SCHNEIDER NATIONAL, INC., 10-K filed on 2/27/2018
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2017
Jun. 30, 2017
Feb. 22, 2018
Class A Common Shares
Feb. 22, 2018
Class B Common Stock
Document Information [Line Items]
 
 
 
 
Document Type
10-K 
 
 
 
Amendment Flag
false 
 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
 
Document Fiscal Year Focus
2017 
 
 
 
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
Non-accelerated Filer 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
Entity Voluntary Filers
No 
 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
 
Entity Public Float
 
$ 933,800,753 
 
 
Entity Common Stock, Shares Outstanding (shares)
 
 
83,029,500 
93,885,659 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
OPERATING REVENUES
$ 4,383.6 
$ 4,045.7 
$ 3,959.4 
OPERATING EXPENSES:
 
 
 
Purchased transportation
1,605.3 
1,466.0 
1,430.2 
Salaries, wages, and benefits
1,223.5 
1,129.3 
1,076.5 
Fuel and fuel taxes
305.5 
252.9 
290.5 
Depreciation and amortization
279.0 
266.0 
236.3 
Operating supplies and expenses
493.9 
449.9 
452.5 
Insurance and related expenses
90.3 
89.1 
82.0 
Other general expenses, net
105.8 
102.1 
125.2 
Goodwill impairment charge
6.0 
Total operating expenses
4,103.3 
3,755.3 
3,699.2 
INCOME FROM OPERATIONS
280.3 
290.4 
260.2 
OTHER EXPENSES (INCOME):
 
 
 
Interest expense—net
17.4 
21.4 
18.7 
Other expenses (income)—net
(0.5)
3.4 
2.8 
Total other expenses
16.9 
24.8 
21.5 
INCOME BEFORE INCOME TAXES
263.4 
265.6 
238.7 
PROVISION FOR (BENEFIT FROM) INCOME TAXES
(126.5)
108.7 
97.8 
NET INCOME
389.9 
156.9 
140.9 
OTHER COMPREHENSIVE INCOME (LOSS):
 
 
 
Foreign currency translation adjustments
(0.9)
0.7 
(0.4)
Unrealized gain on marketable securities—net of tax
(0.2)
Total other comprehensive income (loss)
(0.9)
0.5 
(0.4)
COMPREHENSIVE INCOME
$ 389.0 
$ 157.4 
$ 140.5 
Weighted average common shares outstanding (shares)
171.1 
156.6 
155.3 
Basic earnings per share (usd per share)
$ 2.28 
$ 1.00 
$ 0.91 
Weighted average diluted shares outstanding (shares)
171.3 
156.8 
155.6 
Diluted earnings per share (usd per share)
$ 2.28 
$ 1.00 
$ 0.91 
Dividends per share of common stock (usd per share)
$ 0.2 
$ 0.2 
$ 0.16 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 238.5 
$ 130.8 
Marketable securities
41.6 
52.5 
Trade accounts receivable—net of allowance of $5.2 million and $3.5 million, respectively
527.9 
444.0 
Other receivables
22.4 
41.8 
Current portion of lease receivables—net of allowance of $1.7 million and $1.0 million, respectively
104.9 
100.2 
Inventories
83.1 
74.1 
Prepaid expenses and other current assets
75.6 
80.2 
Total current assets
1,094.0 
923.6 
Property and equipment:
 
 
Transportation equipment
2,770.1 
2,596.7 
Land, buildings, and improvements
183.8 
178.9 
Other property and equipment
175.7 
191.6 
Total property and equipment
3,129.6 
2,967.2 
Accumulated depreciation
1,271.5 
1,209.2 
Net property and equipment
1,858.1 
1,758.0 
Lease receivables
138.9 
132.1 
Capitalized software and other noncurrent assets
74.7 
76.9 
Goodwill
164.8 
164.0 
Total noncurrent assets
2,236.5 
2,131.0 
TOTAL
3,330.5 
3,054.6 
CURRENT LIABILITIES:
 
 
Trade accounts payable
230.4 
227.3 
Accrued salaries and wages
85.8 
81.8 
Claims accruals - current
48.3 
52.2 
Current maturities of debt and capital lease obligations
19.1 
258.7 
Dividends payable
8.8 
Other current liabilities
69.6 
57.3 
Total current liabilities
462.0 
677.3 
NONCURRENT LIABILITIES:
 
 
Long-term debt and capital lease obligations
420.6 
439.6 
Claims accruals - noncurrent
102.5 
111.5 
Deferred income taxes
386.6 
538.6 
Other
68.6 
101.2 
Total noncurrent liabilities
978.3 
1,190.9 
COMMITMENTS AND CONTINGENCIES (Note 15)
   
   
TEMPORARY EQUITY - REDEEMABLE COMMON SHARES
 
 
Accumulated earnings
125.1 
Accumulated other comprehensive income
0.9 
Total temporary equity
1,186.4 
SHAREHOLDERS' EQUITY
 
 
Additional paid-in capital
1,534.6 
Accumulated earnings/ retained earnings
355.6 
Accumulated other comprehensive income
Total shareholders' equity
1,890.2 
TOTAL
3,330.5 
3,054.6 
Class A Redeemable Common Shares
 
 
TEMPORARY EQUITY - REDEEMABLE COMMON SHARES
 
 
Total temporary equity
563.2 
Class B Redeemable Common Shares
 
 
TEMPORARY EQUITY - REDEEMABLE COMMON SHARES
 
 
Total temporary equity
497.2 
Class A Common Shares
 
 
SHAREHOLDERS' EQUITY
 
 
Common stock
Class B Common Stock
 
 
SHAREHOLDERS' EQUITY
 
 
Common stock
$ 0 
$ 0 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Trade allowance
$ 5.2 
$ 3.5 
Allowance for lease receivables
$ 1.7 
$ 1.0 
Class A Redeemable Common Shares
 
 
Redeemable common shares, par value (usd per share)
$ 0 
$ 0 
Redeemable common shares, shares authorized (shares)
250,000,000 
Redeemable common shares, shares issued (shares)
83,029,500 
Redeemable common shares, shares outstanding (shares)
83,000,000 
Class B Redeemable Common Shares
 
 
Redeemable common shares, par value (usd per share)
$ 0 
$ 0 
Redeemable common shares, shares authorized (shares)
750,000,000 
Redeemable common shares, shares issued (shares)
73,294,560 
Redeemable common shares, shares outstanding (shares)
73,294,560 
Class A Common Shares
 
