SCHNEIDER NATIONAL, INC., 10-K filed on 2/26/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
$ in Billions
12 Months Ended
Dec. 31, 2018
Feb. 19, 2019
Jun. 29, 2018
Document Information [Line Items]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Trading Symbol SNDR    
Entity Registrant Name SCHNEIDER NATIONAL, INC.    
Entity Central Index Key 0001692063    
Current Fiscal Year End Date --12-31    
Entity Filer Category Large Accelerated Filer    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Small Business false    
Entity Shell Company false    
Entity Emerging Growth Company false    
Entity Well-known Seasoned Issuer Yes    
Entity Public Float     $ 1.3
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)   93,995,072  
v3.10.0.1
Consolidated Statements of Comprehensive Income - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]      
Operating revenues $ 4,977.0 $ 4,383.6 $ 4,045.7
Operating expenses:      
Purchased transportation 1,965.9 1,605.3 1,466.0
Salaries, wages, and benefits 1,259.4 1,223.5 1,129.3
Fuel and fuel taxes 344.8 305.5 252.9
Depreciation and amortization 291.3 279.0 266.0
Operating supplies and expenses 491.3 493.9 449.9
Insurance and related expenses 102.2 90.3 89.1
Other general expenses 144.3 105.8 102.1
Goodwill impairment charge 2.0 0.0 0.0
Total operating expenses 4,601.2 4,103.3 3,755.3
Income from operations 375.8 280.3 290.4
Other expenses (income):      
Interest expense—net 12.5 17.4 21.4
Other expense (income)—net (1.3) (0.5) 3.4
Total other expenses 11.2 16.9 24.8
Income before income taxes 364.6 263.4 265.6
Provision for (benefit from) income taxes 95.7 (126.5) 108.7
Net income 268.9 389.9 156.9
Other comprehensive income (loss):      
Foreign currency translation adjustments (1.0) (0.9) 0.7
Unrealized loss on marketable securities—net of tax 0.0 0.0 (0.2)
Total other comprehensive income (loss) (1.0) (0.9) 0.5
Comprehensive income $ 267.9 $ 389.0 $ 157.4
Weighted average common shares issued and outstanding 177.0 171.1 156.6
Basic earnings per common share $ 1.52 $ 2.28 $ 1.00
Weighted average diluted shares outstanding (shares) 177.2 171.3 156.8
Diluted earnings per common share $ 1.52 $ 2.28 $ 1.00
Dividends per share of common stock (usd per share) $ 0.24 $ 0.2 $ 0.2
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Current Assets:    
Cash and cash equivalents $ 378.7 $ 238.5
Marketable securities 51.3 41.6
Trade accounts receivable—net of allowance of $6.8 million and $5.2, million, respectively 593.1 527.9
Other receivables 31.8 22.4
Current portion of lease receivables—net of allowance of $0.5 million and $1.7 million, respectively 129.1 104.9
Inventories 60.8 83.1
Prepaid expenses and other current assets 79.5 75.6
Total current assets 1,324.3 1,094.0
Property and equipment:    
Transportation equipment 2,900.2 2,770.1
Land, buildings, and improvements 177.2 183.8
Other property and equipment 157.6 175.7
Total property and equipment 3,235.0 3,129.6
Accumulated depreciation 1,312.8 1,271.5
Net property and equipment 1,922.2 1,858.1
Lease receivables 133.2 138.9
Capitalized software and other noncurrent assets 82.6 74.7
Goodwill 162.2 164.8
Total noncurrent assets 2,300.2 2,236.5
Total Assets 3,624.5 3,330.5
Current Liabilities:    
Trade accounts payable 226.0 230.4
Accrued salaries and wages 94.8 85.8
Claims accruals—current 58.3 48.3
Current maturities of debt and capital lease obligations 51.7 19.1
Dividends payable 10.6 8.8
Other current liabilities 81.2 69.6
Total current liabilities 522.6 462.0
Noncurrent Liabilities:    
Long-term debt and capital lease obligations 359.6 420.6
Claims accruals—noncurrent 113.3 102.5
Deferred income taxes 450.6 386.6
Other 46.1 68.6
Total noncurrent liabilities 969.6 978.3
Commitments and Contingencies (Note 16)
Shareholders' Equity:    
Additional paid-in capital 1,544.0 1,534.6
Retained earnings 589.3 355.6
Accumulated other comprehensive income (1.0) 0.0
Total shareholders' equity 2,132.3 1,890.2
Total liabilities and shareholders' equity 3,624.5 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 (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Trade allowance $ 6.8 $ 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) 94,593,588 93,850,011
Common stock, shares outstanding (shares) 93,969,268 93,850,011
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Operating Activities:      
Net income $ 268.9 $ 389.9 $ 156.9
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 291.3 279.0 266.0
Gains on sales of property and equipment (8.1) (9.4) (18.3)
Goodwill impairment charge 2.0 0.0 0.0
Deferred income taxes 62.2 (152.0) 75.6
WSL contingent consideration adjustment 0.0 (13.5) 0.0
Long-term incentive compensation expense 22.8 17.0 18.3
Other noncash items (3.5) (0.7) (1.4)
Changes in operating assets and liabilities:      
Receivables (74.8) (64.4) 1.1
Other assets (9.0) 1.4 (4.9)
Payables 3.0 16.0 (0.6)
Other liabilities 11.7 (2.0) (37.4)
Net cash provided by operating activities 566.5 461.3 455.3
Investing Activities:      
Purchases of transportation equipment (385.1) (388.5) (422.1)
Purchases of other property and equipment (36.9) (33.4) (37.0)
Proceeds from sale of property and equipment 90.5 70.0 52.0
Proceeds from lease receipts and sale of off-lease inventory 94.6 61.0 63.5
Purchases of lease equipment (90.5) (110.1) (88.4)
Sales of marketable securities 9.9 10.5 11.1
Purchases of marketable securities (20.1) 0.0 (14.2)
Acquisition of businesses, net of cash acquired 0.0 0.0 (78.2)
Net cash used in investing activities (337.6) (390.5) (513.3)
Financing Activities:      
Proceeds under revolving credit agreements 0.0 0.0 176.0
Payments under revolving credit agreements 0.0 (135.0) (89.9)
Proceeds from other debt 0.0 0.0 0.5
Payments of debt and capital lease obligations (28.7) (123.7) (28.1)
Payment of deferred consideration related to acquisition (19.3) (19.4) 0.0
Proceeds from IPO, net of issuance costs 0.0 340.6 0.0
Dividends paid (40.7) (25.5) (31.3)
Redemptions of redeemable common shares 0.0 (0.1) (1.4)
Proceeds from issuances of redeemable common shares 0.0 0.0 2.3
Net cash provided by (used in) financing activities (88.7) 36.9 28.1
Net increase (decrease) in cash and cash equivalents 140.2 107.7 (29.9)
Cash and Cash Equivalents:      
Beginning of period 238.5 130.8 160.7
End of period 378.7 238.5 130.8
Noncash investing and financing activity:      
Equipment purchases in accounts payable 2.1 9.5 22.4
Dividends declared but not yet paid 10.6 8.8 0.0
Costs in accounts payable related to our IPO 0.0 0.0 2.3
Increase in redemption value of redeemable common shares 0.0 126.6 110.0
Ownership interest in Platform Science, Inc. 3.5 0.0 0.0
Cash paid (refunded) during the year for:      
Interest 15.5 19.2 21.6
Income taxes—net of refunds $ 39.0 $ (4.2) $ 5.0
v3.10.0.1
Consolidated Statements Shareholders' Equity - USD ($)
$ in Millions
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income
Balance at Dec. 31, 2015 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Increase (Decrease) in Stockholders' Equity          
Net income - post-IPO 156.9        
Balance at Dec. 31, 2016 0.0 0.0 0.0 0.0 0.0
Increase (Decrease) in Stockholders' Equity          
Share issuances - IPO 340.6   340.6    
Transfer from temporary equity to permanent equity See Note 11, Temporary Equity 1,201.2   1,187.0 13.3 0.9
Net income - post-IPO 389.9        
Other comprehensive loss - post-IPO (0.9)       (0.9)
Share-based compensation expense 4.8   4.8    
Other 0.0   (1.4) 1.4  
Balance at Dec. 31, 2017 1,890.2 0.0 1,534.6 355.6 0.0
Increase (Decrease) in Stockholders' Equity          
Share issuances - IPO 0.5   0.5    
Net income - post-IPO 268.9     268.9  
Other comprehensive loss - post-IPO (1.0)       (1.0)
Share-based compensation expense 10.9   10.9    
Dividends declared at $0.24 per share (42.5)     (42.5)  
Exercise of employee stock options 0.2   0.2    
Shares withheld for employee taxes (2.3)   (2.3)    
Other 0.1   0.1    
Balance at Dec. 31, 2018 2,132.3 $ 0.0 $ 1,544.0 589.3 $ (1.0)
Increase (Decrease) in Stockholders' Equity          
Cumulative–effect adjustment of ASU 2014-09 adoption See Note 2, Revenue Recognition $ 7.3     $ 7.3  
v3.10.0.1
Consolidated Statements Shareholders' Equity (Parenthetical) - $ / shares
9 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Stockholders' Equity [Abstract]        
Dividends declared per share (usd per share) $ 0.15 $ 0.24 $ 0.2 $ 0.2
v3.10.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

