Schneider National (SNDR) Risk Analysis

Although the number of our associates who are currently represented by a labor union is not significant, we face ongoing risks associated with the potential unionization of certain associates. Over the last several years we have been the subject of isolated unionization efforts involving a relatively small number of associates, which efforts were, in each case, unsuccessful. Overall, we believe our relations with our associates are good; however, should a significant number of our associates opt to be represented by a labor union, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition, and liquidity. Additionally, our responses to any union organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results. These responses could also expose us to legal risk or reputational harm and cause us to incur costs to defend legal and regulatory actions. Moreover, any labor disputes or work stoppages, whether or not such actions culminate in a successful unionization campaign, could disrupt our operations and have a material adverse effect on our financial results.

Our Intermodal segment utilizes railroads and, in some cases, third-party drayage carriers to transport freight for our intermodal customers. The majority of these services are provided pursuant to contracts with our service partners which are subject to periodic renewal. While we have had agreements with all of the Class I railroads, our primary contracts for railroad transportation in support of our intermodal operations are currently with CSX Transportation, the UP, and the CPKC. In certain areas of the U.S., rail service is limited to a few railroads, or even a single railroad due to the lack of competition. Our ability to provide intermodal services in certain traffic lanes is, therefore, likely to be adversely affected if any of the Class I railroads were to discontinue service in certain lanes, or if any of our rail partners experience service interruptions, or if the overall quality of their rail service were to deteriorate. In addition, our intermodal business may be adversely affected by declines in service and volume levels provided by the railroads. All of the Class I railroads in the U.S., including our current rail partners, are unionized and have a recent history of disruption due to labor disputes and collective action, including strikes. While there is currently a contract in place between the Class I Railroads and the unions representing rail workers, underlying labor issues remain including, most prominently, precision-scheduled railroading, the business model adopted in recent years by Class I rail carriers which has been blamed by railroad unions as the reason for a dramatic reduction in the freight rail workforce, increased supply-chain congestion, and deteriorating railroad safety. As a result, we cannot predict whether or when a labor dispute involving our rail partners could occur, the duration of such dispute, and the impact, if any, on our results of operations. Any strike or labor related disruption at any of the Class I railroads can be expected to have an adverse impact on the results of operations of our Intermodal or Truckload segments. In addition, a portion of the freight we deliver through both our Intermodal and Truckload segments is imported to the U.S. through ports of call where workers are represented by the ILWU, a labor union which primarily represents a significant number of longshore workers at 29 ports across the West Coast, or the ILA, the largest union of maritime workers in North America, which represents a larger number of longshoremen on the Atlantic and Gulf Coasts, Great Lakes, major U.S. rivers, Puerto Rico, and Eastern Canada. The west and east coast ports have long been the primary gateways for cargo coming into and leaving the U.S. and have a long history of labor and other port disputes, protracted collective bargaining, and contract negotiations which, in the past, have involved port disputes and closures, as well as threats of a strike that would have disrupted domestic supply chains. For example, the ILA went on strike for three days in October 2024 following disputes with the USMX regarding pay and job security in connection with the negotiation of a new master contract. The strike ended when ILA and USMX agreed to a short-term extension of their existing master contract. In January 2025, the ILA again threatened to strike when the previous master contract extension expired on January 15, 2025, although this strike was avoided when the ILA and USMX agreed to a new six-year master contract. There can be no guarantee that work stoppages or further disruptions at the west or east coast ports will not occur.

We self-insure, or insure through our wholly-owned captive insurance company, a significant portion of our claims exposure resulting from auto liability, general liability, cargo, and property damage claims, as well as workers' compensation. In addition to insuring portions of our risk, our captive insurance company provides insurance coverage to our owner-operator drivers. We are also responsible for our legal expenses relating to such claims, which can be significant both on an aggregate and individual claim basis. Although we reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience, estimating the number and severity of claims, as well as related costs to settle or resolve them, is inherently difficult, and such costs could exceed our estimates. Accordingly, our actual losses associated with insured claims may differ materially from our estimates and adversely affect our financial condition and results of operations in material amounts. As a supplement to our self-insurance program, we maintain insurance with excess insurance carriers for potential losses, which exceed the amounts we self-insure. Although we believe our aggregate insurance limits should be sufficient to cover our historic claims amounts both individually and in the aggregate, the commercial trucking industry has experienced a wave of so-called "nuclear verdicts," where juries have awarded tens or even hundreds of millions of dollars to accident victims and their families. Given this recent trend, it is possible that one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our aggregate insurance coverage, we would bear the excess, in addition to our other self-insured amounts. Given the current truck litigation environment, the amount of coverage available from excess insurance carriers is decreasing, and the premiums for this excess coverage are increasing significantly. For the foregoing reasons, our insurance and claims expenses may increase, or we could increase our self-insured retention as policies are renewed or replaced. In addition, we may assume additional risk within our captive insurance company that we may or may not reinsure. Our results of operations and financial condition could be materially and adversely affected if (1) our costs or losses significantly exceed our aggregate coverage limits, (2) we are unable to obtain insurance coverage in amounts we deem sufficient, (3) our insurance carriers fail to pay on our insurance claims, or (4) we experience a claim for which coverage is not provided.

