SCHNEIDER NATIONAL, INC., 10-Q filed on 11/2/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 26, 2018
Document Information [Line Items]    
Document Type 10-Q  
Entity Registrant Name Schneider National, Inc.  
Amendment Flag false  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Trading Symbol SNDR  
Entity Central Index Key 0001692063  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Class A Common Shares    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding (shares)   83,029,500
Class B Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding (shares)   93,969,268
v3.10.0.1
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
OPERATING REVENUES $ 1,280.1 $ 1,110.8 $ 3,655.4 $ 3,192.4
OPERATING EXPENSES:        
Purchased transportation 521.1 403.9 1,431.8 1,158.7
Salaries, wages, and benefits 317.2 307.4 943.2 910.0
Fuel and fuel taxes 87.4 76.3 260.3 220.7
Depreciation and amortization 73.3 70.5 216.9 207.0
Operating supplies and expenses 123.5 135.3 364.2 369.2
Insurance and related expenses 24.1 22.2 69.4 64.3
Other general expenses, net 35.6 31.1 112.4 75.9
Total operating expenses 1,182.2 1,046.7 3,398.2 3,005.8
INCOME FROM OPERATIONS 97.9 64.1 257.2 186.6
OTHER EXPENSE (INCOME):        
Interest expense—net 2.7 3.6 10.1 13.7
Other income—net (0.1) (0.2) (1.0) (0.3)
Total other expense—net 2.6 3.4 9.1 13.4
INCOME BEFORE INCOME TAXES 95.3 60.7 248.1 173.2
PROVISION FOR INCOME TAXES 24.6 23.8 64.0 67.2
NET INCOME (70.7) (36.9) (184.1) (106.0)
OTHER COMPREHENSIVE INCOME (LOSS):        
Foreign currency translation adjustments (0.9) (0.1) (0.8) (0.7)
Unrealized gain (loss) on marketable securities—net of tax 0.0 0.1 (0.3) 0.2
Total other comprehensive loss (0.9) 0.0 (1.1) (0.5)
COMPREHENSIVE INCOME $ 69.8 $ 36.9 $ 183.0 $ 105.5
Weighted average common shares issued and outstanding 177.0 176.9 177.0 169.2
Weighted average diluted common shares issued and outstanding $ 0.40 $ 0.21 $ 1.04 $ 0.63
Weighted average diluted shares outstanding (shares) 177.2 177.0 177.2 169.3
Diluted earnings per common share $ 0.40 $ 0.21 $ 1.04 $ 0.63
Dividends per share of common stock (usd per share) $ 0.06 $ 0.05 $ 0.18 $ 0.15
v3.10.0.1
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash and cash equivalents $ 359.8 $ 238.5
Marketable securities 45.0 41.6
Trade accounts receivable—net of allowance of $6.6 and $5.2, respectively 588.7 527.9
Other receivables 20.1 22.4
Current portion of lease receivables—net of allowance of $0.5 and $1.7, respectively 130.5 104.9
Inventories 60.9 83.1
Prepaid expenses and other current assets 96.6 75.6
Total current assets 1,301.6 1,094.0
Property and equipment:    
Transportation equipment 2,885.4 2,770.1
Land, buildings, and improvements 175.2 183.8
Other property and equipment 157.2 175.7
Total property and equipment 3,217.8 3,129.6
Accumulated depreciation 1,300.2 1,271.5
Net property and equipment 1,917.6 1,858.1
Lease receivables 130.7 138.9
Capitalized software and other noncurrent assets 79.8 74.7
Goodwill 164.2 164.8
Total noncurrent assets 2,292.3 2,236.5
TOTAL ASSETS 3,593.9 3,330.5
CURRENT LIABILITIES:    
Trade accounts payable 293.0 230.4
Accrued salaries and wages 85.0 85.8
Claims accruals - current 64.4 48.3
Current maturities of debt and capital lease obligations 10.1 19.1
Dividends payable 10.7 8.8
Other current liabilities 93.8 69.6
Total current liabilities 557.0 462.0
NONCURRENT LIABILITIES:    
Long-term Debt and Capital Lease Obligations 412.5 420.6
Claims accruals - noncurrent 98.6 102.5
Deferred income taxes 423.3 386.6
Other 49.3 68.6
Total noncurrent liabilities 983.7 978.3
SHAREHOLDERS' EQUITY    
Additional paid-in capital 1,539.3 1,534.6
Retained earnings 515.0 355.6
Accumulated other comprehensive income (1.1) 0.0
Total shareholders' equity 2,053.2 1,890.2
TOTAL 3,593.9 3,330.5
Class A Common Shares    
SHAREHOLDERS' EQUITY    
Common stock 0.0 0.0
Class B Common Stock    
SHAREHOLDERS' EQUITY    
Common stock $ 0.0 $ 0.0
v3.10.0.1
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
Trade allowance $ (6.6) $ (5.2)
Allowance for lease receivables $ (0.5) $ (1.7)
Class A Common Shares    
Common stock, par value (usd per share) $ 0 $ 0
Common stock, shares authorized (shares) 250,000,000 250,000,000
Common stock, shares issued (shares) 83,029,500 83,029,500
Common stock, shares outstanding (shares) 83,029,500 83,029,500
Class B Common Stock    
Common stock, par value (usd per share) $ 0 $ 0
Common stock, shares authorized (shares) 750,000,000 750,000,000
Common stock, shares issued (shares) 94,607,116 93,850,011
Common stock, shares outstanding (shares) 93,967,681 93,850,011
v3.10.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash and Cash Equivalents, at Carrying Value $ 359.8 $ 202.2
Payments for Previous Acquisition 19.3 19.4
OPERATING ACTIVITIES:    
Net income 184.1 106.0
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 216.9 207.0
Gains on sales of property and equipment (4.2) (6.4)
Deferred income taxes (34.4) (48.8)
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability 0.0 (13.2)
Share-based Compensation 15.3 15.3
Other noncash items (3.1) (0.5)
Changes in operating assets and liabilities:    
Receivables (65.7) (39.0)
Other assets (15.9) (9.5)
Payables 35.6 22.1
Other liabilities 12.7 (14.9)
Net cash provided by operating activities 410.1 315.7
INVESTING ACTIVITIES:    
Purchases of transportation equipment (268.1) (274.1)
Purchases of other property and equipment (22.3) (27.3)
Proceeds from sale of property and equipment 74.6 51.8
Proceeds from lease receipts and sale of off-lease inventory 56.2 42.4
Purchases of lease equipment (58.4) (89.8)
Sales of marketable securities 3.9 8.4
Payments to Acquire Available-for-sale Securities (8.0) 0.0
Advance funding of dividend to transfer agent 0.0 (6.7)
Net cash used in investing activities (222.1) (295.3)
Net Cash Provided by (Used in) Financing Activities, Continuing Operations [Abstract]    
Repayments of Lines of Credit 0.0 135.0
Repayments of Debt and Capital Lease Obligations 17.3 118.5
Payments for Previous Acquisition 19.3 19.4
Proceeds from IPO, net of issuance costs 0.0 340.6
Payments of Dividends 30.1 16.6
Payments for Repurchase of Redeemable Preferred Stock 0.0 (0.1)
Net cash provided by (used in) financing activities (66.7) 51.0
Cash and Cash Equivalents, Period Increase (Decrease) 121.3 71.4
Cash and Cash Equivalents, at Carrying Value 359.8 202.2
Noncash investing and financing activity:    
Capital Expenditures Incurred but Not yet Paid 36.5 57.4
Dividends declared but not yet paid 10.7 8.8
Ownership interest in Platform Science, Inc. 2.5 0.0
Cash paid (refunded) during the period for:    
Interest 13.2 16.6
Income taxes—net of refunds $ 25.5 $ (10.4)
v3.10.0.1
General
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General
GENERAL