(a) Nature of Operations

We are a leading transportation and logistics services company providing a broad portfolio of premier truckload, intermodal, and logistics solutions and operating one of the largest for-hire trucking fleets in North America.

(b) Basis of Presentation
 
As used in these notes, the term “financial statements” refers to the consolidated financial statements. This includes the consolidated statements of comprehensive income, consolidated balance sheets, consolidated statements of cash flows, and consolidated statements of shareholders' equity unless otherwise noted.

Our consolidated financial statements include all of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
 
(c) Use of Estimates
 
The consolidated financial statements contained in this report have been prepared in conformity with GAAP. We make estimates and assumptions that affect assets, liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

(d) Cash and Cash Equivalents
 
Cash in excess of current operating requirements is invested in short-term, highly liquid investments. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
 
(e) Receivables and Allowance for Doubtful Accounts
 
Our trade accounts receivable and lease receivables are recorded net of an allowance for uncollectible accounts and revenue adjustments. The allowance is based on historical experience and an aging analysis, as well as any known trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed at least quarterly. Receivables are reserved when it is probable that amounts related to the receivable will not be collected. In circumstances where we are aware of a specific customer's inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the net receivable to the amount reasonably expected to be collected. Bad debt expense is included in other general expenses in the consolidated statements of comprehensive income.
 
