SCHNEIDER NATIONAL, INC., 10-K filed on 2/19/2020
Annual Report
v3.19.3.a.u2
Cover - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Feb. 18, 2020
Jun. 28, 2019
Document Information [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 001-38054    
Entity Registrant Name Schneider National, Inc.    
Entity Incorporation, State or Country Code WI    
Entity Tax Identification Number 39-1258315    
Entity Address, Address Line One 3101 South Packerland Drive    
Entity Address, City or Town Green Bay,    
Entity Address, State or Province WI    
Entity Address, Postal Zip Code      54313    
City Area Code 920    
Local Phone Number 592-2000    
Title of 12(b) Security Class B common stock, no par value    
Trading Symbol SNDR    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 919.0
Amendment Flag false    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001692063    
Current Fiscal Year End Date --12-31    
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)   94,090,966  
v3.19.3.a.u2
Consolidated Statements of Comprehensive Income - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Operating revenues $ 4,747.0 $ 4,977.0 $ 4,383.6
Operating expenses:      
Purchased transportation 1,996.4 1,965.9 1,605.3
Salaries, wages, and benefits 1,106.0 1,259.4 1,223.5
Fuel and fuel taxes 289.7 344.8 305.5
Depreciation and amortization 292.9 291.3 279.0
Operating supplies and expenses 530.2 491.3 493.9
Insurance and related expenses 109.6 102.2 90.3
Other general expenses 116.1 144.3 105.8
Goodwill impairment 34.6 2.0 0.0
Restructuring charges 63.7 0.0 0.0
Total operating expenses 4,539.2 4,601.2 4,103.3
Income from operations 207.8 375.8 280.3
Other expenses (income):      
Interest income (8.5) (4.6) (2.0)
Interest expense 16.6 17.1 19.4
Other expense (income)—net 1.6 (1.3) (0.5)
Total other expenses 9.7 11.2 16.9
Income before income taxes 198.1 364.6 263.4
Provision for (benefit from) income taxes 51.1 95.7 (126.5)
Net income 147.0 268.9 389.9
Other comprehensive income (loss):      
Foreign currency translation adjustments 0.0 (1.0) (0.9)
Net unrealized gains on marketable securities—net of tax 1.1 0.0 0.0
Total other comprehensive income (loss) 1.1 (1.0) (0.9)
Comprehensive income $ 148.1 $ 267.9 $ 389.0
Weighted average common shares outstanding (shares) 177.1 177.0 171.1
Basic earnings per common share $ 0.83 $ 1.52 $ 2.28
Weighted average diluted shares outstanding (shares) 177.3 177.2 171.3
Diluted earnings per common share $ 0.83 $ 1.52 $ 2.28
Dividends declared per share $ 0.24 $ 0.24 $ 0.20
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 551.6 $ 378.7
Marketable securities 48.3 51.3
Trade accounts receivable—net of allowance of $3.4 million and $6.8, million, respectively 465.8 593.1
Other receivables 28.9 31.8
Current portion of lease receivables—net of allowance of $0.6 million and $0.5 million, respectively 121.5 129.1
Inventories 71.9 60.8
Prepaid expenses and other current assets 117.7 79.5
Total current assets 1,405.7 1,324.3
Property and equipment:    
Transportation equipment 2,790.1 2,900.2
Land, buildings, and improvements 199.3 177.2
Other property and equipment 162.7 157.6
Total property and equipment 3,152.1 3,235.0
Accumulated depreciation 1,300.5 1,312.8
Net property and equipment 1,851.6 1,922.2
Lease receivables—noncurrent 109.4 133.2
Capitalized software and other noncurrent assets 165.9 82.6
Goodwill 127.5 162.2
Total noncurrent assets 2,254.4 2,300.2
Total Assets 3,660.1 3,624.5
Current Liabilities:    
Trade accounts payable 207.7 226.0
Accrued salaries, wages, and benefits 63.8 94.8
Claims accruals—current 42.0 58.3
Current maturities of debt and finance lease obligations 55.5 51.7
Dividends payable 10.8 10.6
Other current liabilities 85.4 81.2
Total current liabilities 465.2 522.6
Noncurrent Liabilities:    
Long-term debt and finance lease obligations 305.8 359.6
Claims accruals—noncurrent 118.7 113.3
Deferred income taxes 449.0 450.6
Other noncurrent liabilities 85.0 46.1
Total noncurrent liabilities 958.5 969.6
Total Liabilities 1,423.7 1,492.2
Commitments and Contingencies (Note 15)
Shareholders' Equity:    
Additional paid-in capital 1,542.7 1,544.0
Retained earnings 693.6 589.3
Accumulated other comprehensive income (loss) 0.1 (1.0)
Total Shareholders' Equity 2,236.4 2,132.3
Total Liabilities and Shareholders' Equity 3,660.1 3,624.5
Class A Common Shares    
Shareholders' Equity:    
Common stock 0.0 0.0
Class B Common Stock    
Shareholders' Equity:    