 
Common stock, par value (usd per share)
$ 0 
 
Common stock, shares authorized (shares)
250,000,000 
 
Common stock, shares issued (shares)
83,029,500 
 
Common stock, shares outstanding (shares)
83,029,500 
 
Class B Common Stock
 
 
Common stock, par value (usd per share)
$ 0 
 
Common stock, shares authorized (shares)
750,000,000 
 
Common stock, shares issued (shares)
93,850,011 
 
Common stock, shares outstanding (shares)
93,850,011 
 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
OPERATING ACTIVITIES:
 
 
 
Net income
$ 389.9 
$ 156.9 
$ 140.9 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
279.0 
266.0 
236.3 
Net gains on sales of property and equipment
(9.4)
(18.3)
(28.1)
Goodwill impairment charge
6.0 
Deferred income taxes
(152.0)
75.6 
86.7 
WSL contingent consideration adjustment
(13.5)
Long-term incentive compensation expense
17.0 
18.3 
16.6 
Other noncash items
(0.7)
(1.4)
(0.8)
Changes in operating assets and liabilities:
 
 
 
Receivables
(64.4)
1.1 
(14.1)
Other assets
1.4 
(4.9)
Payables
16.0 
(0.6)
32.4 
Other liabilities
(2.0)
(37.4)
9.7 
Net cash provided by operating activities
461.3 
455.3 
485.6 
INVESTING ACTIVITIES:
 
 
 
Purchases of transportation equipment
(388.5)
(422.1)
(441.8)
Purchases of other property and equipment
(33.4)
(37.0)
(41.0)
Proceeds from sale of property and equipment
70.0 
52.0 
70.4 
Proceeds from lease receipts and sale of off-lease inventory
61.0 
63.5 
57.0 
Purchases of lease equipment
(110.1)
(88.4)
(124.5)
Sales of marketable securities
10.5 
11.1 
15.2 
Purchases of marketable securities
(14.2)
(18.6)
Acquisition of businesses, net of cash acquired
(78.2)
Net cash used in investing activities
(390.5)
(513.3)
(483.3)
FINANCING ACTIVITIES:
 
 
 
Proceeds under revolving credit agreements
176.0 
130.0 
Payments under revolving credit agreements
(135.0)
(89.9)
(273.9)
Proceeds from other debt
0.5 
180.0 
Payments of debt and capital lease obligations
(123.7)
(28.1)
(3.5)
Payment of deferred consideration related to acquisition
(19.4)
Proceeds from IPO, net of issuance costs
340.6 
Dividends paid
(25.5)
(31.3)
(25.2)
Redemptions of redeemable common shares
(0.1)
(1.4)
(2.2)
Proceeds from issuances of redeemable common shares
2.3 
3.3 
Net cash provided by financing activities
36.9 
28.1 
8.5 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
107.7 
(29.9)
10.8 
CASH AND CASH EQUIVALENTS:
 
 
 
Beginning of period
130.8 
160.7 
149.9 
End of period
238.5 
130.8 
160.7 
Noncash investing and financing activity:
 
 
 
Equipment purchases in accounts payable
9.5 
22.4 
12.7 
Dividends declared but not yet paid
8.8 
Costs in accounts payable related to our IPO
2.3 
Increase in redemption value of redeemable common shares
126.6 
110.0 
113.2 
Cash paid (refunded) during the year for:
 
 
 
Interest
19.2 
21.6 
16.5 
Income taxes—net of refunds
$ (4.2)
$ 5.0 
$ 30.5 
Consolidated Statements Shareholders' Equity (USD $)
In Millions, unless otherwise specified
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income
Beginning balance, value at Dec. 31, 2016
$ 0 
$ 0 
$ 0 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Repurchases and retirements of stock related to pre-IPO share-based awards
(0.1)
 
(0.1)
 
 
Share issuances related to pre-IPO share-based awards
2.9 
 
2.9 
 
 
Ending balance, value at Apr. 04, 2017
 
 
 
 
 
Beginning balance, value at Dec. 31, 2016
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Share issuances - IPO
340.6 
 
340.6 
 
 
Transfer from temporary equity to permanent equity - See Note 10, Temporary Equity
1,201.2 
 
1,187.0 
13.3 
0.9 
Net income - post-IPO
389.9 
 
 
 
 
Share-based compensation
4.8 
 
4.8 
 
 
Other
 
(1.4)
1.4 
 
Ending balance, value at Dec. 31, 2017
1,890.2 
1,534.6 
355.6 
Beginning balance, value at Mar. 31, 2017
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Net income - post-IPO
367.4 
 
 
367.4 
 
Other comprehensive loss - post-IPO
(0.9)
 
 
 
(0.9)
Post-IPO dividends declared at $0.15 per share
(26.5)
 
 
(26.5)
 
Post-IPO issuance of stock
0.8 
 
 
 
 
Ending balance, value at Dec. 31, 2017
$ 1,890.2 
$ 0 
 
$ 355.6 
$ 0 
Consolidated Statements Shareholders' Equity (Parenthetical)
9 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of Stockholders' Equity [Abstract]
 
 
 
 
Dividends declared per share (usd per share)
$ 0.15 
$ 0.2 
$ 0.2 
$ 0.16 
Summary of Significant Accounting Policies
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 shareholders' equity, and consolidated statements of cash flows, unless otherwise noted.

Our Consolidated Financial Statements include all of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform with the current year presentation.
 
(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)
 
2017
 
2016
Tractors and trailing equipment for sale or lease
 
$
69.8

 
$
60.5

Replacement parts
 
11.8

 
12.4

Tires and other
 
1.5

 
1.2

Total
 
$
83.1

 
$
74.1




 (g) Investments in Marketable Equity Securities
 
Our marketable securities have maturities ranging from 4 months to 84 months, but our intent is to hold them for less than one year. They are classified as available for sale and carried at fair value in current assets on the consolidated balance sheets. Any unrealized gains and losses, net of tax, are recognized in 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:

 
2017
Tractors
2 - 10 years
Trailing equipment
2 - 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. We capitalize tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service. Gains and losses on the sale or other disposition of equipment are based on the difference between the proceeds received 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. Net gains on equipment sales totaled $9.4 million in 2017, $18.3 million in 2016, and $28.1 million in 2015.
 