(f) Inventory
 
Our inventories consist of tractors and trailing equipment owned by our equipment leasing company to be sold or leased to independent contractors, as well as parts, tires, supplies, and fuel. These inventories are valued at the lower of cost or market using specific identification or average cost. The following table shows the components of our inventory balances as of December 31:

(in millions)
 
2018
 
2017
Tractors and trailing equipment for sale or lease
 
$
48.1

 
$
69.8

Replacement parts
 
11.4

 
11.8

Tires and other
 
1.3

 
1.5

Total
 
$
60.8

 
$
83.1




 (g) Investments in Marketable Securities
 
Our marketable securities are classified as available for sale and carried at fair value in current assets on the consolidated balance sheets. Our portfolio of securities has maturities ranging from 2 months to 81 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.

Any unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on our consolidated balance sheets, unless we determine that an unrealized loss is other-than-temporary. If we determine that an unrealized loss is other-than-temporary, we recognize the loss in earnings. Cost basis is determined using the specific identification method.

(h) 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).

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

(i) Property and Equipment
 
Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method based on the estimated useful lives and residual values. Generally, the estimated useful lives are as follows:

 
2018
Tractors
2 - 10 years
Trailing equipment
6 - 20 years
Other transportation equipment
4 - 5 years
Buildings and improvements
5 - 25 years
Other property
3 - 10 years

Salvage values, when applicable, generally don't exceed 25% of original cost for tractors and trailing equipment and reflect any agreements with tractor suppliers for residual or trade-in values for certain new equipment. Gains and losses on the sale or other disposition of equipment are based on the difference between the proceeds received less costs to sell and the net book value of the assets disposed. Gains and losses are recognized at the time of the sale or disposition and are classified in operating supplies and expenses in the consolidated statements of comprehensive income.
 
(j) Assets Held for Sale

Assets held for sale consist of revenue equipment and are included in prepaid expenses and other current assets in the consolidated balance sheets. Reclassification to assets held for sale occurs when the required criteria, as defined by ASC 360, Property, Plant and Equipment, are satisfied. As of December 31, 2018 and 2017, assets held for sale by segment were as follows:

(in millions)
 
2018
 
2017
Truckload
 
$
19.5

 
$
35.2

Intermodal
 
2.4

 
0.7

Total
 
$
21.9

 
$
35.9


(k) Asset Impairment

Goodwill and other intangible assets with indefinite lives are subject to an annual impairment test. Interim impairment tests are performed when impairment indicators are present. Intangible assets with definite lives are reviewed for impairment on an annual basis. Other long-lived assets require an impairment review when events or circumstances indicate that the carrying amount may not be recoverable. We base our evaluation of other long-lived assets on the presence of impairment indicators such as the future economic benefit of the assets, any historical or future profitability measurements, and other external market conditions or factors.

We perform annual goodwill impairment tests for each of our reporting units containing goodwill during the fourth quarter of each year. Beginning in 2017, we changed our annual goodwill impairment testing date from December 31 to October 31 to better align the testing date with our financial planning process and alleviate resource constraints. We would not expect a materially different outcome in any given year as a result of testing on October 31 as compared to December 31.

The carrying amount of a reporting unit's goodwill is considered not recoverable, and an impairment loss is recorded if the carrying amount of the reporting unit exceeds the reporting unit's fair value, as determined based on a combination of an income approach and a market approach. See Note 7, Goodwill and Other Intangible Assets, for more information on our goodwill and other intangible assets.

The carrying amount of tangible long-lived assets held and used is considered not recoverable if the carrying amount exceeds the undiscounted sum of cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is not recoverable, the impairment loss is measured as the excess of the asset's carrying amount over its fair value.

Assets held for sale are evaluated for impairment at least annually and as impairment indicators are present. The carrying amount of assets held for sale is not recoverable if the carrying amount exceeds the fair value less estimated costs to sell the asset. An impairment loss is recorded for the excess of the asset’s carrying amount over the fair value less estimated costs to sell. Impairment losses are recorded in operating supplies and expenses in the consolidated statements of comprehensive income. Impairment losses were immaterial in 2018, 2017 and 2016.

(l) Revenue Recognition
 
Through December 31, 2017, we recorded transportation revenue at the time of delivery. Beginning in 2018, we implemented ASU 2014-09, Revenue from Contracts with Customers, which is codified as ASC 606 and replaces ASC 605, Revenue Recognition. With the adoption of ASC 606, we began recognizing revenue during the delivery period based on relative transit time in each reporting period, with expenses recognized as incurred. Accordingly, a portion of the total revenue that will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period. See Note 2, Revenue Recognition, for more information on the adoption of ASC 606.
 
When we use third-party carriers, we generally record revenues on the gross basis at amounts charged to our customers because we are the primary obligor, we are a principal in the transaction, we invoice our customers and retain all credit risks, and we maintain discretion over pricing. Additionally, we are responsible for selection of third-party transportation providers to the extent used to satisfy customer freight requirements.

We record revenues net of pass-through taxes in our consolidated statements of comprehensive income.

