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RYDER SYSTEM INC

RYDER SYSTEM INCREarnings & Financial Report

NYSE · logistics

Ryder System, Inc. is an American transportation and logistics company, specializing in truck rental and leasing, fleet management, supply chain management, and transportation management. It also offers full-service leasing, rental and maintenance, used vehicle sales, transportation management, professional drivers, e-commerce fulfillment, and last-mile delivery services. The company is headquartered in Coral Gables, Florida, and operates in the United States and United Kingdom.

What changed in RYDER SYSTEM INC's 10-K — 2022 vs 2023

Top changes in RYDER SYSTEM INC's 2023 10-K

469 paragraphs added · 504 removed · 197 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+15 added−14 removed57 unchanged
This strategy is supported by: • leveraging secular trends that favor the decision to outsource logistics and transportation services, such as dynamic supply chains, labor constraints, increased cost and complexity, supply chain disruptions, government incentives and regulations, e-commerce, and disruptive technologies; • growing earnings from our contractual businesses; • offering innovative products, solutions and support services to create and strengthen customer relationships; • delivering operational excellence through continuous productivity and process improvements; • attracting, developing and retaining the best talent; • deploying technology to accelerate growth while improving operational efficiencies; and • executing our disciplined capital allocation priorities that include investing in organic growth, pursuing targeted acquisitions and investments, and returning capital to shareholders.
This strategy is supported by: • leveraging secular trends that favor the decision to outsource logistics and transportation services, such as dynamic supply chains, labor constraints, increased cost and complexity, supply chain disruptions, government regulations, e-commerce, and disruptive technologies; • growing earnings from our contractual businesses; • offering innovative products, solutions and support services to create and strengthen customer relationships; • delivering operational excellence through continuous productivity and process improvements; • attracting, developing and retaining the best talent; • deploying technology to accelerate growth while improving operational efficiencies; and • executing our disciplined capital allocation priorities that include investing in organic growth, pursuing targeted acquisitions and investments, and returning capital to shareholders.
Dedicated Transportation Solutions Value Proposition Through our DTS business, we combine equipment, maintenance, professional drivers, administrative services and additional services, including routing and scheduling, fleet sizing, safety, regulatory compliance, risk management, and technology and communication systems support to provide customers with a dedicated transportation solution that is designed to increase their competitive position, improve risk management and integrate their transportation needs with their overall supply chain.
Dedicated Transportation Solutions Value Proposition Through our DTS business, we combine equipment, maintenance, professional drivers, engineering, administrative services and additional services, including routing and scheduling, fleet sizing, safety, regulatory compliance, risk management, and technology and communication systems support to provide customers with a dedicated transportation solution that is designed to increase their competitive position, improve risk management and integrate their transportation needs with their overall supply chain.
Our FMS product offering is comprised of full service leasing as well as leasing with flexible maintenance options; shorter-term commercial vehicle rental; contract or transactional maintenance services; digital and technology support services that optimize asset performance, compliance, safety; and comprehensive fuel services.
Our FMS product offering is comprised of full service leasing as well as leasing with flexible maintenance options; shorter-term commercial vehicle rental; contract or transactional maintenance 2 services; digital and technology support services that optimize asset performance, compliance, safety; and comprehensive fuel services.
In addition, market demand for just-in-time delivery creates a need for well-defined routing and scheduling plans that are based on comprehensive asset utilization analysis and fleet rationalization studies offered as part of our DTS services. Operations/Product Offerings For the year ended December 31, 2022, our DTS business accounted for 15% of our consolidated revenue.
In addition, market demand for just-in-time delivery creates a need for well-defined routing and scheduling plans that are based on comprehensive asset utilization analysis and fleet rationalization studies offered as part of our DTS services. Operations/Product Offerings For the year ended December 31, 2023, our DTS business accounted for 15% of our consolidated revenue.
Because of these factors, we have continued to focus on increasing the diversity of our customer base and strengthening our long-term business relationships with our customers.
Because of these factors, we have continued to focus on 9 increasing the diversity of our customer base and strengthening our long-term business relationships with our customers.
We may also become subject to new or more restrictive regulations imposed by these agencies or other authorities or states relating to carbon emissions controls and reporting, engine exhaust emissions, drivers’ hours of service, wage and hour requirements, employee and independent contractor classification, security, including data privacy and cyber security, and ergonomics.
We may also become subject to new or more restrictive regulations imposed by these agencies or other authorities or states relating to carbon emissions controls and reporting, engine exhaust emissions, drivers’ hours of service, wage and hour requirements, employee and independent contractor classification, security, including data privacy and cybersecurity, and ergonomics.
Market Trends The U.S. commercial fleet market is estimated to include 9 million vehicles, of which 5 million vehicles are privately owned by companies, 2 million vehicles are with for-hire carriers, 1 million vehicles are leased from banks or other financial institutions, and 1 million vehicles are being leased or rented from third parties, including Ryder 1 .
Market Trends The U.S. commercial fleet market is estimated to include 10 million vehicles, of which 5 million vehicles are privately owned by companies, 2 million vehicles are with for-hire carriers, 1 million vehicles are leased from banks or other financial institutions, and 1 million vehicles are being leased or rented from third parties, including Ryder 1 .
Our e-commerce and last mile services offer omnichannel delivery with two-day delivery across the entire U.S. and one-day delivery across the majority of the U.S. Our e-commerce and last mile services are provided through a network of over 158 sites strategically located throughout the U.S. These sites may be owned or leased by us, our customers or our agents.
Our e-commerce and last mile services offer omnichannel delivery with two-day delivery across the entire U.S. and one-day delivery across the majority of the U.S. Our e-commerce and last mile services are provided through a network of over 106 sites strategically located throughout the U.S. These sites may be owned or leased by us, our customers or our agents.
Upon request to our Investor Relations page on our website , we will provide a copy of these documents to anyone, free of charge.
Upon request to our Investor Relations page on our website , we will provide a copy of these documents to anyone, free of charge. 12
Fatovic Executive Vice President, Chief Legal Officer and Corporate Secretary 2012 Executive Vice President, General Counsel and Secretary from June 2004 to July 2012. Senior Vice President, U.S. Supply Chain Operations, Hi-Tech and Consumer Industries from December 2002 to May 2004. Vice President and Deputy General Counsel from May 2000 to December 2002. 57 Karen M.
Fatovic Executive Vice President, Chief Legal Officer and Corporate Secretary 2012 Executive Vice President, General Counsel and Secretary from June 2004 to July 2012. Senior Vice President, U.S. Supply Chain Operations, Hi-Tech and Consumer Industries from December 2002 to May 2004. Vice President and Deputy General Counsel from May 2000 to December 2002. 58 Karen M.
Dedicated transportation operations are located at our customer facilities, and our dedicated offering utilizes and benefits from our extensive network of FMS facilities, which provides maintenance for all Ryder vehicles used in SCS solutions. For the year ended December 31, 2022, approximately 32% of our SCS revenue was related to dedicated transportation services. 6 Transportation Management and Brokerage .
Dedicated transportation operations are located at our customer facilities, and our dedicated offering utilizes and benefits from our extensive network of FMS facilities, which provides maintenance for all Ryder vehicles used in SCS solutions. For the year ended December 31, 2023, approximately 32% of our SCS revenue was related to dedicated transportation services. Transportation Management and Brokerage .
Our transportation consultants focus on carrier procurement of all modes of transportation with an emphasis on truck-based transportation, and also includes rate negotiation, freight bill audits and payment services. In addition, our SCS business provides customers with brokerage services designed to provide prequalified trucking capacity in North America.
Our transportation consultants focus on carrier procurement of all modes of transportation with an emphasis on truck-based transportation, and also includes rate negotiation, freight bill audits and payment services. In addition, our SCS business p rovides customers with brokerage services designed to provide prequalified trucking capacity in North America.
For the year ended December 31, 2022, ChoiceLease revenue accounted for 51% of our FMS total revenue. Commercial Rental . We offer rental vehicles to customers that have a need to supplement their private fleet of vehicles on a short-term basis (one day up to one year in length) to handle seasonal increases in their business or discrete projects.
For the year ended December 31, 2023, ChoiceLease revenue accounted for 54% of our FMS total revenue. Commercial Rental . We offer rental vehicles to customers that have a need to supplement their private fleet of vehicles on a short-term basis (one day up to one year in length) to handle seasonal increases in their business or discrete projects.
The following table provides information regarding the number of vehicles and customers by FMS product offering as of December 31, 2022: U.S.
The following table provides information regarding the number of vehicles and customers by FMS product offering as of December 31, 2023: U.S.
Hodes (1) Senior Vice President and Chief Procurement and Corporate Development Officer 2022 Senior Vice President and Deputy General Counsel and Safety, Health, and Security from February 2011 to October 2022. 55 Rajeev Ravindran Executive Vice President and Chief Information Officer 2018 Chief Information Officer and Group Vice President at JM Enterprises from 2012 to January 2018. 57 Cristina Gallo-Aquino Senior Vice President, Controller and Principal Accounting Officer 2020 Vice President and Chief Financial Officer, Global FMS from August 2015 to August 2020.
Hodes Senior Vice President and Chief Procurement and Corporate Development Officer 2022 Senior Vice President and Deputy General Counsel and Safety, Health, and Security from February 2011 to October 2022. 56 Rajeev Ravindran Executive Vice President and Chief Information Officer 2018 Chief Information Officer and Group Vice President at JM Enterprises from 2012 to January 2018. 58 Cristina Gallo-Aquino Senior Vice President, Controller and Principal Accounting Officer 2020 Vice President and Chief Financial Officer, Global FMS from August 2015 to August 2020.
Our primary strategy is to accelerate growth in our higher return, less capital intensive supply chain and dedicated businesses and grow our fleet management business at or above targeted returns. We aim to achieve this by focusing on companies either internally managing their supply chain services or outsourcing their needs to other providers.
Our strategy is to accelerate growth in our less capital intensive supply chain and dedicated businesses guided by our balanced growth strategy, and grow our fleet management business at or above targeted returns. We aim to achieve this by focusing on companies either internally managing their supply chain services or outsourcing their needs to other providers.
In addition to vehicle rental, we may extend liability insurance coverage under our existing policies to our rental customers as well as the benefits of cost savings and convenience of our comprehensive fuel services program. For the year ended December 31, 2022, commercial rental revenue accounted for 21% of our FMS total revenue.
In addition to vehicle rental, we may extend liability insurance coverage under our existing policies to our rental customers as well as the benefits of cost savings and convenience of our comprehensive fuel services program. For the year ended December 31, 2023, commercial rental revenue accounted for 20% of our FMS total revenue. SelectCare .
Jones Executive Vice President and Chief Marketing Officer 2014 Senior Vice President and Chief Marketing Officer from September 2013 to October 2014. 60 Francisco Lopez Executive Vice President and Chief Human Resources Officer 2018 Chief Human Resources Officer February 2016 to February 2018. Senior Vice President, Global Human Resources Operations from July 2013 to February 2016. 48 Sanford J.
Jones Executive Vice President and Chief Marketing Officer 2014 Senior Vice President and Chief Marketing Officer from September 2013 to October 2014. 61 Francisco Lopez Executive Vice President and Chief Human Resources Officer 2018 Chief Human Resources Officer February 2016 to February 2018. Senior Vice President, Global Human Resources Operations from July 2013 to February 2016. 49 Sanford J.
In the U.S., SCS customer accounts are mostly large enterprises that maintain large, complex supply chains. Most of our core SCS business operations are strategically geographically located to maximize efficiencies and reduce costs. We also centralize certain logistics expertise in locations not associated with specific customer sites.
(2) Includes 15 managed warehouses in Mexico. In the U.S., SCS customer accounts are mostly large enterprises that maintain large, complex supply chains. Most of our core SCS business operations are strategically located to maximize efficiencies and reduce costs. We also centralize certain logistics expertise in locations not associated with specific customer sites.
In Mexico, our operations offer a full range of SCS services, which are often highly integrated with our distribution and transportation operations, and manage approximately 20,700 border crossings each month between the U.S. and Mexico. Our Canadian operations are highly coordinated with their U.S. and Mexico counterparts and manage approximately 8,800 border crossings each month.
In Mexico, our operations offer a full range of SCS services, which are often highly integrated with our distribution and transportation operations, and manage approximately 20,900 border crossings each month between the U.S. and Mexico. Our Canadian operations are highly coordinated with their U.S. and Mexico counterparts and manage approximately 6,000 border crossings each month.
For the year ended December 31, 2022, we purchased or executed $10.7 billion in freight moves on our customers' behalf, including $248 million in brokerage services. For the year ended December 31, 2022, transportation management solutions accounted for 12% of our SCS revenue. E-commerce and Last Mile.
For the year ended December 31, 2023, we purchased or executed $10.0 billion in freight moves on our customers' behalf, including $173 million in brokerage services. For the year ended December 31, 2023, transportation management solutions accounted for 10% of our SCS revenue. E-commerce and Last Mile.
Market Trends The U.S. dedicated market was estimated to be $23.1 billion 3 from an addressable market of approximately $550.0 billion 4 . This market is affected by many of the same trends that impact our FMS business.
Market Trends The U.S. dedicated market was estimated to be $29 billion 3 from an addressable market of approximately $660 billion 4 . This market is affected by many of the same trends that impact our FMS business.
In 2022, we introduced in select markets, a pay-as-you-go retail mobile maintenance solution and digital platform that enables all fleet owners and managers to order maintenance with an expert technician anytime, anywhere, without contract with Torque by Ryder ® . For the year ended December 31, 2022, SelectCare revenue accounted for 10% of our FMS total revenue.
In 2023, we launched Torque by Ryder ® in select markets, a pay-as-you-go retail mobile maintenance solution and digital platform that enables all fleet owners and managers to order maintenance with an expert technician anytime, anywhere, with no long term contract. For the year ended December 31, 2023, SelectCare revenue accounted for 12% of our FMS total revenue.
We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing and leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, last mile, and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, and administrative support.
We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing that includes our contractual maintenance offering, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides fully integrated port-to-door logistics solutions, including distribution management, dedicated transportation, transportation management, freight brokerage, e-commerce fulfillment, last-mile delivery, contract packaging, and contract manufacturing in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, and administrative support.
We also operate on-site at 164 customer locations, which primarily provide vehicle maintenance solely for that customer's fleet. Canada . As of December 31, 2022, we had 28 operating locations throughout seven Canadian provinces. We also operate 14 maintenance facilities on-site at customer properties in Canada. Europe.
We also operate on-site at 158 customer locations, which primarily provide vehicle maintenance solely for that customer's fleet. Canada . As of December 31, 2023, we had 28 operating locations throughout seven Canadian provinces. We also operate 14 maintenance facilities on-site at customer properties in Canada. FMS Product Offerings ChoiceLease .
Our business is organized by industry verticals (Consumer Packaged Goods and Retail, Automotive, Technology and Healthcare, and Industrial and Other) to enable our teams to focus on the specific needs of their customers. Our SCS product offerings includes: distribution management, dedicated transportation, transportation management, brokerage, e-commerce, last mile, and professional services.
Our business is organized by industry vertical (omnichannel retail (includes retail, technology, last mile and e-commerce), automotive, consumer packaged goods (CPG), and industrial and other (includes healthcare)) to enable our teams to focus on the specific needs of their customers. Our SCS product offerings provide port-to-door solutions including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, and last mile.
We provide our FMS customers with access to diesel fuel at competitive prices at 427 of our maintenance facilities across the U.S. and Canada. We also provide fuel services such as fuel planning, fuel tax reporting, centralized billing, fuel cards and fuel monitoring.
(2) Our SelectCare customers includ e approximately 1,000 ChoiceLease customers. Fuel Services. We provide our FMS customers with access to diesel fuel at competitive prices at 415 of our maintenance facilities across the U.S. and Canada. We also provide fuel services such as fuel planning, fuel tax reporting, centralized billing, fuel cards and fuel monitoring.
The strategy revolves around the following interrelated goals and priorities: • provide customers with best in class execution and quality through reliable and flexible supply chain solutions; • develop innovative solutions and capabilities that drive value for our customers, such as RyderShare™ , a real-time collaborative visibility tool showing all goods moving across the supply chain; • create a culture of innovation and collaboration to provide solutions to meet our clients' needs; • focus consistently on network optimization and continuous improvement; • execute on targeted sales and marketing growth strategies; and • expand customer relationships to include fast growing offerings in e-commerce fulfillment and last mile.
The strategy revolves around the following interrelated goals and priorities: • provide customers with best in class execution and quality through reliable and flexible supply chain solutions; • develop innovative solutions and capabilities that drive value for our customers, such as RyderShare™ , a real-time collaborative visibility tool showing all goods moving across the supply chain; • create a culture of innovation and collaboration to provide solutions to meet our clients' needs; • focus consistently on network optimization and continuous improvement; • execute on targeted sales and marketing growth strategies; and • expand customer relationships to include fast growing offerings in e-commerce fulfillment and last mile. 7 Competition As an alternative to using our services, companies may choose to internally manage their own supply chains and logistics operations, or obtain similar or alternative services from other third-party vendors.
As of December 31, 2022, we had 558 operating locations, excluding ancillary storage locations, in 50 states, the District of Columbia and Puerto Rico.
As of December 31, 2023, we had 559 operating locations, excluding ancillary storage locations, in 49 states, the District of Columbia and Puerto Rico.
As of December 31, 2022, we had 209 DTS customer accounts in the U.S. Because it is highly customized, our DTS product is particularly attractive to companies that operate in industries that have time-sensitive deliveries or special handling requirements, as well as companies who require specialized equipment.
As of December 31, 2023, we ha d 189 DTS customer accounts in the U.S. Because it is highly customized, our DTS product is particularly attractive to companies that operate in industries that have time-sensitive deliveries or special handling requirements, as well as companies who require a highly engineered transportation solution with specialized services.
Although fuel sales do not have a significant impact on our FMS earnings, as it is largely a pass-through cost to customers, we believe allowing customers to leverage our fuel buying power is a significant and valuable benefit to our customers. For the year ended December 31, 2022, fuel services revenue accounted for 18% of our FMS total revenue.
Although fuel sales do not have a significant impact on our FMS earnings, as it is largely a pass-through cost to customers, we believe allowing customers to leverage our fuel buying power is a significant and valuable benefit to our customers.
Our customer base includes enterprises operating in a variety of industries as shown below: Further information on our business and reportable business segments are presented in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report. 1 MISSION AND STRATEGY Ryder's mission is to responsibly deliver innovative supply chain and transportation solutions that are reliable, safe and efficient, enabling our customers to deliver on their promises.
Our customer base includes enterprises operating in a variety of industries as shown below: Further information on our business and business segments are presented in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report.
