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What changed in RYDER SYSTEM INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RYDER SYSTEM INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+406 added−456 removedSource: 10-K (2025-02-12) vs 10-K (2024-02-20)

Top changes in RYDER SYSTEM INC's 2024 10-K

406 paragraphs added · 456 removed · 310 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

98 edited+16 added−44 removed3 unchanged
Biggest changeFleet 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.
Biggest changeOnce we have a signed agreement with the customer, we acquire vehicles that are engineered to the customer's requirements; • No Vehicle Residual Risk Exposure as we typically retain vehicle residual risk exposure; • Fleet Support Services , including services related to fuel, safety, fuel tax reporting, permitting and licensing, certain regulatory compliance and physical damage coverage; and • Digital Fleet Management Platform, RyderGyde™ available in a mobile application or at ryder.com® , that enables our customers to manage their fleets.
We also recognize that it is important to develop our future leaders. We provide a variety of resources to help our employees build and develop their skills, including online development resources as well as individual development opportunities and projects for key talent. Additionally, we have leadership development resources for our future leaders as they continue to develop their skills.
We recognize that it is important to develop our future leaders. We provide a variety of resources to help our employees build and develop their skills, including online development resources as well as individual development opportunities and projects for key talent. Additionally, we have leadership development resources for our future leaders as they continue to develop their skills.
We have a robust talent and succession planning process and have established programs to support the development of our talent pipeline for critical roles in our organization. Annually, we conduct a robust review with the leadership team focusing on high performing and high potential talent, diverse talent and the succession plan for our critical roles.
We have a robust talent and succession planning process and 8 have established programs to support the development of our talent pipeline for critical roles in our organization. Annually, we conduct a robust review with our leadership team focusing on high performing and high potential talent, diverse talent and the succession plan for our critical roles.
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.
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 manages our safety policies, technologies and training, all field safety processes, risks assessments, safety site investigations and regulatory compliance activities, among other things.
We are committed to identifying and developing the talent necessary for our long-term success throughout all levels of our organization, including our front-line employees interacting with our customers or behind-the-scenes supporting our field teams.
We are committed to identifying and developing the talent necessary for our long-term success throughout all levels of our organization, including our front-line employees interacting with our customers or supporting our field teams from behind the scenes.
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.
As a core value, 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.
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.
Department of Agriculture (USDA). 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.
Risk Factors for further information regarding risk associated with our human capital and the attraction, development, and retention of personnel. Safety Our safety culture is founded upon a core commitment to the safety, health and well-being of our employees, customers and the community.
Refer to Item 1A, "Risk Factors" for further information regarding risk associated with our human capital and the attraction, development and retention of personnel. Safety Our safety culture is founded upon a core commitment to the safety, health and well-being of our employees, customers and the community.
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.
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 related to dynamic supply chains, disruptive technologies, labor shortages, government regulation and increased vehicle cost and complexity.
The SEC maintains an Internet site that contains our reports, proxy and information statements, and our other SEC filings. The address of the SEC's website is www.sec.gov . In addition, our Corporate Governance Guidelines, Principles of Business Conduct and Board committee charters are posted on the Corporate Governance page of our website at investors.ryder.com .
The 10 SEC maintains an Internet site that contains our reports, proxy and information statements and other SEC filings. The address of the SEC's website is www.sec.gov . In addition, our Corporate Governance Guidelines, Principles of Business Conduct and board committee charters are posted on the Governance page in the Investor Relations area of our website at investors.ryder.com .
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.
DTS Business Strategy Our strategy is to offer custom solutions to customers who need specific vehicles, specialized handling, dedicated capacity or integrated transportation services.
We make available our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports through the Investor Relations page on our website at www.ryder.com as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC).
We make available our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports through the Investor Relations area of our website at investors.ryder.com as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC).