For the year ended December 31, 2018, no customer accounted for more than 10% of our consolidated revenues. We had one customer who accounted for slightly more than 10% of our consolidated revenues in 2017. No customer accounted for more than 10% of our consolidated revenues in 2016.
 
(m) Income Taxes
 
Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We record valuation allowances for deferred tax assets to the extent we believe these assets are not more likely than not to be realized through the reversal of existing taxable temporary differences, projected future taxable income, or tax-planning strategies. We record a liability for unrecognized tax benefits when the benefits of tax positions taken on a tax return are not more likely than not to be sustained upon audit. Interest and penalties related to uncertain tax positions are classified as income tax expense in the consolidated statements of comprehensive income.
  
(n) Earnings Per Share
 
We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if holders of unvested restricted and performance share units or options exercised or converted their holdings into common stock. Awards that would have an antidilutive impact are excluded from the calculation and have been deemed immaterial.

As disclosed in Note 3, IPO, our IPO of shares of Class B Common Stock was effective in April 2017. In connection with the offering, we subsequently sold additional shares of common stock.

(o) Share-based Compensation

We have share-based compensation plans covering certain employees, including officers and directors. We account for share-based compensation using the fair value recognition provisions of current accounting standards for share-based payments. We grant restricted share units, restricted shares, performance share units, performance shares, and nonqualified stock options. We recognize compensation expense over the requisite service periods within each award. See Note 14, Share-Based Compensation, for more information about our plans.
 
(p) Claims Accruals
 
We are self-insured for loss of and damage to our owned and leased revenue equipment. We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have excess policies to limit our exposure to catastrophic claim costs. The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type.
 
Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and provides an allowance for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2018 and 2017, we had an accrual of approximately $156.0 million and $147.2 million, respectively, for estimated claims net of reinsurance receivables. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2018 and 2017, we had an aggregate prepaid insurance asset of approximately $9.2 million and $7.9 million, respectively, which represented prefunded premiums and deposits.
 
(q) 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 currently cannot reasonably estimate 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 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 was effective for us January 1, 2019. 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 elected this transition method of applying the new lease standard and recognized 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 elected the package of practical expedients provided under the guidance. The practical expedient package applied to leases that commenced prior to adoption of the new standard and permitted 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. The Company also elected the recognition exemption for equipment leases, which allows the Company to not recognize right-of-use assets and liabilities for leases with an initial term of 12 months or less. Additionally, the Company elected to take the practical expedient to include non-lease components as part of the right-of-use asset and lease liability. A cross-functional implementation team identified the Company's lease population, leveraged and expanded the use of our existing lease software to assist with the reporting and disclosure requirements under the standard, and abstracted and validated our lease information. The adoption of the standard added approximately $80 million in right-of-use assets and related lease obligations to our consolidated balance sheet for operating leases in which we were the lessee as of January 1, 2019. The adoption of this standard did not have a material impact on our consolidated statements of comprehensive income. Leasing activities in which we are the lessor in the transaction are also subject to ASC 842. As a lessor, adopting this standard did not have a material impact on our consolidated balance sheets but will add to both operating revenues and expenses in the consolidated statements of comprehensive income, as certain leases previously treated as direct financing leases will become sales-type leases.
v3.10.0.1
Revenue Recognition
12 Months Ended
Dec. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
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. Revenue in transit and the related expenses are recorded within our Other segment, except for FTFM which is recorded within the Truckload segment.

 
 
Year Ended December 31, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
Operating revenues
 
$
4,977.6

 
$
(0.6
)
 
$
4,977.0

Purchased transportation
 
1,965.2

 
0.7

 
1,965.9

Salaries, wages, and benefits
 
1,260.3

 
(0.9
)
 
1,259.4

Total operating expenses
 
4,601.4

 
(0.2
)
 
4,601.2

Income from operations
 
376.2

 
(0.4
)
 
375.8

Provision for income taxes
 
364.6

 

 
364.6

Net income
 
269.3

 
(0.4
)
 
268.9

Comprehensive income
 
268.3

 
(0.4
)
 
267.9


 
 
December 31, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Balance Sheet
 
 
 
 
 
 
Prepaid expenses and other current assets
 
$
59.8

 
$
19.7

 
$
79.5

Total current assets
 
1,304.6

 
19.7

 
1,324.3

Total assets
 
3,604.8

 
19.7

 
3,624.5

Other current liabilities
 
70.8

 
10.4

 
81.2

Total current liabilities
 
512.2

 
10.4

 
522.6

Deferred income taxes
 
448.2

 
2.4

 
450.6

Total noncurrent liabilities
 
967.2

 
2.4

 
969.6

Retained earnings
 
582.4

 
6.9

 
589.3

Total shareholders' equity
 
2,125.4

 
6.9

 
2,132.3

Total liabilities and shareholders' equity
 
3,604.8

 
19.7

 
3,624.5


 
 
Year Ended December 31, 2018
Financial Statement Line Item (in millions)
 
Under ASC 605
 
Adjustment
 
As Reported
Consolidated Statement of Cash Flows
 
 
 
 
 
 
Operating Cash Flows
 
 
 
 
 
 
        Net income
 
$
269.3

 
$
(0.4
)
 
$
268.9

        Change in: Other assets
 
(8.7
)
 
(0.3
)
 
(9.0
)
        Change in: Payables
 
3.0

 

 
3.0

        Change in: Other liabilities
 
11.0

 
0.7

 
11.7


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.
 