Monthly safety scorecards are tracked and reviewed by management for progress toward key safety objectives. The safety of our customers is also paramount at Ryder. Safety support is provided to customers through Ryder Fleet Risk Services (FRS). FRS helps customers navigate the increasingly complex industry landscape through customized consultation, innovative solutions, and best-in-class safety programs.
Monthly safety scorecards are tracked and reviewed by management for progress toward key safety objectives. The safety of our customers is also paramount at Ryder. Safety support is provided to customers through Ryder Fleet Risk Services (FRS).
We believe these trends increase the value of our product offering and will increasingly lead privately held fleets to outsource. 1 U.S. Fleet as of September 2022, Class 3-8, IHS Markit Ltd. 2 Operations In 2022, our global FMS business accounted for 46% of our consolidated revenue. U.S.
We believe these trends increase the value of our product offering and will increasingly lead privately held fleets to outsource. Operations In 2023, our global FMS business accounted for 44% of our consolidated revenue. U.S.
Our technicians also receive both online and in-person training to enable them to continuously improve their maintenance skills and we collaborate with our OEMs to ensure our technicians possess the knowledge and skills necessary to service our customers. Our warehouse workers also receive regular safety and compliance training that is specific to their location.
Our technicians also receive both online and in-person training and we collaborate with our OEMs to ensure our technicians possess the knowledge and skills necessary to service our customers. Our warehouse workers also receive regular safety and compliance training that is specific to their location. At December 31, 2023, we had approximately 47,500 full-time employees in North America .
Although a significant portion of our DTS operations are located at customer facilities, our DTS business also utilizes and benefits from our extensive network of FMS facilities, including the FMS maintenance network that services the vehicles used in DTS solutions.
Although a significant portion of our DTS operations are located at customer facilities, our DTS business also utilizes and benefits from our extensive network of FMS facilities, including the FMS maintenance network that services the vehicles used in DTS solutions. _________________________ (3) Armstrong & Associates - A Roaring 2021: Demand Drives 3PLs to the Best Growth and M&A Year on Record, July 2022.
(formerly RL Polk) & Ryder Internal Estimates 8 DTS Business Strategy Our DTS business strategy is to offer services to customers who need specialized equipment, specialized handling, dedicated capacity, or integrated transportation services.
DTS Business Strategy Our DTS business strategy is to offer services to customers who need specific vehicles, specialized handling, dedicated capacity, or integrated transportation services.
These offerings are supported by our continued investments in a variety of information technology and engineering solutions and can be provided independently or as an integrated solution to optimize supply chain effectiveness. Key aspects of our value proposition are our operational execution, industry expertise, and customer-facing visibility platform, which are important differentiators in the marketplace.
These offerings are supported by our continued investments in a variety of information technology and engineering solutions that can be provided independently or as an integrated solution to optimize supply chain effectiveness.
Executive Vice President of Operations, U.S. FMS from October 2005 to October 2007. Senior Vice President and Chief Information Officer from January 2003 to October 2005. 57 John J. Diez Executive Vice President and Chief Financial Officer 2021 President, Global FMS from August 2019 to May 2021. President of DTS from March 2015 to August 2019.
President, Global FMS from September 2010 to February 2012. Executive Vice President and Chief Financial Officer from October 2007 to September 2010. Executive Vice President of Operations, U.S. FMS from October 2005 to October 2007. Senior Vice President and Chief Information Officer from January 2003 to October 2005. 58 John J.
Dedicated transportation services provided as part of an operationally integrated, multi-service, supply chain solution to SCS customers are primarily reported in the SCS business segment.
Dedicated transportation services provided as part of an operationally integrated, multi-service supply chain solution to SCS customers are primarily reported in the SCS business segment. In the beginning of 2022, we announced our intention to exit our lower return FMS Europe (primarily United Kingdom (U.K.)) business.
We face different competitors in each country or region where they may have a greater operational presence. We compete based on factors such as price, service offerings, market knowledge, expertise in logistics-related technology and overall performance (e.g., timeliness, accuracy, and flexibility).
We compete based on factors such as price, service offerings, market knowledge, expertise in logistics-related technology and overall performance (e.g., timeliness, accuracy, and flexibility).
Additional information about the regulations that we are subject to can be found in Item 1A. "Risk Factors" in this Annual Report on Form 10-K. Refer to Note 20, “Environmental Matters,” in the Notes to Consolidated Financial Statements for a discussion surrounding environmental matters.
Additional information about the regulations that we are subject to can be found in Item 1A. "Risk Factors" in this Annual Report on Form 10-K.
The maintenance and operation of commercial vehicles has become more complex and expensive, requiring companies to spend a significant amount of time and money implementing new technology, diagnostics, retooling and training.
The maintenance and operation of commercial vehicles has become more complex and expensive, requiring companies to spend a significant amount of time and money implementing new technology, diagnostics, retooling and training. Companies must also manage global supply chain disruptions and labor issues, such as a limited supply of commercial vehicles and a shortage of mechanics and qualified truck drivers.
In addition, through our SCS business, we can reduce costs and add value to a DTS customer’s distribution system by aggregating orders into loads, looking for shipment consolidation opportunities and organizing loads for vehicles that are returning from their destination point back to their point of origin (backhaul). 3 Armstrong & Associates - A Roaring 2021: Demand Drives 3PLs to the Best Growth and M&A Year on Record,, July 2022 4 Addressable market as of September 2022, Class 3-8, IHS Markit Ltd.
In addition, through our SCS business, we can reduce costs and add value to a DTS customer’s distribution system by aggregating orders into loads, looking for shipment consolidation opportunities and organizing loads for vehicles that are returning from their destination point back to their point of origin (backhaul).
Senior Vice President of Ryder Dedicated from March 2014 to February 2015. Senior Vice President of Asset Management from January 2011 to February 2014. 52 Thomas M. Havens President, Global Fleet Management Solutions 2021 Senior Vice President and Global Chief of Operations for FMS from November 2012 to May 2021.
Diez Executive Vice President and Chief Financial Officer 2021 President, Global FMS from August 2019 to May 2021. President of DTS from March 2015 to August 2019. Senior Vice President of Ryder Dedicated from March 2014 to February 2015. Senior Vice President of Asset Management from January 2011 to February 2014. 53 Thomas M.
Although we have not experienced a material work stoppage or strike, these events can potentially occur given the types of businesses in which we currently engage. We consider the relationship with our employees to be good. Refer to Item 1A. Risk Factors for further information regarding risk associated with our human capital and the attraction, development, and retention of personnel.
Their wages and benefits are governed by 98 separate labor agreements which are renegotiated periodically. Although we have not experienced a material work stoppage or strike, these events can potentially occur given the types of businesses in which we currently engage. We consider the relationship with our employees to be good. Refer to Item 1A.
ITEM 1. BUSINESS OVERVIEW Ryder System, Inc. (Ryder) is a leading logistics and transportation company. We provide supply chain, dedicated transportation, and commercial fleet management solutions.
ITEM 1. BUSINESS OVERVIEW Ryder System, Inc. (Ryder) is a leading provider of outsourced logistics and transportation services with significant growth opportunities from secular trends and large addressable markets. We provide supply chain, dedicated transportation, and commercial fleet management solutions.
Additional value-added services, such as light assembly of components into defined units, packaging and refurbishment, are also offered to our customers. For the year ended December 31, 2022, distribution management solutions accounted for 33% of our SCS revenue. Dedicated Transportation.
Additional value-added services, such as light assembly of components into defined units, packaging and refurbishment, are also offered to our customers.
The goal of each customized plan is to create a distribution system that optimizes freight flow while meeting a customer’s service goals. A team of DTS transportation specialists can then implement the plan by leveraging the resources, expertise and technological capabilities of both our FMS and SCS businesses.
A team of DTS transportation specialists can then implement the plan by leveraging the resources, expertise and technological capabilities of both our FMS and SCS businesses.
Once we have signed an agreement with the customer, we acquire vehicles and components that are custom engineered to the customer’s requirements and lease the vehicles to the customer for periods generally ranging from three to seven years for trucks and tractors and typically ten years for trailers. • Preventative and Flexible Maintenance Programs based on vehicle type and time or mileage intervals that are cost-effective and designed to reduce vehicle downtime. • Extensive network of maintenance facilities and trained technicians for maintenance, vehicle repairs, 24-hour emergency roadside service, and replacement vehicles for vehicles that are temporarily out of service. • Access to Lease Vehicles as we are able to leverage our original equipment manufacturer (OEM) relationships to secure access to vehicles. • No Vehicle Residual Risk Exposure as we typically retain vehicle residual risk exposure. • Optional Fleet Support Services , including our fuel services; safety services such as safety training, driver certification and loss prevention consulting; vehicle use and other tax reporting, permitting and licensing, and regulatory compliance (including hours of service administration); physical damage insurance coverage extension under our existing insurance policies and related insurance services; environmental services; access to RyderGyde™ on ryder.com® , our customer-facing platform that enables fleet managers and drivers to engage with Ryder services in a digital way.
Fleet as of September 2023, Class 3-8, IHS Markit Ltd. 3 • Access to Lease Vehicles as we are able to leverage our original equipment manufacturer (OEM) relationships to secure access to vehicles. • No Vehicle Residual Risk Exposure as we typically retain vehicle residual risk exposure. • Optional Fleet Support Services , including our fuel services; safety services such as safety training, driver certification and loss prevention consulting; vehicle use and other tax reporting, permitting and licensing, and regulatory compliance (including hours of service administration); physical damage insurance coverage extension under our existing insurance policies and related insurance services; environmental services. • Digital Fleet Management Platform as access to RyderGyde™ on ryder.com® , our customer-facing platform that enables fleet managers and drivers to engage with our services in a digital way.
Used Vehicles. We primarily sell our used vehicles from our 66 retail sales centers throughout North America (15 of which are co-located at an FMS shop), at our branch locations and through our website at www.ryder.com/used-trucks .
For the year ended December 31, 2023, fuel services revenue accounted for 14% of our FMS total revenue. 4 Used Vehicles. We primarily sell our used vehicles from our 57 retail sales centers throughout the U.S. and Canada (12 of which are co-located at an FMS shop), at our branch locations and through our website at www.ryder.com/used-trucks .
In 2022, we announced our intentions to exit the FMS United Kingdom (U.K.) business and have substantially completed the wind down as of December 31, 2022. ___________________ (1) FMS revenue includes eliminations We operate in highly competitive markets. Our customers select us based on numerous factors including service quality, price, technology and service offerings.
We completed the shutdown of operations as well as the sale of the remaining vehicles and properties in 2023. ___________________ FMS revenue includes eliminations 1 We operate in highly competitive markets. Our customers select us based on numerous factors including service quality, price, technology and service offerings.
SCS Business Strategy Our SCS business strategy is to offer our customers differentiated, functional execution and proactive solutions from our expertise in key industry verticals.
For the year ended December 31, 2023, our contract packaging and contract manufacturing services and other services accounted for 4% of our SCS revenue. SCS Business Strategy Our SCS business strategy is to offer our customers differentiated, functional execution and proactive solutions from our expertise in key industry verticals.
Customs Service as a result of increased focus on homeland security and our Customs-Trade Partnership Against Terrorism certification.
In addition, we must comply with licensing and other requirements imposed by the U.S. Department of Homeland Security and the U.S. Customs Service as a result of increased focus on homeland security and our Customs-Trade Partnership Against Terrorism certification.
Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA), which regulate safety, the management of hazardous materials, water discharges, air emissions, solid waste disposal and the 9 release and cleanup of regulated substances. In addition, we must comply with licensing and other requirements imposed by the U.S. Department of Homeland Security and the U.S.
Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA), which regulate safety, the management of hazardous materials, water discharges, air emissions, solid waste disposal and the release and cleanup of regulated substances, and the Food and Drug Administration (FDA) and United States Department of Agriculture (USDA), which regulate foodstuffs and other products for human consumption.
Safety Our safety culture is founded upon a core commitment to the safety, health and well-being of our employees, customers and the community. As a core value, our focus on safety is embedded in our day-to-day operations, reinforced by many safety programs and continuous operational improvement and supported by a talented and dedicated safety organization.
As a core value, our focus on safety is embedded in our day-to-day operations, reinforced by many safety programs and continuous operational improvement and supported by a talented and dedicated safety organization. We have created and implemented policies, processes and training programs to minimize safety events, and we review and monitor our performance closely.
At December 31, 2022, we had approximately 48,300 full-time employees worldwide, of which 48,100 were employed in North America and 200 in Europe. We currently employ approximately 10,800 professional drivers and 4,800 technicians. We have approximately 31,900 hourly employees in the U.S., approximately 3,700 of which are organized by labor unions.
We currently employ approximately 10,800 professional drivers and 4,800 technicians. We have approximately 31,300 hourly employees in the U.S., 10 approximately 3,700 of which are organized by labor unions. Those employees organized by labor unions are principally represented by the International Brotherhood of Teamsters, the International Association of Machinists and Aerospace Workers, and the United Auto Workers.
As an alternative to using our services, companies may choose to internally manage their own private fleets, or obtain similar or alternative services from other third-party vendors.
We compete with these companies based on a number of factors, including price, equipment options and features, maintenance, service and geographic coverage, driver availability and operations expertise. As an alternative to using our services, companies may choose to internally manage their own private fleets, or obtain similar or alternative services from other third-party vendors.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Position Current Position Since Prior Business Experience Age Robert E. Sanchez Chair and Chief Executive Officer 2013 President and Chief Operating Officer from February 2012 to December 2012. President, Global FMS from September 2010 to February 2012. Executive Vice President and Chief Financial Officer from October 2007 to September 2010.
FRS helps customers navigate the increasingly complex industry landscape through customized consultation, innovative solutions, and best-in-class safety programs. 11 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Position Current Position Since Prior Business Experience Age Robert E. Sanchez Chair and Chief Executive Officer 2013 President and Chief Operating Officer from February 2012 to December 2012.
We have created and implemented policies, processes and training programs to minimize safety events, and we review and monitor our performance closely. Our safety organization team oversees our overall safety strategy and consists of three divisions: Safety Standards & Technology, Field Safety Solutions, and U.S. Department of Transportation Compliance.
Our safety organization team oversees our overall safety strategy and consists of three divisions: Safety Standards & Technology, Field Safety Solutions, and U.S. Department of Transportation Compliance. Together, our safety organization manages our safety policies, technologies and training, all field safety processes, risks assessments, safety site investigations and regulatory compliance activities, among other things.
We compete with a handful of large, multi-service companies across all of our product 7 offerings and industries. We also compete against other companies on specific service offerings (for example, in transportation management, distribution management or dedicated transportation) or with companies specializing in a specific industry.
We also compete against other companies on specific service offerings (for example, in transportation management, distribution management or dedicated transportation) or with companies specializing in a specific industry. We face different competitors in each country or region where they may have a greater operational presence.
We are also focused on delivering positive free cash flow over the economic and freight cycles and returning capital to shareholders.
We are also focused on delivering positive free cash flow over the freight cycles and returning capital to shareholders. The balanced growth strategy focuses on three transformative objectives: (i) de-risk and optimize the model, (ii) enhance returns and free cash flow, and (iii) drive long-term profitable growth.
We also install aftermarket safety monitoring systems that provide effective means for our operations teams to measure and improve driver performance, including in-vehicle video event recorders. Driver training is also a key component of our safety program. We use certified driver trainers to on-board and train our professional drivers.
We deploy relevant vehicle safety systems in the vehicles we operate, including active brake assistance, lane departure warning systems, adaptive cruise control and stability control, to enhance safety performance. We also install aftermarket safety monitoring systems that provide effective means for our operations teams to measure and improve driver performance, including in-vehicle video event recorders.
Proactive injury and crash prevention and remedial training are also delivered regularly online to 10 each employee through a highly interactive lesson platform. Our technicians also receive both online and in-person training to enable them to continuously improve their maintenance skills to ensure we are servicing our customers in compliance with best-in-line safety measures.
Our technicians also receive both online and in-person training to enable them to continuously improve their maintenance skills to ensure we are servicing our customers in compliance with best-in-line safety measures. We provide annual training to warehouse employees on safe cutting, trailer securement, proper lifting/material handling techniques, and equipment safety along with regular OSHA training.
Vice President and General Manager for FMS in Canada from September 2011 to November 2012. 54 J. Steven Sensing President, Global Supply Chain Solutions and Dedicated Transportation Solutions 2015 Vice President and General Manager of the Technology industry group from February 2007 to February 2015. 55 Robert D.
Havens President, Fleet Management Solutions 2021 Senior Vice President and Global Chief of Operations for FMS from November 2012 to May 2021. Vice President and General Manager for FMS in Canada from September 2011 to November 2012. 55 J.
Industry and market data used throughout Item 1 was obtained through a compilation of surveys and studies conducted by industry sources, consultants and analysts.
Vice President and Controller from September 2010 to August 2015. 50 FURTHER INFORMATION For further discussion concerning our business, see the information included in Items 7 and 8 of this report. Industry and market data used throughout Item 1 was obtained through a compilation of surveys and studies conducted by industry sources, consultants and analysts.
Competition As an alternative to using our services, companies may choose to internally manage their own supply chains and logistics operations, or obtain similar or alternative services from other third-party vendors. In the SCS business segment, we compete with a large number of companies providing similar services, each of which has a different set of core competencies.
In the SCS business segment, we compete with a large number of companies providing similar services, each of which has a different set of core competencies. We compete with a handful of large, multi-service companies across all of our product offerings and industries.
In order to customize a DTS transportation solution for our customers, our DTS logistics specialists perform a transportation analysis using advanced logistics planning and operating tools. Based on this analysis, they formulate a logistics design that includes the routing and scheduling of vehicles, the efficient use of vehicle capacity and overall asset utilization.
Based on this analysis, they formulate a logistics design that includes the routing and scheduling of vehicles, the efficient use of vehicle capacity and overall asset utilization. The goal of each customized plan is to create a distribution system that optimizes freight flow while meeting a customer’s service goals.
Market Trends Logistics spending in our key target markets in North America was approximately $2.5 trillion, of which $484 billion was outsourced 2 . Outsourced logistics is a market with significant growth opportunity. More sophisticated, cost-effective and reliable supply chain practices are required as supply chains expand and become more complex and susceptible to global disruptions.
Key aspects of our value proposition are our operational execution, industry expertise, and customer-facing visibility platform, which are important differentiators in the marketplace. 5 Market Trends Logistics spending in our key target markets in North America was approximately $2.7 trillion , of which $388 billion was outsourced 2 . Outsourced logistics is a market with significant growth opportunity.
ChoiceLease includes 100 customers related to the exit of the FMS U.K. business. (2) Commercial rental customers represent those who rented a vehicle more than 3 days during the year and include 5,800 ChoiceLease customers. (3) SelectCare customers include approximately 1,000 ChoiceLease customers. Fuel Services.