Description of Business
In this report, when we refer to “the Company,” “us,” “we,” “our,” or “ours,” we are referring to Schneider National, Inc. and its subsidiaries. We are a leading transportation services organization headquartered in Green Bay, Wisconsin. We provide a broad portfolio of premier truckload, intermodal, and logistics solutions and operate one of the largest trucking fleets in North America.

Our IPO of shares of Class B Common Stock was completed in early April 2017, and additional shares were sold in May 2017 under an option granted to the underwriters. In connection with the offering, we sold a total of 20,145,000 shares of Class B common stock at $19 per share and received proceeds of $382.7 million. Expenses related to the offering totaled approximately $42.1 million, resulting in net proceeds of $340.6 million.

Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance 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. These consolidated financial statements 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, 2017. 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 Issued but Not Yet Adopted
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the capitalization requirements for implementation costs incurred in a hosting arrangement that is a service contract with the existing capitalization requirements for implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for us as of January 1, 2020 with early adoption permitted. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Requirements, which removes, modifies, and adds certain disclosure requirements for fair value measurements. ASU 2018-13 is effective for us January 1, 2020 with early adoption permitted. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements and do not believe the impact will be material.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, which discusses the reclassification of certain tax effects from accumulated other comprehensive income. The guidance requires companies to disclose a description of their accounting policy for releasing income tax effects from accumulated other comprehensive income and whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act, along with information about other income tax effects that are reclassified.  ASU 2018-02 is effective for us January 1, 2019 with early adoption permitted. We plan to early adopt this ASU during the fourth quarter of 2018 and expect the reclassification of stranded income tax effects to have an immaterial impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires companies to use a forward-looking, expected loss model to estimate credit losses on various types of financial assets and net investments in leases. It also requires additional disclosure related to credit quality of trade and other receivables, including information related to management’s estimate of credit allowances. ASU 2016-13 is effective for us January 1, 2020. We currently cannot reasonably estimate the impact the adoption of this ASU will have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which amended authoritative guidance on leases and is codified in ASC 842. The amended guidance requires lessees to recognize most leases on their balance sheets as right-of-use assets along with corresponding lease liabilities. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for us January 1, 2019, with early adoption permitted. In July 2018, the FASB issued additional authoritative guidance providing companies with the option to apply this ASU to new and existing leases within the scope of the guidance as of the beginning of the period of adoption. We plan to elect this transition method of applying the new lease standard and will recognize right-of-use assets, lease liabilities, and any cumulative-effect adjustments to the opening balance of retained earnings as of January 1, 2019. Prior period amounts will not be adjusted and will continue to be reported under the accounting standards in effect for those periods. Upon adoption of the new standard on January 1, 2019, we expect to elect the package of practical expedients provided under the guidance. The practical expedient package applies to leases that commenced prior to adoption of the new standard and permits companies not to reassess whether existing or expired contracts are or contain a lease, the lease classification, and any initial direct costs for any existing leases. We have created a cross-functional implementation team whose efforts to date consist of identifying the Company's lease population, selecting a lease software that will assist with the reporting and disclosure requirements under the standard, and abstracting and validating our lease information. As we continue to evaluate this standard, we anticipate it will have a material impact on our consolidated balance sheets due to the capitalization of right-of-use assets and lease liabilities associated with our current operating leases in which we are the lessee. We do not believe it will have a material impact on our consolidated statements of comprehensive income or cash flows. Leasing activities in which we are the lessor in the transaction are also subject to ASC 842. Our evaluation of the impact of this standard on our lessor activity is ongoing, however from a lessor perspective, we do not believe the standard will have a material impact on our consolidated balance sheets, statements of comprehensive income, or cash flows.
v3.10.0.1
Revenue Recognition Revenue Recognition
9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]
REVENUE RECOGNITION

We implemented ASU 2014-09, Revenue from Contracts with Customers, which is codified as ASC 606 as of January 1, 2018 and replaces ASC 605, Revenue Recognition. We used the modified retrospective approach for adoption, which required us to record the cumulative effect of the transition through retained earnings as of January 1, 2018. Retained earnings increased by $7.3 million upon adoption. The adjustment related only to contracts that were not completed as of January 1, 2018. The following table shows the amount by which financial statement lines were affected by the adoption of the new standard. The changes relate to the recognition of transportation revenue over time rather than at delivery, as explained below under the Transportation heading.