(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. As of December 31, 2017 and 2016, assets held for sale by segment were as follows:

(in millions)
 
2017
 
2016
Truckload
 
$
35.2

 
$
33.8

Intermodal
 
0.7

 
3.8

Total
 
$
35.9

 
$
37.6


(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 a quarterly 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. Both the previous and the current testing dates are in the fourth quarter of the year, and our 2017 test using the new date took place less than twelve months after the previous annual test. Therefore, this change was not a material change in the application of an accounting principle.

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 6, 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 when they are placed in held for sale status and in subsequent reporting periods. 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 income. Impairment losses were $1.4 million in 2017, immaterial in 2016, and $3.0 million in 2015.

(l) Revenue Recognition
 
Through December 31, 2017, we recorded transportation revenue at the time of delivery. Beginning in 2018, with the adoption of ASC 606, Revenue from Contracts with Customers, we will recognize 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 will be 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 section (q) within this Note titled "Accounting Standards Issued But Not Yet Adopted" for more information.
 
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, 2017, we had one customer who accounted for slightly more than 10% of our consolidated revenues. The revenues from this customer totaled $460 million and crossed all of our reportable segments.
 
(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 interest 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.

As disclosed in Note 2, 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 on a straight-line basis over the requisite service periods within each award. See Note 13, 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, 2017 and 2016, we had an accrual of approximately $147.2 million and $160.1 million, respectively, for estimated claims. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2017 and 2016, we had an aggregate prepaid insurance asset of approximately $7.9 million and $7.0 million, respectively, which represented prefunded premiums and deposits.
 
(q) Accounting Standards Issued But Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is codified as ASC 606. This guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. As amended, the new revenue recognition standard is effective for us beginning with the reporting period ending March 31, 2018. We chose to use the modified retrospective approach for adoption, which requires us to record the cumulative effect of the transition through retained earnings as of January 1, 2018. Retained earnings will increase by approximately $8 million upon adoption. The primary change related to the new standard is that we will be required to recognize revenue from our transportation contracts over time as control transfers to the customer, which is determined based on the progress toward completion. Prior to the adoption of this standard, we recognized revenue at delivery. The impact of this change is expected to be immaterial to our consolidated statements of comprehensive income in future periods. The "contract" as defined by the new standard is the individual order level for the majority of our transportation agreements. These orders are very short-term in nature. For our warehousing contracts and our supply chain management contracts, we are electing to use the right-to-invoice practical expedient, as this provides the best reflection of the value customers receive from our services.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This update was issued to enhance the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. These provisions are effective for us beginning with the reporting period ending March 31, 2018, but we do not expect the adoption of this ASU to have an impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize in the consolidated balance sheets assets and liabilities for leases with lease terms of more than 12 months. Consistent with current accounting principles, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current accounting principles, which require only capital leases to be recognized in the consolidated balance sheets, the new ASU will require both types of leases to be recognized in the consolidated balance sheets. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that companies may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases. The new standard is effective for us beginning with the reporting period ending March 31, 2019, with early adoption permitted. We expect an increase in our assets and liabilities from the recognition of operating leases on the consolidated balance sheets and are in the process of evaluating other potential impacts that the adoption of this ASU will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires companies to use a forward-looking, expected loss model to estimate credit losses on various types of financial assets and net investments in leases. It also requires additional disclosure related to credit quality of trade and other receivables, including information related to management’s estimate of credit allowances. This guidance is effective for us beginning with the reporting period ending March 31, 2020. We currently cannot reasonably estimate the impact that the adoption of this ASU will have on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable. The provisions of this update are effective for us beginning with the reporting period ending March 31, 2018. Several of the changes to the presentation of items identified in the guidance could impact our classification on our cash flow statements, but the impact will be dependent on circumstances after adoption.

In January 2017, the FASB issued ASU 2017-4, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment testing process. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the new standard, a goodwill impairment loss is measured as the excess of the carrying value of a reporting unit over its fair value. The provisions of this update would have been effective for our goodwill impairment test in 2020, but we early-adopted this standard in the fourth quarter of 2017 for our annual goodwill impairment test. The change had no impact on the outcome of the impairment test.
IPO
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 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.
Acquisition
Acquisition
ACQUISITION

On June 1, 2016, we acquired 100% of the shares of WSL for $150.4 million in cash and future payments. WSL brings together final-mile delivery, claims-free handling, and an innovative technology platform. It provides 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 FASB 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. No adjustments were made to the estimated fair values of the assets acquired and liabilities assumed during the year ended December 31, 2017, and the measurement period has ended.
(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 total present value of the remaining two payments was $38.0 million at December 31, 2017.

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, 2017. See Note 4, 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 period 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, 2015.
 (in millions, except per share data)
 
Year Ended December 31, 2016
 
Year Ended December 31, 2015
Pro forma net sales
 
$
4,119.3

 
$
4,137.0

Pro forma net income
 
$
155.0

 
$
144.8

Basic earnings per share as reported
 
$
1.00

 
$
0.91

Pro forma basic earnings per share
 
$
0.99

 
$
0.93

Diluted earnings per share as reported
 
$
1.00

 
$
0.91

Pro forma diluted earnings per share
 
$
0.99

 
$
0.93

Fair Value
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, 2017. 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)
 
2017
 
2016
Beginning balance
 
$
13.5

 
$
13.5

Change in fair value
 
(13.5
)
 

Ending balance
 
$

 
$
13.5



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.

See Note 5, Marketable Securities, for information on the fair value of our marketable securities.

There were no transfers between levels for the periods shown.

Fair Value of Other Financial Instruments

The recorded value of cash, receivables, and payables approximates fair value.

The following table shows the long-term debt on our balance sheets, which is not recorded at fair value:
 
 
December 31, 2017
 
December 31, 2016
(in millions)
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Fixed-rate debt portfolio
 
$
429.8

 
$
432.4

 
$
684.3

 
$
683.9

Marketable Securities
Marketable Securities
MARKETABLE SECURITIES

The following table presents the values of our marketable securities as of the dates shown.
 