Currently the long-haul trucking industry in North America is diesel fuel-based, and long-haul trucking operations powered by electricity, natural gas, or hydrogen-based powertrains rather than diesel are not commercially feasible at scale in North America. Significant challenges remain with respect to the economic feasibility of these trucks, and further development of this technology is necessary considering power, torque, range, efficiency and other performance requirements of long-haul trucking operations. Moreover, the extensive nationwide charging/fueling infrastructure and maintenance network that would be necessary to support such operations does not exist. Nevertheless, federal, state, and local governmental agencies continue to engage in efforts to support legislation and regulations mandating the transition of diesel fuel-based commercial motor vehicles, such as Class 8 tractors operated by the Company's independent owner operators and third-party brokerage carriers, to ZEVs. In 2024, the SEC adopted climate disclosure rules to enhance and standardize climate-related disclosures by public companies and in public offerings. Among other things, the final rules will require a registrant to disclose: (a) climate-related risks that have had or are reasonably likely to have a material impact on the registrant's business strategy, results of operations, or financial condition; (b) the actual and potential material impacts of any identified climate-related risks on the registrant's strategy, business model, and outlook; (c) for large accelerated filers and accelerated filers like us that are not otherwise exempted, information about material Scope 1 and Scope 2 emissions; and (d) for those required to disclose Scope 1 and/or Scope 2 emissions (which would include us), an assurance report at the limited assurance level, which, following an additional transition period, will be at the reasonable assurance level. In addition, California and other states have enacted laws which mandate certain climate-related disclosures. As a result, we have and, expect that we will need to continue to expand our climate-related disclosures to comply with the SEC's and other state disclosure requirements. Should the Company fail to implement appropriate policies and procedures to accurately track or report all of the information required under these regulations and laws, it could be determined that the Company has weaknesses in its internal controls, and the Company would not be able to obtain the required third-party attestation report or file them timely and could lose customers. Should any of those events occur, the Company could face fines and penalties from the SEC and other states and the Company's share price could be negatively impacted. At the state level, CARB has withdrawn its request for an EPA waiver to enforce its ACF rule. The withdrawal means CARB is no longer seeking to enforce its ZEV mandate on fleets. Other states have enacted similar legislation to the ACF and, in the wake of CARB's decision, it is uncertain whether that legislation will be enforced. Mandates requiring the transition to ZEVs would create substantial costs for the Company's third-party capacity providers and, in turn, increase the cost of purchased transportation to the Company. An increase in the costs to purchase, lease, or maintain tractor equipment or in purchased transportation cost caused by existing or new regulations, without a corresponding increase in price to the customer, could adversely affect our results of operations and financial condition. Due primarily to the uncertainty of the timing of availability of compliant tractors from OEMs and the timing of the effectiveness of such laws and regulations, we are not currently able to forecast whether such impact will be material. We, and others, currently do not expect that long-haul trucking operations powered by electricity, natural gas, or hydrogen-based powertrains rather than diesel, will become commercially viable at scale throughout North America in the near term. However, as various technology alternatives continue to develop and mature and investment in infrastructure continues, local or regional service in certain geographic areas utilizing Class 8 tractors powered by electricity, natural gas, or hydrogen-based powertrains may become commercially viable in such time frame. We continue to actively monitor, evaluate, and test developments in the trucking industry related to the design, manufacture, operation, and support of heavy-duty trucks powered by electricity, natural gas, or hydrogen-based powertrains in order to consider the implementation of initiatives involving those technologies, as those technologies and the related infrastructure needed to support them may mature in the future. An increase in costs to implement these initiatives without a corresponding increase in price to the customer could adversely affect our results of operations and financial condition. Refer to Item 1. Business, for additional details on the ACT Regulations, the SEC Climate Disclosure Rule, California SB 253 and SB 261, and the VCMDA.

A critical component of our multi-pronged plan to reduce our carbon emissions and comply with California's and other states' zero or reduced emission requirements is the deployment of ZEVs in significant numbers in these states together with leveraging our intermodal capability. As an early adopter of ZEVs, there can be no assurance that we will be successful deploying ZEVs in our operations in significant numbers, that we will be successful converting more over-the-road freight to intermodal, that the national support infrastructure, including the nation's electricity grid, for heavy-duty ZEVs will be built-out as expected. Should any of those things fail to occur, we may fail to meet our published sustainability goals, which could result in losing the support of our investors, customers, and other stakeholders; our becoming subject to regulatory enforcement actions; or suffering reputational harm which, in any case, may increase the cost of providing transportation services or adversely affect our financial condition, results of operations, and liquidity.