 
 
Three Months Ended September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
Operating revenues
 
$
1,273.1

 
$
7.0

 
$
1,280.1

Purchased transportation
 
517.3

 
3.8

 
521.1

Salaries, wages, and benefits
 
318.2

 
(1.0
)
 
317.2

Total operating expenses
 
1,179.4

 
2.8

 
1,182.2

Income from operations
 
93.7

 
4.2

 
97.9

Provision for income taxes
 
23.4

 
1.2

 
24.6

Net income
 
67.7

 
3.0

 
70.7

Comprehensive income
 
66.8

 
3.0

 
69.8



 
 
Nine Months Ended September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
Operating revenues
 
$
3,642.9

 
$
12.5

 
$
3,655.4

Purchased transportation
 
1,424.2

 
7.6

 
1,431.8

Salaries, wages, and benefits
 
943.0

 
0.2

 
943.2

Total operating expenses
 
3,390.4

 
7.8

 
3,398.2

Income from operations
 
252.5

 
4.7

 
257.2

Provision for income taxes
 
62.7

 
1.3

 
64.0

Net income
 
180.7

 
3.4

 
184.1

Comprehensive income
 
179.6

 
3.4

 
183.0



 
 
September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Balance Sheet
 
 
 
 
 
 
Prepaid expenses and other current assets
 
$
64.9

 
$
31.7

 
$
96.6

Total current assets
 
1,269.9

 
31.7

 
1,301.6

Total assets
 
3,562.2

 
31.7

 
3,593.9

Other current liabilities
 
75.2

 
18.6

 
93.8

Total current liabilities
 
538.4

 
18.6

 
557.0

Deferred income taxes
 
420.9

 
2.4

 
423.3

Total noncurrent liabilities
 
981.3

 
2.4

 
983.7

Retained earnings
 
504.3

 
10.7

 
515.0

Total shareholders' equity
 
2,042.5

 
10.7

 
2,053.2

Total liabilities and shareholders' equity
 
3,562.2

 
31.7

 
3,593.9


 
 
Nine Months Ended September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Cash Flows
 
 
 
 
 
 
Operating Cash Flows
 
 
 
 
 
 
        Net income
 
$
180.7

 
$
3.4

 
$
184.1

        Change in: Other assets
 
(3.6
)
 
(12.3
)
 
(15.9
)
        Change in: Payables
 
34.3

 
1.3

 
35.6

        Change in: Other liabilities
 
5.1

 
7.6

 
12.7



ASC 606 requires us to look at revenue from customers at a contract level to determine the appropriate accounting. As defined by the new standard, a “contract” can range from an individual order to a multi-year agreement with a customer, depending on the specific arrangement. The majority of our revenues are related to transportation and have similar characteristics. The following table breaks down our revenues by type of service, and each type of service is further described below.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Disaggregated Revenues (in millions)
 
2018
 
2017
 
2018
 
2017
Transportation
 
$
1,175.0

 
$
1,005.7

 
$
3,362.9

 
$
2,921.0

Logistics management
 
57.7

 
55.8

 
163.7

 
160.6

Other
 
47.4

 
49.3

 
128.8

 
110.8

Total operating revenues
 
$
1,280.1

 
$
1,110.8

 
$
3,655.4

 
$
3,192.4



Transportation
Transportation revenues relate to the Truckload and Intermodal reportable segments, as well as to our Brokerage business, which is included in the Logistics reportable segment.

In the Transportation portfolio, our service obligation to customers is satisfied over time. We do not believe there is a significant impact on the nature, amount, timing, and uncertainty of revenue or cash flows based on the mode of transportation. The economic factors that impact our transportation revenue are generally consistent across these modes given the relatively short term nature of each contract. For the majority of our transportation business, the “contract with a customer” is identified as an individual order under a negotiated agreement. Some consideration is variable in that a final transaction price is uncertain and is susceptible to factors outside of Schneider's influence, such as the weather or the accumulation of accessorial charges. Pricing information is supplied by the rate schedules that accompany negotiated contracts.

Transportation orders are short-term in nature and generally have terms of significantly less than one year. They do not include significant financing components. A small portion of revenues in our transportation business relate to fixed payments in our Truckload segment. These payments are due regardless of volumes, and in these arrangements, the master agreement rather than the individual order may be considered the “contract.” See the Remaining Performance Obligations table below for more information on fixed payments.

Prior to the adoption of ASC 606, we recognized revenue from transportation services when we completed our obligation to the customer, upon delivery. In accordance with the new standard, we now recognize revenue over the period transportation services are provided to the customer, including service performed as of the end of the reporting period for loads currently in transit, in order to recognize the value that is transferred to a customer over the course of the transportation service.

We determine revenue in transit using the input method, under which revenue is recognized based on time lapsed from the departure date (start of transportation services) to the arrival date (completion of transportation services). Measurement of revenue in transit requires the application of significant judgment. We calculate the estimated percentage of an order's transit time that is complete at period end, and we apply that percentage of completion to the order's estimated revenue. Revenue recognized in the period ended September 30, 2018 includes amounts related to orders that were partially completed (in transit) in prior periods.