 
December 31, 2017
 
December 31, 2016
(in millions)
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Zero coupon bonds
 
$
3.8

 
$
3.9

 
$
3.8

 
$
3.8

U.S. treasury and government agencies
 
6.0

 
6.0

 
8.0

 
8.1

Asset-backed securities
 
0.3

 
0.3

 
0.4

 
0.4

Corporate debt securities
 
9.1

 
9.2

 
14.4

 
14.5

State and political subdivisions
 
22.7

 
22.2

 
26.2

 
25.7

Total marketable securities
 
$
41.9

 
$
41.6

 
$
52.8

 
$
52.5



Gross realized and unrealized gains and losses on sales of marketable securities were not material for the years ended December 31, 2017 and 2016.
Goodwill and Other Intangible Assets
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 year ended 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


At December 31, 2017 and 2016, we had accumulated goodwill impairment charges of $6.0 million.

In the fourth quarter of 2017, annual impairment tests were performed on all of our reporting units containing goodwill. See Note 1(k), Summary of Significant Accounting Policies - Asset Impairment, for more information. No impairments resulted from these tests.

The identifiable intangible assets other than goodwill listed below are included in other noncurrent assets on the condensed consolidated balance sheets.
 
 
December 31, 2017
 
December 31, 2016
(in millions)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer lists
 
$
10.5

 
$
2.5

 
$
8.0

 
$
10.5

 
$
1.4

 
$
9.1

Trade names
 
1.4

 
0.7

 
0.7

 
1.4

 
0.3

 
1.1

Total intangible assets
 
$
11.9

 
$
3.2

 
$
8.7

 
$
11.9

 
$
1.7

 
$
10.2



Amortization expense for intangible assets was $1.5 million, $0.9 million and $0.4 million for the years ended December 31, 2017, 2016, and 2015, 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):
2018
1.4

2019
1.1

2020
1.0

2021
1.0

2022
1.0

2023 and thereafter
3.2

Total
$
8.7

Debt and Credit Facilities
Debt and Credit Facilities
DEBT AND CREDIT FACILITIES

As of December 31, 2017 and 2016, debt included the following:
(in millions)
 
December 31,
2017
 
December 31,
2016
Unsecured senior notes: principal payable at maturities ranging from 2018 through 2025; interest payable in semiannual installments through the same time frame; weighted-average interest rate of 3.36% and 3.66% for 2017 and 2016, respectively *
 
$
400.0

 
$
500.0

Equipment financing notes: principal and interest payable in monthly installments through 2023; weighted average interest rate of 3.76% and 3.82% for 2017 and 2016, respectively
 
29.8

 
49.3

Secured credit facility: collateralized by certain trade receivables; interest rate of 1.68% for 2016
 

 
135.0

Total principal outstanding
 
429.8

 
684.3

Current maturities
 
(15.2
)
 
(254.4
)
Debt issuance costs
 
(0.9
)
 
(1.1
)
Long-term debt
 
$
413.7

 
$
428.8


* We used $100 million of the proceeds from our IPO to repay the 4.83% unsecured senior note that matured on May 7, 2017.

Scheduled principal payments of debt subsequent to December 31, 2017 are as follows:

Years ending December 31
 
(in millions)

2018
 
$
15.2

2019
 
50.7

2020
 
56.0

2021
 
40.8

2022
 
61.2

2023 and thereafter
 
205.9

Total
 
$
429.8



Our master revolving credit agreement provides borrowing capacity of up to $250.0 million through November 2018. This 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, 2017 or 2016. Standby letters of credit under this agreement amounted to $3.9 million and $4.1 million at December 31, 2017 and 2016, respectively, and were primarily related to the requirements of certain of our real estate leases.

Our secured credit facility allows us to borrow up to $200.0 million against qualifying trade receivables at rates based on the 30-day LIBOR. In December 2017, this agreement was extended through September 2018. At December 31, 2017 and 2016, standby letters of credit under this agreement amounted to $63.8 million and $60.1 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.
Leases Leases
LEASES

As lessee — We have various lease agreements primarily related to transportation equipment and real estate. At December 31, 2017, 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
2018
 
$
36.0

 
$
4.2

2019
 
24.9

 
6.9

2020
 
18.4

 
0.2

2021
 
9.6

 

2022
 
6.2

 

2023 and thereafter
 
16.6

 

Total
 
$
111.7

 
$
11.3

Amount representing interest
 
 
 
(0.5
)
Present value of minimum lease payments
 
 
 
10.8

Current maturities
 
 
 
(3.9
)
Long-term capital lease obligations
 
 
 
$
6.9



Lease expense for all operating leases was $38.0 million, $45.6 million, and $51.4 million in 2017, 2016, and 2015, 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 lease as components of property and equipment as of December 31, 2017 and 2016, as follows:

(in millions)
 
2017
 
2016
Transportation equipment
 
$
25.0

 
$
25.1

Real property
 
0.8

 
0.8

Other property
 
0.6

 
0.6

Accumulated amortization
 
(12.6
)
 
(9.1
)
Total
 
$
13.8

 
$
17.4



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 or direct financing leases. As of December 31, 2017 and 2016, the investment in lease receivables was as follows:

(in millions)
 
2017
 
2016
Future minimum payments to be received on leases
 
$
141.2

 
$
137.3

Guaranteed residual lease values
 
130.7

 
124.5

Total minimum lease payments to be received
 
271.9

 
261.8

Unearned income
 
(28.1
)
 
(29.5
)
Net investment in leases
 
243.8

 
232.3

 
 
 
 
 
Current maturities of lease receivables
 
106.6

 
101.2

Less—allowance for doubtful accounts
 
(1.7
)
 
(1.0
)
Current portion of lease receivables—net of allowance
 
104.9

 
100.2

 
 
 
 
 
Lease receivables—noncurrent
 
$
138.9

 
$
132.1



The principal amounts to be received on lease receivables as of December 31, 2017, were as follows:

Years ending December 31
(in millions)
2018
$
104.9

2019
98.3

2020
39.6

2021
1.0

2022

2023 and thereafter

Total
$
243.8



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, 2017, there were $1.4 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

As lessee — We have various lease agreements primarily related to transportation equipment and real estate. At December 31, 2017, 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
2018
 
$
36.0

 
$
4.2

2019
 
24.9

 
6.9

2020
 
18.4

 
0.2

2021
 
9.6

 

2022
 
6.2

 

2023 and thereafter
 
16.6

 

Total
 
$
111.7

 
$
11.3

Amount representing interest
 
 
 
(0.5
)
Present value of minimum lease payments
 
 
 
10.8

Current maturities
 
 
 
(3.9
)
Long-term capital lease obligations
 
 
 