Common stock $ 0.0 $ 0.0
v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Trade allowance $ 3.4 $ 6.8
Allowance for lease receivables $ 0.6 $ 0.5
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) 94,837,673 94,593,588
Common stock, shares outstanding (shares) 94,088,025 93,969,268
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Operating Activities:      
Net income $ 147.0 $ 268.9 $ 389.9
Adjustments to reconcile net income to net cash flows from operating activities:      
Depreciation and amortization 292.9 291.3 279.0
Goodwill impairment 34.6 2.0 0.0
Gains on sales of property and equipment—net (3.3) (8.4) (10.8)
Impairment on assets held for sale 14.3 0.3 1.4
Proceeds from lease receipts 78.7 0.0 0.0
Deferred income taxes (0.2) 62.2 (152.0)
WSL contingent consideration adjustment 0.0 0.0 (13.5)
Long-term incentive and share-based compensation (benefit) expense (3.6) 22.8 17.0
Non-cash restructuring charges 50.0 0.0 0.0
Other noncash items 3.4 (3.5) (0.7)
Changes in operating assets and liabilities:      
Receivables 119.9 (62.8) (63.3)
Other assets (3.3) (9.0) 0.3
Payables (35.3) 3.0 16.0
Claims reserves and other receivables - net (12.6) 8.8 (12.9)
Other liabilities (46.2) (9.1) 10.9
Net cash provided by operating activities 636.3 566.5 461.3
Investing Activities:      
Purchases of transportation equipment (335.3) (385.1) (388.5)
Purchases of other property and equipment (61.7) (36.9) (33.4)
Proceeds from sale of property and equipment 90.1 90.5 70.0
Proceeds from lease receipts 0.0 72.7 53.1
Proceeds from sale of off-lease inventory 20.7 21.9 7.9
Purchases of lease equipment (68.7) (90.5) (110.1)
Proceeds from marketable securities 22.1 9.9 10.5
Purchases of marketable securities (17.4) (20.1) 0.0
Net cash used in investing activities (350.2) (337.6) (390.5)
Financing Activities:      
Payments under revolving credit agreements 0.0 0.0 (135.0)
Payments of debt and finance lease obligations (52.0) (28.7) (123.7)
Payments of deferred consideration related to acquisition (18.7) (19.3) (19.4)
Proceeds from IPO—net of issuance costs 0.0 0.0 340.6
Dividends paid (42.5) (40.7) (25.5)
Redemptions of redeemable common shares 0.0 0.0 (0.1)
Net cash provided by (used in) financing activities (113.2) (88.7) 36.9
Net increase in cash and cash equivalents 172.9 140.2 107.7
Cash and Cash Equivalents:      
Beginning of period 378.7 238.5 130.8
End of period 551.6 378.7 238.5
Noncash investing and financing activity:      
Equipment and inventory purchases in accounts payable 19.1 2.1 9.5
Dividends declared but not yet paid 10.8 10.6 8.8
Increase in redemption value of redeemable common shares 0.0 0.0 126.6
Ownership interest in Platform Science, Inc. 0.0 3.5 0.0
Cash paid (refunded) during the year for:      
Interest 14.5 15.5 19.2
Income taxes—net of refunds $ 51.6 $ 39.0 $ (4.2)
v3.19.3.a.u2
Consolidated Statements Shareholders' Equity - USD ($)
$ in Millions
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income
Balance at Dec. 31, 2016 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Increase (Decrease) in Stockholders' Equity          
Transfer from temporary equity to permanent equity 1,201.2     13.3 0.9
Net income—post-IPO 389.9        
Other 0.0 0.0 (1.4) 1.4 0.0
Balance at Dec. 31, 2017 1,890.2 0.0 1,534.6 355.6 0.0
Increase (Decrease) in Stockholders' Equity          
Share issuances 0.5 0.0 0.5 0.0 0.0
Net income—post-IPO 268.9 0.0 0.0 268.9 0.0
Other comprehensive loss—post-IPO (1.0) 0.0 0.0 0.0 (1.0)
Share-based compensation expense 10.9 0.0 10.9 0.0 0.0
Dividends declared at $0.24 per share (42.5) 0.0 0.0 (42.5) 0.0
Exercise of employee stock options 0.2 0.0 0.2 0.0 0.0
Shares withheld for employee taxes (2.3) 0.0 (2.3) 0.0 0.0
Other 0.1 0.0 0.1 0.0 0.0
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 7.3 0.0 0.0 7.3 0.0
Share issuances 0.3 0.0 0.3 0.0 0.0
Net income—post-IPO 147.0 0.0 0.0 147.0 0.0
Other comprehensive loss—post-IPO 1.1 0.0 0.0 0.0 1.1
Share-based compensation expense (0.4) 0.0 (0.4) 0.0 0.0
Dividends declared at $0.24 per share (42.7) 0.0 0.0 (42.7) 0.0
Shares withheld for employee taxes (1.2) 0.0 (1.2) 0.0 0.0
Balance at Dec. 31, 2019 $ 2,236.4 $ 0.0 $ 1,542.7 $ 693.6 $ 0.1
v3.19.3.a.u2
Consolidated Statements Shareholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]      
Dividends declared per share $ 0.24 $ 0.24 $ 0.20
v3.19.3.a.u2
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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