Canada Total Vehicles Customers Vehicles Customers Vehicles Customers ChoiceLease 130,300 10,400 8,600 1,200 138,900 11,600 Commercial rental (1) 34,400 23,700 2,000 3,000 36,400 26,700 SelectCare (2) 48,200 1,700 3,400 200 51,600 1,900 ___________________ (1) Commercial rental customers represent those who rented a vehicle more than three days during the year and include 5,400 ChoiceLease customers.
The more complicated the supply chain or the product requirements, the greater the need for companies to utilize the expertise of supply chain solution providers. 2 Armstrong & Associates - A Roaring 2021: Demand Drives 3PLs to the Best Growth and M&A Year on Record, July 2022 5 Operations For the year ended December 31, 2022, our global SCS business accounted for 39% of our consolidated revenue, and our global customer accounts and warehousing square footage were as follows: December 31, 2022 (In millions, except customer accounts) Customer Accounts Square Footage (1) Global SCS United States 669 88 Foreign: Mexico 116 5 Canada 35 2 151 7 Total 820 95 ___________________ (1) Includes Ryder leased and owned, and Ryder managed.
Operations For the year ended December 31, 2023, our global SCS business accounted for 41% of our consolidated revenue, and our customer accounts and warehousing square footage were as follows: December 31, 2023 (Square footage in millions) Customer Accounts Number of Warehouses Square Footage (1) SCS United States 750 236 92 Foreign (2) 163 51 9 Total 913 287 101 ___________________ (1) Includes Ryder leased and owned, and Ryder managed.
In 2022, OEMs continued to face new vehicle production challenges and rapidly changing demand patterns, resulting in strong used vehicle sales throughout the year, despite the sequential decline in used truck and tractor pricing during the second half of the year from record high levels in the first half. 4 FMS Business Strategy Our FMS business strategy is to be the leading provider of fleet management outsourcing services for light, medium and heavy duty commercial highway vehicles.
FMS Business Strategy Our FMS business strategy is to be the leading provider of fleet management outsourcing services for light, medium and heavy duty commercial vehicles.
In recent years, the general state of the used vehicle sales market has been particularly volatile. Pricing in the used vehicle market significantly declined in 2019 and 2020 and then significantly increased in 2021.
In recent years, the general state of the used vehicle sales market has been particularly volatile. In 2023, pricing in the used vehicle market declined from the historical highs of the prior year, reflecting softer economic conditions and higher market inventories. We have used vehicle inventory of 8,000 vehicles, in line with our long-term target range of 7,000-9,000.
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Companies must also manage global supply chain disruptions and labor issues that have accelerated due to the pandemic, such as a limited supply of commercial vehicles and a shortage of mechanics and qualified truck drivers.
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MISSION AND STRATEGY Ryder's mission is to responsibly deliver innovative supply chain and transportation solutions that are reliable, safe and efficient, enabling our customers to deliver on their promises. Companies performing their own logistics and transportation services face increasing challenges of dynamic supply chains, disruptive technologies, labor shortages, and increased vehicle cost and complexity.
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At the beginning of 2022, we announced our intention to exit operations in Europe. Throughout 2022, we disposed of the majority of our vehicles and facilities in Europe. As of December 31, 2022, we had 8 locations and approximately 800 vehicles remaining. We expect to complete the wind down of European operations by June 2023. FMS Product Offerings ChoiceLease .
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Once we have signed an agreement with the customer, we acquire vehicles and components that are custom engineered to the customer’s requirements and lease the vehicles to the customer for periods generally ranging from three to seven years for trucks and tractors and typically ten years for trailers. • Extensive Network of Maintenance Facilities and Trained Technicians for maintenance, vehicle repairs, 24-hour emergency roadside service, and replacement vehicles for vehicles that are temporarily out of service. • Preventative and Flexible Maintenance Programs based on vehicle type and time or mileage intervals that are cost-effective and designed to reduce vehicle downtime. _________________________ (1) U.S.
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We also provide our customers with access to one of the leading commercial vehicle sharing platform, COOP by Ryder®, connecting fleet owners with idle vehicles to trusted businesses in need of rental vehicles, available to businesses in all 3 50 states.
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More sophisticated, cost-effective and reliable supply chain practices are required as supply chains expand and become more complex and susceptible to global disruptions.
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With the nationwide rollout of COOP, more companies and vehicle owners can generate the revenue needed to support vehicle payments or meet financial strains caused by otherwise idle vehicles. Additionally, COOP provides relief to businesses as the industry continues to face ongoing driver and vehicle shortages. SelectCare .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We and the vehicle equipment manufacturers in our FMS business rely on a small number of suppliers. We buy vehicles and related equipment from a relatively small number of OEMs in our FMS business. Some of our vehicle manufacturers rely on a small concentration of suppliers for certain vehicle parts, components and equipment.
We and the vehicle equipment manufacturers in our FMS business rely on a small number of suppliers. We buy vehicles and related equipment from a relatively small number of OEMs in our FMS business. Some of our OEMs rely on a small concentration of suppliers for certain vehicle parts, components and equipment.
We provide services domestically and to a lesser extent outside of the U.S., which subjects our business to various additional risks, including: • changes in tariffs, trade restrictions, trade agreements, and taxes; • varying tax regimes, including consequences from changes in applicable tax laws; • difficulties in managing or overseeing foreign operations and agents; • foreign currency fluctuations and limitations on the repatriation of funds due to foreign currency controls; • different liability standards; • fluctuations in inflation rates; • the price and availability of fuel; • national and international conflict; and • intellectual property laws of countries that do not protect our rights in intellectual property to the same extent as the laws of the U.S.
We provide services domestically and to a lesser extent outside of the U.S., which subjects our business to various additional risks, including: • changes in tariffs, trade restrictions, trade agreements and taxes; • varying tax regimes, including consequences from changes in applicable tax laws; • difficulties in managing or overseeing foreign operations and agents; • foreign currency fluctuations and limitations on the repatriation of funds due to foreign currency controls; • different liability standards; • fluctuations in inflation and interest rates; • the price and availability of fuel; • national and international conflict; and • intellectual property laws of countries that do not protect our rights in intellectual property to the same extent as the laws of the U.S.
Numerous competitive factors could impair our ability to maintain our current profitability, including: • our inability to obtain expected customer retention levels or profitability; • customers may choose to provide the services we provide for themselves; • we compete with many other transportation and logistics service providers, some of which have greater capital resources or lower cost structures than we do; • our inability to compete with new entrants in the transportation and logistics market that may offer similar services at lower cost or have greater technological capabilities; • our competitors may periodically reduce their prices to gain business, especially during times of declining economic growth, which may limit our ability to maintain or increase prices or impede our ability to maintain our profitability or grow our market share or profitability; • many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress rates or result in the loss of some of our business to competitors; • the continuing trend toward consolidation in the trucking industry may result in larger carriers with greater financial resources than we have; • advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments; and • because cost of capital is a significant competitive factor, any increase in either the cost of our debt or equity as a result of reductions in our debt rating or stock price volatility could have a significant impact on our competitive position.
Numerous competitive factors could impair our ability to maintain our current profitability, including: • our inability to obtain expected customer retention levels or profitability; • customers may choose to provide the services we provide for themselves; • we compete with many other transportation and logistics service providers, some of which have greater capital resources or lower cost structures than we do; • our inability to compete with new entrants in the transportation and logistics market that may offer similar services at lower cost or have greater technological capabilities; • our competitors may periodically reduce their prices to gain business, especially during times of declining economic growth, which may limit our ability to maintain or increase prices or impede our ability to maintain our profitability or grow our market share or profitability; • many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress rates or result in the loss of some of our business to competitors; 16 • the continuing trend toward consolidation in the trucking industry may result in larger carriers with greater financial resources than we have; • advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments; and • because cost of capital is a significant competitive factor, any increase in either the cost of our debt or equity as a result of, for example, reductions in our debt rating or stock price volatility could have a significant impact on our competitive position.
If our workers were to engage in a work stoppage, strike or other slowdown, or other employees were to become unionized, or the terms and conditions in future labor agreements were renegotiated, we could experience significant business disruptions or higher operating costs, which could have an adverse effect on our financial position, results of operations, or cash flows.
If our workers were to engage in a work stoppage, 18 strike or other slowdown, other employees were to become unionized, or the terms and conditions in future labor agreements were renegotiated, we could experience significant business disruptions or higher operating costs, which could have an adverse effect on our financial position, results of operations or cash flows.
We face litigation risks regarding a variety of issues, including accidents involving our trucks and injuries to employees, alleged violations of federal and state labor and employment law including class-action lawsuits alleging wage and hour 18 violations, independent contractor misclassification and improper pay, securities laws, environmental liability, commercial claims, cyber and other matters.
We face litigation risks regarding a variety of issues, including accidents involving our trucks and injuries to employees, alleged violations of federal and state labor and employment law including class-action lawsuits alleging wage and hour violations, independent contractor misclassification and improper pay, securities laws, environmental liability, commercial claims, cyber and other matters.
Threats to network and data security are becoming increasingly diverse and sophisticated, with attacks increasing in frequency (especially with the shift to remote work environments), scope and potential harm. We have experienced cybersecurity threats and breaches targeting our information technology systems and networks and those of our third-party providers.
Threats to network and data security are becoming increasingly diverse and sophisticated, with attacks increasing in frequency (especially with the shift to remote work environments), scope and potential harm. 15 We have experienced cybersecurity threats and breaches targeting our information technology systems and networks and those of our third-party providers.
To successfully execute on this strategy, we must continue to focus on developing innovative solutions that meet our existing and target customers’ evolving needs and keep pace with our competitors. Expanding our service offerings to entice and support new clients may strain our management, capital resources, information systems and customer service.
To successfully execute on this strategy, we must continue to focus on developing innovative solutions that meet both our existing and target customers' evolving needs and keep pace with our competitors. Expanding our service offerings to entice and support new clients may strain our management, capital resources, information systems and customer service.
For example, new concepts are currently under development for advanced electric vehicles, autonomous or semi-autonomous self-driving vehicles, connected vehicle platforms and drones. There is also a rapidly growing demand for e-commerce services, last mile home delivery and asset- and freight-sharing services.
For example, new concepts are currently under development for advanced electric vehicles, autonomous or semi-autonomous self-driving vehicles and connected vehicle platforms. There is also a rapidly growing demand for e-commerce services, last-mile home delivery, and asset- and freight-sharing services.
These activities subject us to additional costs and risks, including disruption of our internal control structure, substantial capital expenditures, 14 additional administration and operating expenses, impairment of our ability to provide our services, retention of sufficiently skilled personnel to implement and operate the new systems, and other costs and risks.
These activities subject us to additional costs and risks, including disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, impairment of our ability to provide our services, retention of sufficiently skilled personnel to implement and operate the new systems, and other costs and risks.
A discrete event in a particular OEM’s or supplier’s industry or location, or adverse regional economic conditions impacting an 16 OEM or supplier’s ability to provide vehicles or a particular component, has and could in the future adversely impact our FMS business and profitability.
A discrete event in a particular OEM's or supplier's industry or location, or adverse regional economic conditions impacting an OEM or supplier's ability to provide vehicles or a particular component, has and could in the future adversely impact our FMS business and profitability.
Insurance to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, and may not be sufficient to cover all of our damages and may not be available at commercially reasonable rates.
Insurance to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, and may not be sufficient to cover all of our damages or may not be available at commercially reasonable rates.
General Risk Factors Our business may be affected by uncertainty or changes in U.S. or global social, political or regulatory conditions. Adverse developments in laws, policies or practices in the U.S. and internationally can negatively impact our business and the business of our customers.
General Risk Factors Our business may be affected by uncertainty or changes in U.S. or global social, political or regulatory conditions. Adverse developments in laws, policies or practices in the U.S. and internationally can negatively impact our business and the businesses of our customers.
Increased competition or our inability to compete successfully may lead to a reduction in revenues, 15 reduced profit margins, increased pricing pressure, or a loss of market share, any one of which could affect our financial results.
Increased competition or our inability to compete successfully may lead to a reduction in revenues, reduced profit margins, increased pricing pressure, or a loss of market share, any one of which could affect our financial results.
Disruptions in global supply chains have impacted each of our business segments as the supply and demand of commercial vehicles directly impacts our FMS business, and the production and supply of certain goods impacts the business of our customers in SCS and DTS, and therefore our own business.
Disruptions in global supply chains have impacted each of our business segments as the supply and demand of commercial vehicles directly impacts our FMS business, and the production and supply of certain goods impacts the businesses of our customers in SCS and DTS, and therefore our own business.
These changes could exacerbate the effects of an act of terrorism on our business, resulting in a significant business interruption, increased costs and liabilities and decreased revenues or an adverse impact on results of operations. 21
These changes could exacerbate the effects of an act of terrorism on our business, resulting in a significant business interruption, increased costs and liabilities and decreased revenues, or an adverse impact on results of operations.
While we are actively engaged in evaluating emerging technology and developing strategic alliances and new products, we cannot be certain that our initiatives will be successful or timely, and our failure to effectively implement any initiative could have an adverse impact on our financial condition or results of operations.
While we are actively engaged in deploying emerging technology and developing strategic alliances and new products, we cannot be certain that our initiatives will be successful or timely, and our failure to effectively implement any initiative could have an adverse impact on our financial condition or results of operations.
In addition, many of our customers operate in cyclical or seasonal industries, or operate in industries, including the food and beverage industry, that may be impacted by unanticipated weather, growing conditions (such as drought, insects or disease), natural disasters, pandemics, and other conditions over which we have no control.
In addition, many of our SCS customers operate in cyclical or seasonal industries, or operate in industries, such as the food and beverage industry, that may be impacted by unanticipated weather, growing conditions (such as drought, insects or disease), natural disasters, pandemics, and other conditions over which we have no control.
These higher labor costs as well as higher subcontracted transportation costs have negatively impacted our earnings in both DTS and SCS in the past. If labor shortages continue for an extended period of time, our earnings may be further adversely impacted. Professional Drivers. We hire professional drivers primarily for our SCS and DTS business segments.
These higher labor costs as well as higher subcontracted transportation costs have negatively impacted our earnings in both DTS and SCS. If labor shortages continue for an extended period of time, our earnings may be further adversely impacted. Professional Drivers. We hire professional drivers primarily for our SCS and DTS business segments.
Moreover, if we fail to comply with DOT regulations, including our failure to maintain a “satisfactory” DOT safety rating, the DOT could levy fines and require us to cease all transportation services under our operating authority, which could have a material adverse effect on our business.
Moreover, if we fail to comply with DOT regulations, including our failure to maintain a "satisfactory" DOT safety rating, the DOT could levy fines and require us to cease all transportation services under our operating authority, which could have a material adverse effect on our business.
For instance, a regulatory mandate for the use of zero-emission vehicles or ban of diesel or gasoline powered vehicles could reduce the resell value and demand for our vehicles as well as the demand for maintenance services in FMS and offerings in our SCS and DTS businesses.
For instance, a regulatory mandate for the use of zero-emission vehicles or ban of diesel- or gasoline-powered vehicles could reduce the resale value and demand for our vehicles as well as the demand for maintenance services in FMS and offerings in our SCS and DTS businesses.
For example, federal, state and local governments are considering emission reduction (e.g., greenhouse gas and nitrogen dioxide) regulatory requirements or related taxes, zero-emission vehicle mandates and increased environmental disclosure and compliance requirements.
For example, federal, state and local governments are considering or implementing environmental disclosure requirements, emission reduction (e.g., greenhouse gas and nitrogen dioxide) regulatory requirements and related taxes, zero-emission vehicle mandates and other increased compliance requirements.
With the increase in the use of social media outlets such as Facebook, YouTube, Instagram and Twitter, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. This unfavorable publicity could also require us to allocate significant resources to rebuild our reputation.
With the increase in the use of social media outlets, such as Facebook, YouTube and Instagram, amongst others, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. This unfavorable publicity could also require us to allocate significant resources to rebuild our reputation.
Overcapacity could require us to deploy or sell vehicles at lower than anticipated pricing levels, which may result in higher depreciation and losses on sales of vehicles. In addition, overcapacity could result in lower revenues and higher costs and have an adverse impact on profitability.
Overcapacity could require us to deploy or sell vehicles at lower than anticipated pricing levels, which may result in higher depreciation or losses on vehicle sales. In addition, 14 overcapacity could result in lower revenues and higher costs and have an adverse impact on profitability.
A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors.
A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; wholesale market prices; customer requirements and preferences; and changes in underlying assumption factors.
Regulations adopted by federal, state or local governmental bodies that impact the transportation industry, including checkpoints and travel restrictions on large trucks, could disrupt or impede the timing of our operations or cause us to incur increased expenses in order to continue meeting customer requirements.
Regulations adopted by federal, state or local governmental bodies, including the Office of Foreign Assets Control (OFAC), that impact the transportation industry, including checkpoints and travel restrictions on large trucks, could disrupt or impede the timing of our operations or cause us to incur increased expenses in order to continue meeting customer requirements.
As of December 31, 2022, we had $6.4 billion of outstanding indebtedness. If we are unable to raise additional capital by accessing the debt and equity markets or our costs of raising additional capital were to materially increase, our business could experience a material adverse effect on our operating results or we could face difficulty in implementing our long-term strategy.
As of December 31, 2023, we had $7.2 billion of outstanding indebtedness. If we are unable to raise additional capital by accessing the debt and equity markets or our costs of raising additional capital were to materially increase, our business could experience a material adverse effect on our operating results or we could face difficulty in implementing our long-term strategy.
If one or more of these customers were to become bankrupt, insolvent or otherwise were unable to pay for the services provided by us, we may incur significant write-offs of accounts receivable or incur lease or asset impairment charges that could adversely affect our operating results and financial condition.
If one or more of our customers were to become bankrupt, insolvent or otherwise were unable to pay for the services we provide, we may incur significant write-offs of accounts receivable or incur lease or asset impairment charges that could adversely affect our operating results and financial condition.
For a detailed discussion on our accounting policies and assumptions relating to our self-insurance reserves, please see the “Critical Accounting Estimates - Self-Insurance Accruals” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For a detailed discussion on our accounting policies and assumptions relating to our self-insurance reserves, please see the "Critical Accounting Estimates - Self-Insurance Accruals" section in Management's Discussion and Analysis of Financial Condition and Results of Operations.
Human Capital If we are unable to mitigate labor shortage challenges our financial results may continue to be negatively impacted. We are experiencing higher labor costs due to labor shortage challenges across all of our business segments, particularly our DTS and SCS segments.
