UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549  
 
FORM 8-K  
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 1, 2017  
 
SCHNEIDER NATIONAL, INC.
(Exact Name of Registrant as Specified in Charter)  

	

Wisconsin	 	001-38054	 	39-1258315	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(I.R.S. Employer
Identification No.)	
3101 South Packerland Drive
    Green Bay, WI 54313	
(Address of Principal Executive Offices)	

Registrant’s telephone number, including area code: (920) 592-2000
                        
(Former Name or Former Address, if Changed Since Last Report)  
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

	
			
 		Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	

	
			
 		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	

	
			
 		Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	

	
			
 		Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

ITEM 2.02.      Results of Operations and Financial Condition.
On August 1, 2017 , Schneider National, Inc. issued a press release announcing its financial results for the three months ended June 30, 2017 , which is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference in this Item 2.02.

The information in this Item 2.02 and in Exhibit 99.1 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01.      Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit No.      Description of Exhibit
99.1        Press release dated August 1, 2017

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

    
SCHNEIDER NATIONAL, INC.

Date: August 1, 2017             By:      _/s/ Lori A. Lutey __________________________
Name: Lori A. Lutey                 
Title: Executive Vice President and Chief Financial Officer    

EXHIBIT INDEX

Exhibit No .          Description of Exhibit
99.1            Press release dated August 1, 2017

 
 Schneider National, Inc. Reports Second Quarter 2017 Results

•	Operating Revenues of $1.1 billion , an increase of 8.1% compared to second quarter 2016	
		
•	Net Income of $46.5 million , an increase of 5.2% compared to second quarter 2016	

•	Diluted Earnings Per Share of $0.27 , compared to second quarter 2016 of $0.28	

•	Adjusted Diluted Earnings Per Share of $0.23 , compared to second quarter 2016 of $0.28	
		
•	Full year 2017 adjusted diluted earnings per share guidance of $0.94 to $1.02	
 
Green Bay, WI, August 1, 2017 – Schneider National, Inc. (NYSE: SNDR), (“Schneider” or the “Company”), 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, today announced results for the second quarter and six-months ended June 30, 2017 .

“We are pleased with our performance in the second quarter and reported overall results that were in line with what we had expected across all three of our businesses, including a number of key customer wins that we anticipate will help set the stage for our results in the second half of 2017,” commented Chris Lofgren, Chief Executive Officer of Schneider. "Freight market dynamics improved throughout the quarter. Much of what we’ve faced thus far in 2017 stemmed from customer contracts that were negotiated during 2016 and inflationary driver costs that persisted into the second quarter.”
 
Lofgren continued, “The second quarter also marked the one-year anniversary of our acquisitions of Watkins & Shepard and Lodeso, which enhanced our first-to-final mile service offering. Over the past year we’ve worked with omnichannel retailers and manufacturing customers to reduce complexities in the supply chain and provide a premium delivery service. The positive impact these acquisitions have delivered relative to new customers, in new markets, and revenue growth is undeniable. We are actively engaged in improving the effectiveness of the "middle mile network," and fully implementing the operating contribution disciplines of our Quest platform to accelerate profitability and growth.”

Results of Operations (unaudited)

The following table sets forth, for the periods indicated, the Company’s results of operations:

																	
(in thousands, except per share amounts)	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2017	 	2016	 	2017	 	2016	
Operating revenues	 	$	1,075,172		 	$	994,573		 	$	2,081,611		 	$	1,922,676		
Adjusted enterprise revenue (excluding fuel surcharge)	 	$	982,615		 	$	922,283		 	$	1,898,804		 	$	1,794,232		
Income from operations	 	$	79,002		 	$	79,639		 	$	122,552		 	$	131,672		
Adjusted income from operations	 	$	67,702		 	$	79,639		 	$	112,552		 	$	131,672		
Operating ratio	 	92.7	%	 	92.0	%	 	94.1	%	 	93.2	%	
Adjusted operating ratio	 	93.1	%	 	91.4	%	 	94.1	%	 	92.7	%	
Net income	 	$	46,473		 	$	44,167		 	$	69,042		 	$	72,306		
Adjusted net income	 	$	39,693		 	$	44,167		 	$	63,042		 	$	72,306		
Adjusted EBITDA	 	$	136,338		 	$	143,482		 	$	249,058		 	$	259,410		
Diluted earnings per share	 	$	0.27		 	$	0.28		 	$	0.42		 	$	0.46		
Adjusted diluted earnings per share	 	$	0.23		 	$	0.28		 	$	0.38		 	$	0.46		
Weighted average diluted shares outstanding	 	174,453		 	156,425		 	165,436		 	156,160		

1

Results of Operations - Enterprise

Enterprise operating revenues for the three months ended June 30, 2017 were $1,075.2 million , an increase of $80.6 million , or 8.1% , compared to the three months ended June 30, 2016 primarily due to the June 2016 acquisition of Watkins & Shepard and Lodeso (WSL), higher fuel surcharge revenue, brokerage growth and revenue generated from the Company's equipment leasing business.