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.
 
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.
 
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)
 
2019
 
2018
Tractors and trailing equipment for sale or lease
 
$
59.3

 
$
48.1

Replacement parts
 
11.3

 
11.4

Tires and other
 
1.3

 
1.3

Total
 
$
71.9

 
$
60.8


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 3 months to 82 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.

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.

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:
 
2019
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.

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. 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.

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.
 
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.

Assets held for sale are evaluated for impairment when transferred to held for sale status or 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. For the year ended December 31, 2019, total impairment losses were $42.4 million, which included a $28.1 million impairment related to the shutdown of our FTFM service offering and an $11.5 million impairment related to a bulk sale of tractors. Impairment losses for the years ended December 31, 2018 and 2017 were $0.3 million and $1.4 million, respectively.

As of December 31, 2019 and 2018, assets held for sale, net of impairment, by segment were as follows:
(in millions)
 
2019
 
2018
Truckload (1)
 
$
63.5

 
$
19.5

Intermodal
 
3.9

 
2.4

Total
 
$
67.4

 
$
21.9


(1)
As of December 31, 2019, $33.4 million related to the shutdown of our FTFM service offering.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets with indefinite lives are tested for impairment annually in October, or more frequently if impairment indicators exist. Intangible assets with definite lives are reviewed for impairment if impairment indicators are present and at least annually.

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 the combination of an income approach and a market approach. See Note 6, Goodwill and Other Intangible Assets, for more information on our goodwill and other intangible assets.

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 years ended December 31, 2019 and 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.

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.
  
Earnings Per Share
 
We compute basic earnings per share by dividing net income available to common stockholders by the 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.

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 13, Share-Based Compensation, for more information about our plans.
 
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 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, 2019 and 2018, we had an accrual of $143.5 million and $156.0 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, 2019 and 2018, we had an aggregate prepaid insurance asset of $8.1 million and $9.2 million, respectively, which represented prefunded premiums and deposits.
 
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 aligned 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 was effective for us as of January 1, 2020. We adopted this standard on a prospective basis, and it did not have a material impact on our consolidated financial statements or disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which required 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 required additional disclosures related to credit quality of trade and other receivables, including information related to management’s estimate of credit allowances. In November 2018, this was further updated with the issuance of ASU 2018-19, which excluded receivables from operating leases from the scope. We adopted this standard on January 1, 2020 for our available-for-sale debt securities, net investment in leases, contract assets, trade accounts receivable, and reinsurance receivables and it did not have a material impact on our consolidated financial statements.
v3.19.3.a.u2
Revenue Recognition
12 Months Ended
Dec. 31, 2019
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 replaced 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 tables show 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.
 
 
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

Income before 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
 
(9.8
)
 
0.7

 
(9.1
)





Disaggregated Revenues

The majority of our revenues are related to transportation and have similar characteristics. The following table summarizes our revenues by type of service, and each type of service is further described below.
 
 
Year Ended December 31,
Disaggregated Revenues (in millions)
 
2019
 
2018
Transportation
 
$
4,376.6

 
$
4,589.7

Logistics Management
 
153.8

 
228.3

Other
 
216.6

 
159.0

Total operating revenues
 
$
4,747.0

 
$
4,977.0



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 ASC 606, 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.

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 remains 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 as of date shown:
Remaining Performance Obligations (in millions)
 
December 31, 2019
Expected to be recognized within one year
 
 
Transportation
 
$
6.7

Logistics Management
 
9.3

Expected to be recognized after one year
 
 
Transportation
 
0.9

Logistics Management
 
13.7

Total
 
$
30.6



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)
 
December 31, 2019
 
December 31, 2018
 
January 1, 2018
Other current assets - Contract assets
 
$
17.6

 
$
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 straight-line 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, 2019
 
December 31, 2018
Capitalized contract fulfillment costs
 
$
4.2

 
$
5.0



Amortization of capitalized contract fulfillment costs was as shown:
 
 
Year Ended December 31,
(in millions)
 
2019
 
2018
Amortization of contract fulfillment costs
 
$
3.2

 
$
2.5



Impairment losses on capitalized contract fulfillment costs for the periods ended December 31, 2019 and December 31, 2018 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.
v3.19.3.a.u2
IPO
12 Months Ended
Dec. 31, 2019
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.
v3.19.3.a.u2
Fair Value
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value FAIR VALUE

The Company early adopted ASU 2018-13, Fair Value Measurement (Topic 820): Disclosures Framework - Changes to the Disclosure Requirements for Fair Value Measurement in the fourth quarter of 2019. This ASU removes, modifies, and adds to existing fair value measurement disclosure requirements. As a result, the Company removed its disclosures surrounding transfers between Level 1 and Level 2 fair value instruments and added additional disclosures of the range and weighted average of significant unobservable inputs used to determine the fair value of Level 3 measurements.

The table below sets forth the Company’s financial assets and liabilities that are measured at fair value on a recurring basis in accordance with ASC 820.
 