In certain transportation arrangements, an unrelated party contributes a specified service to our customer. For example, we contract with third-party carriers to perform transportation services on behalf of our customers in our Brokerage business, and we use third-party rail carriers in our Intermodal segment. In situations that include the contributions of third parties, we act as principal in the arrangement, and, accordingly, we recognize gross revenues from these transactions.

Logistics Management
Logistics Management revenues relate to our Supply Chain Management and Import/Export Services operating segments, both of which are included in our Logistics reportable segment. Within this portfolio, the key service we provide to the customer is management of freight shipping and/or storage.

The “contracts” in our Logistics Management portfolio are the negotiated agreements, which contain both fixed and variable components. The variability of revenues is driven by volumes and transactions, which are known as of an invoice date. See the Remaining Performance Obligations table below for additional information. Supply Chain Management and Import/Export Services contracts typically have terms that extend beyond one year, and they do not include financing components.

Prior to the adoption of ASC 606, we recognized revenue under these contracts over time, based on pricing terms within the arrangements. Our recognition model will remain the same under the new standard, as we have elected to use the right to invoice practical expedient, which reflects the fact that a customer obtains the benefit associated with logistics services as they are provided (output method).

In our Supply Chain Management business, we subcontract third parties to perform a portion of the services. We are responsible for ensuring the services are performed and that they are acceptable to the customer, and we are, therefore, considered to be the principal in these arrangements.

Other
Other revenues relate to activities that are out of scope for purposes of ASC 606, including our leasing and captive insurance businesses.

Quantitative Disclosure

The following table provides information related to transactions and expected timing of revenue recognition related to performance obligations that are fixed in nature and relate to contracts with terms greater than one year.

Remaining Performance Obligations (in millions)
 
September 30, 2018
Expected to be recognized within one year
 
 
Transportation
 
$
8.9

Logistics Management
 
24.3

Expected to be recognized after one year
 
 
Transportation
 
1.4

Logistics Management
 
5.0

Total
 
$
39.6



This disclosure does not include revenue related to performance obligations that are part of a contract whose original expected duration is one year or less. In addition, this disclosure does not 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, 2018
 
January 1, 2018
Other current assets - Contract assets
 
$
34.8

 
$
22.2

Other current liabilities - Contract liabilities
 

 



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 service.

For certain of our contracts, we incur upfront costs to fulfill the master agreement, including driver recruiting and equipment relocation, that are capitalized and amortized over the master contract term, which has been deemed to be the period of benefit. These costs usually relate to dedicated transportation arrangements. The following table presents the amounts capitalized for contract fulfillment costs as of the dates shown.

(in millions)
 
September 30, 2018
 
December 31, 2017
Capitalized contract fulfillment costs
 
$
6.1

 
$
3.7



Amortization of capitalized contract fulfillment costs was as shown:

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Amortization of contract fulfillment costs
 
$
0.7

 
$
0.4

 
$
2.1

 
$
1.5



Practical Expedients

We elected to use the following practical expedients that are available under ASC 606: (i) not to adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised service to a customer and when the customer pays for that service will be one year or less; (ii) to apply the new revenue standard to a portfolio of contracts (or performance obligations) with similar characteristics, as we reasonably expect that the effects on the consolidated financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that portfolio; and (iii) to recognize revenue in the Logistics Management portfolio in the amount of consideration to which we have a right to invoice, that corresponds directly with the value to the customer of the service completed to date.
v3.10.0.1
Fair Value
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
Fair Value
FAIR VALUE

Fair value focuses on the estimated price that would be received to sell an asset or paid to transfer a liability, which is referred to as the exit price. 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).

All marketable securities were 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 (Level 2 in the fair value hierarchy). We measure our marketable securities on a recurring, monthly basis. See Note 4Investments, for information on the fair value of our marketable securities.

In connection with the June 1, 2016 acquisition of WSL, a contingent payment arrangement based on the achievement of specified earnings targets is in place for three consecutive 12-month periods after the closing, with the aggregate payment total not to exceed $40.0 million. No payments have been made through September 30, 2018. The fair value of the contingent consideration at September 30, 2018 and December 31, 2017 was zero. The valuation was based on Level 3 inputs.

Our ownership interest in Platform Science, Inc. discussed in Note 4, Investments, was valued based on Level 3 inputs.

There were no transfers between levels for the periods discussed.

Fair Value of Other Financial Instruments

The recorded value of cash, trade accounts receivable, and trade accounts payable approximates fair value.

The table below presents the carrying value of our debt portfolio along with the fair value of a fixed-rate debt portfolio with similar terms and maturities, which is based on borrowing rates available to us in the applicable year. This valuation used Level 2 inputs.

 
 
September 30, 2018
 
December 31, 2017
(in millions)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Debt portfolio
 
$
415.4

 
$
405.2

 
$
429.8

 
$
432.4

v3.10.0.1
Investments
9 Months Ended
Sep. 30, 2018
Investments Schedule [Abstract]  
Investment [Text Block]
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. Any unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income. Our portfolio of securities has maturities ranging from 2 to 75 months. While our intent is to hold our securities to maturity, sudden changes in the market or to our liquidity needs may cause us to sell certain securities in advance of their maturity date.