Adjusted enterprise revenue (excluding fuel surcharge) for the three months ended June 30, 2017 was $ 982.6 million , an increase of $ 60.3 million , or 6.5% , compared to the three months ended June 30, 2016 . Truckload revenue (excluding fuel surcharge) increased 4.5% compared to second quarter 2016 primarily due to the acquisition and improving market conditions throughout the quarter. Intermodal revenue (excluding fuel surcharge) increased 3.8% compared to second quarter 2016 primarily due to higher volume offset by network mix changes and a weaker pricing environment. Logistics revenue (excluding fuel surcharge) increased 7.2% compared to second quarter 2016 primarily due to brokerage growth.

Enterprise income from operations for the three months ended June 30, 2017 was $79.0 million , a decrease of $ 0.6 million , or 0.8% , compared to the three months ended June 30, 2016 primarily due to inflationary driver costs and lower gain on sale of equipment. The Company recorded an adjustment to a contingent consideration liability related to its acquisition of WSL in the second quarter of 2017, resulting in an increase in income from operations. The adjustment was 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.

Adjusted income from operations for the three months ended June 30, 2017 was $67.7 million , a decrease of $11.9 million , or 15.0% , compared to second quarter 2016 . The Company adjusted its income from operations by ($12.9) million in the second quarter of 2017 for the WSL contingent consideration liability adjustment and by $1.6 million for the duplicate chassis costs related to the cost of idle rental units due to its conversion to an owned chassis model. The Company remains on track with its conversion plan and expects to be completed by the end of 2017 to coincide with the expiration of the existing lease requirements. See the "Reconciliation of Non-GAAP Financial Measures" at the end of this release for additional details.

Interest expense (net) in the current quarter decreased $ 0.5 million compared to second quarter 2016 due to lower debt levels and increased interest income due to proceeds from the Company's initial public offering in April 2017 (the "IPO"). The effective income tax rate was 38.6% and 40.0% for the six months ended June 30, 2017 and 2016, respectively. The lower rate is due to resolution of tax credits claimed. The Company regularly claims tax credits which will impact the effective tax rate.

Net income for the three months ended June 30, 2017 was $46.5 million , or $0.27 on a weighted average diluted per share basis, an increase of $2.3 million or 5.2% , compared to the three months ended June 30, 2016 . Net income as a percent of operating revenues was 4.3% for second quarter 2017. Adjusted net income for second quarter 2017 was $39.7 million , or $0.23 on a weighted average diluted per share basis, a decrease of $4.5 million, or 10.1% compared to second quarter 2016.

Adjusted EBITDA for the three months ended June 30, 2017 was $136.3 million , a decrease of $ 7.1 million or 5.0% , compared to the three months ended June 30, 2016. Adjusted EBITDA as a percentage of adjusted enterprise revenue (excluding fuel surcharge) was 13.9% for second quarter 2017 compared to 15.6% for second quarter 2016.
   
Cash Flow and Capitalization

At June 30, 2017 , the Company had a total of $ 449.6 million outstanding on various debt instruments compared to $ 699.4 million as of December 31, 2016 . At June 30, 2017 , the Company had cash and cash equivalents of $259.9 million compared to $130.8 million at December 31, 2016 . The Company's net increase in cash and cash equivalents of $129.1 million was primarily due to proceeds from the IPO offset by debt repayments.

The Company’s free cash flow increased $ 23.2 million compared to the six months ended June 30, 2016. Capital expenditures decreased year over year due to lower purchases of transportation equipment, the result of a combination of factors including the acceleration of purchases in 2016.  The used equipment market has stabilized in 2017, albeit at historically weak levels. Chassis capital expenditures for the six months ended June 30, 2017 were approximately $69 million. Net cash provided by operating activities declined year over year due to a decrease in cash generated from income tax receivables and the timing of payables related to equipment purchases.

The Company declared a $0.05 dividend payable to shareholders of record as of June 30, 2017. The dividend was paid on July 11, 2017. Additionally, the Company declared a $0.05 dividend payable to shareholders of record as of September 20, 2017. This dividend is expected to be paid on October 2, 2017.

2

Results of Operations – Reportable Segments

Truckload

•	Revenue (excluding fuel surcharge):   $ 543.0 million ; an increase of 4.5% compared to second quarter 2016	
		
•	Income from Operations:  $53.2 million ; a decrease of 13.7% compared to second quarter 2016	

Truckload revenue (excluding fuel surcharge) increased 4.5% compared to second quarter 2016 primarily due to the acquisition of WSL in June 2016. Second quarter driver capacity, although stable, was below desired levels in parts of the Truckload segment which partially offset the revenue attributed to the acquisition. The Company's operational focus on effective fleet sizing to freight volume and effective freight selection resulted in Truckload revenue per truck per week of $3,608 , an increase of $103 , or 2.9% , compared to second quarter 2016 .

The Company’s Truckload income from operations decreased 13.7% compared to second quarter 2016 . Inflationary driver costs and lower gain on sale of equipment due to the continued weakness in the used equipment market were partially offset by earnings improvements from effective fleet sizing, freight selection through the Company's Quest platform and improving market conditions throughout the quarter.