Human Capital If we are unable to mitigate labor shortage challenges, our financial results may continue to be negatively impacted. We have experienced high labor costs due to labor shortage challenges across all of our business segments, particularly our DTS and SCS segments.
Adverse publicity (whether or not justified) relating to activities by our employees, contractors, agents or others with whom we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand.
Adverse publicity (whether or not 21 justified) relating to activities by our employees, contractors, agents or others with whom we do business, such as customer service mishaps or noncompliance with laws, including misconduct, fraud or other improper activities, could tarnish our reputation and reduce the value of our brand.
In addition, the integration of an acquired business may result in material unanticipated challenges, expenses and liabilities. Any one of these factors could result in lower than expected revenues or earnings related to combining the companies or derived from a strategic transaction and could adversely impact our financial condition or results of operations.
In addition, the integration of an acquired business may result in material unanticipated challenges, expenses and liabilities. Any one of these factors could result in lower than expected revenues or earnings from the acquisition or strategic transaction and could adversely impact our financial condition or results of operations.
In addition, there may be other innovations that could impact the transportation, trucking and supply chain and logistics industries that we cannot yet foresee. Our inability to quickly adapt to and adopt innovations desired by our customers may result in a significant loss of demand for our service offerings.
In addition, there may be other innovations that could impact the transportation, trucking, and supply chain and logistics industries, such as machine learning and artificial intelligence, as well as other technologies we cannot yet foresee. Our inability to quickly adapt to and adopt innovations desired by our customers may result in a significant loss of demand for our service offerings.
The receipt of a final “conditional” or “unsatisfactory” safety rating due to deficiencies in our safety and compliance program could have a material adverse effect on our customer relationships, as some of our existing customer contracts require a “satisfactory” DOT safety rating.
The receipt of a final "conditional" or "unsatisfactory" safety rating due to deficiencies in our safety and compliance program could have a material adverse effect on our customer relationships, as some of our existing customer contracts require a "satisfactory" DOT safety rating.
We make commitments to purchase the vehicles many months in advance of the expected use of the vehicle and seek to optimize the size and mix of the commercial rental fleet based on demand projections and various other factors.
We make significant investments in vehicles to support our rental business based on anticipated customer demand. We make commitments to purchase the vehicles many months in advance of the expected use of the vehicle and seek to optimize the size and mix of the commercial rental fleet based on demand projections and various other factors.
If we are unable to successfully take actions to manage the adverse impacts of new tax legislation, or if additional interpretations, regulations, amendments or technical corrections exacerbate the adverse impacts of such legislation, the legislation could have a material adverse effect on our financial condition, results of operations and cash flows.
If we are unable to successfully take actions to manage the adverse impacts of new tax legislation, or if additional interpretations, regulations, amendments or technical corrections exacerbate the adverse impacts of such legislation, our financial condition, results of operations and cash flows could be adversely affected.
Failure to maintain, upgrade and consolidate our information technology networks could adversely affect us. Our success depends on the functionality of information technology systems to support our service offerings.
Failure to maintain, upgrade and consolidate our information technology networks, or maintain adequate controls over such technology systems, could adversely affect us. Our success depends on the functionality of information technology systems to support our business and service offerings.
Given the size of our employee base, we are also subject to health and safety laws imposed by OSHA, as well as those imposed by state and local authorities. In addition, we must also comply with domestic and international laws and regulations related to tax.
Given the size of our employee base, we are also subject to health and safety laws imposed by OSHA, as well as those imposed by state and local authorities. In addition, we must also comply with domestic and international laws and regulations related to tax. We are further subject to anti-bribery, anti-corruption, and anti-money laundering laws, including the U.S.
Extended delays or cost overruns in securing, developing and otherwise implementing technology solutions to support our business, including any future initiatives, would delay and possibly prevent us from realizing the projected benefits of these initiatives.
In addition, extended delays or cost overruns in securing, developing, managing and otherwise implementing technology solutions to support our business may delay and possibly prevent us from realizing the projected benefits of these solutions.
We have approximately 3,700 employees that are organized by labor unions whose wages and benefits are governed by 96 labor agreements that are renegotiated periodically.
We have approximately 3,700 employees in the U.S. that are organized by labor unions whose wages and benefits are governed by 98 labor agreements that are renegotiated periodically.
A downturn in our customers’ businesses or unanticipated events impacting their businesses could cause a reduction in freight volume shipped by those customers or a reduction in their need for our services, which could materially and adversely affect our operating results and financial condition.
Because of the concentration of customers in our SCS business, a downturn in our customers' businesses could cause a reduction in freight volume shipped by those customers or a reduction in their need for our services, which could materially and adversely affect our operating results and financial condition.
Our vehicles are leased or rented to customers that transport goods commercially, so the demand for our products and services is tied directly to the production and sale of goods by our customers, and more generally, the health of the North American economy and overall levels of competition in the transportation and logistics industry.
In our FMS business, vehicles are leased or rented to customers that transport goods commercially, hence, the demand for our products and services is directly tied to the production and sale of goods by our customers, and more generally, the health of the North American economy.
For example, the DOT, through the Federal Motor Carrier Safety Administration (FMCSA) periodically conducts compliance reviews and evaluates the safety rating assessed to motor carriers (“satisfactory,” “conditional” or “unsatisfactory”).
For example, the DOT, through the Federal Motor Carrier Safety Administration (FMCSA), periodically conducts compliance reviews and evaluates the safety rating assessed to motor carriers ("satisfactory," "conditional" or "unsatisfactory").
In 2021, we experienced a significant increase in demand for rental and used vehicles, as well as lease, due to the limited supply of commercial vehicles caused by these global supply chain disruptions.
On the other hand, when global supply chain disruptions caused a semiconductor shortage, we experienced a significant increase in demand for rental and used vehicles, as well as lease, due to the limited supply of commercial vehicles.
Moreover, we are also subject to reputational risk and other detrimental business consequences associated with noncompliance by other parties with whom we engage with, such as employees, customers, agents, suppliers or other persons using our supply chain or assets to commit illegal acts, including the use of company assets for terrorist activities or a breach of data privacy laws. 19 Our failure to comply with U.S. or foreign tax laws or a government challenging our tax position could adversely affect our business and future operating results.
Moreover, we are also subject to reputational risk and other detrimental business consequences associated with noncompliance by other parties with whom we engage with, such as employees, customers, agents, suppliers or other persons using our supply chain or assets to commit illegal acts, including the use of company assets for terrorist activities, fraud or a breach of data privacy laws.
Compliance with existing laws and regulations has involved, and we expect will continue to involve, significant time commitments and costs, and in recent years, we have seen an increase in proactive regulatory enforcement.
Foreign Corrupt Practices Act and Office of Foreign Assets Control (OFAC) restrictions. Compliance with existing laws and regulations has involved, and we expect will continue to involve, significant time commitments and costs, and in recent years, we have seen an increase in proactive regulatory enforcement.
If uncertainty and lack of customer confidence around macroeconomic and transportation industry conditions increase (such as due to recessionary conditions or inflationary pressures), our future growth prospects, business and results of operations could be materially adversely affected.
If uncertainty around macroeconomic conditions and the transportation and logistics industries increase, such as due to recessionary conditions, unexpected interest rate fluctuations or inflationary pressures, our future growth prospects, business and results of operations could be materially adversely affected.
Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.
Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows. 19 We operate in a highly regulated industry, and changes in existing regulations or costs of compliance with, or liability for violation of, existing or future laws or regulations could have a material adverse effect on our business.
We are affected by various U.S. federal, state and foreign tax laws, including income taxes and taxes imposed on the purchase, sale and lease of goods and services, such as sales, excise, property, value-added tax, fuel, environmental and other taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.
We are affected by various U.S. federal, state and foreign tax laws, including income taxes, taxes imposed on the purchase, sale and lease of goods and services, such as sales, excise, property, value-added tax, fuel, environmental and other taxes, and taxes imposed on multinational corporations.
Our self-insurance accruals are based on actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported.
We are substantially self-insured for vehicle liability and workers' compensation claims. Our self-insurance accruals are based on actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported.
Additionally, although some of our SCS or DTS contracts provide for renegotiation upon a material change, there is no assurance that we will be successful in obtaining the necessary price adjustments or that pricing will be sufficient to cover the risk.
Although these contracts include indexed price escalation clauses or permit renegotiation upon a material change, there is no assurance that we will be successful in obtaining the necessary price adjustments or that pricing will be sufficient to cover the risk.
If we fail to recruit, retain and motivate our employees in senior management and other key roles such as technology and supply chain management, or fail to preserve company culture, then we may not be able to execute on our strategy and grow our business as planned. 17 In addition, we are committed to creating a diverse, equitable and collaborative work environment by implementing diversity and inclusion initiatives throughout our organization.
If we fail to recruit, retain and motivate our employees in senior management and other key roles such as technology and supply chain management, or fail to preserve company culture, then we may not be able to execute on our strategy and grow our business as planned.
Any failure to comply with data privacy laws and regulations could result in significant penalties, fines, legal challenges and reputational harm. We may fail to establish sufficient insurance reserves to adequately cover workers’ compensation and vehicle liabilities. We are substantially self-insured for vehicle liability and workers’ compensation claims.
Privacy security laws and regulations pose increasingly complex and rigorous compliance challenges, which may increase our compliance costs. Any failure to comply with data privacy laws and regulations could result in significant penalties, fines, legal challenges and reputational harm. We may fail to establish sufficient insurance reserves to adequately cover workers' compensation and vehicle liabilities.
We bear the risk that we will not be able to resell our used vehicles at a price at or above their residual value estimates. To determine the residual value estimates and useful life of our vehicle fleet, management is required to make judgments about future events that are subject to risks and uncertainties outside of their control.
To determine the residual value estimates and useful life of our vehicle fleet, management is required to make judgments about future events that are subject to risks and uncertainties outside of their control.
For a detailed discussion on our accounting policies and assumptions relating to depreciation and residual values, please see “Critical Accounting Estimates - Residual Value Estimates and Depreciation” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For a detailed discussion on our accounting policies and assumptions relating to depreciation and residual values, please see "Critical Accounting Estimates - Residual Value Estimates and Depreciation" in Management's Discussion and Analysis of Financial Condition and Results of Operations. 13 Disruptions in global supply chains have impacted, and may continue to impact, our business, results of operations and financial condition.
If a limited supply of commercial vehicles continues for an extended period, we expect to continue to experience benefits in rental and used vehicle pricing and overall demand; however, we may experience limited rental and lease fleet growth, and have a limited inventory of used vehicles for sale.
However, we may experience limited rental and lease fleet growth and have a limited inventory of used vehicles for sale during an extended period of limited supply of commercial vehicles.
Our business is highly susceptible to changes in economic conditions and our products and services are directly tied to the production and sale of goods.
Our business is highly susceptible to disruptions in global supply chains as services are directly tied to the production and sale of goods.
Environmental, Climate and Weather Risks Our business may be affected by global climate change and legal, regulatory or other market responses to such change. Global, federal, state and local legislative and regulatory efforts to address the effects of global warming and climate change have affected and will likely continue to affect our businesses.
Global, federal, state and local legislative and regulatory efforts to address the effects of global warming and climate change have affected and will likely continue to affect our businesses.
Failure to execute our business strategy, explore strategic transactions, and develop, market and deliver high-quality services that meet customer expectations may cause our revenue and earnings to suffer. Our long-term business strategy is to move clients to outsource their transportation and logistics needs and thereby expand the market for our services.
Failure to execute our business strategy, explore strategic transactions, and develop, market and deliver high-quality services that meet customer expectations may cause our revenue and earnings to suffer.
In addition, new laws, rules or regulations may be adopted or interpretative changes to existing regulations could be issued at any time. Any new initiatives could further increase our costs or operating complexity and our ability to offer certain services in the jurisdictions in which we operate.
Any new initiatives could further increase our costs or operating complexity and our ability to offer certain services in the jurisdictions in which we operate.
For example, in 2022 we completed several acquisitions that expanded our e-commerce network; however, if we fail to properly integrate those businesses, there is a risk that the acquisitions will not add the forecasted revenue to SCS or provide the expected incremental growth to earnings.
For example, in 2023 we completed an acquisition that expanded our contract packaging, contract manufacturing and warehousing capabilities; however, if we fail to properly integrate that business, there is a risk that the acquisition will not add the forecasted revenue to SCS or provide the expected incremental growth to earnings.
These contractual arrangements include pricing terms that are subject to a number of key operational assumptions, such as: • with respect to our SCS contracts, the scope of services, production volumes, operational efficiencies, the mix of fixed versus variable costs, market wages, availability of labor, productivity, inflation, interest rates and other factors; • with respect to our DTS contracts, market wages, availability of labor, equipment costs, insurance rates, inflation, interest rates, and other operating factors; and • with respect to our ChoiceLease and SelectCare contracts, residual value estimates (ChoiceLease only) and maintenance costs (including inflation and interest rates). 13 If we are incorrect in our operational assumptions, or, as a result of subsequent changes in customer demand or other market forces that are outside of our control, these assumptions prove to be invalid, we could have lower margins than anticipated in a contract or segment, lose business, or be unable to offer competitive products and services.
These contractual arrangements include pricing terms that are subject to a number of key operational assumptions: • with respect to our SCS contracts, the scope of services, production volumes, operational efficiencies, the mix of fixed versus variable costs, market wages, availability of labor, productivity, inflation, interest rates and other factors; • with respect to our DTS contracts, market wages, availability of labor, equipment costs, insurance rates, inflation, interest rates, and other operating factors; and • with respect to our ChoiceLease and SelectCare contracts, residual value estimates (ChoiceLease only) and maintenance costs (including inflation and interest rates), as well as other factors.
In the U.S., the Department of Transportation (DOT), as well as local, state and other federal agencies exercise broad powers over our motor carrier operations, safety and the treatment and disposal of waste materials. We are also subject to environmental laws and regulations imposed by the EPA, including requirements related to exhaust emissions.
Our business is subject to regulation by various federal, state, local and foreign governmental agencies. In the U.S., the Department of Transportation (DOT), as well as local, state and other federal agencies exercise broad powers over our motor carrier operations, safety and the treatment and disposal of waste materials.
As a result, if we do not accurately predict our costs to execute SCS or DTS contracts, it could result in a significant decrease in revenue or loss that could adversely affect our operating results and financial condition.
As a result, if we do not accurately predict our costs to execute SCS or DTS contracts, it could result in a significant decrease in revenue or loss that could adversely affect our operating results and financial Our capital-intensive business requires us to make capital decisions based upon projected customer activity levels and market demand for our commercial rental product line.
In addition, we are facing increased regulatory and compliance requirements that further decrease the pool of available candidates. Failure to successfully negotiate with our union employees may result in strikes, work stoppages, or substantially higher labor costs.
In addition, we are facing increased regulatory and compliance requirements that further decrease the pool of available candidates. A significant labor dispute involving us, our vendors, or one or more of our customers, or that could otherwise affect our operations, may result in strikes, work stoppages or substantially higher labor costs.
Negative impacts on our suppliers could result in disruptions in the supply and availability of equipment or services needed for our business that could in turn affect our ability to operate and serve our customers as planned. 20 Volatility in assumptions, discount rates, and asset values related to our pension plans may adversely affect the valuation of our obligations, the current funding levels and our pension expense under our defined benefit pension plans.
Negative impacts on our suppliers could result in disruptions to the supply and availability of equipment or services needed for our business that could in turn affect our ability to operate and serve our customers as planned.
For example, significant judgment is required in determining our worldwide provision for income taxes. Our tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions, including assessments that could affect the valuation of our net deferred tax assets.
In addition, in the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. For example, significant judgment is required in determining our worldwide provision for income taxes and our tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions.
Also, efforts to prevent, detect and mitigate data breaches and cyberattacks subject us to additional costs. Regulatory authorities have increased their focus on how companies collect, process, use, store, share and transmit personal data.
Moreover, weaknesses in vendor management or third-party controls could expose us, our vendors, or our customers to additional cybersecurity risks. Also, efforts to prevent, detect and mitigate data breaches and cyberattacks subject us to additional costs. Regulatory authorities continue to focus on how companies collect, process, use, store, share and transmit personal data.
In the first half of 2020, the measures taken in response to the COVID-19 pandemic prohibited many of our customers from continuing their operations, which had an immediate adverse effect on our business as we experienced lower demand for commercial rental and used vehicles in our FMS business and reduced volumes in our SCS business.
For example, when COVID-19 measures prohibited many of our customers from continuing their operations, our business was initially adversely impacted because we experienced lower demand for commercial rental and used vehicles in our FMS business and reduced volumes in our SCS business.
Our operating results could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes in tax legislation, the results of audits and examinations of previously filed tax returns and continuing assessments of our income and indirect tax exposures.
Our operating results could be adversely affected by changes in the effective tax rate as a result of a change in a variety of factors, including the mix of earnings in countries with differing statutory tax rates and changes in our overall profitability. 20 From time to time we are also under audit by tax authorities in different jurisdictions with regards to income tax and indirect tax matters.
If we do not, or are perceived not to, successfully implement these initiatives, our reputation or ability to recruit and retain talent may be adversely impacted.
In addition, we are committed to creating a positive and collaborative work environment throughout our organization. If we do not, or are perceived not to, have such a work environment, our reputation or ability to recruit and retain talent may be adversely impacted.
In addition, compliance and enforcement initiatives implemented by the FMCSA related to driver time, fitness and safety may shrink the industry’s pool of qualified professional drivers.
In addition, compliance and enforcement initiatives implemented by the FMCSA related to driver time, fitness and safety may shrink the industry's pool of qualified professional drivers. With respect to our international operations in Canada and Mexico, we are subject to local laws and regulatory requirements, including tax and anti-bribery laws, which vary significantly from country to country.
We historically sponsored a number of defined benefit plans for employees not covered by union-administered plans, including certain employees in foreign countries. As of December 31, 2022, the aggregate projected benefit obligations of our global defined pension plans was $1.7 billion, and the plan assets of our global defined benefit pension plans was $1.6 billion.
As of December 31, 2023, the aggregate projected benefit obligations of our global defined pension plans was $1.9 billion, and the plan assets of our global defined benefit pension plans was $1.6 billion.
Overall, although these supply chain disruptions have contributed to increased demand for our services as companies seek long-term outsourcing solutions, such disruptions have also negatively impacted a portion of our earnings. The extent to which such disruptions will continue to impact our business, operations and financial results will depend on numerous evolving factors that are difficult to accurately predict.
Overall, the extent to which future supply chain disruptions impact our business, operations and financial results will depend on numerous factors that are difficult to accurately predict.
We derive a significant portion of our SCS and DTS segment revenue from a relatively small number of customers. During 2022, sales to our top ten SCS customers accounted for 42% of our SCS total revenue and 34% of our SCS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation).