$
6.9



Lease expense for all operating leases was $38.0 million, $45.6 million, and $51.4 million in 2017, 2016, and 2015, 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 lease as components of property and equipment as of December 31, 2017 and 2016, as follows:

(in millions)
 
2017
 
2016
Transportation equipment
 
$
25.0

 
$
25.1

Real property
 
0.8

 
0.8

Other property
 
0.6

 
0.6

Accumulated amortization
 
(12.6
)
 
(9.1
)
Total
 
$
13.8

 
$
17.4



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 or direct financing leases. As of December 31, 2017 and 2016, the investment in lease receivables was as follows:

(in millions)
 
2017
 
2016
Future minimum payments to be received on leases
 
$
141.2

 
$
137.3

Guaranteed residual lease values
 
130.7

 
124.5

Total minimum lease payments to be received
 
271.9

 
261.8

Unearned income
 
(28.1
)
 
(29.5
)
Net investment in leases
 
243.8

 
232.3

 
 
 
 
 
Current maturities of lease receivables
 
106.6

 
101.2

Less—allowance for doubtful accounts
 
(1.7
)
 
(1.0
)
Current portion of lease receivables—net of allowance
 
104.9

 
100.2

 
 
 
 
 
Lease receivables—noncurrent
 
$
138.9

 
$
132.1



The principal amounts to be received on lease receivables as of December 31, 2017, were as follows:

Years ending December 31
(in millions)
2018
$
104.9

2019
98.3

2020
39.6

2021
1.0

2022

2023 and thereafter

Total
$
243.8



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, 2017, there were $1.4 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.
Income Taxes
Income Taxes
INCOME TAXES

In December 2017, President Trump signed into law new tax legislation known as the Tax Cuts and Jobs Act. In accordance with GAAP, the effects of this new legislation were recognized in 2017 upon enactment. The primary impact of the Act for us relates to the change in the Federal corporate income tax rate from 35% to 21% beginning in 2018. Our previously recorded deferred tax assets and liabilities were remeasured to reflect the 21% rate at which these assets and liabilities will be realized in future periods, with the corresponding impact recorded through our provision for income taxes.

In accordance with SEC Staff Accounting Bulletin No. 118, the amounts recorded in the fourth quarter of 2017 related to the Tax Cuts and Jobs Act represent reasonable estimates based on our analysis to date and are considered to be provisional and subject to revision during 2018. Provisional amounts were recorded for the remeasurement of our 2017 net deferred tax liabilities and ancillary state tax effects. These amounts are considered to be provisional as we continue to assess available tax methods and elections and refine our computations. In addition, further regulatory guidance related to the Tax Cuts and Jobs Act is expected to be issued in 2018 which may result in changes to our current estimates. Any revisions to the estimated impacts of the Tax Cuts and Jobs Act will be recorded quarterly until the computations are complete, which is expected to be no later than the fourth quarter of 2018.

The components of the provision for income taxes as of December 31, 2017, 2016 and 2015, were as follows:

 
(in millions)
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
 
 
Federal
 
$
19.3

 
$
24.4

 
$
5.5

 
State and other
 
5.6

 
7.5

 
7.5

 
 
 
24.9

 
31.9

 
13.0

 
 
 
 
 
 
 
 
Deferred:
 
 
 
 
 
 
 
Federal
 
71.4

 
71.2

 
79.3

 
State and other
 
6.7

 
5.6

 
5.5

 
Impact of the Tax Cuts and Jobs Act
 
(229.5
)
 

 

 
 
 
(151.4
)
 
76.8

 
84.8

Total provision for (benefit from) income taxes
 
$
(126.5
)
 
$
108.7

 
$
97.8


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

The provision for income taxes as of December 31, 2017, 2016, and 2015 differed from the amounts computed using the federal statutory rate of 35% in effect for each year as follows:

 
 
 
2017
 
2016
 
2015
 
(in millions, except percentages)
 
Dollar Impact
Rate
 
Dollar Impact
Rate
 
Dollar Impact
Rate
Income tax at federal statutory rate
 
$
92.2

35.0
 %
 
$
93.0

35.0
%
 
$
83.6

35.0
%
State tax, net of federal effect
 
8.6

3.3
 %
 
10.5

3.9
%
 
10.3

4.3
%
Nondeductible meals and entertainment
 
3.4

1.3
 %
 
3.4

1.3
%
 
3.6

1.5
%
Impact of the Tax Cuts and Jobs Act
 
(229.5
)
(87.1
)%
 


 


Other, net
 
(1.2
)
(0.5
)%
 
1.8

0.7
%
 
0.3

0.2
%
 
Total provision for (benefit from) income taxes
 
$
(126.5
)
(48.0
)%
 
$
108.7

40.9
%
 
$
97.8

41.0
%


The components of the net deferred tax liability included in deferred income taxes in the consolidated balance sheets as of December 31, 2017 and 2016, were as follows:

(in millions)
 
2017
 
2016
Deferred tax assets:
 
 
 
 
Allowances for doubtful accounts
 
$
1.1

 
$
1.0

Compensation and employee benefits
 
15.6

 
21.5

Insurance and claims accruals
 
2.8

 
4.7

State net operating losses and credit carryforwards
 
17.7

 
14.0

Other
 
4.0

 
6.2

 
Total gross deferred tax assets
 
41.2

 
47.4

Valuation allowance
 
(4.4
)
 
(2.8
)
 
Total deferred tax assets, net of valuation allowance
 
36.8

 
44.6

Deferred tax liabilities:
 
 
 
 
Property and equipment
 
410.8

 
572.9

Prepaid expenses
 
3.6

 
5.1

Intangibles
 
8.7

 
5.2

Other
 
0.3

 

 
Total gross deferred tax liabilities
 
423.4

 
583.2

Net deferred tax liability
 
$
386.6

 
$
538.6



Unrecognized Tax Benefits-Our unrecognized tax benefits as of December 31, 2017 would reduce the provision for income taxes if subsequently recognized. Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. Interest and penalties recorded in income tax expense for the years ended December 31, 2017, 2016, and 2015 were immaterial. Accrued interest and penalties for such unrecognized tax benefits as of December 31, 2017, 2016 and 2015 were $1.2 million, $1.0 million, and $0.9 million, respectively. We expect no significant increases or decreases for unrecognized tax benefits during the twelve months immediately following the December 31, 2017 reporting date.