 
 
 
December 31, 2019
 
December 31, 2018
(in millions)
 
Level in Fair
Value Hierarchy
 
Fair Value
 
Fair Value
Marketable securities (1)
 
2
 
$
48.3

 
$
51.3

WSL contingent consideration (2)
 
3
 

 


(1)
Marketable securities are valued based on quoted prices for similar assets in active markets or quoted prices for identical or similar assets in markets that are not active and are, therefore, classified as Level 2 in the fair value hierarchy. We measure our marketable securities on a recurring, monthly basis. See Note 5, Investments, for additional information on the fair value of our marketable securities.
(2)
In connection with the June 1, 2016 acquisition of WSL, a contingent payment arrangement based on the achievement of specified earnings targets was in place for three consecutive 12-month periods after the closing, with the aggregate payment total not to exceed $40.0 million. No payments were made under the agreement which expired June 30, 2019. This valuation was based on a probability-adjusted level of earnings before interest, taxes, depreciation, and amortization, or Level 3 inputs.

The fair value of the Company's debt was $368.5 million and $398.4 million as of December 31, 2019 and December 31, 2018, respectively. The carrying value of the Company's debt was $360.0 million and $405.0 million as of December 31, 2019 and December 31, 2018, respectively. The fair value of our debt was calculated using a fixed rate debt portfolio with similar terms and maturities, which is based on the borrowing rates available to us in the applicable year. This valuation used Level 2 inputs.

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

We measure non-financial assets such as goodwill, intangible assets, assets held for sale, and other long-lived assets at fair value when there is an indicator of impairment and only when we recognize an impairment loss. The table below sets forth the Company’s financial assets that were measured at fair value on a non-recurring basis during 2019.
(in millions)
 
Level in Fair
Value Hierarchy
 
Fair Value
Assets held for sale
 
 
 
 
Non restructuring (1)
 
2
 
$
8.1

Restructuring (2)
 
2
 
18.5

Right-of-use lease assets
 

 

Non restructuring (3)
 
3
 
1.0

Restructuring (2)
 
3
 
2.0

WSL acquisition internal-use software and intangible assets (4)
 
3
 

FTFM reporting unit goodwill (5)
 
3
 

(1)
Our held for sale revenue equipment is evaluated for impairment using market data upon classification as held for sale or as impairment indicators are present. If the carrying value of the assets held for sale exceeds the fair value, an impairment is recorded. Of the $34.0 million of assets held for sale not related to the FTFM shutdown as of December 31, 2019, $8.1 million are recorded at fair value. Refer to Note 1, Summary of Significant Accounting Policies for further details on impairment charges.
(2)
We recognized impairment charges and recorded certain assets held for sale and right-of-use lease assets associated with the shutdown of the FTFM service offering at fair value as of December 31, 2019. Transportation equipment was measured using market data, while right-of-use lease assets were measured using discounted cash flow analyses. Of the $33.4 million of assets held for sale related to the FTFM shutdown, $18.5 million are recorded at fair value. The discounted cash flow analyses for right-of-use lease assets used a range of discount rates from 2.9% to 4.5%, with a weighted average rate of 4.0%. For further details on the impairment charges recorded refer to Note 18, Restructuring Charges.
(3)
During the fourth quarter of 2019, we recognized an impairment on one of our right-of-use lease assets. The discounted cash flow analysis performed used a discount rate of 4.0%.
(4)
As part of the shutdown of the FTFM service offering in the third quarter of 2019, we recognized impairment charges and recorded internal-use software and finite lived intangible assets at fair value. The WSL acquisition internal-use software and intangible assets, which were previously valued using the replacement cost method and discounted cash flow analyses, respectively, were written off as part of the shutdown of the FTFM service offering. For further details on the impairment charges recorded refer to Note 18, Restructuring Charges.
(5)
During the second quarter of 2019, a triggering event occurred within our FTFM reporting unit which resulted in an impairment test being performed and full impairment of its goodwill. For further details on the valuation process used and the goodwill impairment charge recorded refer to Note 6, Goodwill and Other Intangible Assets.

Our ownership interest in PSI discussed in Note 5, Investments, does not have a readily determinable fair value and is accounted for using the measurement alternative in ASC 321-10-35-2. Our interest was last revalued in the period ending December 31, 2018 using Level 3 inputs, as there were no observable price changes during 2019.
v3.19.3.a.u2
Investments
12 Months Ended
Dec. 31, 2019
Investments Schedule [Abstract]  
Investments INVESTMENTS

Marketable Securities

The following table presents the values of our marketable securities as of the dates shown:
 
 
December 31, 2019
 
December 31, 2018
(in millions)
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
U.S. treasury and government agencies
 
$
16.5

 
$
17.0

 
$
20.0

 
$
19.8

Asset-backed securities
 
0.1

 
0.1

 
0.1

 
0.1

Corporate debt securities
 
15.1

 
15.4

 
15.1

 
15.0

State and municipal bonds
 
11.6

 
11.8

 
12.5

 
12.5

Other U.S. and non-U.S. government bonds
 
4.0

 
4.0

 
3.9

 
3.9

Total marketable securities
 
$
47.3

 
$
48.3

 
$
51.6

 
$
51.3



Gross realized gains and losses on marketable securities were not material for the years ended December 31, 2019, 2018, and 2017. Net unrealized gains on marketable securities, net of tax, were $1.1 million for the year ended December 31, 2019. Net unrealized losses and gains were not material for the years ended December 31, 2018, and 2017, respectively. We did not have any other-than-temporary impairments for the years ended December 31, 2019, 2018, and 2017.