Our top ten DTS customers accounted for about 40% of DTS total revenue and about 35% of DTS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation). We are also subject to credit risk associated with the concentration of our accounts receivable from our SCS and DTS customers.
In addition, our reputation with our customers suffers when outages, system failures or delays in timely access to data occur in our information technology systems that support key business processes. We are continuously upgrading and consolidating our information technology systems by enhancing or replacing legacy systems.
When outages, system failures or delays in timely access to data occur in our information technology systems that support key business processes, for example our financial reporting and service offerings, our business may be adversely impacted.
Moreover, depending on the measures taken by governments, businesses and individuals in response to new variants of COVID-19, economic and commercial activity may be impacted, and, as a result, we may again experience slowdowns and reduced demand.
Depending on the circumstances of a particular supply chain disruption, economic and commercial activity may be impacted, and, as a result, we may again experience slowdowns, reduced demand and a negative impact to a portion of our earnings.
Accordingly, any sustained weakness in demand or a protracted economic downturn can negatively impact performance and operating results in used vehicle sales, rental, and longer-term contractual services across our business segments. Disruptions in global supply chains, including as a result of global pandemics, has impacted, and may continue to impact, our business, results of operations and financial condition.
Accordingly, any sustained weakness in demand or a protracted economic downturn can negatively impact performance and operating results in used vehicle sales, rental and longer-term contractual services across our business segments. We bear the risk that we will not be able to resell our used vehicles at a price at or above their residual value estimates.
To the extent that similar measures are implemented in the future in response to the COVID-19 pandemic or other public health or safety crisis, our business and results of operations may be adversely affected. In 2020, we experienced global supply chain disruptions as a result of COVID-19-related policies and regulations.
To the extent that customers are prohibited from continuing or are unable to continue their operations, whether due to measures implemented in response to a public health or safety crisis or to labor strikes, our business and results of operations may be adversely affected.
If OEMs improve the supply or produce an oversupply of new commercial vehicles in an attempt to meet increased consumer demand, our FMS business may experience reduced rental demand and used vehicle sales in the future.
After a period of limited commercial vehicle supply, if OEMs then produce an oversupply of new commercial vehicles, our FMS business may experience reduced rental demand and used vehicle sales in the future. In addition, when global supply chains have been disrupted, we have experienced increased inflationary pressures that increased costs in certain areas like payroll and third-party services.
The frequency or intensity of severe weather events has increased in the last 20 years as a result of global climate change, according to United Nations Office for Disaster Risk Reduction, and may continue to do so. Legal and Regulatory Risks We face litigation risks that could have a material adverse effect on the operation of our business.
Legal and Regulatory Risks We face litigation risks that could have a material adverse effect on the operation of our business.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES Our properties consist primarily of vehicle maintenance and repair facilities, warehouses and other real estate and improvements. We maintain 637 FMS properties in the U.S., Puerto Rico and Canada; we own 439 of these and lease the remaining properties.
ITEM 2. PROPERTIES Our properties consist primarily of vehicle maintenance and repair facilities, warehouses and other real estate and improvements. We maintain 634 FMS properties in the U.S., Puerto Rico and Canada; we own 454 of these and lease the remaining properties.
Our FMS properties are primarily comprised of maintenance facilities generally including a repair shop, rental counter, fuel service island, administrative offices, and used vehicle retail sales centers. Additionally, we manage 178 on-site maintenance facilities, located at customer locations. We also maintain 229 locations in the U.S. and Canada in connection with our domestic SCS business.
Our FMS properties are primarily comprised of maintenance facilities generally including a shop for preventive maintenance and repairs, a service island for fueling, safety inspections and preliminary maintenance checks, used vehicle retail sales centers, and in many cases, a commercial rental vehicle counter. Additionally, we manage 172 on-site maintenance facilities, located at customer locations.
Almost all of our SCS locations are leased and generally include a warehouse and administrative offices. We maintain 48 international locations (locations outside of the U.S. and Canada) for our international businesses. There are 8 locations in the U.K. and Germany, and 40 locations in Mexico.
We also maintain 292 locations in the U.S., Canada and Mexico in connection with our SCS business. Almost all of our SCS locations are leased and generally include a warehouse and administrative offices. Our Mexico locations may also include repair shops. Additionally, we maintain 12 U.S. locations primarily used for Central Support Services.
The majority of these locations are leased and may be a repair shop, warehouse or administrative office. Additionally, we maintain 10 U.S. locations primarily used for Central Support Services. These facilities are generally administrative offices, of which we own four and lease the remaining locations.
These facilities are generally administrative offices, of which we own three and lease the remaining locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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While any proceeding or litigation has an element of uncertainty, management believes that the disposition of such matters, in the aggregate, will not have a material impact on our consolidated financial condition or liquidity. Refer to Note 22, "Contingencies and Other Matters", for additional information regarding our legal proceedings.
While any proceeding or litigation has an element of uncertainty, management believes that the disposition of such matters, in the aggregate, will not have a material impact on our consolidated financial condition or liquidity. Refer to Note 21, "Contingencies and Other Matters", for additional information regarding our legal proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The stock performance graph assumes for comparison that the value of our common stock and of each index was $100 on December 31, 2017, and that all dividends were reinvested.
The stock performance graph assumes for comparison that the value of our common stock and of each index was $100 on December 31, 2018, and that all dividends were reinvested.
Refer to Note 15, "Share Repurchase Programs," in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs.
Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs.
The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of quality acquisitions and stock price. (3) In September 2022, we completed our $300 million accelerated share repurchase program.
The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of quality acquisitions and stock price.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Ryder Common Stock Our common shares are listed on the New York Stock Exchange under the trading symbol “R.” As of January 31, 2023, there were 5,154 common stockholders of record. 22 Performance Graph The following graph compares the performance of our common stock with the performance of the Standard & Poor’s MidCap 400 Index and the Dow Jones Transportation 20 Index for a five year period by measuring the changes in common stock prices from December 31, 2017 to December 31, 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Ryder Common Stock Our common shares are listed on the New York Stock Exchange under the trading symbol “R.” As of January 31, 2024, there were 4,877 common stockholders of record.
Past performance is not necessarily an indicator of future result 23 Purchases of Equity Securities The following table provides information with respect to purchases we made of our common stock during the quarter ended December 31, 2022: Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Maximum Number of Shares That May Yet Be Purchased Under the Discretionary and Anti-Dilutive Programs (2) Maximum Number of Dollars That May Yet Be Purchased Under the Accelerated Share Repurchase Program (3) October 1 through October 31, 2022 — $ — — 4,500,000 $ — November 1 through November 30, 2022 2,840,743 88.72 2,840,673 1,659,327 $ — December 1 through December 31, 2022 85,284 93.00 84,720 1,574,607 $ — Total 2,926,027 $ 88.84 2,925,393 ___________________ (1) During the three months ended December 31, 2022, we purchased an aggregate of 634 shares of our common stock in employee-related transactions.
Past performance is not necessarily an indicator of future result Purchases of Equity Securities The following table provides information with respect to purchases we made of our common stock during the quarter ended December 31, 2023: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Aggregate Maximum Number of Shares That May Yet Be Purchased Under the Discretionary and Anti-Dilutive Programs (1) October 1 through October 31, 2023 129,129 $ 100.33 92,342 3,907,658 November 1 through November 30, 2023 437,540 105.19 437,540 3,470,118 December 1 through December 31, 2023 277 108.66 — 3,470,118 Total 566,946 $ 104.08 529,882 ______________________ (1) We currently maintain two share repurchase programs approved by our board of directors in October 2023.
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Employee-related transactions may include: (i) shares of common stock withheld as payment for the exercise price of options exercised or to satisfy the tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.
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Performance Graph The following graph compares the performance of our common stock with the performance of the Standard & Poor’s MidCap 400 Index and the Dow Jones Transportation 20 Index for a five-year period by measuring the changes in common stock prices from December 31, 2018 to December 31, 2023.
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(2) In October 2021, our board of directors authorized two new share repurchase programs. The first program grants management discretion to repurchase up to 2.0 million shares of common stock over a period of two years, commencing on October 14, 2021 and expiring on October 14, 2023 (the "2021 Discretionary Program").
Removed
The 2021 Discretionary Program is designed to provide management with capital structure flexibility while concurrently managing objectives related to balance sheet leverage, acquisition opportunities, and shareholder returns. The second program authorizes management to repurchase up to 2.5 million shares of common stock, issued to employees under our employee stock plans since September 1, 2021 (the "2021 Anti-Dilutive Program").
Removed
The 2021 Anti-Dilutive Program is designed to mitigate the dilutive impact of shares issued under our employee stock plans. The 2021 Anti-Dilutive Repurchase Program commenced on October 14, 2021 and expires on October 14, 2023.
Removed
This program was authorized by our board of directors in February 2022, and at that time, we repurchased and retired an initial share amount of approximately 3 million. The final settlement occurred in September 2022, resulting in the delivery and retirement of approximately 1 million additional shares.
Removed
The number of shares ultimately repurchased and retired was based on the average of Ryder's daily volume-weighted average price per share of common stock during a repurchase period, less a discount. The average price paid for all of the shares delivered and retired under the ASR was $74.47 per share.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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ITEM 6. SELECTED FINANCIAL DATA Reserved. 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our consolidated financial statements and related notes contained in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 6. [RESERVED] 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our consolidated financial statements and related notes contained in Part II, Item 8 of this Annual Report on Form 10-K.
Further information on our business and reportable business segments are presented in Part I, Item 1, "Business", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report.
Further information on our business and business segments are presented in Part I, Item 1, "Business", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report. 25 ITEM 7.
While we are experiencing positive momentum in our businesses, other unknown effects from extended higher fuel prices, inflationary cost pressures, prolonged labor shortages, extended disruptions in vehicle and vehicle part production and rising interest rates may negatively impact demand for our business, financial results, and significant judgments and estimates.
While we are experiencing positive momentum in our businesses, other unknown effects from extended higher fuel prices, inflationary cost pressures, labor interruptions, extended disruptions in vehicle and vehicle part production and the higher rising interest rate environment may negatively impact demand for our business, financial results, and significant judgments and estimates. 26
We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing and leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, last mile, and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, and administrative support.
We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing that includes our contractual maintenance offering, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides fully integrated port-to-door logistics solutions, including distribution management, dedicated transportation, transportation management, freight brokerage, e-commerce fulfillment, last-mile delivery, contract packaging, and contract manufacturing in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, and administrative support.
This MD&A includes certain forward-looking statements that are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed. Certain prior period amounts have been reclassified to conform with the current period presentation.
This MD&A includes certain forward-looking statements that are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed.
Dedicated transportation services provided as part of an operationally integrated, multi-service, supply chain solution to SCS customers are primarily reported in the SCS business segment. In 2022, we announced our intentions to exit the FMS United Kingdom (U.K.) business and have substantially completed the wind down as of December 31, 2022.
Dedicated transportation services provided as part of an operationally integrated, multi-service supply chain solution to SCS customers are primarily reported in the SCS business segment. In 2022, we announced our intention to exit our lower return FMS Europe (primarily United Kingdom (U.K.)) business.
"Risk Factors” and "Special Note Regarding Forward-Looking Statements" sections included in this Annual Report. This MD&A includes certain non-GAAP financial measures. Please refer to the “Non-GAAP Financial Measures” section of this MD&A for information on these non-GAAP measures, including reconciliations to the most comparable GAAP financial measure and the reasons why we believe each measure is useful to investors.
Please refer to the “Non-GAAP Financial Measures” section of this MD&A for information on these non-GAAP measures, including reconciliations to the most comparable GAAP financial measure and the reasons why we believe each measure is useful to investors. OVERVIEW General Ryder is a leading logistics and transportation company.
The following MD&A describes the principal factors affecting results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates. This section of the Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
The following MD&A describes the principal factors affecting our results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates.
Our lease pricing initiatives also delivered improved portfolio returns, and we expect to continue realizing incremental earnings as our remaining portfolio is renewed at higher returns. In SCS, we experienced strong outsourcing trends in warehousing and distribution, as well as in e-commerce fulfillment and last mile delivery of big and bulky items in 2022.
Our lease pricing initiatives are delivering improved portfolio returns and we expect to realize incremental earnings benefits as our remaining portfolio is renewed at higher returns. In addition, our maintenance cost savings initiatives continue to benefit earnings. In our SCS business, strong outsourcing trends in warehousing and distribution continue.
SELECTED OPERATING PERFORMANCE ITEMS • Total revenue of $12.0 billion and operating revenue (a non-GAAP measure) of $9.3 billion for 2022 increased 24% and 19%, respectively as compared to prior year, reflecting organic revenue growth across all business segments and SCS acquisitions • Diluted EPS from continuing operations of $16.96 in 2022 versus $9.70 in prior year, reflecting significantly higher earnings in FMS and improved performance in SCS and DTS • Comparable EPS (a non-GAAP measure) from continuing operations of $16.37 in 2022 versus $9.58 in prior year • Adjusted Return on Equity (ROE) (a non-GAAP measure) of 29% in 2022, up from 21% in prior year • Net cash provided by operating activities from continuing operations of $2.3 billion in 2022 versus $2.2 billion in prior year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2023 HIGHLIGHTS COMPARED WITH 2022 • Diluted EPS from continuing operations of $8.73 in 2023, which includes a non-cash currency translation adjustment loss related to the FMS U.K. business exit of $3.93, versus $16.96 in prior year • Comparable EPS (a non-GAAP measure) from continuing operations of $12.95 in 2023 versus $16.37 in prior year, reflecting weaker market conditions in used vehicle sales and rental, partially offset by strong DTS and SCS results • Adjusted Return on Equity (ROE) (a non-GAAP measure) of 19% in 2023, compared to 29% in prior year • Total revenue of $11.8 billion compared to $12.0 billion in 2022 • Operating revenue (a non-GAAP measure) of $9.5 billion, up 2% • Full-year 2023 net cash provided by operating activities from continuing operations of $2.4 billion and free cash flow (a non-GAAP measure) of negative $54 million Business Trends During 2023, market conditions for our used vehicle sales and commercial rental continued to weaken.
These market conditions, along with successful management of our initiatives to increase long-term returns, resulted in record revenue and earnings. We had strong sales of new long-term customer contracts in SCS and DTS, which we expect will contribute to long-term profitable growth.
We continue to benefit, though, from favorable secular trends in logistics and transportation solutions including supply chain disruptions. These secular trends, along with successful management of initiatives to increase long-term returns, are driving operating revenue growth and benefiting earnings in our SCS and DTS business segments.
As a result of the liquidation of the balance sheet, we anticipate recognizing a material foreign currency cumulative translation adjustment loss in 2023. The foreign currency cumulative translation adjustment will have no impact on our consolidated financial position or cash flows. 33 ITEM 7.
The currency translation adjustment loss had no impact on our consolidated financial position or cash flows. Refer to Note 16, "Accumulated Other Comprehensive Loss" for a discussion on the currency translation adjustment loss.
Removed
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 17, 2022.
Added
This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the business under Part I, Item 1A. "Risk Factors” and "Special Note Regarding Forward-Looking Statements" sections included in this Annual Report. Certain prior period amounts have been reclassified to conform with the current period presentation.
Removed
First, we included "Other operating expenses" with "Selling, general and administrative expenses" in the Consolidated Statements of Earnings.
Added
In the first quarter of 2023, we revised our primary measurement of segment financial performance to exclude intangible amortization expense. This change did not have a material impact to segment results. This MD&A includes certain non-GAAP financial measures.
Removed
Second, we revised the presentation of certain costs that for the year ended December 31, 2021, were reported in "Cost of lease & related maintenance and rental" and "Cost of services," which should have been included in the "Cost of fuel services" within the Consolidated Statements of Earnings.
Added
We completed the shutdown of operations as well as the sale of the remaining vehicles and properties in 2023, generating cash proceeds of $394 million and recording gains of $95 million from the beginning of 2022 through 2023.
Removed
These costs were not material to any financial statement line item and we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial statements. For a detailed description of certain risk factors that impact our business, including those related to the COVID-19 effects, refer to Part I, Item 1A.
Added
As a result of the shutdown, we reclassified $188 million ($183 million, net of tax) of cumulative currency translation adjustment charges from "Accumulated other comprehensive loss" in our Consolidated Balance Sheet into a one-time, non-cash charge in the second quarter of 2023 in our Consolidated Statements of Earnings.
Removed
OVERVIEW General Ryder is a leading logistics and transportation company.
Added
In our FMS North America business, used vehicle pricing declined from the historical highs in the prior year and rental utilization was 75% during 2023, as compared to a record 83% in the prior year.
Removed
Business Trends During 2022, we continued to experience highly favorable trends in logistics and transportation solutions due to ongoing supply chain and labor shortage challenges. In addition, demand conditions for transportation services were strong reflecting solid freight activity and tight vehicle availability due to continued OEM production constraints.
Added
We anticipate that market conditions, including a slower freight environment will remain weak in the first half of 2024 for used vehicle sales and rental with gradual improvements expected in the second half of 2024.
Removed
In the first half of the year, we also experienced strong demand and pricing for our rental and used vehicles due to a limited supply of vehicles. Benefits from our initiatives to increase returns and drive long-term profitable growth delivered 25 ITEM 7.
Added
ChoiceLease vehicle fleet grew during 2023, and included the redeployment of units from our rental fleet into new ChoiceLease contracts in order to maintain optimal rental utilization and provide immediate availability to our lease customers.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS higher earnings in our contractual lease, supply chain and dedicated businesses. We have also experienced higher costs across our business, particularly payroll and third-party services, due to increasing inflationary pressure. In FMS, used vehicle sales and rental outperformed the prior year.
Added
New contract wins, increased volumes, particularly in the automotive industry vertical, higher pricing and the acquisition of IFS Holdings, LLC, a holding company for Impact Fulfillment Services, LLC (IFS) drove operating revenue (a non-GAAP measure) growth in SCS in 2023. Pricing adjustments and cost recovery initiatives benefited earnings in both SCS and DTS.
Removed
Used vehicle market conditions remain relatively strong, and as anticipated, pricing sequentially declined in the second half of the year from historical highs. Despite this decline in pricing, we realized record used vehicle gains as prices remained, and continue to remain, well above our residual value estimates. Our North America ChoiceLease fleet grew 1,300 units in 2022.
Added
Profitability in SCS was negatively impacted by weaker volume trends and lost business in the omnichannel retail vertical. During 2023, DTS contract sales activity slowed, consistent with a softer freight environment. However, DTS profitability was at the high end of our target range for 2023.
Removed
In 2023, we expect strong but reduced earnings as a slowing macroeconomic and freight environment drive lower results in used vehicle sales and rental, with some offset from tight truck capacity due to ongoing OEM production constraints.