The following table presents the values of our marketable securities as of the dates shown:
 
 
September 30, 2018
 
December 31, 2017
(in millions)
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Zero coupon bonds
 
$
3.9

 
$
3.9

 
$
3.8

 
$
3.9

U.S. treasury and government agencies
 
18.0

 
17.7

 
6.0

 
6.0

Asset-backed securities
 
0.1

 
0.1

 
0.3

 
0.3

Corporate debt securities
 
11.1

 
11.0

 
9.1

 
9.2

State and municipal bonds
 
12.6

 
12.3

 
22.7

 
22.2

Total marketable securities
 
$
45.7

 
$
45.0

 
$
41.9

 
$
41.6



Gross realized and unrealized gains and losses on sales of marketable securities were not material for the three and nine months ended September 30, 2018 and 2017.

Ownership Interest in Platform Science, Inc.
In 2018, we received a 30% ownership interest in Platform Science, Inc. in exchange for our contribution of a non-exclusive license for telematics mobile software that was developed to enable driver productivity and ensure regulatory compliance. Our ownership interest in Platform Science, Inc. is recorded at fair value in other noncurrent assets on the consolidated balance sheet. The fair value of the ownership interest was initially determined to be $2.5 million through an independent valuation and is being accounted for under ASC 321, Investments - Equity Securities. As of September 30, 2018, there have been no transactions that have triggered an indicator that the value of our ownership interest in Platform Science, Inc. has changed.
v3.10.0.1
Goodwill and Other Intangible Assets
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the purchase price of our acquisitions over the fair value of the identifiable net assets acquired. Changes in the carrying amount of goodwill were as follows:
(in millions)
 
Truckload
 
Logistics
 
Other
 
Total
Balance at December 31, 2017
 
$
138.2

 
$
14.2

 
$
12.4

 
$
164.8

Foreign currency translation
 

 

 
(0.6
)
 
(0.6
)
Balance at September 30, 2018
 
$
138.2

 
$
14.2

 
$
11.8

 
$
164.2



At September 30, 2018 and December 31, 2017, we had accumulated goodwill impairment charges of $6.0 million.

During the second quarter of 2018, we reorganized the structure of the operating segments within the Truckload reportable segment to include FTFM as a separate operating segment and integrated the remaining Dedicated activities into the VTL operating segment. Each Truckload operating segment was determined to be its own reporting unit due to the level at which financial information is available and management's review of that information. As a result of the reorganization, goodwill within the Truckload reportable segment, which was previously attributable to the Dedicated reporting unit, was reallocated to the VTL and FTFM reporting units on a relative fair value basis. After the reallocation of goodwill, an impairment test was performed for these reporting units, and it was determined that goodwill was not impaired as each reporting unit had an estimated fair value in excess of its respective carrying amount.

The identifiable intangible assets other than goodwill listed below are included in other noncurrent assets on the consolidated balance sheets.
 
 
September 30, 2018
 
December 31, 2017
(in millions)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer lists
 
$
10.5

 
$
3.2

 
$
7.3

 
$
10.5

 
$
2.5

 
$
8.0

Trade names
 
1.4

 
1.1

 
0.3

 
1.4

 
0.7

 
0.7

Total intangible assets
 
$
11.9

 
$
4.3

 
$
7.6

 
$
11.9

 
$
3.2

 
$
8.7



Amortization expense for intangible assets was $0.3 and $0.4 million for the three months ended September 30, 2018 and 2017, respectively, and $1.1 million for each of the nine months ended September 30, 2018 and 2017. Accumulated amortization in the table above includes foreign currency translation related to a customer list.

Estimated future amortization expense related to intangible assets is as follows (in millions):
Remaining 2018
$
0.3

2019
1.1

2020
1.0

2021
1.0

2022
1.0

2023 and thereafter
3.2

 
$
7.6

v3.10.0.1
Debt and Credit Facilities
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Debt and Credit Facilities
DEBT AND CREDIT FACILITIES

As of September 30, 2018 and December 31, 2017, debt included the following:
(in millions)
 
September 30,
2018
 
December 31,
2017
Unsecured senior notes: principal payable at maturities ranging from 2019 through 2025; interest payable in semiannual installments through the same timeframe; weighted-average interest rate of 3.36% for both 2018 and 2017
 
$
400.0

 
$
400.0

Equipment financing notes: principal and interest payable in monthly installments through 2023; weighted average interest rate of 3.79% and 3.76% for 2018 and 2017, respectively
 
15.4

 
29.8

Total principal outstanding
 
415.4

 
429.8

Current maturities
 
(7.3
)
 
(15.2
)
Debt issuance costs
 
(0.7
)
 
(0.9
)
Long-term debt
 
$
407.4

 
$
413.7



On August 6, 2018, we entered into a $250.0 million Credit Agreement (the “2018 Credit Facility”) among us, the lenders party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., as administrative agent, and terminated our prior $250.0 million Credit Agreement dated February 18, 2011 (as amended). The 2018 Credit Facility is a revolving credit facility that matures on August 6, 2023 and allows us to request an increase in total commitment by up to $150.0 million, for a total potential commitment of $400.0 million. The 2018 Credit Facility also provides a sublimit of $100.0 million to be used for the issuance of letters of credit. The applicable interest rate under the 2018 Credit Facility is based on the Prime Rate, the Federal Funds Rate, or the London InterBank Offered Rate (LIBOR), depending upon the type of borrowing, plus an applicable margin based on our consolidated net debt coverage ratio as of the end of each fiscal quarter. We had no outstanding borrowings under these agreements as of September 30, 2018 or December 31, 2017. Standby letters of credit under these agreements amounted to $3.9 million at September 30, 2018 and December 31, 2017, and were primarily related to the requirements of certain of our real estate leases.

