SCHNEIDER NATIONAL, INC., 10-Q filed on 4/30/2020
Quarterly Report
v3.20.1
Cover Page - shares
3 Months Ended
Mar. 31, 2020
Apr. 24, 2020
Document Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
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 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  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0001692063  
Current Fiscal Year End Date --12-31  
Class A Common Shares    
Document Information    
Entity Common Stock, Shares Outstanding   83,029,500
Class B Common Stock    
Document Information    
Entity Common Stock, Shares Outstanding   94,186,859
v3.20.1
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Mar. 31, 2020
Dec. 31, 2019
Current Assets:    
Cash and cash equivalents $ 600.6 $ 551.6
Marketable securities 49.2 48.3
Trade accounts receivable—net of allowance of $3.7 million and $3.4 million, respectively 475.8 465.8
Other receivables 26.8 28.9
Current portion of lease receivables—net of allowance of $0.7 million and $0.6 million, respectively 118.3 121.5
Inventories 60.9 71.9
Prepaid expenses and other current assets 127.7 117.7
Total current assets 1,459.3 1,405.7
Property and equipment:    
Transportation equipment 2,815.7 2,790.1
Land, buildings, and improvements 199.6 199.3
Other property and equipment 165.0 162.7
Total property and equipment 3,180.3 3,152.1
Accumulated depreciation 1,342.5 1,300.5
Net property and equipment 1,837.8 1,851.6
Lease receivables—noncurrent 112.4 109.4
Capitalized software and other noncurrent assets 178.1 165.9
Goodwill 127.3 127.5
Total noncurrent assets 2,255.6 2,254.4
Total Assets 3,714.9 3,660.1
Current Liabilities:    
Trade accounts payable 238.3 207.7
Accrued salaries, wages, and benefits 57.9 63.8
Claims accruals—current 44.0 42.0
Current maturities of debt and finance lease obligations 30.5 55.5
Dividends payable 11.8 10.8
Other current liabilities 92.1 85.4
Total current liabilities 474.6 465.2
Noncurrent Liabilities:    
Long-term debt and finance lease obligations 306.1 305.8
Claims accruals—noncurrent 132.0 118.7
Deferred income taxes 453.4 449.0
Other noncurrent liabilities 80.3 85.0
Total noncurrent liabilities 971.8 958.5
Total liabilities 1,446.4 1,423.7
Shareholders' Equity:    
Additional paid-in capital 1,543.8 1,542.7
Retained earnings 725.7 693.6
Accumulated other comprehensive income (loss) (1.0) 0.1
Total shareholders' equity 2,268.5 2,236.4
Total Liabilities and Shareholders' Equity 3,714.9 3,660.1
Class A Common Shares    
Shareholders' Equity:    
Common stock 0.0 0.0
Class B Common Stock    
Shareholders' Equity:    
Common stock $ 0.0 $ 0.0
v3.20.1
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
Operating revenues $ 1,119.1 $ 1,194.1
Operating expenses:    
Purchased transportation 479.6 473.3
Salaries, wages, and benefits 264.4 313.0
Fuel and fuel taxes 60.9 74.8
Depreciation and amortization 69.8 73.4
Operating supplies and expenses 132.0 145.1
Insurance and related expenses 29.2 28.2
Other general expenses 29.5 34.8
Restructuring—net (1.2) 0.0
Total operating expenses 1,064.2 1,142.6
Income from operations 54.9 51.5
Other expenses (income):    
Interest income (1.8) (2.2)
Interest expense 3.8 3.9
Other expenses (income)—net (5.4) 0.4
Total other expenses (income) (3.4) 2.1
Income before income taxes 58.3 49.4
Provision for income taxes 14.5 12.5
Net income 43.8 36.9
Other comprehensive income (loss):    
Foreign currency translation adjustments (0.8) 0.3
Net unrealized gains (losses) on marketable securities—net of tax (0.3) 0.4
Total other comprehensive income (loss) (1.1) 0.7
Comprehensive income $ 42.7 $ 37.6
Weighted average common shares outstanding 177.1 177.0
Basic earnings per common share $ 0.25 $ 0.21
Weighted average diluted shares outstanding 177.4 177.4
Diluted earnings per common share $ 0.25 $ 0.21
v3.20.1
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2020
Dec. 31, 2019
Trade allowance $ 3.7 $ 3.4
Allowance for lease receivables $ 0.7 $ 0.6
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) 95,031,063 94,837,673
Common stock, shares outstanding (shares) 94,183,081 94,088,025
v3.20.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Operating Activities:    
Net income $ 43.8 $ 36.9
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 69.8 73.4
Losses (gains) on sales of property and equipment—net 2.8 (2.8)
Impairment on assets held for sale 2.0 0.0
Proceeds from lease receipts 18.0 20.0
Deferred income taxes 4.5 7.3
Long-term incentive and share-based compensation expense 2.4 6.1
Noncash restructuring—net (1.1) 0.0
Other noncash items (4.9) 0.3
Changes in operating assets and liabilities:    
Receivables (7.2) 55.2
Other assets (29.9) (42.0)
Payables 18.6 12.0
Claims reserves and other receivables—net 11.6 8.5
Other liabilities (5.9) (41.7)
Net cash provided by operating activities 124.5 133.2
Investing Activities:    
Purchases of transportation equipment (22.2) (50.1)
Purchases of other property and equipment (12.6) (11.1)
Proceeds from sale of property and equipment 19.4 11.1
Proceeds from sale of off-lease inventory 4.0 4.9
Purchases of lease equipment (26.6) (18.7)
Proceeds from marketable securities 6.2 6.1
Purchases of marketable securities (7.9) (1.4)
Net cash used in investing activities (39.7) (59.2)
Financing Activities:    
Payments of debt and finance lease obligations (25.1) (1.1)
Dividends paid (10.7) (10.6)
Net cash used in financing activities (35.8) (11.7)
Net increase in cash and cash equivalents 49.0 62.3
Cash and Cash Equivalents:    
Beginning of period 551.6 378.7
End of period 600.6 441.0
Noncash investing and financing activity:    
Equipment purchases in accounts payable 31.1 72.2
Dividends declared but not yet paid 11.8 10.7
Cash Paid During the Period For:    
Interest 4.8 5.1
Income taxes—net of refunds $ 0.2 $ 0.7
v3.20.1
Consolidated Statements Shareholders' Equity - USD ($)
$ in Millions
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2018 $ 2,132.3 $ 0.0 $ 1,544.0 $ 589.3 $ (1.0)
Increase (Decrease) in Stockholders' Equity          
Net income 36.9 0.0 0.0 36.9 0.0
Other comprehensive gain (loss) 0.7 0.0 0.0 0.0 0.7
Share-based compensation expense 2.0 0.0 2.0 0.0 0.0
Dividends declared (10.7) 0.0 0.0 (10.7) 0.0
Shares withheld for employee taxes (1.2) 0.0 (1.2) 0.0 0.0
Balance at Mar. 31, 2019 2,160.0 0.0 1,544.8 615.5 (0.3)
Balance at Dec. 31, 2019 2,236.4 0.0 1,542.7 693.6 0.1
Increase (Decrease) in Stockholders' Equity          
Net income 43.8 0.0 0.0 43.8 0.0
Other comprehensive gain (loss) (1.1) 0.0 0.0 0.0 (1.1)
Share-based compensation expense 1.9 0.0 1.9 0.0 0.0
Dividends declared (11.7) 0.0 0.0 (11.7) 0.0
Share issuances 0.1 0.0 0.1 0.0 0.0
Shares withheld for employee taxes (0.9) 0.0 (0.9) 0.0 0.0
Balance at Mar. 31, 2020 $ 2,268.5 $ 0.0 $ 1,543.8 $ 725.7 $ (1.0)
v3.20.1
Consolidated Statements Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Class A Common Shares    
Dividends declared per share $ 0.065 $ 0.06
Class B Common Stock    
Dividends declared per share $ 0.065 $ 0.06
v3.20.1
General
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General GENERAL