 
Year Ended December 31,
Disaggregated Revenues (in millions)
 
2018
 
2017
Transportation
 
$
4,589.7

 
$
4,012.4

Logistics management
 
228.3

 
220.2

Other
 
159.0

 
151.0

Total operating revenues
 
$
4,977.0

 
$
4,383.6


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 the Company'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 December 31, 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)
 
December 31, 2018
Expected to be recognized within one year
 
 
Transportation
 
$
5.6

Logistics Management
 
17.4

Expected to be recognized after one year
 
 
Transportation
 
2.2

Logistics Management
 
4.0

Total
 
$
29.2


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)
 
December 31, 2018
 
January 1, 2018
Other current assets - Contract assets
 
$
21.7

 
$
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)
 
December 31, 2018
 
January 1, 2018
Capitalized contract fulfillment costs
 
$
5.0

 
$
3.7


Amortization of capitalized contract fulfillment costs was as shown:
 
 
Year Ended December 31,
(in millions)
 
2018
 
2017
Amortization of contract fulfillment costs
 
$
2.5

 
$
2.0


Impairment losses for the periods ended December 31, 2018 and December 31, 2017 were immaterial.

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
IPO
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
IPO
IPO

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.
v3.10.0.1
Acquisition
12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Acquisition
ACQUISITION

On June 1, 2016, we acquired 100% of the shares of WSL for $150.4 million in cash and future payments. WSL combines final-mile delivery with an innovative technology platform to provide LTL, truckload, and logistics services for large parcel goods, such as furniture and floor coverings, across North America. It uses proprietary technology to handle supply chain complexities within the national home delivery industry. We acquired WSL because it creates integrated first to final mile delivery capabilities, which reduce supply chain complexities for omnichannel retailers and manufacturers.

The acquisition was accounted for as a purchase in accordance with ASC Topic 805, Business Combinations. Assets acquired and liabilities assumed were recorded in the Truckload segment at their fair values as of the acquisition date, as shown in the table below. The fair values of identifiable intangible assets, which were primarily customer relationships and trade names, were based on valuations using the income approach. The excess of the purchase price over the estimated fair values of tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill. The goodwill is attributable to expected synergies and expected growth opportunities. We believe that 100% of the goodwill will be deductible for United States income tax purposes.
(in millions)
 
 
Recognized amounts of identifiable assets acquired and liabilities assumed
 
As of June 1, 2016
Cash
 
$
1.3

Receivables
 
16.2

Inventories
 
0.5

Prepaid expenses and other current assets
 
4.4

Property and equipment
 
81.8

Capitalized software and other noncurrent assets
 
5.8

Intangible assets
 
10.9

Goodwill
 
138.2

Total assets acquired
 
259.1

 
 
 
Payables assumed
 
7.8

Accrued liabilities assumed
 
5.3

Current maturities of debt and capital lease obligations assumed
 
47.7

Debt and capital lease obligations assumed
 
46.2

Other noncurrent liabilities assumed
 
1.7

Fair value of total consideration transferred
 
$
150.4


In addition to cash of $79.5 million paid at closing, the purchase and sale agreement 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 December 31, 2018, which is recorded in other current liabilities on the consolidated balance sheet.

A contingent payment arrangement based on the achievement of specified earnings targets is also 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 December 31, 2018. See Note 5, Fair Value, for information regarding the fair value of this contingent arrangement.

Acquisition-related costs included in other general expenses in our consolidated statements of comprehensive income for the year ended December 31, 2016, were $1.4 million.

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 operation of the business and that, as a result, the former owners are entitled to an accelerated payment of the contingent amount described above 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. The representative of the former owners has filed a counterclaim seeking the full amount of the accelerated payment.

The following unaudited pro forma condensed combined financial information presents our results as if we had acquired WSL on January 1, 2016.
 (in millions, except per share data)
 
Year Ended December 31, 2016
Pro forma net sales
 
$
4,119.3

Pro forma net income
 
155.0

Basic earnings per share as reported
 
1.00

Pro forma basic earnings per share
 
0.99

Diluted earnings per share as reported
 
1.00

Pro forma diluted earnings per share
 
0.99

v3.10.0.1
Fair Value
12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value
FAIR VALUE

Fair Value of WSL Contingent Consideration

The fair value of the contingent consideration related to the 2016 acquisition of WSL was zero at December 31, 2018. This valuation was based on significant inputs that are not observable in the market, which are referred to as Level 3 inputs. One of the key assumptions was a probability-adjusted level of earnings before interest, taxes, depreciation, and amortization. The following table sets forth a reconciliation of changes in the fair value of the contingent consideration:
(in millions)
 
2018
 
2017
Beginning balance
 
$

 
$
13.5

Change in fair value
 

 
(13.5
)
Ending balance
 
$

 
$


We recorded adjustments to the contingent consideration liability in the second, third, and fourth quarters of 2017, resulting in an increase in income from operations. The adjustments were caused by a change in the fair value of the contingent liability, which reflected three-year growth targets established by the seller prior to the close of the acquisition. No payments have been made through December 31, 2018.

See Note 6, Investments, for information on the fair value of our marketable securities.