Intermodal

•	Revenue (excluding fuel surcharge): $194.3 million ; an increase of 3.8% compared to second quarter 2016	
		
•	Income from Operations:  $11.2 million ; a decrease of 17.7% compared to second quarter 2016	

Intermodal revenue (excluding fuel surcharge) increased 3.8% compared to second quarter 2016 due to a 10.6% increase in Intermodal volume partially offset by a 6.2% decrease in revenue per order. Intermodal revenue per order was $1,858 , a decrease of $123 compared to second quarter 2016 due to growth in the East and Intra-West, which have shorter lengths of haul, and the continued competitive pricing environment.

The Company’s Intermodal income from operations decreased 17.7% compared to second quarter 2016 . Improved volume and tractor and container productivity were not able to overcome the impact of the competitive pricing environment and the increase in duplicative costs due to the conversion from leased to owned chassis. Duplicate chassis costs; which represent the cost of idle rented units, had a negative impact of $1.6 million, or approximately 80 basis points on Intermodal's second quarter 2017 operating ratio. The Company remains on track with its conversion plan and expects to be completed by the end of 2017 to coincide with the expiration of the existing lease requirements. The full impact of reduced friction costs will not be realized until 2018; however, Intermodal has begun to realize decreased costs due to the new chassis in the areas of driver retention, safety and maintenance.

Logistics

•	Revenue (excluding fuel surcharge):   $191.8 million ; an increase of 7.2% compared to second quarter 2016	
		
•	Income from Operations:   $6.6 million ; a decrease of 18.6% compared to second quarter 2016	

Logistics revenue (excluding fuel surcharge) increased 7.2% compared to second quarter 2016 primarily due to growth of the Company’s brokerage business. Brokerage revenue (excluding fuel surcharge) was 73% of Logistics revenue (excluding fuel surcharge) for second quarter 2017 vs. 72% for second quarter 2016 .

The Company’s Logistics income from operations decreased 18.6% compared to second quarter 2016 . Despite the growth in brokerage volume, market conditions resulted in increased third party transportation costs compared to second quarter 2016 as evidenced by a decline in gross margin. Brokerage gross margin, however, did increase as the quarter progressed.

3

Business Outlook

“The market pressures of the first quarter continued into the second quarter," said Lofgren. "However, in June indications of improving market conditions began to appear. July is always a challenging month, so we will have a better read by mid-August, but we are cautiously optimistic that the market will see strengthening in the second half of 2017.  The market improvement, our efforts to increase driver capacity, new Dedicated contracts and our ongoing revenue management work positions us well for the second half of 2017. Last quarter, I discussed my commitment to be thoughtful and disciplined as to capital expenditures. In light of anticipated market improvement and new customer wins, we have increased our anticipated full year net capital expenditures range to $350 million to $400 million which includes $100 million for chassis. Further, we anticipate full year 2017 adjusted diluted earnings per share in the range of $0.94 to $1.02, which includes the impact of increased share count from the IPO estimated at $0.10 per share."
   
Non-GAAP Financial Measures

We have presented certain non-GAAP financial measures, including adjusted enterprise revenue (excluding fuel surcharge), adjusted income from operations, adjusted operating ratio, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share and free cash flow. Management believes the use of non-GAAP measures assists investors in understanding our business as further described below. The non-GAAP information provided is used by our management and may not be comparable to similar measures disclosed by other companies. The non-GAAP measures used herein have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.

A reconciliation of net income per share to adjusted diluted earnings per share as projected for 2017 is not provided.  Schneider does not forecast net income per share as we cannot, without unreasonable effort, estimate or predict with certainty various components of net income. The components of net income that we cannot predict include expenses for items that do not relate to our core operating performance such as duplicate chassis costs or costs related to potential future acquisition as well as related tax impact of these items. Further, in the future, other items with similar characteristics to those currently included in adjusted net income, that have a similar impact on the comparability of periods, and which are not known at this time, may exist and impact adjusted net income.

About Schneider National, Inc.

We are a leading transportation and logistics services company providing a broad portfolio of premier truckload, intermodal and logistics solutions and operate one of the largest for-hire trucking fleets in North America. We believe we have developed a differentiated business model that is difficult to replicate due to our scale, breadth of complementary service offerings and proprietary technology platform. Our highly flexible and balanced business combines asset-based truckload services with asset-light intermodal and non-asset logistics offerings, enabling us to serve our customers’ diverse transportation needs. Since our founding in 1935, we believe we have become an iconic and trusted brand within the transportation industry by adhering to a culture of safety “first and always” and upholding our responsibility to our associates, our customers and the communities that we serve.

Special Note Regarding Forward-Looking Statements

This earnings release contains forward-looking statements, within the meaning of the United States Private Securities Litigation Reform Act of 1995, which are intended to come within the safe harbor protection provided by such Act. These forward-looking statements reflect our current expectations, beliefs, plans, or forecasts with respect to, among other things, future events and financial performance and trends in our business and industry. Forward-looking statements are often characterized by words or phrases such as “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “prospects,” “potential” and “forecast,” and other words, terms, and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks, and uncertainties. We caution readers that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement.