Nature of Operations

In this report, when we refer to “the Company,” “us,” “we,” “our,” “ours,” or “Schneider,” we are referring to Schneider National, Inc. and its subsidiaries. Schneider is a transportation service organization headquartered in Green Bay, Wisconsin and has three reportable segments focused on providing truckload, intermodal, and logistics solutions.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in conformity with GAAP and the rules and regulations of the SEC applicable to quarterly reports on Form 10-Q. Therefore, these consolidated financial statements and footnotes do not include all disclosures required by GAAP for annual financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019. Financial results for an interim period are not necessarily indicative of the results for a full year. All intercompany transactions have been eliminated in consolidation.

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

COVID-19

There are many uncertainties regarding the COVID-19 pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its customers, employees, owner-operators, and business partners. While the pandemic did not have a significant impact on the Company’s operational or financial results in the quarter ended March 31, 2020, we are unable to predict the impact COVID-19 will have on its future financial position and operating results due to numerous uncertainties. The Company will continue to assess the impact of the COVID-19 pandemic as it evolves.

Accounting Standards Issued but Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. This guidance offers optional expedients and exceptions for applying GAAP to transactions, including contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity affected by reference rate reform, if certain criteria are met. Entities may elect to apply the provisions of this new standard as early as March 12, 2020 until December 31, 2022, when the reference rate replacement activity is expected to be complete. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements and related disclosures and have not yet elected an adoption date.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which reduces complexity in accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for us as of January 1, 2021 with early adoption permitted. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements and do not believe the impact will be material.

Accounting Standards Recently Adopted

We adopted ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350, as of January 1, 2020 on a prospective basis. This standard 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. The adoption did not have a material impact on our consolidated financial statements or disclosures.