Added
We expect DTS revenue in 2024 to significantly benefit from the acquisition of CLH Parent Corporation (Cardinal Logistics).
Removed
Although we expect a weaker economic environment in 2023, we believe our 2023 used vehicle sales and rental results will be reflective of a normalized economic environment compared to the elevated performance levels we experienced during 2022.
Removed
New long-term customer contracts in SCS and DTS, combined with the e-commerce acquisition of Whiplash and the Midwest Warehouse & Distribution System (Midwest) acquisition, contributed to significant revenue growth. The SCS acquisitions are providing us with enhanced capabilities in fast-growing e-commerce fulfillment and in multi-client warehousing.
Removed
The pricing adjustments and cost recovery initiatives implemented this year due to higher labor costs in SCS and DTS, have helped DTS return to its target earnings level and SCS improve its earnings year-over-year.
Removed
Free cash flow (a non-GAAP measure) of $921 million in 2022 versus $1.1 billion in prior year 26 ITEM 7.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS SUMMARY Change (Dollars in millions, except per share amounts) 2022 2021 2020 2022/2021 2021/2020 Total revenue $ 12,011 $ 9,663 $ 8,420 24% 15% Operating revenue (1) 9,280 7,828 7,024 19% 11% Earnings (loss) from continuing operations before income taxes (EBT) $ 1,216 $ 693 $ (130) 75% NM Comparable EBT (1) 1,144 682 (29) 68% NM Earnings (loss) from continuing operations 863 522 (112) 65% NM Comparable earnings from continuing operations (1) 833 515 (14) 62% NM Net earnings (loss) 867 519 (122) 67% NM Comparable EBITDA (1) 2,722 2,433 2,258 12% 8% Earnings (loss) per common share (EPS) — Diluted Continuing operations $ 16.96 $ 9.70 $ (2.15) 75% NM Comparable (1) 16.37 9.58 (0.27) 71% NM Net earnings (loss) 17.04 9.66 (2.34) 76% NM Debt to equity 216 % 235 % 293 % Adjusted return on equity (1) 29 % 21 % (1) % Net cash provided by operating activities from continuing operations $ 2,310 $ 2,175 $ 2,181 Free cash flow (1) 921 1,057 1,587 Total capital expenditures (2) 2,652 2,012 1,070 ____________________ NM - Denotes Not Meaningful throughout the MD&A (1) Non-GAAP financial measure.
Removed
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. (2) Includes capital expenditures that have been accrued, but not yet paid. In 2022, total revenue increased 24% to $12.0 billion .
Removed
Operating revenue (a non-GAAP measure excluding fuel, subcontracted transportation and ChoiceLease liability insurance revenues) increased 19% to $9.3 billion. The increases in total and operating revenue were primarily due to higher revenue across all of our business segments and the SCS acquisitions of Whiplash and Midwest. Total revenue also increased from higher subcontracted transportation and fuel revenue.
Removed
EBT and comparable EBT (a non-GAAP measure) increased to $1.2 billion and $1.1 billion, respectively, from $693 million and $682 million, respectively, primarily due to higher used vehicle sales results (including the declining impact of depreciation expense from prior residual value estimate changes), better commercial rental performance, and increased results in SCS and DTS.
Removed
FULL YEAR CONSOLIDATED RESULTS Lease & Related Maintenance and Rental Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Lease & related maintenance and rental revenues $ 4,174 $ 3,995 $ 3,704 4% 8% Cost of lease & related maintenance and rental 2,774 2,884 3,109 (4)% (7)% Gross margin $ 1,400 $ 1,111 $ 595 26% 87% Gross margin % 34 % 28 % 16 % Lease & related maintenance and rental revenues represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment.
Removed
Revenues increased 4% in 2022, primarily driven by increases in commercial rental demand and pricing.
Removed
Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and rental revenue and are comprised of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and labor), and other costs such as licenses, insurance and operating taxes.
Removed
Cost of lease & related maintenance and rental excludes interest costs from vehicle financing, which are reported within "Interest expense" in our Consolidated Statements of Earnings. 27 ITEM 7.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cost of lease & related maintenance and rental decreased 4% in 2022 primarily due to declining depreciation expense impacts from prior residual value estimate changes as well as the reduction of the U.K. vehicle fleet related to our exit from the FMS U.K. business, partially offset by higher repair labor and parts costs.
Removed
Lease & related maintenance and rental gross margin and gross margin as a percentage of revenue increased to 34% primarily due to a declining impact of depreciation expense from prior residual value estimate changes, higher commercial rental and ChoiceLease pricing and improved rental utilization.
Removed
Services Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Services revenue $ 7,118 $ 5,181 $ 4,318 37% 20% Cost of services 6,153 4,503 3,653 37% 23% Gross margin $ 965 $ 678 $ 665 42% 2% Gross margin % 14 % 13 % 15 % Services revenue represents all the revenues associated with our SCS and DTS business segments, as well as SelectCare and fleet support services associated with our FMS business segment.
Removed
Services revenue increased 37% in 2022, due to increases in revenue in SCS and DTS driven by growth from acquisitions, new business, increased pricing and higher volumes. Prior year volumes in SCS were negatively impacted from supply chain disruptions, primarily in the automotive industry.
Removed
Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs and maintenance costs.
Removed
Cost of services increased 37% in 2022, primarily due to the growth in revenue and higher subcontracted transportation and labor, rent and fuel costs in SCS and DTS, including the impact from inflationary cost pressures. Services gross margin increased 42% in 2022, due to higher pricing, new business, growth from acquisitions and increased volumes.
Removed
Services gross margin as a percentage of revenue increased in 2022, due to pricing adjustments made on SCS and DTS customer contracts to recover higher labor and subcontracted transportation costs as well as other cost recovery efforts.
Removed
Fuel Services Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Fuel services revenue $ 719 $ 487 $ 398 48% 22% Cost of fuel services 694 474 383 46% 24% Gross margin $ 25 $ 13 $ 15 92% (13)% Gross margin % 3 % 3 % 4 % Fuel services revenue represents fuel services provided to our FMS customers.
Removed
Fuel services revenue increased 48% in 2022, primarily reflecting higher fuel prices passed through to customers. Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment.
Removed
Cost of fuel services increased 46% in 2022 as a result of higher fuel prices. Fuel services gross margin increased to $25 million and gross margin as a percentage of revenue remained at 3% in 2022. Fuel is largely a pass-through to customers for which we realize minimal changes in margin during periods of steady market fuel prices.
Removed
However, fuel services margin is impacted by sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established based on current market fuel costs. Fuel services gross margin was not significantly impacted by these price change dynamics in 2022. 28 ITEM 7.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selling, General and Administrative Expenses Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Selling, general and administrative expenses (SG&A) $ 1,415 $ 1,187 $ 1,044 19% 14% Percentage of total revenue 12 % 12 % 12 % SG&A expenses increased 19% in 2022.
Removed
The increase in 2022 was mainly due to higher incentive-based compensation costs, higher bad debt, amortization of intangibles from the Whiplash and Midwest acquisitions and higher travel expense. SG&A expenses as a percentage of total revenue remained unchanged at 12% in 2022.
Removed
Non-Operating Pension Costs, net Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Non-operating pension costs, net $ 11 $ (1) $ 11 NM NM Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized.
Removed
Non-operating pension costs, net increased due to lower return on assets from a shift in mix of assets and higher interest expense from a higher discount rate partially offset by lower amortization expense.
Removed
Used Vehicle Sales, net Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Used vehicle sales, net $ (450) $ (257) $ — 75% NM Used vehicle sales, net includes gains or losses from sales of used vehicles, selling costs associated with used vehicles and write-downs of vehicles held for sale to fair market value (referred to as "valuation adjustments").
Removed
The increased used vehicle sales results in 2022 was due to higher proceeds per unit of sales of used vehicles as compared to the prior year. Used vehicle sales, net in 2022, includes gains associated with the exit of the FMS U.K. business of $49 million. Average proceeds per unit increased in 2022 from the prior year.
Removed
The following table presents the average used vehicle proceeds per unit changes, using constant currency, compared with the prior year: 2022/2021 2021/2020 Tractors 43% 78% Trucks 51% 70% Interest Expense Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Interest expense $ 228 $ 214 $ 261 7% (18)% Effective interest rate 3.5% 3.2% 3.6% Interest expense increased 7% in 2022 primarily reflecting higher interest rates and higher average outstanding debt, partially offset by a higher mix of variable rate debt.
Removed
Miscellaneous Income, net Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Miscellaneous income, net $ (32) $ (66) $ (22) (52)% 200% Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income, gains on sales of operating property, foreign currency transaction remeasurement and other non-operating items. Miscellaneous 29 ITEM 7.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS income, net was $32 million in 2022 as compared to $66 million in the prior year, primarily due to lower investment income and higher gains on sale of properties in the prior year.
Removed
Restructuring and Other Items, net Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Restructuring and other items, net $ 2 $ 32 $ 111 (94)% (71)% Refer to Note 21, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for a discussion of restructuring charges and other items.
Removed
Provision for (Benefit from) Income Taxes Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Provision for (benefit from) income taxes $ 353 $ 171 $ (18) 106% NM Effective tax rate on continuing operations 29.1 % 24.7 % (14.1) % Comparable tax rate on continuing operations (1) 27.2 % 24.5 % (52.1) % _______________ (1) Non-GAAP financial measure.
Removed
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. The provision for income taxes increased to $353 million in 2022 due to higher earnings and a higher effective tax rate.
Removed
Our effective tax rate from continuing operations was 29.1% as compared to 24.7% in the prior year and our comparable tax rate on continuing operations was 27.2% as compared to 24.5% in the prior year.
Removed
The increases in the rates were due to incremental U.S. tax on higher foreign earnings related to the exit of our FMS U.K. business as well as a shift in the mix of earnings subject to tax in different jurisdictions.
Removed
Refer to our discussion of changes in our provision for (benefit from) income taxes and effective tax rate from continuing operations in Note 11, “Income Taxes” in the Notes to Consolidated Financial Statements. 30 ITEM 7.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FULL YEAR OPERATING RESULTS BY BUSINESS SEGMENT Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Revenue: Fleet Management Solutions $ 6,327 $ 5,680 $ 5,171 11% 10% Supply Chain Solutions 4,720 3,155 2,544 50% 24% Dedicated Transportation Solutions 1,786 1,457 1,229 23% 19% Eliminations (822) (629) (524) (31)% (20)% Total $ 12,011 $ 9,663 $ 8,420 24% 15% Operating Revenue: (1) Fleet Management Solutions $ 5,213 $ 4,941 $ 4,578 6% 8% Supply Chain Solutions 3,254 2,211 1,870 47% 18% Dedicated Transportation Solutions 1,239 1,055 929 17% 14% Eliminations (426) (379) (353) (12)% (7)% Total $ 9,280 $ 7,828 $ 7,024 19% 11% Earnings (loss) from continuing operations before income taxes: Fleet Management Solutions $ 1,054 $ 663 $ (142) 59% NM Supply Chain Solutions 186 117 160 59% (27)% Dedicated Transportation Solutions 102 49 73 108% (33)% Eliminations (115) (78) (43) 47% (81)% 1,227 751 48 63% NM Unallocated Central Support Services (83) (69) (77) 20% 10% Non-operating pension costs, net (11) 1 (11) NM NM Other items impacting comparability, net (2) 83 10 (90) NM NM Earnings (loss) from continuing operations before income taxes $ 1,216 $ 693 $ (130) 75% NM _______________ (1) Non-GAAP financial measure.
Removed
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. (2) Refer to Note 21, "Other Items Impacting Comparability," and below for a discussion of items excluded from our primary measure of segment performance.
Removed
As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as "Earnings from continuing operations before taxes" (EBT), which includes an allocation of costs from Central Support Services (CSS) and excludes non-operating pension costs, net and certain other items as discussed in Note 21, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements.
Removed
CSS represents those costs incurred to support all business segments, including finance and procurement, corporate services, human resources, information technology, public affairs, legal, marketing and corporate communications.
Removed
The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs.
Removed
Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.
Removed
Refer to Note 3, “Segment Reporting,” in the Notes to Consolidated Financial Statements for a description of the methodology for allocating the remainder of CSS costs to the business segments. Our FMS segment leases revenue earning equipment, as well as provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments.
Removed
Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to SCS and DTS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation (presented as “Eliminations”). 31 ITEM 7.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth the benefit from equipment contribution included in EBT for our SCS and DTS business segments: Change (Dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Equipment Contribution: Supply Chain Solutions $ 47 $ 33 $ 18 42% 83% Dedicated Transportation Solutions 68 45 25 51% 80% Total $ 115 $ 78 $ 43 47% 81% In 2022, the increase in SCS and DTS equipment contribution is primarily related to increased fuel margins due to rapid fluctuations in fuel prices and higher proceeds on sales of used vehicles.
Removed
Items excluded from our segment EBT measure and their classification within our Consolidated Statements of Earnings are as follows (dollars in millions): Description Classification 2022 2021 2020 Restructuring and other, net (1) Restructuring and other items, net $ (2) $ (19) $ (77) ERP implementation costs (1) Restructuring and other items, net — (13) (34) Gains on sale of U.K revenue earning equipment (1) Used vehicles sales, net 49 — — Gains on sale of properties (1) Miscellaneous income, net 36 42 6 Early redemption of medium-term notes (1) Interest expense — — (9) ChoiceLease liability insurance revenue (1) Revenue — — 24 Other items impacting comparability, net 83 10 (90) Non-operating pension costs, net (2) Non-operating pension costs, net (11) 1 (11) $ 72 $ 11 $ (101) _______________ (1) Refer to Note 21, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additional information.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

20 edited+233 added−3 removed3 unchanged
Certain items included in EBT, earnings and diluted EPS from continuing operations have been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures.
Certain items included in EBT, Earnings from continuing operations and Diluted EPS have been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ◦ Business interruptions or expenditures due to severe weather or other natural occurrences. • Financing Concerns: ◦ Higher borrowing costs. ◦ Increased inflationary pressures. ◦ Unanticipated interest rate and currency exchange rate fluctuations. ◦ Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates. ◦ Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit. • Accounting Matters: ◦ Reductions in residual values or useful lives of revenue earning equipment. ◦ Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory changes affecting pension estimates, accruals and expenses. ◦ Changes in accounting rules, assumptions and accruals. • Other risks detailed from time to time in our SEC filings, including in “Item 1A.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ◦ Business interruptions or expenditures due to severe weather or other natural occurrences. • Financing Concerns: ◦ Higher borrowing costs. ◦ Increased inflationary pressures. ◦ Unanticipated interest rate and currency exchange rate fluctuations. ◦ Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates. ◦ Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit. • Accounting Matters: ◦ Reductions in residual values or useful lives of revenue earning equipment. ◦ Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory changes affecting pension estimates, accruals and expenses. ◦ Changes in accounting rules, assumptions and accruals. • Other risks detailed from time to time in our SEC filings, including in "Item 1A.
Risk Factors” of this Annual Report. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements.
Risk Factors" of this Annual Report. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements.
(2) Refer to the table above in the Full Year Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Consolidated Statements of Earnings and Note 21, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
(2) Refer to the table above in the Full Year Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Consolidated Statements of Earnings and Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Competition: ◦ Advances in technology may impact demand for our services or may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments. ◦ Competition from other service providers, some of which have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves. ◦ Continued consolidation in the markets where we operate which may create large competitors with greater financial resources. ◦ Our inability to maintain current pricing levels due to economic conditions, demand for services, customer acceptance or competition. • Profitability: ◦ Lower than expected sales volumes or customer retention levels. ◦ Decreases in commercial rental fleet utilization and pricing. ◦ Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail versus wholesale sales. ◦ Loss of key customers in our SCS and DTS business segments. ◦ Decreases in volume in e-commerce and Ryder Last Mile. ◦ Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis. ◦ The inability of our information technology systems to provide timely access to data. ◦ The inability of our information security program to safeguard our data. ◦ Sudden changes in market fuel prices and fuel shortages. ◦ Higher prices for vehicles, diesel engines and fuel as a result of new regulations and inflationary pressures. ◦ Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives. ◦ Lower than expected revenue growth due to production delays at our automotive SCS customers, primarily related to the worldwide semiconductor supply shortage. ◦ The inability of an original equipment manufacturer or supplier to provide vehicles or components as originally scheduled. ◦ Our inability to successfully execute our strategic returns and asset management initiatives, maintain our fleet at normalized levels and right-size our fleet in line with demand. ◦ Our key assumptions and pricing structure, including any assumptions made with respect to inflation, of our SCS and DTS contracts prove to be inaccurate. ◦ Increased unionizing, labor strikes and work stoppages. ◦ Difficulties in attracting and retaining professional drivers, warehouse personnel, and technicians due to labor shortages, which may result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers. ◦ Our inability to manage our cost structure. ◦ Our inability to limit our exposure for customer claims. ◦ Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions. 56 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Competition: ◦ Advances in technology may impact demand for our services or may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments. ◦ Competition from other service providers, some of which have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves. ◦ Continued consolidation in the markets where we operate which may create large competitors with greater financial resources. ◦ Our inability to maintain current pricing levels due to economic conditions, demand for services, customer acceptance or competition. • Profitability: ◦ Lower than expected sales volumes or customer retention levels. ◦ Decreases in commercial rental fleet utilization and pricing. ◦ Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail versus wholesale sales. ◦ Loss of key customers in our SCS and DTS business segments. ◦ Decreases in volume in our omnichannel retail vertical. ◦ Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis. ◦ The inability of our information technology systems to provide timely access to data. ◦ The inability of our information security program to safeguard our data. ◦ Sudden changes in market fuel prices and fuel shortages. ◦ Higher prices for vehicles, diesel engines and fuel as a result of new regulations or inflationary pressures. ◦ Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives. ◦ Lower than expected revenue growth due to production delays at our automotive SCS customers, primarily related to supply chain disruptions. ◦ The inability of an original equipment manufacturer or supplier to provide vehicles or vehicle components as originally scheduled. ◦ Our inability to successfully execute our strategic returns and asset management initiatives, maintain our fleet at normalized levels, and right-size our fleet in line with demand. ◦ Our key assumptions and pricing structure, including any assumptions made with respect to inflation, of our SCS and DTS contracts prove to be inaccurate. ◦ Increased unionizing, labor strikes and work stoppages. ◦ Difficulties in attracting and retaining professional drivers, warehouse personnel and technicians due to labor shortages, which may result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers. ◦ Our inability to manage our cost structure. ◦ Our inability to limit our exposure for customer claims. ◦ Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions. 54 ITEM 7.