Such risks and uncertainties include, among others, those discussed under the heading “Risk Factors” in our Prospectus dated April 5, 2017 filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) of the Securities Act of 1933, as amended, which is deemed to be part of our Registration Statement on Form S-1 (File No. 333-215244), as well other filings with the SEC. In addition to any such risks, uncertainties, and other factors discussed elsewhere herein, risks, uncertainties, and other factors that could cause or contribute to actual results differing materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: economic and business risks inherent in the truckload industry, including competitive pressures pertaining to pricing, capacity, and service; risks associated with the loss of a significant customer or customers; fluctuations

4

in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments, and our ability to recover fuel costs through our fuel surcharge programs; our ability to attract and retain qualified drivers, including owner-operators, in the operation of our intermodal and trucking businesses; risks related to demand for our service offerings; our ability to recruit, develop, and retain our key associates; the impact of laws and regulations that apply to our business, including those that relate to the environment, taxes, employees, and owner-operators, our captive insurance company, and the increased costs of compliance with existing or future federal, state, and local regulations; significant systems disruptions, including those caused by cybersecurity breaches; negative seasonal patterns generally experienced in the trucking industry during traditionally slower shipping periods and winter months; exposure to claims and lawsuits in the ordinary course of our business and the risk of insurance claims through our captive insurance company; our ability to effectively manage and implement our growth and diversification strategies and cost saving initiatives; risks associated with acquisitions and other strategic transactions; risks associated with obtaining materials, equipment, and services from our vendors and suppliers; risks associated with cross-border operations and doing business in foreign countries; risks associated with financial and credit markets, including our ability to service indebtedness and fund capital expenditures and strategic initiatives; and risks associated with reliance on third parties with respect to certain of our businesses, including railroads with respect to our intermodal business and third-party capacity providers for our Logistics brokerage business. 

We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Contact:
Schneider National, Inc.
Pat Costello, SVP, Financial Planning and Analysis / Investor Relations
920-592-SNDR
investor@schneider.com

Source: Schneider SNDR

5

SCHNEIDER NATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)

	
																
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
OPERATING REVENUES	$	1,075,172		 	$	994,573		 	$	2,081,611		 	$	1,922,676		
OPERATING EXPENSES:	 	 	 	 	 	 	 	
Purchased transportation	387,541		 	358,197		 	754,869		 	696,396		
Salaries, wages, and benefits	304,907		 	280,904		 	602,630		 	558,370		
Fuel and fuel taxes	71,189		 	64,336		 	144,386		 	117,745		
Depreciation and amortization	68,636		 	63,843		 	136,506		 	127,738		
Operating supplies and expenses	127,667		 	104,720		 	233,901		 	203,983		
Insurance and related expenses	20,252		 	18,599		 	42,083		 	37,268		
Other general expenses, net	15,978		 	24,335		 	44,684		 	49,504		
Total operating expenses	996,170		 	914,934		 	1,959,059		 	1,791,004		
INCOME FROM OPERATIONS	79,002		 	79,639		 	122,552		 	131,672		
NONOPERATING EXPENSES:	 	 	 	 	 	 	 	
Interest expense—net	4,624		 	5,087		 	10,110		 	9,888		
Other—net	(221	)	 	941		 	(88	)	 	1,274		
Total nonoperating expenses	4,403		 	6,028		 	10,022		 	11,162		
INCOME BEFORE INCOME TAXES	74,599		 	73,611		 	112,530		 	120,510		
PROVISION FOR INCOME TAXES	28,126		 	29,444		 	43,488		 	48,204		
NET INCOME	$	46,473		 	$	44,167		 	$	69,042		 	$	72,306		

Weighted average common shares outstanding	174,424		 	156,295		 	165,422		 	156,000		
Basic earnings per share	$	0.27		 	$	0.28		 	$	0.42		 	$	0.46		
Weighted average diluted shares outstanding	174,453		 	156,425		 	165,436		 	156,160		
Diluted earnings per share	$	0.27		 	$	0.28		 	$	0.42		 	$	0.46		
Dividends per share of common stock	$	0.05		 	$	—		 	$	0.10		 	$	—		

6

SCHNEIDER NATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)

	
								
 	June 30, 2017	 	December 31, 2016	
ASSETS	 	 	 	
CURRENT ASSETS:	 	 	 	
Cash and cash equivalents	$	259,931		 	$	130,787		
Marketable securities	45,282		 	52,489		
Trade accounts receivable—net of allowance of $3,928 and $3,455, respectively	449,174		 	443,984		
Other receivables	21,918		 	41,807		
Current portion of lease receivables—net of allowance of $1,493 and $1,036, respectively	94,917		 	100,211		
Inventories	82,958		 	74,126		
Prepaid expenses and other current assets	92,420		 	80,244		
Total current assets	1,046,600		 	923,648		
NONCURRENT ASSETS:	 	 	 	
Property and equipment:	 	 	 	
Transportation equipment	2,677,729		 	2,596,668		
Land, buildings, and improvements	182,870		 	178,895		
Other	174,479		 	191,664		
Total property and equipment	3,035,078		 	2,967,227		
Accumulated depreciation	1,222,664		 	1,209,172		
Net property and equipment	1,812,414		 	1,758,055		
Lease receivables	138,125		 	132,121		
Capitalized software and other noncurrent assets	75,780		 	76,782		
Goodwill	164,302		 	164,035		
Total noncurrent assets	2,190,621		 	2,130,993		
TOTAL	$	3,237,221		 	$	3,054,641		