As of December 31, 2017, 2016, and 2015, a reconciliation of the beginning and ending amount of unrecognized tax benefits, which is recorded as other noncurrent liabilities in the consolidated balance sheets, is as follows:

(in millions)
 
2017
 
2016
 
2015
Gross unrecognized tax benefits - beginning of year
 
$
2.4

 
$
2.0

 
$
2.9

 
Gross increases - tax positions related to current year
 
0.4

 
0.5

 
0.5

 
Gross decreases - tax positions taken in prior years
 

 
(0.1
)
 
(1.1
)
 
Settlements
 

 

 
(0.2
)
 
Lapse of statutes
 

 

 
(0.1
)
Gross unrecognized tax benefits - end of year
 
$
2.8

 
$
2.4

 
$
2.0



Tax Examinations-We file a U.S. federal income tax return, as well as income tax returns in a majority of state tax jurisdictions. We also file returns in foreign jurisdictions. The years 2014, 2015 and 2016 are open for examination by the Internal Revenue Service (“IRS”), and various years are open for examination by state and foreign tax authorities. In June 2016, we closed the examination with the IRS for tax years 2012 and 2013, and there were no adjustments that had a material impact on income tax expense. State and foreign jurisdictional statutes of limitations generally range from three to four years.

Carryforwards-As of December 31, 2017, we had $289.1 million of state net operating loss carryforwards which are subject to expiration from 2018 to 2037. We also had state credit carryforwards of $0.8 million, which are subject to expiration from 2018 to 2027, and no capital loss carryforwards. The deferred tax assets related to carryforwards at December 31, 2017 were $17.2 million for state net operating loss carryforwards and $0.5 million for state credit carryforwards. Carryforwards are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax-planning strategies, and projections of future taxable income. At December 31, 2017, we carried a total valuation allowance of $4.4 million, which represents $4.1 million against state deferred tax assets and $0.3 million against state credit carryforwards.
Temporary Equity
Temporary Equity
TEMPORARY EQUITY

Prior to our IPO in April 2017, our Class A and Class B Common Stock was considered redeemable under GAAP because of certain repurchase rights granted to our shareholders pursuant to the Schneider National, Inc. Employee Stock Purchase Plan and certain agreements governing ownership of our common stock held by existing shareholders, including members of the Schneider family and their family trusts. As a result, all vested Class A and Class B common shares were recorded as temporary equity (redeemable common shares) on the consolidated balance sheets at their redemption value as of the respective balance sheet dates. Accumulated earnings on the consolidated balance sheets were adjusted for the changes during the period in the current redemption value of vested Class A and Class B redeemable common shares.

All contractual redemption features were removed at the time of the IPO. As a consequence, all outstanding shares of Class A and Class B Common Stock ceased to be considered temporary equity and were reclassified to Shareholders’ Equity, including the associated balances of accumulated earnings and accumulated other comprehensive income. As the common shares have no par value, the amounts recorded in temporary equity for the share redemption value were recorded to additional paid-in capital within Shareholders’ Equity upon the transfer.

The following table shows all changes to temporary equity during the year ended December 31, 2017.
 
 
Class A
Redeemable Common
Shares
 
Class B
Redeemable Common
Shares
 
Accumulated Earnings
 
Accumulated Other Comprehensive Income
 
 
(in millions)
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
Total
BALANCE—December 31, 2016
 
83.0

 
$
563.2

 
73.3

 
$
497.2

 
$
125.1

 
$
0.9

 
$
1,186.4

Net income
 

 

 

 

 
22.6

 

 
22.6

Other comprehensive income
 

 

 

 

 

 

 

Dividends declared at $0.05 per share
 

 

 

 

 
(7.8
)
 

 
(7.8
)
Change in redemption value of redeemable common shares
 

 
67.3

 

 
59.3

 
(126.6
)
 

 

Transfer from temporary equity to common equity
 
(83.0
)
 
(630.5
)
 
(73.3
)
 
(556.5
)
 
(13.3
)
 
(0.9
)
 
(1,201.2
)
BALANCE—December 31, 2017
 

 
$

 

 
$

 
$

 
$

 
$

Common Equity
Common Equity
COMMON EQUITY

On March 21, 2017, the Board declared pro rata share dividends entitling each holder of our Class A and Class B common stock outstanding as of March 21, 2017 to receive 29 shares of Class A or Class B common stock for each share of Class A or Class B common stock held by the shareholder. The share dividend was accounted for as a 30-for-1 stock split and is retroactively reflected in these consolidated financial statements.

All share redemption provisions mentioned in Note 10, Temporary Equity, were removed effective with the IPO of Class B common shares in April 2017. Therefore, all Class A and Class B common shares were reclassified from temporary equity to permanent equity as of April 2017.

Prior to the IPO, restricted share awards that were not yet vested and held for more than 180 days were classified as liabilities at their redemption values, taking into consideration the portion of the requisite service that had been provided as of the reporting date. At the IPO date, these unvested shares were reclassified to equity.

Earnings Per Share

As disclosed in Note 2, IPO, our IPO of shares of Class B Common Stock was effective in April 2017. In connection with the offering, we sold additional shares of common stock.
 
 
Year Ended December 31,
(in millions, except per share data)
 
2017
 
2016
 
2015
Basic earnings per common share:
 
 
 
 
 
 
Net income available to common shareholders
 
$
389.9

 
$
156.9

 
$
140.9

Weighted average common shares issued and outstanding
 
171.1

 
156.6

 
155.3

Basic earnings per common share
 
$
2.28

 
$
1.00

 
$
0.91

Diluted earnings per common share:
 
 
 
 
 
 
Net income applicable to diluted earnings per common share
 
$
389.9

 
$
156.9

 
$
140.9

Dilutive potential common shares:
 
 
 
 
 
 
Restricted share units
 
0.2

 
0.2

 
0.3

Dilutive potential common shares
 
0.2

 
0.2

 
0.3

Total diluted average common shares issued and outstanding
 
171.3

 
156.8

 
155.6

Diluted earnings per common share
 
$
2.28

 
$
1.00

 
$
0.91



The calculation of diluted earnings per share for the twelve months ended December 31, 2017 excluded an immaterial amount of share-based compensation awards that had an anti-dilutive effect.