Ownership Interest in Platform Science, Inc.

In 2018, we acquired a 30% ownership interest in PSI in exchange for granting PSI a non-exclusive license to our proprietary telematics mobile software that was developed to enable driver productivity and ensure regulatory compliance. Our ownership interest in PSI is being accounted for under ASC 321, Investments - Equity Securities using the measurement alternative and is recorded in other noncurrent assets on the consolidated balance sheets. The fair value of the ownership interest as of 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. As of December 31, 2019, there have been no transactions that would indicate that the value of our ownership interest in PSI changed.
v3.19.3.a.u2
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2019
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, 2019 and December 31, 2018.

(in millions)
 
Truckload
 
Logistics
 
Other
 
Total
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

Goodwill impairment charge
 
(34.6
)
 

 

 
(34.6
)
Foreign currency translation
 

 

 
(0.1
)
 
(0.1
)
Balance at December 31, 2019
 
$
103.6

 
$
14.2

 
$
9.7

 
$
127.5


At December 31, 2019 and 2018, we had accumulated goodwill impairment charges of $42.6 million and $8.0 million, respectively.
 
Goodwill is tested for impairment at least annually using the discounted cash flow, guideline public company, and guideline merged and acquired company methods to calculate the fair values of our reporting units. Key inputs used in the discounted cash flow approach include growth rates for sales and operating profit, perpetuity growth assumptions, and discount rates. As interest rates rise, the calculated fair values of our reporting units will decrease, which could impact the results of our goodwill impairment tests.

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.

During the second quarter of 2019, a triggering event occurred as results from our FTFM reporting unit continued to be less than projected, despite sustained investments and operational changes designed to improve efficiencies. Because of this triggering event, an impairment test was performed for the FTFM reporting unit. As a result of the testing performed, an impairment loss of $34.6 million was recorded for our FTFM reporting unit as the discounted cash flows expected to be generated by this reporting unit were not sufficient to recover its carrying value. This represented all of the goodwill related to the FTFM reporting unit. In the fourth quarter of 2019, annual impairment tests were performed on all three of our remaining reporting units with goodwill. No impairments resulted from these tests.

The identifiable intangible assets other than goodwill listed below are included in capitalized software and other noncurrent assets on the consolidated balance sheets.
 
 
December 31, 2019
 
December 31, 2018
(in millions)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer lists
 
$
1.1

 
$
1.1

 
$

 
$
10.5

 
$
3.5

 
$
7.0

Trade names
 

 

 

 
1.4

 
1.2

 
0.2

Total intangible assets
 
$
1.1

 
$
1.1

 
$

 
$
11.9

 
$
4.7

 
$
7.2



As part of the shutdown of our FTFM service offering in 2019, we wrote-off the gross carrying amount of the customer lists and trade name obtained through the WSL acquisition. An impairment charge of $6.5 million was recorded for the unamortized value of the customer lists within the Truckload segment. The impairment charge is included in the consolidated statements of comprehensive income within restructuring charges. Refer to Note 18, Restructuring Charges, for additional details.

Amortization expense for intangible assets was $0.7 million, $1.4 million and $1.5 million for the years ended December 31, 2019, 2018, and 2017, respectively. Accumulated amortization in the table above includes foreign currency translation related to a customer list.
v3.19.3.a.u2
Debt and Credit Facilities
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Debt and Credit Facilities DEBT AND CREDIT FACILITIES

As of December 31, 2019 and 2018, debt included the following:
(in millions)
 
December 31, 2019
 
December 31, 2018
Unsecured senior notes: principal payable at maturities ranging from 2020 through 2025; interest payable in semiannual installments through the same timeframe; weighted-average interest rate of 3.42% and 3.36% for 2019 and 2018, respectively
 
$
360.0

 
$
400.0

Equipment financing notes: paid in full during 2019; weighted average interest rate of 3.61% and 3.72% for 2019 and 2018, respectively
 

 
5.0

Total principal outstanding
 
360.0

 
405.0

Current maturities
 
(55.0
)
 
(45.0
)
Debt issuance costs
 
(0.4
)
 
(0.6
)
Long-term debt
 
$
304.6

 
$
359.4

Scheduled principal payments of debt subsequent to December 31, 2019 are as follows:
(in millions)
 
December 31, 2019
2020
 
$
55.0

2021
 
40.0

2022
 
60.0

2023
 
70.0

2024
 
40.0

2025 and thereafter
 
95.0

Total
 
$
360.0



Our Credit Agreement (the “2018 Credit Facility”) provides borrowing capacity of $250.0 million 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 through August 2023. The agreement also provides a sublimit of $100.0 million to be used for the issuance of letters of credit. We had no outstanding borrowings under this agreement as of December 31, 2019 or 2018. Standby letters of credit under this agreement amounted to $3.8 million and $3.9 million at December 31, 2019 and 2018, respectively, and were primarily related to the requirements of certain of our real estate leases.