Given our focus on maximizing sales proceeds, we primarily sell our used vehicles through our retail channel, which allows us to leverage our maintenance expertise and strong brand reputation to realize higher sales proceeds than in the wholesale market.
We primarily sell our used vehicles through our retail channel, which allows us to leverage our maintenance expertise and strong brand reputation, and to realize higher sales proceeds than in the wholesale market.
For example, we believe secular trends continue to accelerate demand for supply chain resiliency, outsourcing, e-commerce fulfillment and final mile delivery of big and bulky goods, and a movement towards onshoring and nearshoring of manufacturing and supply chain operations.
For example, we believe secular trends continue to accelerate demand for supply chain resiliency, e-commerce fulfillment, final mile delivery of big and bulky goods, and onshoring and nearshoring of manufacturing and supply chain operations.
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.
Our customer base reflects a variety of industries as shown below (as percentage of revenue): 1 Further information on our business and business segments is 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.
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 .
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. As of December 31, 2024, we had approximately 50,700 full-time employees in North America.
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.
We may also become subject to new or more restrictive regulations by these agencies or other authorities, including regulations related to emissions reduction or engine exhaust requirements, drivers' hours of service, wage and hour requirements, employee and independent contractor classification, security, including data privacy and cybersecurity, and ergonomics.
(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.
(2) Our SelectCare customers includ e approximately 1,100 ChoiceLease customers. Fuel Services. Our FMS customers have access to competitively priced diesel fuel at 412 of our maintenance facilities across the U.S. and Canada. We also provide services such as fuel planning, fuel tax reporting, centralized billing, fuel cards and fuel monitoring.
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.
We currently employ approximately 13,400 professional drivers and 5,000 technicians. We have approximately 34,000 hourly employees in the U.S., approximately 3,800 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.
Our proprietary, web-based safety management system, Ryder SafetyNet , delivers monthly proactive safety programs as well as safety compliance tasks tailored to every location and helps measure safety activity effectiveness across the organization. The safety policies and procedures in place require that all managers, supervisors and employees incorporate safe processes in all aspects of our business.
Our proprietary, web-based safety management system, Ryder SafetyNet , delivers monthly proactive safety programs and compliance tasks that are tailored to each location. The safety policies and procedures in place require that all managers, supervisors and employees incorporate safe processes in all aspects of our business.
This strategy revolves around the following interrelated goals and priorities: • drive fleet growth that maximizes our return on investment by (1) successfully implementing sales and marketing initiatives designed to encourage private fleet operators and for-hire carriers to outsource all or some portion of their fleet management needs to us, (2) reducing costs through operational efficiencies, including long-term maintenance initiatives, and (3) offering innovative products, solutions and support services that will create and strengthen new and existing customer relationships; • deliver a consistent, industry-leading and cost-effective lease and maintenance program to our customers through continued process improvement, productivity initiatives, and technology improvements, which also help us attract new customers; and • optimize asset utilization and management, particularly with respect to our rental fleet, used vehicle operations and maintenance facility infrastructure.
Our strategy is driven by the following priorities: • drive fleet growth that maximizes our return on investment by (1) implementing sales and marketing initiatives to encourage private fleets to outsource their fleet management needs to us, (2) reducing costs through operational efficiencies, and (3) offering innovative products, solutions and support services that strengthen customer relationships; • deliver a consistent, industry-leading and cost-effective lease and maintenance program through continued process improvement, productivity initiatives and technology improvements, which also help us attract new customers; and • optimize asset utilization and management, particularly with respect to our rental fleet, used vehicle operations and maintenance facility infrastructure.
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).
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.
Because commercial rental and used vehicle sales are transactional, they are more cyclical in nature and are also heavily dependent on economic and market conditions, and results can vary significantly in both the short- and long-term. We mitigate some of the potential impact of an economic downturn through a disciplined and centralized approach to asset management.
Our commercial rental and used vehicle sales businesses are transactional and more susceptible to economic and market conditions, which can significantly impact their results in both the short- and long-term. We mitigate some of the potential impact of an economic downturn through a disciplined and centralized approach to asset management.