7

SCHNEIDER NATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)

	
								
 	June 30, 2017	 	December 31, 2016	
LIABILITIES, TEMPORARY EQUITY, AND SHAREHOLDERS' EQUITY	 	 	 	
CURRENT LIABILITIES:	 	 	 	
Trade accounts payable	$	256,633		 	$	227,253		
Accrued salaries and wages	74,134		 	81,799		
Claims accruals - current	54,477		 	52,216		
Current maturities of debt and capital lease obligations	20,740		 	258,658		
Dividends payable	8,842		 	—		
Other current liabilities	52,826		 	57,342		
Total current liabilities	467,652		 	677,268		
NONCURRENT LIABILITIES:	 	 	 	
Long-term debt	419,049		 	428,807		
Capital lease obligations	8,873		 	10,820		
Claims accruals - noncurrent	107,291		 	111,542		
Deferred income taxes	575,029		 	538,624		
Other	72,830		 	101,130		
Total noncurrent liabilities	1,183,072		 	1,190,923		
COMMITMENTS AND CONTINGENCIES		 		
TEMPORARY EQUITY - REDEEMABLE COMMON SHARES	 	 	 	
Redeemable common shares at December 31, 2016, Class A, no par value, shares authorized: 250,000,000, shares issued and outstanding: 83,029,500	—		 	563,217		
Redeemable common shares at December 31, 2016, Class B, no par value, shares authorized: 750,000,000, shares issued and outstanding: 73,294,560	—		 	497,175		
Accumulated earnings	—		 	125,175		
Accumulated other comprehensive income	—		 	883		
Total temporary equity	—		 	1,186,450		
SHAREHOLDERS' EQUITY	 	 	 	
Class A common shares at June 30, 2017, no par value, shares authorized: 250,000,000, shares issued and outstanding: 83,029,500	—		 	—		
Class B common shares at June 30, 2017, no par value, shares authorized: 750,000,000, shares issued and outstanding: 93,811,890	—		 	—		
Additional paid-in capital	1,533,653		 	—		
Retained earnings	52,384		 	—		
Accumulated other comprehensive income	460		 	—		
Total shareholders' equity	1,586,497		 	—		
TOTAL	$	3,237,221		 	$	3,054,641		

8

SCHNEIDER NATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)

	
								
 	Six Months Ended June 30,	
 	2017	 	2016	
OPERATING ACTIVITIES:	 	 	 	
Net income	$	69,042		 	$	72,306		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	
Depreciation and amortization	136,506		 	127,738		
Gain on sale of property and equipment	(6,114	)	 	(10,977	)	
Deferred income taxes	36,299		 	15,890		
WSL contingent consideration adjustment	(12,900	)	 	—		
Other noncash items	1,616		 	(661	)	
Changes in operating assets and liabilities:	 	 	 	
Receivables	15,026		 	36,573		
Other assets	(11,849	)	 	(13,985	)	
Payables	1,986		 	18,316		
Other liabilities	(2,919	)	 	20,166		
Net cash provided by operating activities	226,693		 	265,366		
INVESTING ACTIVITIES:	 	 	 	
Purchases of transportation equipment	(163,029	)	 	(212,735	)	
Purchases of other property and equipment	(18,320	)	 	(20,017	)	
Proceeds from sale of property and equipment	34,595		 	24,141		
       Proceeds from lease receipts and sale of off-lease inventory	29,943		 	26,279		
Purchases of lease equipment	(51,993	)	 	(45,998	)	
Sales of marketable securities	7,232		 	3,096		
Purchases of marketable securities	—		 	(4,002	)	
Acquisition of businesses, net of cash acquired	—		 	(78,221	)	
Net cash used in investing activities	(161,572	)	 	(307,457	)	
FINANCING ACTIVITIES:	 	 	 	
Proceeds under revolving credit agreements	—		 	75,000		
Payments under revolving credit agreements	(135,000	)	 	(83,948	)	
Payments of debt and capital lease obligations	(114,751	)	 	(13,255	)	
Payment of deferred consideration related to acquisition	(19,383	)	 	—		
Proceeds from IPO, net of issuance costs	341,059		 	—		
Dividends on redeemable common shares	(7,816	)	 	—		
Redemptions of redeemable common shares	(86	)	 	(16	)	
Proceeds from issuances of redeemable common shares	—		 	2,298		
Net cash provided by (used in) financing activities	64,023		 	(19,921	)	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	129,144		 	(62,012	)	
CASH AND CASH EQUIVALENTS:	 	 	 	
Beginning of period	130,787		 	160,676		
End of period	$	259,931		 	$	98,664		
ADDITIONAL CASH FLOW INFORMATION:	 	 	 	
Noncash investing and financing activity:	 	 	 	
Equipment purchases in accounts payable	$	49,365		 	$	66,671		
Dividends declared but not yet paid	$	8,842		 	$	—		
Costs in accounts payable related to our IPO	$	412		 	$	—		
Increase in redemption value of redeemable common shares	$	—		 	$	(109,961	)	
Cash paid during the year for:	 	 	 	
Interest	$	11,074		 	$	10,069		
Income taxes—net of refunds	$	(13,546	)	 	$	(32,432	)	