On September 5, 2018, we entered into a Joinder and Amendment No. 2 to our Amended and Restated Receivables Purchase Agreement (the “2018 Receivables Purchase Agreement”) relating to our $200.0 million secured accounts receivable facility. The 2018 Receivables Purchase Agreement has a scheduled maturity date of September 3, 2021, allows us to borrow funds against qualifying trade receivables at rates based on one-month LIBOR, and provides for the issuance of standby letters of credit. We had no outstanding borrowings under this facility at September 30, 2018 or December 31, 2017. At September 30, 2018 and December 31, 2017, standby letters of credit under this agreement amounted to $62.8 million and $63.8 million, respectively, and were primarily related to the requirements of certain of our insurance obligations.
v3.10.0.1
Lease Receivables
9 Months Ended
Sep. 30, 2018
Leases [Abstract]  
Lease Receivables
LEASE RECEIVABLES

We finance various types of transportation-related equipment for independent third parties. The transactions are generally for one to five years and are accounted for as sales-type or direct financing leases. As of September 30, 2018 and December 31, 2017, the investment in lease receivables was as follows:
(in millions)
 
September 30, 2018
 
December 31, 2017
Future minimum payments to be received on leases
 
$
141.5

 
$
141.2

Guaranteed residual lease values
 
148.7

 
130.7

Total minimum lease payments to be received
 
290.2

 
271.9

Unearned income
 
(29.0
)
 
(28.1
)
Net investment in leases
 
261.2

 
243.8

 
 
 
 
 
Current maturities of lease receivables
 
131.0

 
106.6

Less—allowance for doubtful accounts
 
(0.5
)
 
(1.7
)
Current portion of lease receivables—net of allowance
 
130.5

 
104.9

 
 
 
 
 
Lease receivables—noncurrent
 
$
130.7

 
$
138.9

v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES

Our effective income tax rate was 25.8% and 39.2% for the three months ended September 30, 2018 and 2017, respectively, and 25.8% and 38.8% for the nine months ended September 30, 2018 and 2017, respectively. The decrease in the rates was due to the enactment of the Tax Cuts and Jobs Act in December 2017. 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 estimate of nontaxable and nondeductible items of income and expense.

In accordance with SEC Staff Accounting Bulletin No. 118, the amounts recorded in the fourth quarter of 2017 related to the Tax Cuts and Jobs Act represent reasonable estimates based on our analysis to date and are considered to be provisional and subject to revision during 2018. Due to the complex nature of the enacted tax law changes, and their application, certain amounts related to our 2017 tax provision recorded in the financial statements as a result of the Tax Legislation are to be considered "provisional" and subject to revision, as we await additional guidance from income tax authorities. No changes were made to the estimated impacts in the first three quarters of 2018.
v3.10.0.1
Common Equity
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Common Equity
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, 2018 and 2017.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions, except per share data)
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
 
    Net income available to common shareholders
 
$
70.7

 
$
36.9

 
$
184.1

 
$
106.0


 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
    Weighted average common shares issued and outstanding
 
177.0

 
176.9

 
177.0

 
169.2

    Effect of dilutive restricted share units
 
0.2

 
0.1

 
0.2

 
0.1

    Weighted average diluted common shares issued and outstanding
 
177.2

 
177.0

 
177.2

 
169.3


 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
0.40

 
$
0.21

 
$
1.04

 
$
0.63

Diluted earnings per common share
 
$
0.40

 
$
0.21

 
$
1.04

 
$
0.63



The calculation of diluted earnings per share for the three and nine months ended September 30, 2018 excluded an immaterial amount of share-based compensation awards that had an anti-dilutive effect.

Subsequent Event - Dividends Declared
In October of 2018, our Board of Directors declared a quarterly cash dividend for the fourth fiscal quarter of 2018 in the amount of $0.06 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 14, 2018, and is expected to be paid on January 7, 2019.
v3.10.0.1
Share-based Compensation
9 Months Ended
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-based Compensation
SHARE-BASED COMPENSATION

We grant various equity-based awards relating to Class B Common Stock under our 2017 Omnibus Incentive Plan (“the Plan”). These awards consist of the following: restricted shares, restricted stock units (“RSUs”), performance-based restricted shares (“Performance Shares”), performance-based restricted stock units (“PSUs”), and non-qualified stock options.

The following table summarizes the components of our share-based compensation program expense:

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Restricted Shares and RSUs
 
$
0.8

 
$
0.4

 
$
2.4

 
$
1.0

Pre-IPO Restricted Shares
 
0.2

 
0.5

 
0.8

 
1.6

Performance Shares and PSUs
 
0.8

 
0.6

 
2.0

 
1.3

Nonqualified Stock Options
 
0.3

 
0.2

 
1.1

 
0.4

Share-based compensation expense
 
$
2.1

 
$
1.7

 
$
6.3

 
$
4.3

Related tax benefit
 
$
0.5

 
$
0.7

 
$
1.6

 
$
1.7



As of September 30, 2018, we had $13.7 million of pre-tax unrecognized compensation cost related to outstanding share-based compensation awards that is expected to be recognized over a weighted-average period of 2.6 years.

Restricted Shares and RSUs

Under the Plan, the majority of the restricted shares and RSUs granted in 2017 and 2018 vest ratably over a four-year period, with the first 25% of the grant vesting approximately one year after the date of grant, subject to continued employment through the vesting date or retirement eligibility. Dividend equivalents equal to dividends paid on our common shares during the vesting period are tracked and accumulated for each restricted share and RSU. The dividend equivalents are forfeitable and are distributed to participants in cash consistent with the date the awards vest.