We adopted ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which is codified in ASC 326, as of January 1, 2020. The guidance replaced the incurred loss model with a methodology that
reflects expected credit losses over the life of the financial assets held at the reporting date based on historical experience, as well as considerations of current conditions and reasonable and supportable forecasts. This new model for estimating our expected credit losses was implemented for our trade accounts receivable and reinsurance recoverables (Note 2, Receivables), net investment in leases (Note 3, Leases), and available-for-sale debt securities (Note 6, Investments) and did not result in a material impact to our consolidated financial statements or disclosures upon adoption.
v3.20.1
Receivables (Notes)
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Credit Loss on Financial Instruments RECEIVABLES

Trade Accounts Receivable and Allowance

Our trade accounts receivable is recorded net of an allowance for doubtful accounts and revenue adjustments. The allowance is based on an aging analysis using historical experience, as well as any known and expected trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed at least quarterly, and receivables that are not expected to be collected are reserved for. In circumstances where we are aware of a customer's inability to meet its financial obligations, a specific reserve is recorded to reduce the net receivable to the amount we reasonably expect to collect. Bad debt expense is included in other general expenses in the consolidated statements of comprehensive income.

The following table shows changes to our trade accounts receivable allowance for doubtful accounts for the three months ended March 31, 2020. Excluded from the amounts below is the portion of the allowance recorded for revenue adjustments, as that portion is not credit-related nor due to a customer’s inability to meet its financial obligations.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
Balance at beginning of period
 
$
0.9

Charges to expense
 
0.3

Write-offs
 
(0.3
)
Recoveries
 
0.1

Balance at end of period
 
$
1.0


LEASES

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 include office equipment and truck washes. The majority of our leases include an option to extend the lease, and a small number of our leases include an option to terminate the lease early, which may include a termination payment.

Additional information related to our leases is as follows:
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
Operating cash flows from operating leases
 
$
8.6

 
$
8.8

Operating cash flows from finance leases
 

 
0.1

Financing cash flows from finance leases
 
0.2

 
0.7

 
 
 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
 
 
Operating leases
 
$
7.4

 
$
11.2

Finance leases
 
0.3

 



As of March 31, 2020, we had additional leases signed that had not yet commenced of $4.2 million. These leases will commence during the remainder of 2020 and have lease terms of five years.
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 accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contractual residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.

As of March 31, 2020 and December 31, 2019, the investments in lease receivables were as follows:
(in millions)
 
March 31, 2020
 
December 31, 2019
Future minimum payments to be received on leases
 
$
141.9

 
$
135.0

Guaranteed residual lease values
 
122.1

 
126.6

Total minimum lease payments to be received
 
264.0

 
261.6

Unearned income
 
(33.3
)
 
(30.7
)
Net investment in leases
 
230.7

 
230.9

 
 
 
 
 
Current maturities of lease receivables
 
119.0

 
122.1

Allowance for doubtful accounts
 
(0.7
)
 
(0.6
)
Current portion of lease receivables—net of allowance
 
118.3

 
121.5

 
 
 
 
 
Lease receivables—noncurrent
 
$
112.4

 
$
109.4



Before entering into a lease contract, we assess the credit quality of the potential lessee through the use of credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. As part of our ongoing monitoring of the credit quality of our lease portfolio, on a weekly basis we track amounts past due, days past due, and outstanding maintenance account balances, including running subsequent credit checks as needed. The following table presents our net investment in leases, which includes both current and future lease payments, as of March 31, 2020 by amounts past due, our primary ongoing credit quality indicator, and lease origination year:
 
 
Net Investment in Leases by Lease Origination Year (in millions)
Amounts Past Due (in ones)
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
 
Total
Greater than $3,000
 
$
0.7

 
$
2.8

 
$
1.6

 
$
0.6

 
$
0.1

 
$

 
$
5.8

Between $2,999 and $1,500
 
1.4

 
4.3

 
2.0

 
0.7

 
0.4

 

 
8.8

Less than $1,499
 
5.6

 
13.6

 
6.1

 
2.5

 
0.8

 
0.1

 
28.7

Total
 
$
7.7

 
$
20.7

 
$
9.7

 
$
3.8

 
$
1.3

 
$
0.1

 
$
43.3



Lease payments are generally due on a weekly basis and are classified as past due when past the due date. The following table presents an aging analysis of our lease payments owed to us which are classified as past due as of March 31, 2020:
(in millions)
 
March 31, 2020
1-29 days
 
$
1.3

30-59 days
 
0.5

60-89 days
 
0.3

90 days or greater
 
0.4

Total past due
 
$
2.5



Our lease receivables are recorded net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to not be collected. 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, which can be impacted by economic conditions, is not realized.

Accrued interest on our leases is included within lease receivables on the consolidated balance sheets and was not material as of March 31, 2020 and December 31, 2019. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or 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 both March 31, 2020 and December 31, 2019, $0.2 million of our net investment in leases were on nonaccrual status.

The table below provides additional information on our sales-type leases.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Revenue
 
$
54.7

 
$
56.2

Cost of goods sold
 
(48.9
)
 
(49.9
)
Operating profit
 
$
5.8

 
$
6.3

 
 
 
 
 
Interest income on lease receivable
 
$
6.5

 
$
6.6


INVESTMENTS

Marketable Securities

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

With the adoption of ASU 2016-13, the guidance on reporting credit losses for available-for-sale debt securities was amended. Under this new guidance, credit losses are to be recorded through an allowance for credit losses rather than as a direct write-down to the security. As a result, any unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on the consolidated balance sheets, unless we determine that the amortized cost basis is not recoverable. If we determine that the amortized cost basis of the impaired security is not recoverable, we recognize the credit loss by increasing the allowance for those losses. Cost basis is determined using the specific identification method.