Subsequent Event - Dividends Declared

In January 2018, our Board of Directors declared a quarterly cash dividend for the first fiscal quarter of 2018 in the amount of $0.06 per share to holders of our Class A and Class B common stock. The dividend is payable to shareholders of record at the close of business on March 15, 2018, and is expected to be paid on April 9, 2018.
Employee Benefit Plans
Pension and Other Postretirement Benefits Disclosure [Text Block]
EMPLOYEE BENEFIT PLANS

We sponsor defined contribution plans for certain eligible employees. Under these plans, annual contribution levels, as defined in the agreements, are based upon years of service. Expense under these plans totaled $11.2 million, $10.7 million, and $10.3 million in 2017, 2016, and 2015, respectively, and is classified in salaries, wages, and benefits in the consolidated statements of comprehensive income.

We also have a savings plan, organized pursuant to Section 401(k) of the Internal Revenue Code, to provide employees with additional income upon retirement. Under the terms of the plan, substantially all employees may contribute a percentage of their annual compensation, as defined, to the plan. We make contributions to the plan, up to a maximum amount per employee, based upon a percentage of employee contributions. Our net expense under this plan was $10.7 million, $10.0 million, and $9.6 million in 2017, 2016, and 2015, respectively.
Share-based Compensation
Share-based Compensation
SHARE-BASED COMPENSATION

In April 2017, we granted various equity-based awards relating to Class B Common Stock under our 2017 Omnibus Incentive Plan ("the Plan"). These awards consisted of the following: restricted shares, restricted stock units ("RSUs"), performance-based restricted shares ("Performance Shares"), performance-based restricted stock units ("PSUs"), and non-qualified stock options.

Prior to our IPO, we granted restricted shares of Class B Common Stock. The pre-IPO restricted shares must be paid out in shares, and are accounted for as equity awards. In the year ended December 31, 2017, no restricted shares were granted prior to our IPO.

We account for our restricted shares, RSUs, performance shares, PSUs, and non-qualified stock options granted in 2017 as equity awards in accordance with the applicable accounting standards for these types of share-based payments. These standards require that the cost of the awards be recognized in our Consolidated Financial Statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award, subject to the attainment of performance metrics established for performance-based restricted shares and PSUs. Share-based compensation expense is recorded in salaries, wages, and employee benefits in our Consolidated Statements of Earnings, along with other compensation expenses to employees.

The following table summarizes the components of our share-based compensation program expense (in millions):

 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Restricted Shares and RSUs
 
$
1.5

 
$

 
$

Pre-IPO Restricted Shares
 
1.9

 
2.2

 
2.2

Performance Shares and PSUs
 
1.2

 

 

Nonqualified Stock Options
 
0.6

 

 

Share-based compensation expense
 
$
5.2

 
$
2.2

 
$
2.2

Related tax benefit
 
$
2.0

 
$
0.9

 
$
0.9



As of December 31, 2017, we had $8.2 million of pre-tax unrecognized compensation cost related to outstanding share-based compensation awards that is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Shares and RSUs

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

Restricted Shares and RSUs
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2016
 

 
$

Granted
 
246,516

 
19.00

Vested
 

 

Forfeited
 
(6,500
)
 
19.00

Unvested at December 31, 2017
 
240,016

 
$
19.00


Cash dividends are not paid on the unvested pre-IPO restricted shares, nor do they accumulate during the vesting period. Shares included in the pre-IPO restricted share grants vest ratably over a three-year period.

Pre-IPO Restricted Shares
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at January 1, 2016
 
798,960

 
$
5.63

Granted
 
386,370

 
6.78

Vested
 
(398,220
)
 
5.42

Forfeited
 
(9,900
)
 
6.17

Unvested at December 31, 2016
 
777,210

 
6.31

Granted
 

 

Vested
 
(621,722
)
 
7.59

Forfeited (a)
 
(3,289
)
 
19.00

Unvested at December 31, 2017
 
152,199

 
$
19.00


(a) In April 2017, unvested restricted shares were adjusted to the IPO share price of $19.00.
Performance Shares and PSUs

Performance shares and PSUs include a three-year performance period with vesting based on attainment of threshold performance of net income and return on capital targets. These awards cliff-vest at the end of the three year performance period, subject to continued employment through the vesting date or retirement eligibility, and payout ranges from 0%-200% for PSUs and from 0%-100% for performance shares. Dividend equivalents equal to dividends paid on our common shares during the vesting period are tracked and accumulated for each award. The dividends are distributed to participants in cash consistent with the date the awards vest.
Performance Shares and PSUs
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2016
 

 
$

Granted
 
396,201

 
19.00

Vested
 

 

Forfeited
 
(4,660
)
 
19.00

Unvested at December 31, 2017
 
391,541

 
$
19.00



Nonqualified Stock Options

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

Nonqualified Stock Options
 
Number of Awards
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2016
 

 
$

Granted
 
229,620

 
6.37

Vested
 

 

Forfeited
 

 

Unvested at December 31, 2017
 
229,620

 
$
6.37



We estimated the grant date fair value of option awards using the Black-Scholes option pricing model. The Black-Scholes option valuation model uses assumptions over the expected term of the options. We used volatility analysis of comparable companies to determine the expected volatility of the stock. We used market data to estimate option exercise and employee termination within the valuation model. The expected term of options granted was based on the average of the contractual term and the weighted average of the vesting term, and it represents the average period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Assumptions used in calculating the Black-Scholes value of options granted during 2017 were as follows:

 
 
Year Ended December 31, 2017
Weighted-average Black-Scholes value
 
$
6.37

Black-Scholes Assumptions:
 
 
Expected term
 
6.25 years

Expected volatility
 
35.0
%
Expected dividend yield
 
1.1
%
Risk-free interest rate
 
2.2
%


Director Share Awards and Deferred Stock Units

We also granted equity retainer awards, or shares in lieu of cash retainer awards, on a quarterly basis to our non-employee directors during 2017 under the Plan. These awards consisted of fully vested shares of our Class B Common Stock or deferred stock units (“DSUs”) that are granted in arrears on the first business day following a quarter close. The number of shares or DSUs granted each quarter was determined by dividing the quarterly retainer amount by the fair market value of the shares of common stock as of the grant date. We account for the director share awards and DSUs granted in 2017 as liability awards in accordance with the applicable accounting standards for these types of share-based payments.
Other Long-Term Incentive Compensation
Other Long-Term Incentive Compensation
OTHER LONG-TERM INCENTIVE COMPENSATION

We maintain legacy long-term cash incentive compensation plans. The total expense recognized for the plans that include executives was $10.8 million in 2017, $13.7 million in 2016, and $14.4 million in 2015.