Our ownership interest in Platform Science, Inc. discussed in Note 6, Investments, was valued based on Level 3 inputs.

There were no transfers between levels for the periods shown.

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.
 
 
December 31, 2018
 
December 31, 2017
(in millions)
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Fixed-rate debt portfolio
 
$
405.0

 
$
398.4

 
$
429.8

 
$
432.4

v3.10.0.1
Investments
12 Months Ended
Dec. 31, 2018
Investments Schedule [Abstract]  
Investments
INVESTMENTS

Marketable Securities

The following table presents the values of our marketable securities as of the dates shown.
 
 
December 31, 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
 
20.0

 
19.8

 
6.0

 
6.0

Asset-backed securities
 
0.1

 
0.1

 
0.3

 
0.3

Corporate debt securities
 
15.1

 
15.0

 
9.1

 
9.2

State and municipal bonds
 
12.5

 
12.5

 
22.7

 
22.2

Total marketable securities
 
$
51.6

 
$
51.3

 
$
41.9

 
$
41.6


Gross realized gains and losses on marketable securities were not material for the years ended December 31, 2018, 2017, and 2016, respectively. Unrealized gains and losses on marketable securities were not material for the years ended December 31, 2018, and 2017, respectively.
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 being accounted for under ASC 321, Investments - Equity Securities and is recorded at fair value in other noncurrent assets on the consolidated balance sheets. The fair value of our ownership interest at December 31, 2018 was determined to be $3.5 million through an independent valuation and is recorded in other income in the consolidated statements of comprehensive income.
v3.10.0.1
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 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. The following table shows changes to our goodwill balances by segment during the years ended December 31, 2018 and December 31, 2017.

(in millions)
 
Truckload
 
Logistics
 
Other
 
Total
Balance at December 31, 2016
 
$
138.2

 
$
14.2

 
$
11.6

 
$
164.0

Foreign currency translation
 

 

 
0.8

 
0.8

Balance at December 31, 2017
 
138.2

 
14.2

 
12.4

 
164.8

Goodwill impairment charge
 

 

 
(2.0
)
 
(2.0
)
Foreign currency translation
 

 

 
(0.6
)
 
(0.6
)
Balance at December 31, 2018
 
$
138.2

 
$
14.2

 
$
9.8

 
$
162.2

At December 31, 2018 and 2017, we had accumulated goodwill impairment charges of $8.0 million and $6.0 million, respectively.
 
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 reviews 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-Dedicated Services 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.

In the fourth quarter of 2018, annual impairment tests were performed on all four of our reporting units with goodwill. As a result of the testing performed, an impairment loss of $2.0 million was recorded for our Asia reporting unit as the discounted cash flows expected to be generated by this reporting unit were not sufficient to recover its carrying value.

The identifiable intangible assets other than goodwill listed below are included in capitalized software and other noncurrent assets on the consolidated balance sheets. Our customer lists and trade names are amortized over weighted-average amortization periods of ten and three years, respectively.
 
 
December 31, 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

 
$
3.5

 
$
7.0

 
$
10.5

 
$
2.5

 
$
8.0

Trade names
 
1.4

 
1.2

 
0.2

 
1.4

 
0.7

 
0.7

Total intangible assets
 
$
11.9

 
$
4.7

 
$
7.2

 
$
11.9

 
$
3.2

 
$
8.7


Amortization expense for intangible assets was $1.4 million, $1.5 million and $0.9 million for the years ended December 31, 2018, 2017, and 2016, respectively. 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):
2019
$
1.1

2020
1.0

2021
1.0

2022
1.0

2023
1.0

2024 and thereafter
2.1

Total
$
7.2

v3.10.0.1
Debt and Credit Facilities
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Debt and Credit Facilities
DEBT AND CREDIT FACILITIES

As of December 31, 2018 and 2017, debt included the following:
(in millions)
 
December 31, 2018
 
December 31, 2017
Unsecured senior notes: principal payable at maturities ranging from 2019 through 2025; interest payable in semiannual installments through the same time frame; 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 2019; weighted average interest rate of 3.72% and 3.76% for 2018 and 2017, respectively
 
5.0

 
29.8

Total principal outstanding
 
405.0

 
429.8

 
 
 
 
 
Current maturities of debt
 
(45.0
)
 
(15.2
)
Debt issuance costs
 
(0.6
)
 
(0.9
)
Long-term debt
 
$
359.4

 
$
413.7

Scheduled principal payments of debt subsequent to December 31, 2018 are as follows:
Years ending December 31,
 
(in millions)

2019
 
$
45.0

2020
 
55.0

2021
 
40.0

2022
 
60.0

2023
 
70.0

2024 and thereafter
 
135.0

Total
 
$
405.0


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 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 this agreement as of December 31, 2018 or 2017. Standby letters of credit under this agreement amounted to $3.9 million at both December 31, 2018 and 2017, respectively, 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 December 31, 2018 or 2017. At December 31, 2018 and 2017, standby letters of credit under this agreement amounted to $65.3 million and $63.8 million, respectively, and were primarily related to the requirements of certain of our insurance obligations.