When adopting this standard, we elected to continue to present the accrued interest receivable balance associated with our investments in marketable securities separate from the marketable securities line in the consolidated balance sheets. As of March 31, 2020, accrued interest receivable associated with our investments in marketable securities was not material and is included with other receivables in the consolidated balance sheets. We have elected the practical expedient provided under the guidance to exclude the applicable accrued interest from the amortized cost basis disclosure of our marketable securities. We have also elected not to measure an allowance for credit losses on our accrued interest receivable and to write off accrued interest receivable by reversing interest income when it is not considered collectible.

The following table presents the maturities and values of our marketable securities as of the dates shown:
 
 
March 31, 2020
 
December 31, 2019
(in millions, except maturities in months)
 
Maturities
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
U.S. treasury and government agencies
 
12 to 79
 
$
14.6

 
$
14.9

 
$
16.5

 
$
17.0

Asset-backed securities
 
10
 

 

 
0.1

 
0.1

Corporate debt securities
 
1 to 67
 
18.3

 
18.5

 
15.1

 
15.4

State and municipal bonds
 
3 to 66
 
11.6

 
11.8

 
11.6

 
11.8

Other U.S. and non-U.S. government bonds
 
4 to 54
 
4.0

 
4.0

 
4.0

 
4.0

Total marketable securities
 
 
 
$
48.5

 
$
49.2

 
$
47.3

 
$
48.3



Gross realized gains and losses and net unrealized gains and losses, net of tax, on marketable securities were not material for the three months ended March 31, 2020 and 2019. Additionally, we did not have an allowance for credit losses on our marketable securities as of March 31, 2020 or any other-than-temporary impairments as of December 31, 2019, and our total unrealized gains and losses were not material as of March 31, 2020 and December 31, 2019.
v3.20.1
Leases (Notes)
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Finance Leases LEASES

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 include office equipment and truck washes. The majority of our leases include an option to extend the lease, and a small number of our leases include an option to terminate the lease early, which may include a termination payment.

Additional information related to our leases is as follows:
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
Operating cash flows from operating leases
 
$
8.6

 
$
8.8

Operating cash flows from finance leases
 

 
0.1

Financing cash flows from finance leases
 
0.2

 
0.7

 
 
 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
 
 
Operating leases
 
$
7.4

 
$
11.2

Finance leases
 
0.3

 



As of March 31, 2020, we had additional leases signed that had not yet commenced of $4.2 million. These leases will commence during the remainder of 2020 and have lease terms of five years.
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 accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contractual residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.

As of March 31, 2020 and December 31, 2019, the investments in lease receivables were as follows:
(in millions)
 
March 31, 2020
 
December 31, 2019
Future minimum payments to be received on leases
 
$
141.9

 
$
135.0

Guaranteed residual lease values
 
122.1

 
126.6

Total minimum lease payments to be received
 
264.0

 
261.6

Unearned income
 
(33.3
)
 
(30.7
)
Net investment in leases
 
230.7

 
230.9

 
 
 
 
 
Current maturities of lease receivables
 
119.0

 
122.1

Allowance for doubtful accounts
 
(0.7
)
 
(0.6
)
Current portion of lease receivables—net of allowance
 
118.3

 
121.5

 
 
 
 
 
Lease receivables—noncurrent
 
$
112.4

 
$
109.4



Before entering into a lease contract, we assess the credit quality of the potential lessee through the use of credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. As part of our ongoing monitoring of the credit quality of our lease portfolio, on a weekly basis we track amounts past due, days past due, and outstanding maintenance account balances, including running subsequent credit checks as needed. The following table presents our net investment in leases, which includes both current and future lease payments, as of March 31, 2020 by amounts past due, our primary ongoing credit quality indicator, and lease origination year:
 
 
Net Investment in Leases by Lease Origination Year (in millions)
Amounts Past Due (in ones)
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
 
Total
Greater than $3,000
 
$
0.7

 
$
2.8

 
$
1.6

 
$
0.6

 
$
0.1

 
$

 
$
5.8

Between $2,999 and $1,500
 
1.4

 
4.3

 
2.0

 
0.7

 
0.4

 

 
8.8

Less than $1,499
 
5.6

 
13.6

 
6.1

 
2.5

 
0.8

 
0.1

 
28.7

Total
 
$
7.7

 
$
20.7

 
$
9.7

 
$
3.8

 
$
1.3

 
$
0.1

 
$
43.3



Lease payments are generally due on a weekly basis and are classified as past due when past the due date. The following table presents an aging analysis of our lease payments owed to us which are classified as past due as of March 31, 2020:
(in millions)
 
March 31, 2020
1-29 days
 
$
1.3

30-59 days
 
0.5

60-89 days
 
0.3

90 days or greater
 
0.4

Total past due
 
$
2.5



Our lease receivables are recorded net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to not be collected. 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, which can be impacted by economic conditions, is not realized.

Accrued interest on our leases is included within lease receivables on the consolidated balance sheets and was not material as of March 31, 2020 and December 31, 2019. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or 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 both March 31, 2020 and December 31, 2019, $0.2 million of our net investment in leases were on nonaccrual status.