A small portion of the restricted shares relate to a one-time 2018 grant, which vests 50% after a five-year period, with the remaining 50% vesting after a six-year period after the grant date, subject to continued employment through the vesting date. Dividend equivalents equal to dividends paid on our common shares during the vesting period are tracked and accumulated for each restricted share. The dividend equivalents are distributed to participants in cash consistent with the date the awards vest.
Restricted Shares and RSUs
 
Number of Awards
 
Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2017
 
240,016

 
$
19.00

Granted
 
229,272

 
26.82

Vested
 
(74,795
)
 
19.00

Forfeited
 
(14,370
)
 
20.21

Unvested at September 30, 2018
 
380,123

 
$
23.67


Prior to our IPO, we granted restricted shares of Class B Common Stock. Shares included in the pre-IPO restricted share grants vest ratably over a three-year period. Cash dividends are not paid on the unvested pre-IPO restricted shares, nor do they accumulate during the vesting period.
Pre-IPO Restricted Shares
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2017
 
152,199

 
$
19.00

Granted
 

 

Vested
 
(101,643
)
 
19.00

Forfeited
 
(5,084
)
 
19.00

Unvested at September 30, 2018
 
45,472

 
$
19.00


 
Performance Shares and PSUs

Performance shares and PSUs include a three-year performance period with vesting based on attainment of threshold performance of earnings and return on capital targets. These awards cliff-vest at the end of the three-year performance period, subject to continued employment through the vesting date or retirement eligibility, and payout ranges from 0%-200% for PSUs and from 0%-100% for performance shares. Dividend equivalents equal to dividends paid on our common shares during the vesting period are tracked and accumulated for each award. The dividend equivalents are forfeitable and are distributed to participants in cash consistent with the date the awards vest.
Performance Shares and PSUs
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2017
 
391,541

 
$
19.00

Granted
 
303,228

 
26.78

Vested
 

 

Forfeited
 
(45,113
)
 
19.00

Unvested at September 30, 2018
 
649,656

 
$
22.63



Nonqualified Stock Options

The options granted under the Plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a four-year period, with the first 25% of the grant becoming exercisable approximately one year after the date of grant. The options expire ten years from the date of grant.

Nonqualified Stock Options
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2017
 
229,620

 
$
6.37

Granted
 
173,024

 
8.96

Vested
 
(8,410
)
 
6.37

Forfeited
 
(25,230
)
 
6.37

Unvested at September 30, 2018
 
369,004

 
$
7.59


Assumptions used in calculating the Black-Scholes value of options granted during 2018 were as follows:
Weighted-average Black-Scholes value
 
$
8.96

Black-Scholes Assumptions:
 
 
Expected term
 
6.25 years

Expected volatility
 
32.2
%
Expected dividend yield
 
0.9
%
Risk-free interest rate
 
2.8
%
v3.10.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES

In the ordinary course of conducting our business we become involved in certain legal matters and investigations on a number of matters, including liability claims, taxes other than income taxes, contract disputes, employment, and other litigation matters. We accrue for anticipated costs to defend and 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.

At September 30, 2018, our firm commitments to purchase transportation equipment totaled approximately $131.6 million.

WSL Acquisition
The purchase and sale agreement related to our June 2016 acquisition of WSL included guaranteed payments of $20.0 million to the former owners of WSL on each of the first three anniversary dates of the closing. The liability recorded was discounted between one percent and three percent, based on credit-adjusted discount rates. The initial payment in the amount of $19.7 million, including calculated interest based on the discounted amount recorded, was made in June 2017 and reflected an adjustment for a working capital true-up. The second payment in the amount of $20.0 million was made in June 2018. The present value of the remaining payment was $18.7 million at September 30, 2018, which is recorded in other current liabilities on the consolidated balance sheet.
The representative of the former owners of WSL has claimed that we have not fulfilled certain obligations under the purchase and sale agreement relating to the post-closing operations of the business, amongst other matters, and that, as a result, the former owners are entitled to an accelerated payment of the contingent amount described in Note 3, Fair Value, without regard to whether the specified earnings targets are met. We believe this claim is meritless and have filed an action in the Delaware Court of Chancery seeking a declaratory judgment that we have complied with our obligations under the agreement and that no accelerated payment is owed.
v3.10.0.1
Segment Reporting
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment Reporting
SEGMENT REPORTING

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

As of December 31, 2017, our operating segments within the Truckload reportable segment were VTL, Dedicated, and Bulk. During the second quarter of 2018, we reorganized the structure of the Truckload reportable segment, separating FTFM into its own operating segment and moving the remaining business that was previously under the Dedicated operating segment into the VTL operating segment. The Truckload reportable segment now consists of three operating segments (VTL, FTFM, and Bulk) that are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting.

The chief operating decision maker (CODM) reviews revenues for each operating 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. For all operating segments except FTFM, revenue is recognized upon delivery, and in-transit revenue is not reflected in segment results. Income from operations at a segment level reflects the measures 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 reporting segments are eliminated in consolidation.

The following tables summarize our segment information. Intersegment revenues were immaterial for all segments, with the exception of Other, which includes revenues from insurance premiums charged to other segments for workers’ compensation, auto, and other types of insurance. Intersegment revenues included in Other revenues below were $20.7 million and $20.5 million for the three months ended September 30, 2018 and 2017, respectively, and $62.0 million and $57.9 million for the nine months ended September 30, 2018 and 2017, respectively.