Financing arrangements require us to maintain certain covenants and financial ratios. The credit agreements contain various financial and other covenants, including required minimum consolidated net worth, consolidated net debt, limitations on indebtedness, transactions with affiliates, shareholder debt, and restricted payments. The credit agreements and senior notes contain change of control provisions pursuant to which a change of control is defined to mean the Schneider family no longer owns more than 50% of the combined voting power of our capital shares. A change of control event causes an immediate termination of unused commitments under the credit agreements as well as requires repayment of all outstanding borrowings plus accrued interest and fees. The senior notes require us to provide notice to the note holders offering prepayment of the outstanding principal along with interest accrued to the date of prepayment. The prepayment date is required to be within 20 to 60 days from the date of notice. At December 31, 2018, the Company was in compliance with all financial covenants.
v3.10.0.1
Leases
12 Months Ended
Dec. 31, 2018
Leases [Abstract]  
Leases
LEASES

As lessee — We have various real estate and equipment lease agreements. At December 31, 2018, scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year and capital leases were as follows:
(in millions)
 
Operating Leases
 
Capital Leases
2019
 
$
35.8

 
$
6.9

2020
 
25.7

 
0.2

2021
 
14.9

 

2022
 
8.4

 

2023
 
6.8

 

2024 and thereafter
 
12.7

 

Total
 
$
104.3

 
7.1

Amount representing interest
 

 
(0.2
)
Present value of minimum lease payments
 

 
6.9

Current maturities
 

 
(6.7
)
Long-term capital lease obligations
 

 
$
0.2


Lease expense for all operating leases was $37.0 million, $38.0 million, and $45.6 million in 2018, 2017, and 2016, respectively, and is classified in operating supplies and expenses in the consolidated statements of comprehensive income.

The consolidated balance sheets include assets acquired under capital leases as components of property and equipment as of December 31, 2018 and 2017, as follows:
(in millions)
 
2018
 
2017
Transportation equipment
 
$
19.9

 
$
25.0

Real property
 
0.8

 
0.8

Other property
 
0.6

 
0.6

Accumulated amortization
 
(11.2
)
 
(12.6
)
Total
 
$
10.1

 
$
13.8


As lessor — We finance various types of transportation-related equipment for independent third parties. The transactions are generally for one year to five years and are accounted for as sales-type leases with fully guaranteed residual values or direct financing leases. As of December 31, 2018 and 2017, the investment in lease receivables was as follows:
(in millions)
 
2018
 
2017
Future minimum payments to be received on leases
 
$
140.0

 
$
141.2

Guaranteed residual lease values
 
151.0

 
130.7

Total minimum lease payments to be received
 
291.0

 
271.9

Unearned income
 
(28.7
)
 
(28.1
)
Net investment in leases
 
262.3

 
243.8

 
 
 
 
 
Current maturities of lease receivables
 
129.6

 
106.6

Less—allowance for doubtful accounts
 
(0.5
)
 
(1.7
)
Current portion of lease receivables—net of allowance
 
129.1

 
104.9

 
 
 
 
 
Lease receivables—noncurrent
 
$
133.2

 
$
138.9


The principal amounts to be received on lease receivables as of December 31, 2018, were as follows:
Years ending December 31
(in millions)
2019
$
149.0

2020
112.7

2021
29.0

2022
0.3

2023

2024 and thereafter

Total
$
291.0


Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon receipt of notification of bankruptcy, upon the death of a customer, or in other instances in which management concludes collectability is not reasonably assured. The accrual of interest and other fees is resumed when all payments are less than 60 days past due. At December 31, 2018, there were $0.3 million of lease payments greater than 90 days past due.

The terms of the lease agreements generally give us the ability to take possession of the underlying asset in the event of default. We may incur credit losses in excess of recorded allowances if the full amount of any anticipated proceeds from the sale or re-lease of the asset supporting the third party’s financial obligation is not realized. Costs to repossess and estimated reconditioning costs are recorded in the consolidated statements of comprehensive income in the period incurred.
Leases
LEASES

As lessee — We have various real estate and equipment lease agreements. At December 31, 2018, scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year and capital leases were as follows:
(in millions)
 
Operating Leases
 
Capital Leases
2019
 
$
35.8

 
$
6.9

2020
 
25.7

 
0.2

2021
 
14.9

 

2022
 
8.4

 

2023
 
6.8

 

2024 and thereafter
 
12.7

 

Total
 
$
104.3

 
7.1

Amount representing interest
 

 
(0.2
)
Present value of minimum lease payments
 

 
6.9

Current maturities
 

 
(6.7
)
Long-term capital lease obligations
 

 
$
0.2


Lease expense for all operating leases was $37.0 million, $38.0 million, and $45.6 million in 2018, 2017, and 2016, respectively, and is classified in operating supplies and expenses in the consolidated statements of comprehensive income.