The table below provides additional information on our sales-type leases.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Revenue
 
$
54.7

 
$
56.2

Cost of goods sold
 
(48.9
)
 
(49.9
)
Operating profit
 
$
5.8

 
$
6.3

 
 
 
 
 
Interest income on lease receivable
 
$
6.5

 
$
6.6



Operating Leases LEASES

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 include office equipment and truck washes. The majority of our leases include an option to extend the lease, and a small number of our leases include an option to terminate the lease early, which may include a termination payment.

Additional information related to our leases is as follows:
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
Operating cash flows from operating leases
 
$
8.6

 
$
8.8

Operating cash flows from finance leases
 

 
0.1

Financing cash flows from finance leases
 
0.2

 
0.7

 
 
 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
 
 
Operating leases
 
$
7.4

 
$
11.2

Finance leases
 
0.3

 



As of March 31, 2020, we had additional leases signed that had not yet commenced of $4.2 million. These leases will commence during the remainder of 2020 and have lease terms of five years.
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 accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contractual residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.

As of March 31, 2020 and December 31, 2019, the investments in lease receivables were as follows:
(in millions)
 
March 31, 2020
 
December 31, 2019
Future minimum payments to be received on leases
 
$
141.9

 
$
135.0

Guaranteed residual lease values
 
122.1

 
126.6

Total minimum lease payments to be received
 
264.0

 
261.6

Unearned income
 
(33.3
)
 
(30.7
)
Net investment in leases
 
230.7

 
230.9

 
 
 
 
 
Current maturities of lease receivables
 
119.0

 
122.1

Allowance for doubtful accounts
 
(0.7
)
 
(0.6
)
Current portion of lease receivables—net of allowance
 
118.3

 
121.5

 
 
 
 
 
Lease receivables—noncurrent
 
$
112.4

 
$
109.4



Before entering into a lease contract, we assess the credit quality of the potential lessee through the use of credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. As part of our ongoing monitoring of the credit quality of our lease portfolio, on a weekly basis we track amounts past due, days past due, and outstanding maintenance account balances, including running subsequent credit checks as needed. The following table presents our net investment in leases, which includes both current and future lease payments, as of March 31, 2020 by amounts past due, our primary ongoing credit quality indicator, and lease origination year:
 
 
Net Investment in Leases by Lease Origination Year (in millions)
Amounts Past Due (in ones)
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
 
Total
Greater than $3,000
 
$
0.7

 
$
2.8

 
$
1.6

 
$
0.6

 
$
0.1

 
$

 
$
5.8

Between $2,999 and $1,500
 
1.4

 
4.3

 
2.0

 
0.7

 
0.4

 

 
8.8

Less than $1,499
 
5.6

 
13.6

 
6.1

 
2.5

 
0.8

 
0.1

 
28.7

Total
 
$
7.7

 
$
20.7

 
$
9.7

 
$
3.8

 
$
1.3

 
$
0.1

 
$
43.3



Lease payments are generally due on a weekly basis and are classified as past due when past the due date. The following table presents an aging analysis of our lease payments owed to us which are classified as past due as of March 31, 2020:
(in millions)
 
March 31, 2020
1-29 days
 
$
1.3

30-59 days
 
0.5

60-89 days
 
0.3

90 days or greater
 
0.4

Total past due
 
$
2.5



Our lease receivables are recorded net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to not be collected. 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, which can be impacted by economic conditions, is not realized.

Accrued interest on our leases is included within lease receivables on the consolidated balance sheets and was not material as of March 31, 2020 and December 31, 2019. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or 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 both March 31, 2020 and December 31, 2019, $0.2 million of our net investment in leases were on nonaccrual status.

The table below provides additional information on our sales-type leases.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Revenue
 
$
54.7

 
$
56.2

Cost of goods sold
 
(48.9
)
 
(49.9
)
Operating profit
 
$
5.8

 
$
6.3

 
 
 
 
 
Interest income on lease receivable
 
$
6.5

 
$
6.6


Sales-type Leases LEASES

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 include office equipment and truck washes. The majority of our leases include an option to extend the lease, and a small number of our leases include an option to terminate the lease early, which may include a termination payment.

Additional information related to our leases is as follows:
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
Operating cash flows from operating leases
 
$
8.6

 
$
8.8

Operating cash flows from finance leases
 

 
0.1

Financing cash flows from finance leases
 
0.2

 
0.7

 
 
 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
 
 
Operating leases
 
$
7.4

 
$
11.2

Finance leases
 
0.3

 



As of March 31, 2020, we had additional leases signed that had not yet commenced of $4.2 million. These leases will commence during the remainder of 2020 and have lease terms of five years.
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 accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contractual residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.