These risk factors, among others, include the following: • Market Conditions: ◦ Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services and products, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets. ◦ Decreases in freight demand which would impact both our transactional and variable-based contractual business. ◦ Changes in our customers’ operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services and products. ◦ Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions. ◦ Volatility in customer volumes and shifting customer demand in the industries we service. ◦ Changes in current financial, tax or other regulatory requirements that could negatively impact our financial and operating results. 55 ITEM 7.
These risk factors, among others, include the following: • Market Conditions: ◦ Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services and products, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets. ◦ Decreases in freight demand which would impact both our transactional and variable-based contractual business. ◦ Changes in our customers' operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services and products. ◦ Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions. ◦ Volatility in customer volumes and shifting customer demand in the industries we service. ◦ Changes in current financial, tax or other regulatory requirements that could negatively impact our financial and operating results. ◦ Financial institution disruptions and geopolitical events or conflicts. 53 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts.
(2) Refer to the table above for more information on tax adjustments on the previous page. Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related.
(2) Refer to the table above for more information on tax adjustments. Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related. 49 ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of GAAP earnings (loss) before taxes (EBT), earnings (loss), and earnings (loss) per diluted share (Diluted EPS) from continuing operations to comparable EBT, comparable earnings and comparable EPS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of GAAP Earnings from continuing operations before income taxes (EBT), Earnings from continuing operations, and Earnings from continuing operations per common share — Diluted (Diluted EPS) to comparable EBT, comparable earnings and comparable EPS, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of the effective tax rate to the comparable tax rate: Years ended December 31, 2022 2021 2020 Effective tax rate on continuing operations (1) 29.1% 24.7% (14.1)% Tax adjustments and income tax effects of non-GAAP adjustments (2) (1.9)% (0.2)% (38.0)% Comparable tax rate on continuing operations (1) 27.2% 24.5% (52.1)% _______________ (1) The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, respectively.
The following table provides a reconciliation of the effective tax rate to the comparable tax rate: Years ended December 31, 2023 2022 2021 Effective tax rate on continuing operations (1) 34.3% 29.1% 24.7% Tax adjustments and income tax effects of non-GAAP adjustments (2) (8.2)% (1.9)% (0.2)% Comparable tax rate on continuing operations (1) 26.1% 27.2% 24.5% _______________ (1) The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, respectively.
The following table provides a reconciliation of forecasted net cash provided by operating activities to forecasted total cash generated and forecasted free cash flow for 2023: (In millions) Forecast 2023 Net cash provided by operating activities $ 2,400 Proceeds from sales (primarily revenue earning equipment) (1) 750 Total cash generated 3,150 Purchases of property and revenue earning equipment (1) (2,950) Forecasted free cash flow $ 200 _______________ (1) Included in cash flows from investing activities. 53 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of forecasted net cash provided by operating activities to forecasted total cash generated and forecasted free cash flow for 2024: (In millions) Forecast 2024 Net cash provided by operating activities from continuing operations $ 2,400 Proceeds from sales (primarily revenue earning equipment) (1) 550 Total cash generated 2,950 Purchases of property and revenue earning equipment (1) (3,275) Forecasted free cash flow $ (325) _____________________ (1) Included in cash flows from investing activities.
(2) Includes income taxes on discontinued operations. (3) Represents provision for income taxes plus income taxes on other items impacting comparability. (4) Represents the impact of other items impacting comparability, net of tax, to equity for the respective period.
(2) Includes income taxes on discontinued operations. (3) Represents Provision for income taxes plus income taxes on Other items impacting comparability, net. (4) Represents the impact of Other items impacting comparability, net of tax, to equity for the respective period. (5) Adjusted return on equity is calculated by dividing Adjusted net earnings into Adjusted average shareholders' equity. 51 ITEM 7.
(2) Refer to Note 21, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additio nal information. (3) In 2022, adjustments include the global tax impact related to gains on sales of U.K. revenue earning equipment and properties, the release of the valuation allowance on U.K. deferred tax assets, and tax impact of state rate law changes.
(2) Refer to Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additio nal information. (3) In 2023 and 2022, adjustments include the global tax impacts related to the FMS U.K. business exit. In 2022, adjustments also include the tax impact of state rate law changes.
The following table provides a reconciliation of earnings (loss) to comparable EBITDA: Years ended December 31, (In millions) 2022 2021 2020 Net earnings (loss) $ 867 $ 519 $ (122) (Gain) loss from discontinued operations, net of tax (4) 3 10 Provision for (benefit from) income taxes 353 171 (18) EBT 1,216 693 (130) Non-operating pension costs, net (1) 11 (1) 11 Other items impacting comparability, net (2) (83) (10) 90 Comparable EBT 1,144 682 (29) Interest expense (3) 228 214 252 Depreciation 1,713 1,786 2,027 Used vehicle sales, net (4) (400) (257) — Amortization 37 8 8 Comparable EBITDA $ 2,722 $ 2,433 $ 2,258 _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of Net earnings to comparable EBITDA: Years ended December 31, (In millions) 2023 2022 2021 Net earnings $ 406 $ 867 $ 519 (Earnings) loss from discontinued operations, net of tax — (4) 3 Provision for income taxes 212 353 171 EBT 618 1,216 693 Non-operating pension costs, net (1) 40 11 (1) FMS U.K. exit (2) (32) (82) (27) Currency translation adjustment loss (2) 188 — — ERP implementation costs (2) — — 13 Other, net (2) 1 (1) 4 Comparable EBT 815 1,144 682 Interest expense 296 228 214 Depreciation 1,712 1,713 1,786 Used vehicle sales, net (3) (193) (400) (257) Amortization 35 37 8 Comparable EBITDA $ 2,665 $ 2,722 $ 2,433 _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated Financial Statements: Continuing Operations Years ended December 31, (In millions, except per share amounts) 2022 2021 2020 EBT $ 1,216 $ 693 $ (130) Non-operating pension costs, net (1) 11 (1) 11 Restructuring and other, net (2) 2 19 77 ERP implementation costs (2) — 13 34 Gains on sale of U.K. revenue earning equipment (2) (49) — — Gains on sale of properties (2) (36) (42) (6) Early redemption of medium-term notes (2) — — 9 ChoiceLease liability insurance revenue (2) — — (24) Comparable EBT $ 1,144 $ 682 $ (29) Earnings (loss) $ 863 $ 522 $ (112) Non-operating pension costs, net (1) 7 (3) 5 Restructuring and other, net (including ChoiceLease liability insurance results) (2) 3 18 44 ERP implementation costs (2) — 9 25 Gains on sale of U.K. revenue earning equipment (49) — — Gains on sale of properties (2) (36) (32) (5) Early redemption of medium-term notes (2) — — 7 Tax adjustments, net (3) 46 1 22 Comparable Earnings $ 834 $ 515 $ (14) Diluted EPS $ 16.96 $ 9.70 $ (2.15) Non-operating pension costs, net (1) 0.14 (0.06) 0.10 Restructuring and other, net (including ChoiceLease liability insurance results) (2) 0.04 0.34 0.84 ERP implementation costs (2) — 0.18 0.49 Gains on sale of U.K. revenue earning equipment (0.96) — — Gains on sale of properties (2) (0.71) (0.59) (0.10) Early redemption of medium-term notes (2) — — 0.13 Tax adjustments, net (3) 0.90 0.01 0.42 Comparable EPS $ 16.37 $ 9.58 $ (0.27) _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated Financial Statements: Continuing Operations Years ended December 31, (In millions, except per share amounts) 2023 2022 2021 EBT $ 618 $ 1,216 $ 693 Non-operating pension costs, net (1) 40 11 (1) FMS U.K. exit (2) (32) (82) (27) Currency translation adjustment loss 188 — — ERP implementation costs (2) — — 13 Other, net (2) 1 (1) 4 Comparable EBT $ 815 $ 1,144 $ 682 Earnings $ 406 $ 863 $ 522 Non-operating pension costs, net (1) 31 7 (3) FMS U.K. exit (2) (32) (82) (18) Currency translation adjustment loss 183 — — ERP implementation costs (2) — — 9 Other, net (2) 1 (1) 4 Tax adjustments, net (3) 13 46 1 Comparable Earnings $ 602 $ 833 $ 515 Diluted EPS $ 8.73 $ 16.96 $ 9.70 Non-operating pension costs, net (1) 0.68 0.14 (0.06) FMS U.K. exit (2) (0.68) (1.61) (0.34) Currency translation adjustment loss 3.93 — — ERP implementation costs (2) — — 0.18 Other, net (2) 0.01 (0.02) 0.09 Tax adjustments, net (3) 0.28 0.90 0.01 Comparable EPS $ 12.95 $ 16.37 $ 9.58 _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
In 2022, used vehicle sales, net of $49 million related to the sale of used vehicles in the U.K. is excluded as it is included above in "Other items impacting comparability, net." The following table provides a reconciliation of total revenue to operating revenue: Years ended December 31, (In millions) 2022 2021 2020 Total revenue $ 12,011 $ 9,663 $ 8,420 Subcontracted transportation and fuel (2,731) (1,835) (1,372) ChoiceLease liability insurance revenue (1) — — (24) Operating revenue $ 9,280 $ 7,828 $ 7,024 _______________ (1) In the first quarter of 2021, we completed the exit of the extension of our liability insurance coverage for ChoiceLease customers. 51 ITEM 7.
In 2023, and 2022, Used vehicle sales, net of $2 million and $49 million, respectively, related to the sale of used vehicles in the U.K. is excluded as it is included above in "Other Items Impacting Comparability." The following table provides a reconciliation of total revenue to operating revenue: Years ended December 31, (In millions) 2023 2022 2021 Total revenue $ 11,783 $ 12,011 $ 9,663 Subcontracted transportation and fuel (2,286) (2,731) (1,835) Operating revenue $ 9,497 $ 9,280 $ 7,828 The following table provides a reconciliation of FMS total revenue to FMS operating revenue: Years ended December 31, (In millions) 2023 2022 2021 FMS total revenue $ 5,930 $ 6,327 $ 5,680 Fuel services revenue (877) (1,114) (739) FMS operating revenue $ 5,053 $ 5,213 $ 4,941 FMS EBT $ 665 $ 1,057 $ 665 FMS EBT as a % of FMS total revenue 11.2% 16.7% 11.7% FMS EBT as a % of FMS operating revenue 13.2% 20.3% 13.5% 50 ITEM 7.
This Annual Report contains forward-looking statements including statements regarding: • our expectations with respect to the effects of ongoing global supply chain disruptions on our business and financial results; • our expectations regarding supply of vehicles and its effect on pricing and demand; • our expectations of the long-term residual values of revenue earning equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a potential cyclical downturn; • our expectations regarding the effects of acquisitions on our business segments and the integration of such acquisitions; • our expectations regarding the impact of labor shortages on labor and subcontracted transportation costs; • our expectations in our FMS business segment regarding anticipated ChoiceLease pricing actions and revenue, fleet growth, sales volume and earnings; • our expectations in our SCS and DTS business segments regarding anticipated operating revenue, trends, earnings, sales activity and long-term growth; • our expectations regarding industry and market trends and their potential impact on our business; • the expected pricing for used vehicles and sales channel mix; • our expectations of cash flow from operating activities, free cash flow, and capital expenditures; • our expected future contractual cash obligations and commitments; • our ability to meet our objectives with the share repurchase programs; • the adequacy of our accounting estimates and reserves for goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, asset impairments, the valuation of our pension plans, allowance for credit losses, and self-insurance loss reserves; • the adequacy of our fair value estimates of employee incentive awards under our share-based compensation plans, publicly traded debt and other debt; • the adequacy and timing of our fair value estimates for the purposes of our purchase consideration allocation with respect to acquisitions; • our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources; • our expected level of use and availability of outside funding sources, anticipated future payments under debt and lease agreements, and risk of losses resulting from counterparty default under hedging and derivative agreements; • the anticipated impact of fuel and energy prices, interest rate movements, subcontracted transportation costs and exchange rate fluctuations; • our expectations as to return on pension plan assets, future pension expense and estimated contributions; • our expectations regarding the scope and anticipated outcomes with respect to certain claims, proceedings and lawsuits; • the ultimate disposition of estimated environmental liabilities; 54 ITEM 7.
This Annual Report contains forward-looking statements including statements regarding: • our expectations with respect to the effects of outsourcing trends in warehousing and distribution on our business and financial results; • our expectations with respect to the effects of secular trends and supply chain disruptions; • our expectations with respect to the macroeconomic and freight environment; • our expectations regarding supply of vehicles and vehicle parts and its effect on pricing and demand; • our expectations of the long-term residual values of revenue earning equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a further cyclical downturn or changes to the estimated useful lives; • our expectations regarding the effects of acquisitions on our business segments and the integration of such acquisitions; • our expectations in our SCS and DTS business segments related to revenue, earnings growth, and contract sales activity; • our expectations regarding weakening trends and lower volumes in our omnichannel retail vertical; • the expected pricing for used vehicles and sales channel mix; • our expectations regarding used vehicle sales and rental; • our expectations regarding the impact of labor shortages and interruptions or strikes on labor and subcontracted transportation costs; • our expectations regarding ChoiceLease and SelectCare; • our expectations of cash flow from operating activities, free cash flow, and capital expenditures; • our ability to meet our objectives with the share repurchase programs; • the adequacy of our accounting estimates and reserves for goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, the valuation of our pension plans, allowance for credit losses, and self-insurance loss reserves; • the adequacy of our fair value estimates of publicly traded debt and other debt; 52 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Years ended December 31, (In millions) 2022 2021 2020 Net earnings (loss) $ 867 $ 519 $ (122) Other items impacting comparability, net (1) (83) (10) 90 Income taxes (2) 353 171 (18) Adjusted earnings (loss) before income taxes 1,137 680 (50) Adjusted income taxes (3) (307) (164) 21 Adjusted net earnings (loss) [A] $ 830 $ 516 $ (29) Average shareholders’ equity $ 2,845 $ 2,453 $ 2,257 Average adjustments to shareholders’ equity (4) (12) 14 60 Adjusted average shareholders’ equity [B] $ 2,833 $ 2,467 $ 2,317 Adjusted return on equity [A/B] 29.3% 20.9% (1.3)% _______________ (1) Refer to the table above in the Full Year Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Consolidated Statements of Earnings and Note 21, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of SCS total revenue to SCS operating revenue: Years ended December 31, (In millions) 2023 2022 2021 SCS total revenue $ 4,875 $ 4,720 $ 3,155 Subcontracted transportation and fuel (1,250) (1,466) (944) SCS operating revenue $ 3,625 $ 3,254 $ 2,211 SCS EBT $ 231 $ 218 $ 123 SCS EBT as a % of SCS total revenue 4.7% 4.6% 3.9% SCS EBT as a % of SCS operating revenue 6.4% 6.7% 5.6% The following table provides a reconciliation of DTS total revenue to DTS operating revenue: Years ended December 31, (In millions) 2023 2022 2021 DTS total revenue $ 1,785 $ 1,786 $ 1,457 Subcontracted transportation and fuel (487) (547) (402) DTS operating revenue $ 1,298 $ 1,239 $ 1,055 DTS EBT $ 121 $ 103 $ 49 DTS EBT as a % of DTS total revenue 6.8% 5.8% 3.4% DTS EBT as a % of DTS operating revenue 9.3% 8.3% 4.6% The following tables provide numerical reconciliations of net earnings to adjusted net earnings and average shareholders' equity to adjusted average shareholders' equity (Adjusted ROE), and of the non-GAAP elements used to calculate the adjusted return on equity to the corresponding GAAP measures: Years ended December 31, (In millions) 2023 2022 2021 Net earnings $ 406 $ 867 $ 519 Other items impacting comparability, net (1) 157 (83) (10) Provision for income taxes (2) 212 353 171 Adjusted earnings before income taxes 775 1,137 680 Adjusted income taxes (3) (204) (307) (164) Adjusted net earnings $ 571 $ 830 $ 516 Average shareholders’ equity $ 3,041 $ 2,845 $ 2,453 Average adjustments to shareholders’ equity (4) (19) (12) 14 Adjusted average shareholders’ equity $ 3,022 $ 2,833 $ 2,467 Adjusted return on equity (5) 19% 29% 21% _______________ (1) Refer to Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
(3) In 2020, interest expense of $9 million recorded for the early redemption of two medium-term notes is excluded as it is included above in "Other items impacting comparability, net." (4) Refer to Note 6,"Revenue Earning Equipment, net," in the Notes to Consolidated Financial Statements for additional information.
(3) Refer to Note 6,"Revenue Earning Equipment, net," in the Notes to Consolidated Financial Statements for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • our ability to access commercial paper and other available debt financing in the capital markets; • the impact of our strategic investments; • our expectations regarding losses under guarantees; • the status of our unrecognized tax benefits related to the U.S. federal, state and foreign tax positions; • our expectation regarding the ability to realize our deferred tax assets; • our expectations regarding the reversal of deferred tax liabilities and the timing of cash impact; • our expectations regarding the completion and ultimate outcome of certain tax audits; • our intent to permanently reinvest the earnings of our non U.K. & Germany foreign subsidiaries indefinitely; • the anticipated impact of recent accounting pronouncements; • our expectation with respect to the slowdown of the economy; • our expectation that used vehicle and rental results will reflect a normalized environment; • our expectation regarding future income tax cash obligations; • our expectations regarding lease pricing initiatives effect on earnings; • our expectations regarding our ability to estimate the fair value of assets acquired and liabilities assumed with respect to Whiplash; • our ability to complete the exit of our FMS U.K. business and our expectation with respect to the timing of such exit; • our expectation regarding a material foreign currency cumulative translation adjustment loss; and • our expectations regarding the effect of changes to systems and processes on our internal control over financial reports.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • the adequacy and timing of our fair value estimates for the purposes of our purchase consideration allocation with respect to acquisitions; • our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources; • our expected level of use and availability of outside funding sources, anticipated future payments under debt and lease agreements, and risk of losses resulting from counterparty default under hedging and derivative agreements; • the anticipated impact of fuel and energy prices, interest rate movements, and exchange rate fluctuations; • our expectations as to return on pension plan assets, future pension expense, and estimated contributions; • our expectations regarding the scope and anticipated outcomes with respect to certain claims, proceedings and lawsuits; • our ability to access commercial paper and other available debt financing in the capital markets; • the impact of our strategic investments and maintenance and lease pricing initiatives; • our intent to permanently reinvest the earnings of our non U.K. & Germany foreign subsidiaries indefinitely; • our expectations regarding the achievement of our return on equity improvement initiatives; • the anticipated impact of inflationary pressures; • our expectations regarding the U.S. federal, state, and foreign tax positions and realizability of deferred tax assets. • our expectations regarding our ability to estimate the fair value of assets acquired and liabilities assumed with respect to acquisitions; and • our expectations regarding the effect of changes to systems and processes on our internal control over financial reports.