The consolidated balance sheets include assets acquired under capital leases as components of property and equipment as of December 31, 2018 and 2017, as follows:
(in millions)
 
2018
 
2017
Transportation equipment
 
$
19.9

 
$
25.0

Real property
 
0.8

 
0.8

Other property
 
0.6

 
0.6

Accumulated amortization
 
(11.2
)
 
(12.6
)
Total
 
$
10.1

 
$
13.8


As lessor — We finance various types of transportation-related equipment for independent third parties. The transactions are generally for one year to five years and are accounted for as sales-type leases with fully guaranteed residual values or direct financing leases. As of December 31, 2018 and 2017, the investment in lease receivables was as follows:
(in millions)
 
2018
 
2017
Future minimum payments to be received on leases
 
$
140.0

 
$
141.2

Guaranteed residual lease values
 
151.0

 
130.7

Total minimum lease payments to be received
 
291.0

 
271.9

Unearned income
 
(28.7
)
 
(28.1
)
Net investment in leases
 
262.3

 
243.8

 
 
 
 
 
Current maturities of lease receivables
 
129.6

 
106.6

Less—allowance for doubtful accounts
 
(0.5
)
 
(1.7
)
Current portion of lease receivables—net of allowance
 
129.1

 
104.9

 
 
 
 
 
Lease receivables—noncurrent
 
$
133.2

 
$
138.9


The principal amounts to be received on lease receivables as of December 31, 2018, were as follows:
Years ending December 31
(in millions)
2019
$
149.0

2020
112.7

2021
29.0

2022
0.3

2023

2024 and thereafter

Total
$
291.0


Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon receipt of notification of bankruptcy, upon the death of a customer, or in other instances in which management concludes collectability is not reasonably assured. The accrual of interest and other fees is resumed when all payments are less than 60 days past due. At December 31, 2018, there were $0.3 million of lease payments greater than 90 days past due.

The terms of the lease agreements generally give us the ability to take possession of the underlying asset in the event of default. We may incur credit losses in excess of recorded allowances if the full amount of any anticipated proceeds from the sale or re-lease of the asset supporting the third party’s financial obligation is not realized. Costs to repossess and estimated reconditioning costs are recorded in the consolidated statements of comprehensive income in the period incurred.
v3.10.0.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. In accordance with GAAP, the effects of this legislation were recognized in 2017 upon enactment. The primary impact of the Act for us related to the reduction of the Federal corporate income tax rate from 35% to 21% beginning in 2018. At December 31, 2017, our previously recorded deferred tax assets and liabilities were remeasured to reflect the 21% rate at which these assets and liabilities would be realized in future periods. The net change in deferred taxes was recorded through our provision for income taxes.

The provisional amounts recorded at December 31, 2017, in accordance with SEC Staff Accounting Bulletin No. 118, were finalized during the fourth quarter of 2018 and had an immaterial impact on the consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, which allowed for a reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Act. We early adopted this ASU during the fourth quarter of 2018, and the reclassification of stranded income tax effects had an immaterial impact on our consolidated financial statements.

The components of the provision for income taxes as of December 31, 2018, 2017 and 2016, were as follows:
 
(in millions)
 
2018
 
2017
 
2016
Current:
 
 
 
 
 
 
 
Federal
 
$
21.7

 
$
19.3

 
$
24.4

 
State and other
 
11.8

 
5.6

 
7.5

 
 
 
33.5

 
24.9

 
31.9

Deferred:
 
 
 
 
 
 
 
Federal
 
54.2

 
71.4

 
71.2

 
State and other
 
6.7

 
6.7

 
5.6

 
Impact of the Tax Cuts and Jobs Act
 
1.3

 
(229.5
)
 

 
 
 
62.2

 
(151.4
)
 
76.8

Total provision for (benefit from) income taxes
 
$
95.7

 
$
(126.5
)
 
$
108.7


Foreign operations of the Company are insignificant in relation to our overall operating results.

The provision for income taxes as of December 31, 2018, 2017, and 2016 differed from the amounts computed using the federal statutory rates in effect of 21% for December 31, 2018 and 35% for December 31, 2017 and 2016, as follows:
 
 
2018
 
2017
 
2016
(in millions, except percentages)
 
Dollar Impact
Rate
 
Dollar Impact
Rate
 
Dollar Impact
Rate
Income tax at federal statutory rate
 
$
76.6

21.0
%
 
$
92.2

35.0
 %
 
$
93.0

35.0
%
State tax, net of federal effect
 
15.4

4.2
%
 
8.6

3.3
 %
 
10.5

3.9
%
Nondeductible meals and entertainment
 
2.1

0.6
%
 
3.4

1.3
 %
 
3.4

1.3
%
Impact of the Tax Cuts and Jobs Act
 
1.3

0.3
%
 
(229.5
)
(87.1
)%
 


Other, net
 
0.3

0.1
%
 
(1.2
)
(0.5
)%
 
1.8

0.7
%
 
Total provision for (benefit from) income taxes
 
$
95.7

26.2
%
 
$
(126.5
)
(48.0
)%
 
$
108.7

40.9
%

The components of the net deferred tax liability included in deferred income taxes in the consolidated balance sheets as of December 31, 2018 and 2017, were as follows:
(in millions)
 
2018
 
2017
Deferred tax assets:
 
 
 
 
Allowances for doubtful accounts
 
$
1.1

 
$
1.1

Compensation and employee benefits
 
14.7

 
15.6

Insurance and claims accruals
 
2.6

 
2.8

State net operating losses and credit carryforwards
 
18.2

 
17.7

Other
 
5.0

 
4.0

 
Total gross deferred tax assets
 
41.6

 
41.2

Valuation allowance
 
(5.8
)
 
(4.4
)
 
Total deferred tax assets, net of valuation allowance
 
35.8

 
36.8

Deferred tax liabilities:
 
 
 
 
Property and equipment
 
466.5

 
410.8

Prepaid expenses
 
4.3