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.
Vice President for Supply Chain Excellence from February 2009 to February 2012. 61 Robert D. 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.
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.
Their wages and benefits are governed by 91 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 engage.
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.
Our FMS product offerings include contract terms with full service leasing, as well as leasing with flexible maintenance options; commercial vehicle rental; maintenance services; digital and technology support services that optimize asset performance, compliance, and safety; and comprehensive fuel services.
In addition, we provide our customers the ability to purchase a large selection of used trucks, tractors and trailers through our used vehicle sales facilities or through our digital channel. FMS also provides vehicles and maintenance, fuel and other services for vehicles used in our SCS and DTS businesses.
In addition, our customers are able to purchase used trucks, tractors and trailers through our used vehicle sales facilities or our digital channel. FMS also provides vehicles, as well as maintenance, fuel and other services, to our SCS and DTS businesses.
The ChoiceLease offering allows customers to select the terms of their lease alongside the level of maintenance they prefer, from full service coverage to on-demand, or pay-as-you-go, maintenance. Our ChoiceLease customers receive the following benefits: • Competitive Prices as we are able to leverage our vehicle buying power for the benefit of our customers.
Customers are able to select the terms of their lease and their preferred level of maintenance services, from full service to on-demand maintenance. Our ChoiceLease customers receive the following benefits: • Competitive Prices as we leverage our vehicle buying power to benefit our customers.
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 .
Market Trends The U.S. commercial fleet market is estimated to include 10 million vehicles, of which 5 million are privately owned by companies, 2 million are for-hire carriers, 1 million are leased from banks or other financial institutions, 1 million are part of utilities and government fleets, and 1 million are being leased or rented from third parties like Ryder. 1 Companies that privately own their fleets are generally providing fleet management services themselves rather than outsourcing those services to third parties like Ryder.
The following table provides information regarding the number of vehicles and customers by FMS product offering as of December 31, 2023: U.S.
During 2024, SelectCare revenue accounted for 11% of our FMS total revenue. The following table provides information regarding the number of vehicles and customers by FMS product offering as of December 31, 2024: U.S.
The FMCSA also has regulations mandating electronic logging devices in commercial motor vehicles that impact various aspects of our dedicated, supply chain and rental businesses. We are also subject to a variety of laws and regulations promulgated by national, state, provincial and local governments, including the U.S.
The FMCSA also has regulations mandating electronic logging devices in commercial motor vehicles that impact various aspects of our dedicated, supply chain and rental businesses. We are also subject to a variety of laws and regulations promulgated by the Occupational Safety and Health Administration (OSHA), the U.S. Environmental Protection Agency (EPA), the Food and Drug Administration (FDA) and U.S.
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.
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. Executive Vice President of Operations, U.S. FMS from October 2005 to October 2007.
Steven Sensing President, Supply Chain Solutions and Dedicated Transportation Solutions 2015 Vice President and General Manager of the Hi-Tech and Healthcare industry groups for SCS from February 2007 to February 2015. 56 Steve W. Martin Executive Vice President, Dedicated Transportation Solution 2024 Senior Vice President, Dedicated Transportation Solutions from August 2019 to February 2024.
Vice President and General Manager for FMS in Canada from September 2011 to November 2012. 56 J. Steven Sensing President, Supply Chain Solutions and Dedicated Transportation Solutions 2015 Vice President and General Manager of the Hi-Tech and Healthcare industry groups for SCS from February 2007 to February 2015. 57 Steve W.
(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.
(2) Includes Ryder leased and owned and Ryder managed. (3) Includes 17 managed warehouses in Mexico. In the U.S., SCS customer accounts are mostly large enterprises with complex supply chains. Most of our core SCS business operations are strategically located to maximize efficiencies and reduce costs.
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 .
