
August 1, 2021 - August 31, 2021— — — — 
September 1, 2021 - September 30, 202110 22.38 — — 
Total49 — $— 
(1)Represents shares of common stock that employees surrendered to satisfy withholding taxes related to the vesting of restricted stock.
(2)The Company is not currently participating in a share repurchase program.

Limitation Upon Payment of Dividends

The 2018 Credit Facility includes covenants limiting our ability to pay dividends or make distributions on our capital stock if a default exists under the 2018 Credit Facility or would be caused by giving effect to such dividend.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS
Exhibit
Number
  Exhibit Description
10.1
31.1*  
31.2*  
32.1**  
32.2**  
101.INS*  XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
104*The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL
*    Filed herewith.
** Furnished herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Schneider National, Inc., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
SCHNEIDER NATIONAL, INC.
Date: October 28, 2021/s/ Stephen L. Bruffett
Stephen L. Bruffett
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
33