9

Schneider National, Inc.
Revenues and Income from Operations by Segment
(unaudited)

Revenues by Segment

																
(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Truckload	$	543,004		 	$	519,497		 	$	1,065,114		 	$	1,010,222		
Intermodal	194,260		 	187,209		 	375,350		 	372,034		
Logistics	191,751		 	178,847		 	375,655		 	345,597		
Other	78,900		 	55,559		 	129,183		 	105,108		
Fuel surcharge	92,557		 	72,290		 	182,807		 	128,444		
Inter-segment eliminations	(25,300	)	 	(18,829	)	 	(46,498	)	 	(38,729	)	
  Operating revenues	$	1,075,172		 	$	994,573		 	$	2,081,611		 	$	1,922,676		

Income from Operations by Segment

																
(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Truckload	$	53,231		 	$	61,705		 	$	91,751		 	$	103,893		
Intermodal (1)	11,232		 	13,646		 	17,866		 	20,735		
Logistics	6,592		 	8,103		 	11,775		 	13,280		
Other (2)	7,947		 	(3,815	)	 	1,160		 	(6,236	)	
  Income from operations	79,002		 	79,639		 	122,552		 	131,672		
 	 	 	 	 	 	 	 	
Adjustments:	 	 	 	 	 	 	 	
  Duplicate chassis cost (1)	1,600		 	—		 	2,900		 	—		
  WSL contingent consideration adjustment (2)	(12,900	)	 	—		 	(12,900	)	 	—		
Adjusted income from operations	$	67,702		 	$	79,639		 	$	112,552		 	$	131,672		

(1) By the end of 2017, the Company expects Intermodal to have completed its migration to an owned chassis model, which requires the replacement of rented chassis with owned chassis to improve safety and reliability and to increase driver retention. During 2017 we expect to add 10,000 to our owned chassis units, resulting in a total of more than 15,000 owned chassis. The existing lease requirements do not expire until December 31, 2017. Accordingly, the Company is adjusting its income from operations for rental costs related to idle chassis as rented units are replaced.
(2) The Company recorded an adjustment to the contingent consideration liability in the second quarter of 2017, resulting in an increase in income from operations. The adjustment was 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.

10

Schneider National, Inc.
Key Performance Indicators by Segment
(unaudited)

																
Truckload	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Dedicated standard	 	 	 	 	 	 	 	
      Revenue (excluding fuel surcharge) (1)	$	71,615		 	$	76,358		 	$	143,279		 	$	150,333		
       Average trucks (2) (3)	1,615		 	1,763		 	1,635		 	1,765		
      Revenue per truck per week (4)	$	3,448		 	$	3,357		 	$	3,423		 	$	3,314		
Dedicated specialty	 	 	 	 	 	 	 	
      Revenue (excluding fuel surcharge) (1)	$	104,537		 	$	93,978		 	$	200,591		 	$	184,046		
       Average trucks (2) (3)	2,228		 	1,988		 	2,178		 	2,000		
      Revenue per truck per week (4)	$	3,649		 	$	3,664		 	$	3,598		 	$	3,581		
For-hire standard	 	 	 	 	 	 	 	
      Revenue (excluding fuel surcharge) (1)	$	285,848		 	$	297,339		 	$	563,799		 	$	586,405		
       Average trucks (2) (3)	6,287		 	6,744		 	6,332		 	6,766		
      Revenue per truck per week (4)	$	3,535		 	$	3,418		 	$	3,478		 	$	3,373		
For-hire specialty	 	 	 	 	 	 	 	
      Revenue (excluding fuel surcharge) (1)	$	81,004		 	$	51,822		 	$	157,445		 	$	89,438		
       Average trucks (2) (3)	1,574		 	996		 	1,619		 	922		
      Revenue per truck per week (4)	$	4,003		 	$	4,032		 	$	3,799		 	$	3,773		
Total Truckload	 	 	 	 	 	 	 	
      Revenue (excluding fuel surcharge) (1)	$	543,004		 	$	519,497		 	$	1,065,114		 	$	1,010,222		
      Average trucks (2) (3)	11,704		 	11,491		 	11,764		 	11,453		
      Revenue per truck per week (4)	$	3,608		 	$	3,505		 	$	3,537		 	$	3,432		
      Average company trucks (3)	8,980		 	8,846		 	9,016		 	8,811		
      Average owner-operator trucks  (3)	2,724		 	2,645		 	2,748		 	2,642		
      Trailers	37,790		 	36,885		 	37,790		 	36,885		
      Operating ratio (5)	90.2	%	 	88.1	%	 	91.4	%	 	89.7	%	

(1) Revenue (excluding fuel surcharge) in thousands
(2) Includes company trucks and owner-operator trucks
		
(3)	Calculated based on beginning and ending month counts and represents the average number of trucks available to haul freight over the specified time frame	
		
(4)	Calculated excluding fuel surcharge, consistent with how revenue is reported internally for segment purposes, using weighted workdays	
(5) Calculated as segment operating expenses divided by segment revenue (excluding fuel surcharge)