We offer used vehicles from our 63 retail sales centers throughout the U.S. and Canada (14 of which are co-located at an FMS shop), at our branch locations and through our website at www.ryder.com/used-trucks .
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.
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. 57 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. 59 ___________________ (1) John J.
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.
Our business is organized by the following industry verticals: omnichannel retail (which includes retail, technology, last mile and e-commerce); automotive; consumer packaged goods (CPG); and industrial and other (which includes healthcare). Our SCS product offerings provide port-to-door solutions, including both dedicated distribution and multi-client distribution, transportation management, dedicated transportation, brokerage, e-commerce, last mile, co-manufacturing and co-packing, and other value-added services.
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.
Safety support is provided to customers through Ryder Fleet Risk Services (FRS), which helps customers navigate the increasingly complex industry landscape through customized consultation, innovative solutions and best-in-class safety programs. 9 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Position Current Position Since Prior Business Experience Age Robert E.
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.
During 2024, our contract manufacturing and contract packaging services and other services accounted for 7% of our SCS revenue. SCS Business Strategy Our strategy is to offer differentiated and proactive solutions utilizing our expertise in our key industry verticals.
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.
Canada Total Vehicles Customers Vehicles Customers Vehicles Customers ChoiceLease 136,700 10,600 8,600 1,200 145,300 11,800 Commercial rental (1) 33,500 24,700 2,000 3,100 35,500 27,800 SelectCare (2) 39,100 1,800 2,700 200 41,800 2,000 ___________________ (1) Commercial rental customers represent those who rented a vehicle for more than three days during the year and include 5,100 ChoiceLease customers.
Vice President and General Manager of the Automotive, Aerospace and Industrial vertical from February 2017 to August 2019. Vice President, Dedicated Transportation Services - East from February 2012 to February 2017. Vice President for Supply Chain Excellence from February 2009 to February 2012. 60 Robert D.
Martin Executive Vice President, Dedicated Transportation Solution 2024 Senior Vice President, Dedicated Transportation Solutions from August 2019 to February 2024. Vice President and General Manager of the Automotive, Aerospace and Industrial vertical from February 2017 to August 2019. Vice President, Dedicated Transportation Services - East from February 2012 to February 2017.
Although we believe these efforts help mitigate the immediate impact of an economic downturn, customers are often unwilling to commit to a full service lease or long-term supply chain and dedicated contracts during a protracted or severe economic downturn.
To mitigate this volatility, we have continued to focus on diversifying our contractual business mix and strengthening our long-term customer relationships. Although we believe these efforts help lessen the immediate impact of an economic downturn, companies are often unwilling to commit to a full service lease or long-term supply chain and dedicated contracts.
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.
During 2024, ChoiceLease revenue accounted for 59% of our FMS total revenue. Commercial Rental . We offer rental vehicles to customers that need to supplement their fleets on a short-term basis to handle seasonal increases or discrete projects.
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.
During 2024, we purchased or executed $10.4 billion in freight moves on our customers' behalf, including $328 million in brokerage services. The brokerage and logistics business from the Cardinal Logistics acquisition complemented our existing product offerings. During 2024, transportation management solutions accounted for 12% of our SCS revenue. E-commerce and Last Mile.
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 report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing, commercial rental and vehicle maintenance services; (2) Supply Chain Solutions (SCS), which provides fully integrated port-to-door logistics solutions; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions, including dedicated vehicles, professional drivers, management and administrative support.
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.
Once we have an executed customer agreement, we acquire vehicles and components that are custom engineered to our customer's requirements and lease such vehicles to them for periods generally ranging three to seven years for trucks and tractors and ten years for trailers; • Extensive Network of Maintenance Facilities and Trained Technicians for vehicle maintenance and repairs, temporary substitute vehicles and 24-hour emergency roadside service; • Preventive and Flexible Maintenance Programs that are cost-effective and designed to reduce vehicle downtime; • Access to Lease Vehicles as we leverage our original equipment manufacturer (OEM) relationships to secure access to vehicles.
