Exit Partner Analysis: Schneider Company
Brief Summary and History of Schneider Company
Schneider Company is one of the largest trucking firms in America. The company was started in 1935 after Al Schneider sold his car to buy the first truck. The company provides a range of services that include intermodal, truckload and logistics. Schneider deals with different solutions that include expedited, bulk, dedicated, long haul, supply chain management, cross dock logistics, regional, intermodal and port logistics (Muller, 2012).
The company was privately owned by members of Schneider and was a small player until 1980s when the industry of trucking was deregulated. During this time, many companies failed, and Schneider worked on improving the business through the integration of advanced communication technology. The company was regulated by federal and state web statues that determined the industry’s rates, routes, and loads. The company was licensed to transport cellulose products. Unions and the government controlled most of the business also affecting the company though the company continued to grow. Due to the rapid growth, Schneider, the company, needed to expand the facility in the 1990s so as to accommodate more drivers. It began to work in a big facility in Memphis during the 1990 (Muller, 2012). The company built a driver operation and center as well as maintenance of the existing center.
Performance of Schneider
The company has undergone dramatic changes in the last three years. These changes were caused by the increased profit and areas in that they could conduct business. Many subsidiaries that the company had opened continued to operate well. Also, the company ensured that much of the logistic operations in areas where it operates were done by the company. In North America, Schneider is the biggest carrier that hauls over 16,275 loads per day in and to different locations. The company has also employed a total of 11,300 drivers who are experienced and responsible in delivering the cargo. The company has 9,600 trucks on different subsidiaries and 31,000 trailers on the road (Schneider National, 2011). The company conducts worldwide business opening over 168 facilities globally. Some of the countries where they operate include China, Canada, and México. The company has built a large customer base of more than two-thirds of 500 fortune companies.
The company has increased the dividends of the company’s shareholder indicating that the services offered by the company are profitable. In the last three years, the company has introduced rewards on the best drivers of the company as well as bonus depending on the miles that one has driven. For example, in the year 2015, the company announced that it had opened a new warehouse that would help the company in storing cargoes from the port. This was caused due to the increase of the customers that the company serves. On average, the company has performed quiet well due to the expansion of the business.
Trends in the Past Five Years
Truckloads
There has been an increase in some truckloads in the market in the last five years. The number of the trucks is expected to grow over time. The increase in the trucks in the market is viewed as a bad idea by the company since the numbers of customers are likely to split.
LTL Freight
LTL freight has increased in the past year, and the move is set to be effected in 2016. Fedex freight which is the largest carrier announced that they are going to impose 4.9% increase on all flight. More companies followed including Can-way that raised their rates as well.
Tracking Rates
Some factors have contributed to the rise in trucking rates. The rates are expected to increase over the years increasing the cost of safe transportation. The economy globally is shaping up affecting the rates of tracking. The economy is projected to grow over the years increasing the tracking rates more so that the companies could get some profit.
Driver Shortage
The shortage of experienced drivers has been a major challenge in the industry. The situation is expected to worsen as we go on since many people have pursued different careers. This development has resulted to the reduction of crisis in the industry. As stated by American Trucking Association, there is a deficit of 48,000 drivers and the number is expected to grow over time. If the trend continues, in 2024 the industry expects to have a shortage of 175,000 drivers. Driver shortage causes the industry to lose more money since many goods will not be delivered to their destination.
A Brief History of who the Existing Partner has acquired before
In the early 1990s, Schneider began investing in equipment especially truck trails that can be used in the railways. In 1991 The Company entered into intermodal transport industry. Schneider Company worked with the railway of Southern Pacific by serving the route between southern and Midwest-California. However, the company’s most freight was shipped by road compared to the percentage shipped by rail. The company was able to combine the two ways of transport that gave the company more efficiency in the route it’s served. In the year 1992, the company had signed several agreements of intermodal shipping with other railroads giving the company a chance to access most of the markets within United State. Schneider invested $12 million in 1990’s to replace the existing trailers truck with trailers that could be stacked on a rail flatbed (Muller, 2012). The company again spent more than $600 million in buying a new model trailer converter named road railer. The road trailer was modified in such a way that frames of the truck were able to use the steel rail wheels and move directly to the train truck. Unlike stackable containers that required lifting equipment that was made specifically to place the container in the rail yard, the road trailers were able to move on the track of the rail whenever there was a spur. This gave the company the flexibility it’s required.
Schneider Company was a fast growing company that embraced innovation in the year 1990s. The company was dominant in the market for adopting new technology that was not adopted by some of its leading competitors in the market. In 1993, the company formed Schneider Logistics that was a subsidiary (Schneider National, 2011). The move was to affect the sale of its shipping expertise to different clients in the market. Large manufacturers who were the customers of the company worked on finding different ways that they could streamline operations and reduce the inventory as a move to increase the profit. Schneider was always available at providing solutions to these manufacturers. The company later earned more contracts through Schneider Logistics that included one with general motors. The deal was to deliver spare parts of the business to different subsidiaries across the United States. By the end of 1995, Schneider Logistics had made 140 contracts that ranged from $200 million for small companies to $200 million for large corporations like PPG Industries and general motors’ (Schneider National, 2011). 15% of the company’s profit in mid-1995 was coming from the logistic division through the acquisition of different contracts with different partners. The logistic sector was the fastest growing in the company due to the acquisition of many contracts to deliver goods to both small and large manufacturers.
Current Trends in EBITDA
EBITDA is calculated adding taxes, depreciation, and interest and amortization expenses to the net income. EBITDA analyses the operation of the company profit before operation expenses that include non-core expenditures and benefits. Other non-cash charges such as amortization and depreciation are considered.
EBITDA = Net income + (taxes + depreciation +interest + amortization expenses)
EBITDA = $ 877,000 + ($15,618 + $ 9,533 + $25,152)
EBITDA= $927,303
This analysis shows that the company has been earning more profit before the expenses of the company operations were reduced. The multiples of the company increases the profit earned by the company.
References
Muller, E. (2012). Don Schneider: A Humble Leader, Distribution. Oxford: Oxford University
Press. Pp. 32-36.
Schneider National (2011). Schneider Launches Nationwide Intermodal Service. USA: American
Shipper Press.