The 2011 Omnibus Long-term Incentive Plan (which we refer to as the “LTIP”), under which performance-based Long-Term Cash Awards ("Cash Plan Awards") and service-based Stock Appreciation Rights ("SARs") were granted to eligible employees, including our executive officers. Our Board of Directors originally adopted and approved the LTIP on February 7, 2011, and approved an amended and restated LTIP on November 8, 2011 and December 31, 2012.

Payout on our Cash Plan Awards, which were granted annually from 2013-2016, is contingent on attainment of two pre-established performance metrics, measured over a five-year period: compounded net income growth (determined on the basis of GAAP with adjustments for significant, nonrecurring items approved by the Compensation Committee of the Board of Directors) and return on capital (“ROC”). While each grant is expressed as a fixed dollar amount, the actual amount earned may range from 0% of target to 250% of target for superior performance. The award cliff-vests after the end of the three-year performance period, with a payout occurring after completion of the five year performance period, subject to continued employment with Schneider and compliance with the terms of certain restrictive covenants. Vested awards are paid out 90 days following completion of the five-year performance period, or on a subsequent deferral date elected by the executive pursuant to our 2005 Supplemental Savings Plan. The liability for the Cash Plan Awards was $25.6 million and $18.6 million at December 31, 2017 and 2016, respectively.
 
SARs awards, which were granted through 2012, became 100% vested on the date provided in the applicable award agreement (a three-year vesting period). Vested SARs were to be paid out on March 1 of the fifth year following the year of such grant (or as soon as practicable thereafter, but in no event later than June 1), or will be paid out on a subsequent deferral date elected by the participant (or within 90 days following a termination of employment or change in control, if earlier), and until payment, continue to appreciate (or depreciate) as if notionally invested in our Class B common stock. The value of the SARs upon payment will equal the excess, if any, of the book value of a common share on the date of payment over the grant price set forth in the applicable award agreement, multiplied by the number of vested SARs, and subject to the discretion of the Compensation Committee. As of December 31, 2017, 2.9 million SARs units were outstanding. The liability for the SARs awards was $8.4 million and $6.0 million at December 31, 2017 and 2016, respectively.

The 2005 Schneider National, Inc. Long-Term Incentive Plan (the “2005 LTIP”), under which awards of cash-settled Retention Credits were granted, including to certain of our named executive officers. Our Board of Directors adopted and approved the 2005 LTIP effective January 1, 2005. The Retention Credits are mandatorily deferred time-based cash credits which typically vest in 20% increments over a five-year period based on continued employment. Vested Retention Credits are paid out in March following the second anniversary of the date of the employee’s termination of employment, provided the employee has not violated the terms of their restrictive covenant agreements. The liability for the Retention Credits awards was $8.8 million and $7.5 million at December 31, 2017 and 2016, respectively.
Commitments and Contingencies
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES

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

At December 31, 2017, our firm commitments to purchase transportation equipment totaled approximately $138.9 million.
Segment Reporting
Segment Reporting
SEGMENT REPORTING

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

The Truckload reportable segment consists of three operating segments (Van Truckload, Specialty Dedicated, and Bulk) that are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting. Van Truckload delivers truckload quantities over irregular routes using dry van trailers. Specialty Dedicated is similar except that it involves recurring routes, and specified trucks are dedicated to the routes using specialty trailers. Bulk transports key inputs to manufacturing processes, such as specialty chemicals using specialty trailers.

The Intermodal reportable segment provides rail intermodal and drayage services to our customers. Company-owned containers and generally Company-owned dray tractors are used to provide these transportation services.

The Logistics reportable segment consists of three operating segments (Brokerage, Supply Chain Management, and Import/Export Services) that are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting. In the Logistics segment, we provide additional sources of truck capacity, manage transportation-systems analysis requirements for individual customers, and provide trans-loading and warehousing services.

We generate other revenues from a captive insurance business and from a leasing business which are operated by wholly owned subsidiaries. We also have operations in Asia that meet the definition of an operating segment. None of these operations meets the quantitative reporting thresholds. As a result, these operations are grouped in “Other” in the tables below. We have also included in “Other” revenues and expenses that are incidental to our activities and are not attributable to any of the reportable segments.

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

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

The following tables summarize our segment information. Intersegment revenues were immaterial for all segments, with the exception of Other, which included revenues from insurance premiums charged to other segments for workers’ compensation, auto, and other types of insurance. Intersegment revenues included in Other revenues below were $78.4 million, $54.4 million and $43.4 million for the years ended December 31, 2017, 2016, and 2015 respectively.

Revenues by Segment
(in millions)
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Truckload
 
$
2,187.4

 
$
2,091.0

 
$
1,977.0

Intermodal
 
779.9

 
757.5

 
789.5

Logistics
 
834.3

 
737.7

 
638.6

Other
 
293.6

 
240.5

 
255.5

Fuel surcharge
 
386.3

 
294.0

 
371.2

Inter-segment eliminations
 
(97.9
)
 
(75.0
)
 
(72.4
)
Operating revenues
 
$
4,383.6

 
$
4,045.7

 
$
3,959.4

Income (Expense) from Operations by Segment
(in millions)
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Truckload
 
$
196.2

 
$
221.1

 
$
217.4

Intermodal
 
52.3

 
46.1

 
58.1

Logistics
 
34.2

 
30.7

 
25.4

Other
 
(2.4
)
 
(7.5
)
 
(40.7
)
Income (Expense) from operations
 
$
280.3

 
$
290.4

 
$
260.2


Depreciation and Amortization Expense by Segment
(In millions)
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Truckload
 
$
205.9

 
$
192.6

 
$
159.6

Intermodal
 
34.5

 
30.9

 
38.3

Logistics
 
0.4

 
0.4

 
0.9

Other
 
38.2

 
42.1

 
37.5

Depreciation and amortization expense
 
$
279.0

 
$
266.0

 
$
236.3


Substantially all of our revenues and assets were generated or located within the United States.
Quarterly Results of Operations (Unaudited)
Quarterly Results of Operations (Unaudited)
QUARTERLY RESULTS OF OPERATIONS (Unaudited)

(in millions, except per share amounts)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
2017
 
 
 
 
 
 
 
 
Operating revenues
 
$
1,006.4

 
$
1,075.2

 
$
1,110.8

 
$
1,191.2