	

Intermodal	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Orders (in thousands)	104.5		 	94.5		 	200.6		 	185.0		
Containers	17,577		 	17,368		 	17,577		 	17,368		
Trucks (1)	1,231		 	1,279		 	1,231		 	1,279		
Revenue per order (2)	$	1,858		 	$	1,981		 	$	1,871		 	$	2,011		
Operating ratio (3)	94.2	%	 	92.7	%	 	95.2	%	 	94.4	%	

11

        
(1) Includes company trucks and owner-operator trucks at the end of the period
(2) Calculated excluding fuel surcharge, consistent with how revenue is reported internally for segment purposes
(3) Calculated as segment operating expenses divided by segment revenue (excluding fuel surcharge)

	
												
Logistics	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Operating ratio (1)	96.6	%	 	95.5	%	 	96.9	%	 	96.2	%	

(1)	Calculated as segment operating expenses divided by segment revenue (excluding fuel surcharge)	

Schneider National, Inc.
Reconciliation of Non - GAAP Financial Measures
(unaudited)
In this earnings release, we present the following non-GAAP financial measures: (1) adjusted enterprise revenue (excluding fuel surcharge), (2) adjusted income from operations, (3) adjusted operating ratio, (4) adjusted net income, (5) adjusted diluted earnings per share, (6) adjusted EBITDA and (7) free cash flow. We also provide below reconciliations of these measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Management believes the use of each of these non-GAAP measures assists investors in understanding our business by (a) removing the impact of items from our operating results that, in our opinion, do not reflect our core operating performance, (b) providing investors with the same information our management uses internally to assess our core operating performance and (c) presenting comparable financial results between periods. In addition, in the case of adjusted enterprise revenue (excluding fuel surcharge), we believe the measure is useful to investors because it isolates volume, price, and cost changes directly related to industry demand and the way we operate our business from the exogenous factor of fluctuating fuel prices and the programs we have in place to manage fuel price fluctuations. Fuel-related costs and their impact on our industry are important to our results of operations, but they are often independent of other, more germane factors affecting our results of operations and our industry. With respect to free cash flow, we believe the measure provides investors with an important perspective on the cash available to fund our business after payment of capital expenditures related to the necessary components of ongoing operations. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. We use free cash flow as a measure to assess overall liquidity.
Although we believe these non-GAAP measures are useful to investors, they have limitations as analytical tools and may not be comparable to similar measures disclosed by other companies. You should not consider the non-GAAP measures in this report in isolation or as substitutes for, or alternatives to, analysis of our results as reported under GAAP. The exclusion of unusual or non-recurring items or other adjustments reflected in the non-GAAP measures should not be construed as an inference that our future results will not be affected by unusual or non-recurring items or by other items similar to such adjustments. Our management compensates for these limitations by relying primarily on our GAAP results in addition to using the non-GAAP measures.

Adjusted enterprise revenue (excluding fuel surcharge)

Adjusted enterprise revenue (excluding fuel surcharge) is a non-GAAP financial measure and is defined as operating revenues less fuel surcharge revenue. The following is a reconciliation of operating revenues, the most closely comparable GAAP financial measure, to adjusted enterprise revenue (excluding fuel surcharge).

																
(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Operating revenues	$	1,075,172		 	$	994,573		 	$	2,081,611		 	$	1,922,676		
  Less: Fuel surcharge revenue	92,557		 	72,290		 	182,807		 	128,444		
Adjusted enterprise revenue (excluding fuel surcharge)	$	982,615		 	$	922,283		 	$	1,898,804		 	$	1,794,232		

12

Adjusted income from operations
Adjusted income from operations is a non-GAAP financial measure and is defined as income from operations, adjusted to exclude material items that do not reflect our core operating performance. For the periods shown, excluded items consist of duplicate chassis costs and the adjustment of a contingent liability related to the WSL acquisition, which are explained below. The following is a reconciliation of income from operations, which is the most directly comparable GAAP measure, to adjusted income from operations.

																
(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Income from operations	$	79,002		 	$	79,639		 	$	122,552		 	$	131,672		
  Duplicate chassis costs (1)	1,600		 	—		 	2,900		 	—		
  WSL contingent consideration adjustment (2)	(12,900	)	 	—		 	(12,900	)	 	—		
Adjusted income from operations	$	67,702		 	$	79,639		 	$	112,552		 	$	131,672		

(1) By the end of 2017, the Company expects Intermodal to have completed its migration to an owned chassis model, which requires the replacement of rented chassis with owned chassis to improve safety and reliability and to increase driver retention. During 2017 we expect to add 10,000 to our owned chassis units, resulting in a total of more than 15,000 owned chassis. The existing lease requirements do not expire until December 31, 2017. Accordingly, the Company is adjusting its income from operations for rental costs related to idle chassis as rented units are replaced.
(2) The Company recorded an adjustment to the contingent consideration liability in the second quarter of 2017, resulting in an increase in income from operations. The adjustment was 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.
Adjusted operating ratio
Adjusted operating ratio is a non-GAAP financial measure and is defined as operating expenses, adjusted to exclude material items that do not reflect our core operating performance, divided by adjusted enterprise revenue (excluding fuel surcharge). For the periods shown, excluded items consist of duplicate chassis costs and the adjustment of a contingent liability related to the WSL acquisition, which are shown below. The following is a reconciliation of operating ratio, which is the most directly comparable GAAP measure, to adjusted operating ratio.