As of March 31, 2020 and December 31, 2019, the investments in lease receivables were as follows:
(in millions)
 
March 31, 2020
 
December 31, 2019
Future minimum payments to be received on leases
 
$
141.9

 
$
135.0

Guaranteed residual lease values
 
122.1

 
126.6

Total minimum lease payments to be received
 
264.0

 
261.6

Unearned income
 
(33.3
)
 
(30.7
)
Net investment in leases
 
230.7

 
230.9

 
 
 
 
 
Current maturities of lease receivables
 
119.0

 
122.1

Allowance for doubtful accounts
 
(0.7
)
 
(0.6
)
Current portion of lease receivables—net of allowance
 
118.3

 
121.5

 
 
 
 
 
Lease receivables—noncurrent
 
$
112.4

 
$
109.4



Before entering into a lease contract, we assess the credit quality of the potential lessee through the use of credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. As part of our ongoing monitoring of the credit quality of our lease portfolio, on a weekly basis we track amounts past due, days past due, and outstanding maintenance account balances, including running subsequent credit checks as needed. The following table presents our net investment in leases, which includes both current and future lease payments, as of March 31, 2020 by amounts past due, our primary ongoing credit quality indicator, and lease origination year:
 
 
Net Investment in Leases by Lease Origination Year (in millions)
Amounts Past Due (in ones)
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
 
Total
Greater than $3,000
 
$
0.7

 
$
2.8

 
$
1.6

 
$
0.6

 
$
0.1

 
$

 
$
5.8

Between $2,999 and $1,500
 
1.4

 
4.3

 
2.0

 
0.7

 
0.4

 

 
8.8

Less than $1,499
 
5.6

 
13.6

 
6.1

 
2.5

 
0.8

 
0.1

 
28.7

Total
 
$
7.7

 
$
20.7

 
$
9.7

 
$
3.8

 
$
1.3

 
$
0.1

 
$
43.3



Lease payments are generally due on a weekly basis and are classified as past due when past the due date. The following table presents an aging analysis of our lease payments owed to us which are classified as past due as of March 31, 2020:
(in millions)
 
March 31, 2020
1-29 days
 
$
1.3

30-59 days
 
0.5

60-89 days
 
0.3

90 days or greater
 
0.4

Total past due
 
$
2.5



Our lease receivables are recorded net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to not be collected. 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, which can be impacted by economic conditions, is not realized.

Accrued interest on our leases is included within lease receivables on the consolidated balance sheets and was not material as of March 31, 2020 and December 31, 2019. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or 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 both March 31, 2020 and December 31, 2019, $0.2 million of our net investment in leases were on nonaccrual status.

The table below provides additional information on our sales-type leases.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Revenue
 
$
54.7

 
$
56.2

Cost of goods sold
 
(48.9
)
 
(49.9
)
Operating profit
 
$
5.8

 
$
6.3

 
 
 
 
 
Interest income on lease receivable
 
$
6.5

 
$
6.6


Credit Loss on Financial Instruments RECEIVABLES

Trade Accounts Receivable and Allowance

Our trade accounts receivable is recorded net of an allowance for doubtful accounts and revenue adjustments. The allowance is based on an aging analysis using historical experience, as well as any known and expected trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed at least quarterly, and receivables that are not expected to be collected are reserved for. In circumstances where we are aware of a customer's inability to meet its financial obligations, a specific reserve is recorded to reduce the net receivable to the amount we reasonably expect to collect. Bad debt expense is included in other general expenses in the consolidated statements of comprehensive income.

The following table shows changes to our trade accounts receivable allowance for doubtful accounts for the three months ended March 31, 2020. Excluded from the amounts below is the portion of the allowance recorded for revenue adjustments, as that portion is not credit-related nor due to a customer’s inability to meet its financial obligations.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
Balance at beginning of period
 
$
0.9

Charges to expense
 
0.3

Write-offs
 
(0.3
)
Recoveries
 
0.1

Balance at end of period
 
$
1.0


LEASES

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 include office equipment and truck washes. The majority of our leases include an option to extend the lease, and a small number of our leases include an option to terminate the lease early, which may include a termination payment.

Additional information related to our leases is as follows:
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
 
 
Operating cash flows from operating leases
 
$
8.6

 
$
8.8

Operating cash flows from finance leases
 

 
0.1

Financing cash flows from finance leases
 
0.2

 
0.7

 
 
 
 
 
Right-of-use assets obtained in exchange for new lease liabilities
 
 
 
 
Operating leases
 
$
7.4

 
$
11.2

Finance leases
 
0.3

 



As of March 31, 2020, we had additional leases signed that had not yet commenced of $4.2 million. These leases will commence during the remainder of 2020 and have lease terms of five years.
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 accounted for as sales-type leases with fully guaranteed residual values. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contractual residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values.