This approach allows us to manage the size, mix and location of our operating fleet and used vehicle inventories to try and maximize asset utilization and used vehicle proceeds in both strong and weak market conditions. REGULATION Our business is subject to regulation by various federal, state, local and foreign governmental entities.
We strive to manage the size, mix and location of our operating fleet and used vehicle inventories to maximize asset utilization and used vehicle proceeds in both strong and weak market conditions.
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 with a handful of large, multi-service companies across all of our product offerings and industries, as well as with other companies on specific service offerings like transportation or distribution management. 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).
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.
Vice President and Chief Financial Officer, Global FMS from August 2015 to August 2020. Vice President and Controller from September 2010 to August 2015. 51 Thomas M. Havens President, Fleet Management Solutions 2021 Senior Vice President and Global Chief of Operations for FMS from November 2012 to May 2021.
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.
Vice President and Deputy General Counsel from May 2000 to December 2002. 59 Karen M. Jones Executive Vice President and Chief Marketing Officer 2014 Senior Vice President and Chief Marketing Officer from September 2013 to October 2014. 62 Francisco Lopez Executive Vice President and Chief Human Resources Officer 2018 Chief Human Resources Officer February 2016 to February 2018.
Our SCS business offers a wide range of services relating to a customer’s distribution operations, such as designing a customer’s distribution network; managing distribution facilities; coordinating warehousing and transportation for inbound and outbound material flows; handling import and export for international shipments; coordinating just-in-time replenishment of component parts to manufacturing plants and final assembly; and providing shipments to customer distribution centers or end customer delivery points, including support for e-commerce fulfillment networks.
We offer a variety of logistics services for warehousing and transportation, including network design; warehouse design and automation; coordinating inbound and outbound material flow; managing import and export of international shipments; coordinating just-in-time replenishment of component parts and final assembly; shipment delivery to distribution centers or end delivery points; and e-commerce fulfillment.
Our strong safety record and focus on customer service also enables us to uniquely meet the needs of customers with high-value products that require specialized handling in a manner that differentiates us from truckload carriers. CYCLICALITY Our business is impacted by economic and market conditions.
Our strong safety record and focus on customer service also enables us to uniquely satisfy our customers' needs with high-value products that require specialized handling in a manner that differentiates us from truckload carriers. _________________________ 7 (3) Armstrong & Associates – Divergence, Latest Third-Party Logistics Market Results and Outlook, July 2024.
Supply Chain Solutions Value Proposition Through our SCS business, we offer a broad range of innovative logistics management services that are designed to optimize customers' supply chain and address customers' key business requirements.
We also face competition from managed maintenance providers who are hired to coordinate and manage the maintenance of large fleets through a network of independent maintenance providers. 4 Supply Chain Solutions Value Proposition Our SCS business provides a broad range of innovative logistics management services that optimize our customers' supply chains and key business requirements.
The realized sales proceeds of used vehicles are dependent upon various other factors, including the general state of the used vehicle market, the supply and demand for used commercial vehicles in wholesale and retail markets, and the age and condition of the vehicle at the time of its disposal.
The realized sales proceeds of used vehicles are dependent upon various factors, including the used vehicle market, supply and demand in wholesale and retail markets, and changes in vehicle technology. In recent years, the used vehicle sales market has been particularly weak.
IFS specializes in contract packaging, contract manufacturing and warehousing, for some of the largest and best-known consumer brands in the U.S., primarily in the consumer packaged goods, retail, and healthcare industries. The acquisition is included within the consumer packaged goods industry vertical in our SCS business segment.
During 2024, our e-commerce and last mile services accounted for 17% of our SCS revenue. Contract Manufacturing and Contract Packaging . We offer contract manufacturing and contract packaging, and warehousing, for some of the largest and best-known consumer brands in the U.S., primarily in the consumer packaged goods, retail, and healthcare industries.