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Revenues by Segment (in millions)
 
2018
 
2017
 
2018
 
2017
Truckload
 
$
565.0

 
$
551.7

 
$
1,685.0

 
$
1,616.8

Intermodal
 
252.1

 
196.0

 
681.0

 
571.4

Logistics
 
268.7

 
209.1

 
739.2

 
584.7

Total revenues of reportable segments
 
1,085.8

 
956.8

 
3,105.2

 
2,772.9

Other
 
91.2

 
85.4

 
248.5

 
214.5

Fuel surcharge
 
134.9

 
93.9

 
385.8

 
276.8

Inter-segment eliminations
 
(31.8
)
 
(25.3
)
 
(84.1
)
 
(71.8
)
Operating revenues
 
$
1,280.1

 
$
1,110.8

 
$
3,655.4

 
$
3,192.4



 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Income (Loss) from Operations by Segment (in millions)
 
2018
 
2017
 
2018
 
2017
Truckload
 
$
53.1

 
$
41.1

 
$
162.8

 
$
132.9

Intermodal
 
36.1

 
12.2

 
88.7

 
30.0

Logistics
 
12.5

 
9.1

 
30.4

 
20.8

Other
 
(3.8
)
 
1.7

 
(24.7
)
 
2.9

Income from operations
 
97.9

 
64.1

 
257.2

 
186.6

Other expense—net
 
2.6

 
3.4

 
9.1

 
13.4

Income before income taxes
 
$
95.3

 
$
60.7

 
$
248.1

 
$
173.2

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Depreciation and Amortization Expense by Segment (in millions)
 
2018
 
2017
 
2018
 
2017
Truckload
 
$
52.6

 
$
51.7

 
$
157.3

 
$
152.7

Intermodal
 
10.3

 
8.8

 
29.0

 
25.3

Logistics
 
0.1

 
0.1

 
0.3

 
0.3

Other
 
10.3

 
9.9

 
30.3

 
28.7

Depreciation and amortization expense
 
$
73.3

 
$
70.5

 
$
216.9

 
$
207.0

v3.10.0.1
General (Policies)
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business
Description of Business
In this report, when we refer to “the Company,” “us,” “we,” “our,” or “ours,” we are referring to Schneider National, Inc. and its subsidiaries. We are a leading transportation services organization headquartered in Green Bay, Wisconsin. We provide a broad portfolio of premier truckload, intermodal, and logistics solutions and operate one of the largest trucking fleets in North America.
Basis of Presentation
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance 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. These consolidated financial statements 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, 2017. 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 Issued But Not Yet Adopted
Accounting Standards Issued but Not Yet Adopted
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the capitalization requirements for implementation costs incurred in a hosting arrangement that is a service contract with the existing capitalization requirements for implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for us as of January 1, 2020 with early adoption permitted. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Requirements, which removes, modifies, and adds certain disclosure requirements for fair value measurements. ASU 2018-13 is effective for us January 1, 2020 with early adoption permitted. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements and do not believe the impact will be material.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, which discusses the reclassification of certain tax effects from accumulated other comprehensive income. The guidance requires companies to disclose a description of their accounting policy for releasing income tax effects from accumulated other comprehensive income and whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act, along with information about other income tax effects that are reclassified.  ASU 2018-02 is effective for us January 1, 2019 with early adoption permitted. We plan to early adopt this ASU during the fourth quarter of 2018 and expect the reclassification of stranded income tax effects to have an immaterial impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires companies to use a forward-looking, expected loss model to estimate credit losses on various types of financial assets and net investments in leases. It also requires additional disclosure related to credit quality of trade and other receivables, including information related to management’s estimate of credit allowances. ASU 2016-13 is effective for us January 1, 2020. We currently cannot reasonably estimate the impact the adoption of this ASU will have on our consolidated financial statements.

v3.10.0.1
Revenue Recognition Revenue Recognition (Tables)
9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Summary of Impact of Adoption of Accounting Standards [Table Text Block]
 
 
Nine Months Ended September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
Operating revenues
 
$
3,642.9

 
$
12.5

 
$
3,655.4

Purchased transportation
 
1,424.2

 
7.6

 
1,431.8

Salaries, wages, and benefits
 
943.0

 
0.2

 
943.2

Total operating expenses
 
3,390.4

 
7.8

 
3,398.2

Income from operations
 
252.5

 
4.7

 
257.2

Provision for income taxes
 
62.7

 
1.3

 
64.0

Net income
 
180.7

 
3.4

 
184.1

Comprehensive income
 
179.6

 
3.4

 
183.0



 
 
September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Balance Sheet
 
 
 
 
 
 
Prepaid expenses and other current assets
 
$
64.9

 
$
31.7

 
$
96.6

Total current assets
 
1,269.9

 
31.7

 
1,301.6

Total assets
 
3,562.2

 
31.7

 
3,593.9

Other current liabilities
 
75.2

 
18.6

 
93.8

Total current liabilities
 
538.4

 
18.6

 
557.0

Deferred income taxes
 
420.9

 
2.4

 
423.3

Total noncurrent liabilities
 
981.3

 
2.4

 
983.7

Retained earnings
 
504.3

 
10.7

 
515.0

Total shareholders' equity
 
2,042.5

 
10.7

 
2,053.2

Total liabilities and shareholders' equity
 
3,562.2

 
31.7

 
3,593.9


 
 
Nine Months Ended September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Cash Flows
 
 
 
 
 
 
Operating Cash Flows
 
 
 
 
 
 
        Net income
 
$
180.7

 
$
3.4

 
$
184.1

        Change in: Other assets
 
(3.6
)
 
(12.3
)
 
(15.9
)
        Change in: Payables
 
34.3

 
1.3

 
35.6

        Change in: Other liabilities
 
5.1

 
7.6

 
12.7

The following table shows the amount by which financial statement lines were affected by the adoption of the new standard. The changes relate to the recognition of transportation revenue over time rather than at delivery, as explained below under the Transportation heading.

 
 
Three Months Ended September 30, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
Operating revenues
 
$
1,273.1

 
$
7.0

 
$
1,280.1

Purchased transportation
 
517.3

 
3.8

 
521.1

Salaries, wages, and benefits
 
318.2

 
(1.0
)
 
317.2

Total operating expenses
 
1,179.4

 
2.8

 
1,182.2

Income from operations
 
93.7

 
4.2

 
97.9

Provision for income taxes
 
23.4

 
1.2

 
24.6

Net income
 
67.7