																
(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Total operating expenses	$	996,170		 	$	914,934		 	$	1,959,059		 	$	1,791,004		
  Divide by: Operating revenues	1,075,172	 	994,573		 	2,081,611		 	1,922,676		
Operating ratio	92.7	%	 	92.0	%	 	94.1	%	 	93.2	%	
 	 	 	 	 	 	 	 	
Operating revenues	$	1,075,172		 	$	994,573		 	$	2,081,611		 	$	1,922,676		
  Less: Fuel surcharge revenue	92,557		 	72,290		 	182,807		 	128,444		
Adjusted enterprise revenue (excluding fuel surcharge)	$	982,615		 	$	922,283		 	$	1,898,804		 	$	1,794,232		
 	 	 	 	 	 	 	 	
Total operating expenses	$	996,170		 	$	914,934		 	$	1,959,059		 	$	1,791,004		
 	 	 	 	 	 	 	 	
Adjusted for:	 	 	 	 	 	 	 	
  Fuel surcharge revenue	(92,557	)	 	(72,290	)	 	(182,807	)	 	(128,444	)	
  Duplicate chassis costs	(1,600	)	 	—		 	(2,900	)	 	—		
  WSL contingent consideration adjustment	12,900		 	—		 	12,900		 	—		
Adjusted total operating expenses	$	914,913		 	$	842,644		 	$	1,786,252		 	$	1,662,560		
Adjusted operating ratio	93.1	%	 	91.4	%	 	94.1	%	 	92.7	%	

13

Adjusted net income and adjusted diluted earnings per share

Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures and are defined as net income and diluted earnings per share, adjusted to exclude material items that do not reflect our core operating performance. For the periods shown, excluded items consist of duplicate chassis costs and the adjustment of a contingent liability related to the WSL acquisition, which are shown below. The following is a reconciliation of net income, which is the most directly comparable GAAP measure, to adjusted net income.

																

(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Net income	$	46,473		 	$	44,167		 	$	69,042		 	$	72,306		
  Duplicate chassis costs	1,600		 	—		 	2,900		 	—		
  WSL contingent consideration adjustment	(12,900	)	 	—		 	(12,900	)	 	—		
  Income tax effect of non-GAAP adjustments	4,520		 	—		 	4,000		 	—		
Adjusted net income	$	39,693		 	$	44,167		 	$	63,042		 	$	72,306		

The following is a reconciliation of diluted earnings per share, which is the most directly comparable GAAP measure, to adjusted diluted earnings per share.

																
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Diluted earnings per share	$	0.27		 	$	0.28		 	$	0.42		 	$	0.46		
  Non-GAAP adjustments, tax effected	(0.04	)	 	—		 	(0.04	)	 	—		
Adjusted diluted earnings per share	$	0.23		 	$	0.28		 	$	0.38		 	$	0.46		

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure and is defined as net income, plus provision for income taxes, interest expense and depreciation and amortization, and is further adjusted to exclude other non-operating expenses, and other material items that do not reflect our core operating performance. For the periods shown, excluded items consist of duplicate chassis costs and the adjustment of a contingent liability related to the WSL acquisition, which are shown below. The following is a reconciliation of net income, which is the most directly comparable GAAP measure, to adjusted EBITDA.

																
(in thousands)	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2017	 	2016	 	2017	 	2016	
Net income	$	46,473		 	$	44,167		 	$	69,042		 	$	72,306		
  Provision for income taxes	28,126		 	29,444		 	43,488		 	48,204		
  Interest expense – net	4,624		 	5,087		 	10,110		 	9,888		
  Depreciation and amortization	68,636		 	63,843		 	136,506		 	127,738		
  Other - net	(221	)	 	941		 	(88	)	 	1,274		
  Duplicate chassis cost	1,600		 	—		 	2,900		 	—		
  WSL contingent consideration adjustment	(12,900	)	 	—		 	(12,900	)	 	—		
Adjusted EBITDA	$	136,338		 	$	143,482		 	$	249,058		 	$	259,410		

14

Free cash flow

Free cash flow is a non-GAAP financial measure and is defined as net cash provided by operating activities less net cash used for capital expenditures. The following is a reconciliation of net cash provided by operating activities, which is the most directly comparable GAAP measure, to free cash flow.

								
(in thousands)	Six Months Ended June 30,	
 	2017	 	2016	
Net cash provided by operating activities	$	226,693		 	$	265,366		
 	 	 	 	
  Purchases of transportation equipment	(163,029	)	 	(212,735	)	
  Purchases of other property and equipment	(18,320	)	 	(20,017	)	
  Proceeds from sale of property and equipment	34,595		 	24,141		
    Net capital expenditures	(146,754	)	 	(208,611	)	
 	 	 	 	
Free cash flow	$	79,939		 	$	56,755		

15