We also have a Receivables Purchase Agreement (the “2018 Receivables Purchase Agreement”) that allows us to borrow funds against qualifying trade receivables at rates based on one-month LIBOR up to $200.0 million and provides for the issuance of standby letters of credit through September 2021. We had no outstanding borrowings under this facility at December 31, 2019 or 2018. At December 31, 2019 and 2018, standby letters of credit under this agreement amounted to $70.3 million and $65.3 million, respectively, and were primarily related to the requirements of certain of our insurance obligations.

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 and 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, 2019, the Company was in compliance with all financial covenants.
v3.19.3.a.u2
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Finance Leases LEASES

We adopted ASU 2016-02, Leases, which is codified in ASC 842, as of January 1, 2019. We elected the optional transition method as part of utilizing the modified retrospective approach in applying the new lease standard and have recognized right-of-use assets and lease liabilities as of January 1, 2019. Prior period amounts were not adjusted and will continue to be reported under ASC 840.

Adoption of the new standard resulted in the initial recording of right-of-use lease assets and related lease liabilities of $80.6 million and $85.2 million, respectively. As of December 31, 2019, right-of-use lease assets and related lease liabilities were $75.5 million and $82.6 million, respectively. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments over the term. Schneider's incremental borrowing rates are used as the discount rates for leases and are determined based on U.S. Treasury rates plus an applicable margin to arrive at all-in rates. Schneider uses multiple discount rates based on lease terms, functional currency, and other economic factors. The operating lease right-of-use asset also includes accrued lease expense resulting from the straight-line accounting under prior accounting methods, which is now being amortized over the remaining life of the lease.

In addition, we elected 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 also elected the practical expedient related to land easements, allowing us to carry forward the accounting treatment of our existing agreements for land easements, none of which were material as of January 1, 2019.
As lessee

We lease real estate, transportation equipment, and office equipment under operating and finance leases. Our real estate operating leases include operating centers, distribution warehouses, offices, and drop yards. Our finance leases relate almost entirely to office equipment. A majority of our leases include an option to extend the lease, and a small number of our leases include an option to early terminate the lease, which may include a termination payment. If we are reasonably certain to exercise an option to extend a lease, the extension period is included as part of the right-of-use asset and lease liability.
For our real estate leases, we have elected to apply the recognition requirement to leases of twelve months or less, therefore, an operating lease right-of-use asset and liability will be recognized for all these leases. For our equipment leases, we have elected to not apply the recognition requirements to leases of twelve months or less. These leases will be expensed on a straight-line basis and no operating lease right-of-use asset or liability will be recorded.

We have also elected to not separate the different components within the contract for our leases; therefore, all fixed costs associated with the lease are included in the right-of-use asset and the operating lease liability. This often relates to the requirement for us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs in addition to a base or fixed rent. Some of our leases have variable payment amounts, and the variable portions of those payments are excluded from the right-of-use asset and the lease liability.

At the inception of our contracts we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

None of our leases contain restrictions or covenants that restrict us from incurring other financial obligations.

The following table presents our net lease costs for the year ended December 31, 2019:
 
 
Financial Statement Classification
 
Year Ended December 31,
(in millions)
 
 
2019
Operating lease cost
 
 
 
 
Operating lease cost
 
Operating supplies and expenses
 
$
32.5

Short-term lease cost (1)
 
Operating supplies and expenses
 
7.6

Finance lease cost
 
 
 
 
Amortization of right-of-use assets
 
Depreciation and amortization
 
3.2

Interest on lease liabilities
 
Interest expense
 
0.2

Variable lease cost
 
Operating supplies and expenses
 
2.6

Sublease income
 
Operating revenues
 
(5.4
)
Total net lease cost
 
 
 
$
40.7

(1) Includes short-term lease costs for leases twelve months or less, including those with a duration of one month or less.

As of December 31, 2019, remaining lease terms and discount rates under operating and finance leases were as follows:
 
 
December 31, 2019
Weighted-average remaining lease term
 
 
Operating leases
 
4.4 years

Finance leases
 
4.3 years

 
 
 
Weighted-average discount rate (1)
 
 
Operating leases
 
4.1
%
Finance leases
 
3.3
%
(1) Determined based on a portfolio approach.
Other information related to our leases is as follows:
 
 
Year Ended December 31,
(in millions)
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash flows from operating leases
 
$
35.3

Operating cash flows from finance leases
 
0.2

Financing cash flows from finance leases
 
6.9

 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
Operating leases
 
$
29.4

Finance leases
 
1.4



Operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities are included in capitalized software and other noncurrent assets, other current liabilities, and other noncurrent liabilities, respectively, in the consolidated balance sheet as of December 31, 2019. For the year ended December 31, 2019, total operating lease right-of-use lease asset impairment losses were $4.1 million, of which $3.8 million related to the shutdown of our FTFM service offering. For further details on the impairment losses recorded refer to Note 18, Restructuring Charges.