Removed
In 2021, adjustments include expense related to expiring state net operating losses. In 2020, adjustments include a valuation allowance of $13 million on our U.K. deferred tax assets, expiring state net operating losses of $7 million, and state law changes of $2 million. 50 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS SUMMARY Change (Dollars in millions, except per share amounts) 2023 2022 2021 2023/2022 2022/2021 Total revenue $ 11,783 $ 12,011 $ 9,663 (2)% 24% Operating revenue (1) 9,497 9,280 7,828 2% 19% Earnings from continuing operations before income taxes (EBT) $ 618 $ 1,216 $ 693 (49)% 75% Comparable EBT (1) 815 1,144 682 (29)% 68% Earnings from continuing operations 406 863 522 (53)% 65% Comparable earnings from continuing operations (1) 602 833 515 (28)% 62% Comparable EBITDA (1) 2,665 2,722 2,433 (2)% 12% Earnings per common share (EPS) — Diluted Continuing operations $ 8.73 $ 16.96 $ 9.70 (49)% 75% Comparable (1) 12.95 16.37 9.58 (21)% 71% Cash dividend per share $ 2.66 $ 2.40 $ 2.28 11% 5% Book value per share (2) 69.91 63.45 52.02 10% 22% Total debt 7,114 6,352 6,580 12% (3)% Total shareholders’ equity 3,069 2,937 2,798 4% 5% Debt to equity 232 % 216 % 235 % Adjusted return on equity (1) 19 % 29 % 21 % Net cash provided by operating activities from continuing operations $ 2,353 $ 2,310 $ 2,175 Free cash flow (1) (54) 921 1,057 Total capital expenditures (3) 3,279 2,652 2,012 ____________________ (1) Non-GAAP financial measure.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of FMS total revenue to FMS operating revenue: Years ended December 31, (In millions) 2022 2021 2020 FMS total revenue $ 6,327 $ 5,680 $ 5,171 Fuel services and ChoiceLease liability insurance (1) (1,114) (739) (593) FMS operating revenue $ 5,213 $ 4,941 $ 4,578 FMS EBT $ 1,054 $ 663 $ (142) FMS EBT as a % of FMS total revenue 16.7% 11.7% (2.7)% FMS EBT as a % of FMS operating revenue 20.2% 13.4% (3.1)% _______________ (1) In the first quarter of 2021, we completed the exit of the extension of our liability insurance coverage for ChoiceLease customers.
Added
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. (2) Book value per share is calculated using Total shareholders’ equity divided by common shares outstanding.
Removed
The following table provides a reconciliation of SCS total revenue to SCS operating revenue: Years ended December 31, (In millions) 2022 2021 2020 SCS total revenue $ 4,720 $ 3,155 $ 2,544 Subcontracted transportation and fuel (1,466) (944) (674) SCS operating revenue $ 3,254 $ 2,211 $ 1,870 SCS EBT $ 186 $ 117 $ 160 SCS EBT as a % of SCS total revenue 3.9% 3.7% 6.3% SCS EBT as a % of SCS operating revenue 5.7% 5.3% 8.6% The following table provides a reconciliation of DTS total revenue to DTS operating revenue: Years ended December 31, (In millions) 2022 2021 2020 DTS total revenue $ 1,786 $ 1,457 $ 1,229 Subcontracted transportation and fuel (547) (402) (300) DTS operating revenue $ 1,239 $ 1,055 $ 929 DTS EBT $ 102 $ 49 $ 73 DTS EBT as a % of DTS total revenue 5.7% 3.4% 5.9% DTS EBT as a % of DTS operating revenue 8.2% 4.6% 7.9% The following tables provide numerical reconciliations of net earnings to adjusted net earnings and average shareholders' equity to adjusted average shareholders' equity (Adjusted ROE), and of the non-GAAP elements used to calculate the adjusted return on equity to the corresponding GAAP measures: 52 ITEM 7.
Added
(3) Includes capital expenditures that have been accrued, but not yet paid. In 2023, total revenue decreased 2% to $11.8 billion, reflecting lower fuel and subcontracted transportation costs passed through to customers, partially offset by higher operating revenue.
Added
Operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 2% to $9.5 billion, primarily reflecting SCS organic and acquisition revenue growth and DTS revenue growth partially offset by lower commercial rental revenue in FMS and the exit of the FMS U.K. business.
Added
EBT and comparable EBT (a non-GAAP measure) decreased to $618 million and $815 million, respectively, from $1.2 billion and $1.1 billion, respectively, primarily due to lower gains on used vehicles sold and decreased commercial rental results in FMS, partially offset by higher earnings in DTS and SCS.
Added
EBT in 2023, also reflects a one-time, non-cash $188 million currency translation adjustment loss related to the FMS U.K. exit.
Added
FULL YEAR CONSOLIDATED RESULTS Lease & Related Maintenance and Rental Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Lease & related maintenance and rental revenue $ 3,937 $ 4,174 $ 3,995 (6)% 4% Cost of lease & related maintenance and rental 2,684 2,774 2,884 (3)% (4)% Gross margin $ 1,253 $ 1,400 $ 1,111 (11)% 26% Gross margin % 32% 34% 28% Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment.
Added
Revenue decreased 6% in 2023, reflecting lower commercial rental demand and a 3% negative impact from the exit of the FMS U.K. business. 27 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cost of lease & related maintenance and rental represents the direct costs related to Lease & related maintenance and rental revenue and are comprised of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and labor), and other costs such as licenses, insurance and operating taxes.
Added
Cost of lease & related maintenance and rental excludes interest costs from vehicle financing, which are reported within "Interest expense" in our Consolidated Statements of Earnings. Cost of lease & related maintenance and rental decreased 3% in 2023 primarily reflecting the exit of the FMS U.K. business and lower operating costs on a 4% smaller average commercial rental fleet.
Added
Lease & related maintenance and rental gross margin decreased due to lower commercial rental demand. Lease & related maintenance and rental gross margin as a percentage of revenue decreased to 32% primarily due to lower commercial rental demand and utilization.
Added
Services Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Services revenue $ 7,297 $ 7,118 $ 5,181 3% 37% Cost of services 6,266 6,153 4,503 2% 37% Gross margin $ 1,031 $ 965 $ 678 7% 42% Gross margin % 14% 14% 13% Services revenue represents all the revenues associated with our SCS and DTS business segments, including subcontracted transportation and fuel, as well as SelectCare and fleet support services associated with our FMS business segment.
Added
Services revenue increased 3% in 2023, due to SCS and DTS increased pricing, new business and higher volumes, as well as higher pricing in SelectCare, partially offset by lower subcontracted transportation and fuel costs passed through to customers.
Added
The acquisition of IFS in the fourth quarter of 2023 and businesses acquired within the SCS segment in the second half of 2022, also contributed to revenue growth.
Added
Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs and maintenance costs. Cost of services increased 2% in 2023, primarily reflecting higher revenue, partially offset by lower subcontracted transportation and fuel costs.
Added
Services gross margin increased in 2023, due to higher pricing in SCS and DTS.
Added
Fuel Services Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Fuel services revenue $ 549 $ 719 $ 487 (24)% 48% Cost of fuel services 534 694 474 (23)% 46% Gross margin $ 15 $ 25 $ 13 (40)% 92% Gross margin % 3 % 3 % 3 % Fuel services revenue represents fuel services provided to our FMS customers.
Added
Fuel services revenue decreased 24% in 2023, primarily reflecting lower fuel prices passed through to customers and to a much lesser extent fewer gallons sold. Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment.
Added
Cost of fuel services decreased 23% in 2023 as a result of lower fuel prices and fewer gallons sold. Fuel services gross margin decreased to $15 million and gross margin as a percentage of revenue remained unchanged at 3% in 2023.
Added
Fuel is largely a pass-through to customers for which we realize minimal changes in margin during periods of steady market fuel prices. However, fuel services margin is impacted by sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established based on current market fuel costs.
Added
Fuel services gross margin was not significantly impacted by these price change dynamics in 2023. 28 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selling, General and Administrative Expenses Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Selling, general and administrative expenses (SG&A) $ 1,421 $ 1,415 $ 1,187 —% 19% Percentage of total revenue 12 % 12 % 12 % SG&A expenses remained at $1.4 billion and SG&A expenses as a percentage of total revenue remained at 12% in 2023, as strategic investments in information technology were offset by lower bad debt expense.
Added
Non-Operating Pension Costs, net Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Non-operating pension costs, net $ 40 $ 11 $ (1) NM NM Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized.
Added
Non-operating pension costs, net increased due to higher interest expense from a higher discount rate partially offset by an increase in expected return on plan assets.
Added
Used Vehicle Sales, net Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Used vehicle sales, net $ (196) $ (450) $ (257) (56)% 75% Used vehicle sales, net includes gains or losses from sales of used vehicles, selling costs associated with used vehicles and write-downs of vehicles held for sale to fair market value (referred to as "valuation adjustments").
Added
The decrease in used vehicle sales in 2023 was due to lower proceeds per unit of sales of used vehicles partially offset by higher volumes compared to the prior year. Used vehicle sales, net in 2022, includes $49 million gains associated with the exit of the FMS U.K. business. Average proceeds per unit decreased in 2023 from the prior year.
Added
The following table presents the average used vehicle proceeds per unit changes, using constant currency, compared with the prior year: 2023/2022 2022/2021 Tractors (37)% 43% Trucks (28)% 51% Interest Expense Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Interest expense $ 296 $ 228 $ 214 30% 7% Effective interest rate 4.4% 3.5% 3.2% Interest expense increased 30% in 2023, primarily reflecting lower fixed-rate interest maturing debt being replaced with new issuances at higher market interest rates to fund increased capital spending in FMS, as well as higher short-term variable interest rates.
Added
Miscellaneous Income, net Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Miscellaneous income, net $ (47) $ (32) $ (66) 47% (52)% Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income, gains on sales of operating property, foreign currency transaction remeasurement and other non-operating items. Miscellaneous 29 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS income, net was $47 million in 2023 as compared to $32 million in the prior year, primarily due to higher investment income on securities used to fund certain benefit plans partially offset by higher gains on sales of U.K. properties in the prior year.
Added
Currency Translation Adjustment Loss Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Currency translation adjustment loss $ 188 $ — $ — NM NM Refer to Note 16, "Accumulated Other Comprehensive Loss" for a discussion on the currency translation adjustment loss.
Added
Restructuring and Other Items, net Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Restructuring and other items, net $ (21) $ 2 $ 32 NM NM Refer to Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for a discussion of restructuring charges and other items.
Added
Provision for Income Taxes Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Provision for income taxes $ 212 $ 353 $ 171 (40)% 106% Effective tax rate on continuing operations 34.3 % 29.1 % 24.7 % Comparable tax rate on continuing operations (1) 26.1 % 27.2 % 24.5 % _______________ (1) Non-GAAP financial measure.
Added
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. Provision for income taxes decreased to $212 million in 2023 due to lower earnings partially offset by a higher effective tax rate.
Added
Our effective tax rate from continuing operations was 34.3% as compared to 29.1% in the prior year. The increase in the effective rate was due to a one-time, nondeductible cumulative currency translation adjustment loss related to the completion of the exit of the FMS U.K. business in 2023.
Added
O ur comparable tax rate on continuing operations was 26.1% as compared to 27.2% in the prior year. Refer to our discussion of changes in our provision for income taxes and effective tax rate from continuing operations in Note 11, “Income Taxes” in the Notes to Consolidated Financial Statements. 30 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FULL YEAR OPERATING RESULTS BY BUSINESS SEGMENT Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Revenue: Fleet Management Solutions $ 5,930 $ 6,327 $ 5,680 (6)% 11% Supply Chain Solutions 4,875 4,720 3,155 3% 50% Dedicated Transportation Solutions 1,785 1,786 1,457 —% 23% Eliminations (807) (822) (629) 2% (31)% Total $ 11,783 $ 12,011 $ 9,663 (2)% 24% Operating Revenue: (1) Fleet Management Solutions $ 5,053 $ 5,213 $ 4,941 (3)% 6% Supply Chain Solutions 3,625 3,254 2,211 11% 47% Dedicated Transportation Solutions 1,298 1,239 1,055 5% 17% Eliminations (479) (426) (379) (12)% (12)% Total $ 9,497 $ 9,280 $ 7,828 2% 19% Earnings from continuing operations before income taxes: Fleet Management Solutions $ 665 $ 1,057 $ 665 (37)% 59% Supply Chain Solutions 231 218 123 6% 77% Dedicated Transportation Solutions 121 103 49 18% 110% Eliminations (95) (114) (78) 17% (46)% 922 1,264 759 (27)% (67)% Unallocated Central Support Services (72) (83) (69) (13)% (20)% Intangible amortization expense (2) (35) (37) (8) 4% (363)% Non-operating pension costs, net (3) (40) (11) 1 NM NM Other items impacting comparability, net (4) (157) 83 10 NM NM Earnings from continuing operations before income taxes $ 618 $ 1,216 $ 693 (49)% 75% ______________________ (1) Non-GAAP financial measure.
Added
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors. (2) Refer to Note 9, "Intangible Assets, Net," for a discussion on this item.
Added
(3) Refer to Note 19, "Employee Benefit Plans," for a discussion on this item. (4) Refer to Note 20, "Other Items Impacting Comparability," and below for a discussion of items excluded from our primary measure of segment performance.
Added
As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as "Earnings from continuing operations before income taxes" (EBT), which includes an allocation of costs from Central Support Services (CSS) and excludes Non-operating pension costs, net, intangible amortization expense, and certain other items as discussed in Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements.
Added
CSS represents those costs incurred to support all business segments, including finance and procurement, corporate services, human resources, information technology, public affairs, legal, marketing and corporate communications.
Added
The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs.
Added
Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation.
Added
Refer to Note 3, “Segment Reporting,” in the Notes to Consolidated Financial Statements for a description of the methodology for allocating the remainder of CSS costs to the business segments. Our FMS segment leases revenue earning equipment and provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments.
Added
Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to SCS and 31 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DTS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation (presented as “Eliminations”).
Added
The following table sets forth the benefit from equipment contribution included in EBT for our SCS and DTS business segments: Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 Equipment Contribution: Supply Chain Solutions $ 43 $ 46 $ 33 (7)% 39% Dedicated Transportation Solutions 52 68 45 (24)% 51% Total $ 95 $ 114 $ 78 (17)% 46% In 2023, the decrease in DTS and SCS equipment contribution was related to lower gains on sales of used vehicles.
Added
The decrease in DTS was also due to lower fuel prices passed through to customers.
Added
Fleet Management Solutions Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 ChoiceLease $ 3,181 $ 3,101 $ 3,064 3% 1% Commercial rental (1) 1,178 1,338 1,077 (12)% 24% SelectCare and other 694 624 538 11% 16% FMS Europe (2) — 150 262 (100)% (43)% Fuel services revenue 877 1,114 739 (21)% 51% FMS total revenue $ 5,930 $ 6,327 $ 5,680 (6)% 11% FMS operating revenue (3) $ 5,053 $ 5,213 $ 4,941 (3)% 6% FMS EBT $ 665 $ 1,057 $ 665 (37)% 59% FMS EBT as a % of FMS total revenue 11.2% 16.7% 11.7% (550) bps 500 bps FMS EBT as a % of FMS operating revenue (3) 13.2% 20.3% 13.5% (710) bps 680 bps _______________ (1) For the years ended December 31, 2023, 2022, and 2021 rental revenue from lease customers in place of a lease vehicle represented 34%, 33%, and 30% of commercial rental revenue, respectively.
Added
(2) Refer to Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additio nal information. (3) Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.
Added
FMS total revenu e decreased 6% to $5.9 billion in 2023 primarily due to lower fuel costs passed through to customers and lower operating revenue (a non-GAAP measure excluding fuel services revenue).
Added
FMS operating revenue decreased 3% to $5.1 billion in 2023 reflecting lower rental demand and the exit of the U.K. business, partially offset by higher ChoiceLease and SelectCare revenue. FMS EBT decreased 37% in 2023, reflecting lower gains on used vehicle sales and lower commercial rental results.
Added
Lower gains on used vehicles sold reflect a 28% and 37% decrease in used truck and tractor pricing, respectively, partially offset by higher volumes. Used vehicle inventory levels increased to 8,000 vehicles, but remains within the target range of 7,000 - 9,000 vehicles. Rental power fleet utilization decreased to 75% from a record 83% in 2022.
Added
The average power fleet was 4% smaller in 2023. 32 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our North America fleet of owned and leased revenue earning equipment and SelectCare vehicles, including vehicles under on-demand maintenance, is summarized as follows (rounded to the nearest hundred): Change 2023 2022 2021 2023/2022 2022/2021 End of period vehicle count By type: Trucks (1) 75,600 72,100 68,900 5% 5% Tractors (2) 69,000 69,300 68,700 —% 1% Trailers and other (3) 40,800 41,200 38,700 (1)% 6% Total 185,400 182,600 176,300 2% 4% By product line: ChoiceLease 138,900 134,600 133,300 3% 1% Commercial rental 36,400 41,800 38,700 (13)% 8% Service vehicles and other 2,100 2,100 2,000 —% 5% 177,400 178,500 174,000 (1)% 3% Held for sale 8,000 4,100 2,300 95% 78% Total 185,400 182,600 176,300 2% 4% Memo: U.K.
Added
Vehicle Count — 1,000 13,000 (100)% (92)% Customer vehicles under SelectCare contracts (4) 51,600 54,600 53,400 (5)% 2% Average vehicle count By product line: ChoiceLease 137,800 134,000 135,200 3% (1)% Commercial rental 39,300 40,800 35,700 (4)% 14% Service vehicles and other 2,000 2,000 2,000 —% —% 179,100 176,800 172,900 1% 2% Held for sale 6,500 3,400 4,500 91% (24)% Total 185,600 180,200 177,400 3% 2% Customer vehicles under SelectCare contracts (4) 52,700 54,800 51,800 (4)% 6% Customer vehicles under SelectCare on-demand (5) 10,600 15,400 15,700 (31)% (2)% Total vehicles serviced 248,900 250,400 244,900 (1)% 2% _______________ (1) Generally comprised of Class 1 through Class 7 type vehicles with a Gross Vehicle Weight (GVW) up to 33,000 pounds.
Added
(2) Generally comprised of over the road on highway tractors and are primarily comprised of Class 8 type vehicles with a GVW over 33,000 pounds. (3) Generally comprised of dry, flatbed and refrigerated type trailers. (4) Excludes customer vehicles under SelectCare on-demand contracts. (5) Comprised of the number of unique vehicles serviced under on-demand maintenance agreements.
Added
This does not represent averages for the periods. Vehicles included in the count may have been serviced more than one time during the respective period. Note: Average vehicle counts were computed using a 24-point average based on monthly information. 33 ITEM 7.

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