As of March 31, 2020 and December 31, 2019, the investments in lease receivables were as follows:
(in millions)
 
March 31, 2020
 
December 31, 2019
Future minimum payments to be received on leases
 
$
141.9

 
$
135.0

Guaranteed residual lease values
 
122.1

 
126.6

Total minimum lease payments to be received
 
264.0

 
261.6

Unearned income
 
(33.3
)
 
(30.7
)
Net investment in leases
 
230.7

 
230.9

 
 
 
 
 
Current maturities of lease receivables
 
119.0

 
122.1

Allowance for doubtful accounts
 
(0.7
)
 
(0.6
)
Current portion of lease receivables—net of allowance
 
118.3

 
121.5

 
 
 
 
 
Lease receivables—noncurrent
 
$
112.4

 
$
109.4



Before entering into a lease contract, we assess the credit quality of the potential lessee through the use of credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. As part of our ongoing monitoring of the credit quality of our lease portfolio, on a weekly basis we track amounts past due, days past due, and outstanding maintenance account balances, including running subsequent credit checks as needed. The following table presents our net investment in leases, which includes both current and future lease payments, as of March 31, 2020 by amounts past due, our primary ongoing credit quality indicator, and lease origination year:
 
 
Net Investment in Leases by Lease Origination Year (in millions)
Amounts Past Due (in ones)
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
 
Total
Greater than $3,000
 
$
0.7

 
$
2.8

 
$
1.6

 
$
0.6

 
$
0.1

 
$

 
$
5.8

Between $2,999 and $1,500
 
1.4

 
4.3

 
2.0

 
0.7

 
0.4

 

 
8.8

Less than $1,499
 
5.6

 
13.6

 
6.1

 
2.5

 
0.8

 
0.1

 
28.7

Total
 
$
7.7

 
$
20.7

 
$
9.7

 
$
3.8

 
$
1.3

 
$
0.1

 
$
43.3



Lease payments are generally due on a weekly basis and are classified as past due when past the due date. The following table presents an aging analysis of our lease payments owed to us which are classified as past due as of March 31, 2020:
(in millions)
 
March 31, 2020
1-29 days
 
$
1.3

30-59 days
 
0.5

60-89 days
 
0.3

90 days or greater
 
0.4

Total past due
 
$
2.5



Our lease receivables are recorded net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to not be collected. 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, which can be impacted by economic conditions, is not realized.

Accrued interest on our leases is included within lease receivables on the consolidated balance sheets and was not material as of March 31, 2020 and December 31, 2019. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or 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 both March 31, 2020 and December 31, 2019, $0.2 million of our net investment in leases were on nonaccrual status.

The table below provides additional information on our sales-type leases.
 
 
Three Months Ended
March 31,
(in millions)
 
2020
 
2019
Revenue
 
$
54.7

 
$
56.2

Cost of goods sold
 
(48.9
)
 
(49.9
)
Operating profit
 
$
5.8

 
$
6.3

 
 
 
 
 
Interest income on lease receivable
 
$
6.5

 
$
6.6


INVESTMENTS

Marketable Securities

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

With the adoption of ASU 2016-13, the guidance on reporting credit losses for available-for-sale debt securities was amended. Under this new guidance, credit losses are to be recorded through an allowance for credit losses rather than as a direct write-down to the security. As a result, any unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on the consolidated balance sheets, unless we determine that the amortized cost basis is not recoverable. If we determine that the amortized cost basis of the impaired security is not recoverable, we recognize the credit loss by increasing the allowance for those losses. Cost basis is determined using the specific identification method.

When adopting this standard, we elected to continue to present the accrued interest receivable balance associated with our investments in marketable securities separate from the marketable securities line in the consolidated balance sheets. As of March 31, 2020, accrued interest receivable associated with our investments in marketable securities was not material and is included with other receivables in the consolidated balance sheets. We have elected the practical expedient provided under the guidance to exclude the applicable accrued interest from the amortized cost basis disclosure of our marketable securities. We have also elected not to measure an allowance for credit losses on our accrued interest receivable and to write off accrued interest receivable by reversing interest income when it is not considered collectible.

The following table presents the maturities and values of our marketable securities as of the dates shown:
 
 
March 31, 2020
 
December 31, 2019
(in millions, except maturities in months)
 
Maturities
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
U.S. treasury and government agencies
 
12 to 79
 
$
14.6

 
$
14.9

 
$
16.5

 
$
17.0

Asset-backed securities
 
10
 

 

 
0.1

 
0.1

Corporate debt securities
 
1 to 67
 
18.3

 
18.5

 
15.1

 
15.4

State and municipal bonds
 
3 to 66
 
11.6

 
11.8

 
11.6

 
11.8

Other U.S. and non-U.S. government bonds
 
4 to 54
 
4.0

 
4.0

 
4.0

 
4.0

Total marketable securities
 
 
 
$
48.5

 
$
49.2

 
$
47.3

 
$
48.3



Gross realized gains and losses and net unrealized gains and losses, net of tax, on marketable securities were not material for the three months ended March 31, 2020 and 2019. Additionally, we did not have an allowance for credit losses on our marketable securities as of March 31, 2020 or any other-than-temporary impairments as of December 31, 2019, and our total unrealized gains and losses were not material as of March 31, 2020 and December 31, 2019.
v3.20.1
Revenue Recognition
3 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer REVENUE RECOGNITION

Disaggregated Revenues

The majority of our revenues are related to transportation and have similar characteristics. The following table summarizes our revenues by type of service.
 