At December 31, 2019, future lease payments under operating and finance leases were as follows:
(in millions)
 
Operating Leases
 
Finance Leases
2020
 
$
29.4

 
$
0.6

2021
 
20.3

 
0.3

2022
 
12.4

 
0.3

2023
 
10.3

 
0.3

2024
 
8.3

 
0.3

2025 and thereafter
 
9.4

 

Total
 
90.1

 
1.8

Amount representing interest
 
(7.5
)
 
(0.1
)
Present value of lease payments
 
82.6

 
1.7

Current maturities
 
(26.7
)
 
(0.5
)
Long-term lease obligations
 
$
55.9

 
$
1.2



For certain of our real estate leases, there are options contained within the lease agreement to extend beyond the initial lease term. The Company recognizes options as right-of-use assets and lease liabilities when deemed reasonably certain to be exercised. Future operating lease payments at December 31, 2019 include $11.0 million related to options to extend lease terms that we are reasonably certain to exercise.

Under ASC 840, future minimum lease payments as of December 31, 2018 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



As of December 31, 2019, we had additional leases that had not yet commenced of $9.5 million. These leases will commence in 2020 and have lease terms of one year to eight years.

The consolidated balance sheets include right-of-use assets acquired under finance leases as components of property and equipment as of December 31, 2019 and January 1, 2019, as follows:
(in millions)
 
December 31, 2019
 
January 1, 2019
Transportation equipment
 
$

 
$
19.9

Real property
 
0.8

 
0.8

Other property
 
2.6

 
0.6

Accumulated amortization
 
(1.9
)
 
(11.2
)
Total
 
$
1.5

 
$
10.1



Transportation equipment is being amortized to the estimated residual value by the end of the lease. Real and other property under finance leases are being amortized to a zero net book value over the initial lease term.

As lessor

We finance various types of transportation-related equipment for independent third parties under lease contracts which are generally for one year to five years and are accounted for as sales-type leases with fully guaranteed residual values. At the inception of the contracts, we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

With the adoption of ASC 842, all leases for which we are the lessor meet the definition of sales-type leases. In addition, as required under ASC 842, all cash flows from lease receipts are classified as operating activities on the consolidated statement of cash flows beginning January 1, 2019. We previously presented all cash flows from lease receipts as investing activities.

As of December 31, 2019 and January 1, 2019, the investment in lease receivables was as follows:
(in millions)
 
December 31, 2019
 
January 1, 2019
Future minimum payments to be received on leases
 
$
135.0

 
$
140.0

Guaranteed residual lease values
 
126.6

 
151.0

Total minimum lease payments to be received
 
261.6

 
291.0

Unearned income
 
(30.7
)
 
(28.7
)
Net investment in leases
 
230.9

 
262.3

 
 
 
 
 
Current maturities of lease receivables
 
122.1

 
129.6

Allowance for doubtful accounts
 
(0.6
)
 
(0.5
)
Current portion of lease receivables—net of allowance
 
121.5

 
129.1

 
 
 
 
 
Lease receivables—noncurrent
 
$
109.4

 
$
133.2


The amounts to be received on lease receivables as of December 31, 2019 were as follows:
(in millions)
 
December 31, 2019
2020
 
$
141.4

2021
 
78.0

2022
 
41.4

2023
 
0.8

2024
 

2025 and thereafter
 

Total undiscounted lease cash flows
 
261.6

Amount representing interest
 
(30.7
)
Present value of lease receivables
 
230.9

Current lease receivables, net of allowance
 
(121.5
)
Long-term lease receivable
 
$
109.4



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, 2019 and 2018, there were $0.4 million and $0.3 million of lease payments greater than 90 days past due, respectively. 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. Repossession and estimated reconditioning costs are recorded in the consolidated statements of comprehensive income in the period incurred.

Our lease payments primarily include base rentals and guaranteed residual values. In addition, we also collect one-time administrative fees and heavy vehicle use tax on our leases. We have elected to not separate the different components within the contract as the administrative fees were not material for the year ended December 31, 2019. We have also elected to exclude all taxes assessed by a governmental authority from the consideration (e.g., heavy vehicle use tax). All of our leases require fixed payments, therefore we have no variable payment provisions.
Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This is estimated to approximate the fair value of the equipment. Equipment is leased under sales-type leases where the lessees guarantee the residual value of the equipment.
The table below provides additional information on our sales-type leases.
 
 
Year Ended December 31,
(in millions)
 
2019
Revenue
 
$
196.0

Cost of goods sold
 
(177.1
)
Operating profit
 
$
18.9

 
 
 
Interest income on lease receivable
 
$
27.3



The amounts to be received on lease receivables as of December 31, 2018 under ASC 840 were as follows:
(in millions)
 
December 31, 2018
2019
 
$
149.0

2020
 
112.7

2021
 
29.0

2022
 
0.3

2023
 

2024 and thereafter
 

Total
 
$
291.0


Operating Leases LEASES

We adopted ASU 2016-02, Leases, which is codified in ASC 842, as of January 1, 2019. We elected the optional transition method as part of utilizing the modified retrospective approach in applying the new lease standard and have recognized right-of-use assets and lease liabilities as of January 1, 2019. Prior period amounts were not adjusted and will continue to be reported under ASC 840.

Adoption of the new standard resulted in the initial recording of right-of-use lease assets and related lease liabilities of $80.6 million and $85.2 million, respectively. As of December 31, 2019, right-of-use lease assets and related lease liabilities were $75.5 million and $82.6 million, respectively. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments over the term. Schneider's incremental borrowing rates are used as the discount rates for leases and are determined based on U.S. Treasury rates plus an applicable margin to arrive at all-in rates. Schneider uses multiple discount rates based on lease terms, functional currency, and other economic factors. The operating lease right-of-use asset also includes accrued lease expense resulting from the straight-line accounting under prior accounting methods, which is now being amortized over the remaining life of the lease.

In addition, we elected 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 also elected the practical expedient related to land easements, allowing us to carry forward the accounting treatment of our existing agreements for land easements, none of which were material as of January 1, 2019.
As lessee

We lease real estate, transportation equipment, and office equipment under operating and finance leases. Our real estate operating leases include operating centers, distribution warehouses, offices, and drop yards. Our finance leases relate almost entirely to office equipment. A majority of our leases include an option to extend the lease, and a small number of our leases include an option to early terminate the lease, which may include a termination payment. If we are reasonably certain to exercise an option to extend a lease, the extension period is included as part of the right-of-use asset and lease liability.
For our real estate leases, we have elected to apply the recognition requirement to leases of twelve months or less, therefore, an operating lease right-of-use asset and liability will be recognized for all these leases. For our equipment leases, we have elected to not apply the recognition requirements to leases of twelve months or less. These leases will be expensed on a straight-line basis and no operating lease right-of-use asset or liability will be recorded.

We have also elected to not separate the different components within the contract for our leases; therefore, all fixed costs associated with the lease are included in the right-of-use asset and the operating lease liability. This often relates to the requirement for us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs in addition to a base or fixed rent. Some of our leases have variable payment amounts, and the variable portions of those payments are excluded from the right-of-use asset and the lease liability.

At the inception of our contracts we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

None of our leases contain restrictions or covenants that restrict us from incurring other financial obligations.

The following table presents our net lease costs for the year ended December 31, 2019:
 
 
Financial Statement Classification
 
Year Ended December 31,
(in millions)
 
 
2019
Operating lease cost
 
 
 
 
Operating lease cost
 
Operating supplies and expenses
 
$
32.5

Short-term lease cost (1)
 
Operating supplies and expenses
 
7.6

Finance lease cost
 
 
 
 
Amortization of right-of-use assets
 
Depreciation and amortization
 
3.2

Interest on lease liabilities
 
Interest expense
 
0.2

Variable lease cost
 
Operating supplies and expenses
 
2.6

Sublease income
 
Operating revenues
 
(5.4
)
Total net lease cost
 
 
 
$
40.7

(1) Includes short-term lease costs for leases twelve months or less, including those with a duration of one month or less.

As of December 31, 2019, remaining lease terms and discount rates under operating and finance leases were as follows:
 
 
December 31, 2019
Weighted-average remaining lease term
 
 
Operating leases
 
4.4 years

Finance leases
 
4.3 years

 
 
 
Weighted-average discount rate (1)
 
 
Operating leases
 
4.1
%
Finance leases
 
3.3
%
(1) Determined based on a portfolio approach.
Other information related to our leases is as follows:
 
 
Year Ended December 31,
(in millions)
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash flows from operating leases
 
$
35.3

Operating cash flows from finance leases
 
0.2

Financing cash flows from finance leases
 
6.9

 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
Operating leases
 
$
29.4

Finance leases
 
1.4



Operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities are included in capitalized software and other noncurrent assets, other current liabilities, and other noncurrent liabilities, respectively, in the consolidated balance sheet as of December 31, 2019. For the year ended December 31, 2019, total operating lease right-of-use lease asset impairment losses were $4.1 million, of which $3.8 million related to the shutdown of our FTFM service offering. For further details on the impairment losses recorded refer to Note 18, Restructuring Charges.

At December 31, 2019, future lease payments under operating and finance leases were as follows:
(in millions)
 
Operating Leases
 
Finance Leases
2020
 
$
29.4

 
$
0.6

2021
 
20.3

 
0.3

2022
 
12.4

 
0.3

2023
 
10.3

 
0.3

2024
 
8.3

 
0.3

2025 and thereafter
 
9.4

 

Total
 
90.1

 
1.8

Amount representing interest
 
(7.5
)
 
(0.1
)
Present value of lease payments
 
82.6

 
1.7

Current maturities
 
(26.7
)
 
(0.5
)
Long-term lease obligations
 
$
55.9

 
$
1.2



For certain of our real estate leases, there are options contained within the lease agreement to extend beyond the initial lease term. The Company recognizes options as right-of-use assets and lease liabilities when deemed reasonably certain to be exercised. Future operating lease payments at December 31, 2019 include $11.0 million related to options to extend lease terms that we are reasonably certain to exercise.

Under ASC 840, future minimum lease payments as of December 31, 2018 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



As of December 31, 2019, we had additional leases that had not yet commenced of $9.5 million. These leases will commence in 2020 and have lease terms of one year to eight years.

The consolidated balance sheets include right-of-use assets acquired under finance leases as components of property and equipment as of December 31, 2019 and January 1, 2019, as follows:
(in millions)
 
December 31, 2019
 
January 1, 2019
Transportation equipment
 
$

 
$
19.9

Real property
 
0.8

 
0.8

Other property
 
2.6

 
0.6

Accumulated amortization