 
Three Months Ended
March 31,
Disaggregated Revenues (in millions)
 
2020
 
2019
Transportation
 
$
1,028.3

 
$
1,071.4

Logistics management
 
31.1

 
58.1

Other
 
59.7

 
64.6

Total operating revenues
 
$
1,119.1

 
$
1,194.1



Quantitative Disclosures

The following table provides information for transactions and expected timing of revenue recognition related to performance obligations that are fixed in nature and pertain to contracts with terms greater than one year as of date shown:
Remaining Performance Obligations (in millions)
 
March 31, 2020
Expected to be recognized within one year
 
 
Transportation
 
$
2.6

Logistics management
 
9.0

Expected to be recognized after one year
 
 
Transportation
 
0.6

Logistics management
 
13.0

Total
 
$
25.2



The information provided in the above table 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)
 
March 31, 2020
 
December 31, 2019
Other current assets - Contract assets
 
$
22.2

 
$
17.6

Other current liabilities - Contract liabilities
 

 



We generally receive payment within 40 days of completing our 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.
v3.20.1
Fair Value
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value FAIR VALUE

Fair value is 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.

The table below sets forth the Company’s financial assets that are measured at fair value on a recurring basis in accordance with ASC 820.
 
 
 
 
Fair Value
(in millions)
 
Level in Fair
Value Hierarchy
 
March 31, 2020
 
December 31, 2019
Marketable securities (1)
 
2
 
$
49.2

 
$
48.3

(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 6, Investments, for additional information on the fair value of our marketable securities.

The fair value of the Company's debt was $331.5 million and $368.5 million as of March 31, 2020 and December 31, 2019, respectively. The carrying value of the Company's debt was $335.0 million and $360.0 million as of March 31, 2020 and December 31, 2019, 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.

Our ownership interest in PSI discussed in Note 6, 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 revalued in the period ending March 31, 2020 using Level 3 inputs and is recorded at fair value.
v3.20.1
Investments
3 Months Ended
Mar. 31, 2020
Debt Securities, Available-for-sale [Abstract]  
Investments INVESTMENTS

Marketable Securities

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

With the adoption of ASU 2016-13, the guidance on reporting credit losses for available-for-sale debt securities was amended. Under this new guidance, credit losses are to be recorded through an allowance for credit losses rather than as a direct write-down to the security. As a result, any unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on the consolidated balance sheets, unless we determine that the amortized cost basis is not recoverable. If we determine that the amortized cost basis of the impaired security is not recoverable, we recognize the credit loss by increasing the allowance for those losses. Cost basis is determined using the specific identification method.

When adopting this standard, we elected to continue to present the accrued interest receivable balance associated with our investments in marketable securities separate from the marketable securities line in the consolidated balance sheets. As of March 31, 2020, accrued interest receivable associated with our investments in marketable securities was not material and is included with other receivables in the consolidated balance sheets. We have elected the practical expedient provided under the guidance to exclude the applicable accrued interest from the amortized cost basis disclosure of our marketable securities. We have also elected not to measure an allowance for credit losses on our accrued interest receivable and to write off accrued interest receivable by reversing interest income when it is not considered collectible.

The following table presents the maturities and values of our marketable securities as of the dates shown:
 
 
March 31, 2020
 
December 31, 2019
(in millions, except maturities in months)
 
Maturities
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
U.S. treasury and government agencies
 
12 to 79
 
$
14.6

 
$
14.9

 
$
16.5

 
$
17.0

Asset-backed securities
 
10
 

 

 
0.1

 
0.1

Corporate debt securities
 
1 to 67
 
18.3

 
18.5

 
15.1

 
15.4

State and municipal bonds
 
3 to 66
 
11.6

 
11.8

 
11.6

 
11.8

Other U.S. and non-U.S. government bonds
 
4 to 54
 
4.0

 
4.0

 
4.0

 
4.0

Total marketable securities
 
 
 
$
48.5

 
$
49.2

 
$
47.3

 
$
48.3



Gross realized gains and losses and net unrealized gains and losses, net of tax, on marketable securities were not material for the three months ended March 31, 2020 and 2019. Additionally, we did not have an allowance for credit losses on our marketable securities as of March 31, 2020 or any other-than-temporary impairments as of December 31, 2019, and our total unrealized gains and losses were not material as of March 31, 2020 and December 31, 2019.

Ownership Interest in Platform Science, Inc.

In 2018, the Company made a strategic decision to invest in PSI and acquired an ownership interest in exchange for granting them a non-exclusive license to our proprietary telematics mobile software that was developed to enable enhanced driver productivity and ensure regulatory compliance. Our ownership interest 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. During the first quarter of 2020, a remeasurement event occurred which required the Company to revalue our interest in PSI. This resulted in the recognition of a $6.1 million pre-tax gain recorded within other income on the consolidated statement of comprehensive income for the three months ended March 31, 2020. The fair value of our ownership interest as of March 31, 2020 and December 31, 2019 was $9.6 million and $3.5 million, respectively, and our ownership percentage was 12% as of March 31, 2020.
Credit Loss on Financial Instruments RECEIVABLES

Trade Accounts Receivable and Allowance

Our trade accounts receivable is recorded net of an allowance for doubtful accounts and revenue adjustments. The allowance is based on an aging analysis using historical experience, as well as any known and expected trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed at least quarterly, and receivables that are not expected to be collected are reserved for. In circumstances where we are aware of a customer's inability to meet its financial obligations, a specific reserve is recorded to reduce the net receivable to the amount we reasonably expect to collect. Bad debt