As an alternative to using our services, customers may choose to provide these services for themselves, or may choose to obtain similar or alternative services from other third-party vendors.
Our customers select us based on numerous factors including service quality, price, technology and service offerings. As an alternative to using our services, customers may choose to provide these services themselves or obtain similar services from other third parties.
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.
At December 31, 2024, we have used vehicle inventory of 9,000 vehicles, in line with our long-term target range of 7,000 to 9,000. FMS Business Strategy Our strategy is to be the leading provider of fleet management services for light-, medium- and heavy-duty commercial vehicles.
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 .
We operate at our customers' facilities, and our customers benefit from our extensive network of FMS facilities that provide maintenance for all Ryder vehicles used in SCS solutions. During 2024, approximately 30% of our SCS revenue was related to dedicated transportation services. Transportation Management and Brokerage .
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.
We also regularly provide proactive injury and crash prevention and remedial training. Our technicians also receive training to improve their maintenance skills to ensure we are complying with best-in-line safety measures. For our warehouse employees, we provide annual training on various safety techniques along with regular OSHA training.
Although a portion of our commercial rental business is purely occasional in nature, we focus on building long-term relationships with customers so that we become their preferred source for commercial vehicle rentals.
ChoiceLease customers also utilize our commercial rental fleet as substitute vehicles while their lease vehicles undergo maintenance and while they await delivery of new lease vehicles. Although our commercial rental business is transactional in nature, we focus on building long-term relationships with customers to become their preferred source for commercial vehicle rentals.
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.
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. ___________________ As of and for the year ended December 31, 2024. FMS revenue includes eliminations We operate in highly competitive markets.
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.
Dedicated Transportation Solutions Value Proposition Our DTS business provides specialized dedicated transportation services. We provide our customers with vehicles and professional drivers, and offer a variety of engineering and other services related to routing and scheduling, fleet design, safety, regulatory compliance, risk management and technology and communication systems support.
As part of our dedicated transportation services, we also offer routing and scheduling, fleet sizing, safety, regulatory compliance, risk management, technology and communication systems support including on-board computer and other technical support.
We offer specialized dedicated transportation services as part of an integrated supply chain solution with our equipment and professional drivers or with outside carriers. We also offer additional services related to routing and scheduling, fleet design, safety, regulatory compliance, risk management, technology and communication systems support.
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.
Senior Vice President and Chief Information Officer from January 2003 to October 2005. 59 John J. Diez (1) President and Chief Operating Officer 2025 Executive Vice President and Chief Financial Officer from June 2021 to December 2024. President, Global FMS from August 2019 to May 2021. President of DTS from March 2015 to August 2019.
This strategy revolves around the following interrelated goals and priorities: • increase market share to provide more specialized services with customers across industries, including customers in the retail, metals and mining, energy and utility, consumer product goods, construction, and food and beverage industries; • 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; • utilize the support of the FMS sales team to compel private fleet operators to outsource all or some of their transportation needs to us; • align the DTS business with other SCS product lines to create revenue opportunities and improve operating efficiencies in both segments; • improve competitiveness in the non-specialized and non-integrated customer segments, including dedicated capacity solutions; • focus consistently on network optimization and continuous improvement; and • recruit and retain professional drivers.
Our strategy is driven by the following key priorities: • increase market share to provide more specialized services across industries, including retail, metals, agriculture and grocery, energy and utility, consumer product goods, construction and food and beverage; • develop innovative solutions, capabilities, and customer-centric technology such as RyderShare™ ; • leverage our FMS sales team to convince private fleet operators to outsource their transportation needs to us; • integrate the DTS business with the acquired Cardinal Logistics network to realize integration synergies; • focus consistently on network optimization and continuous improvement; and • recruit and retain professional drivers.
For our e-commerce customers, we receive, pick, pack, and ship smaller items via parcel carriers to the end consumer’s home or through our carrier networks to our customer’s warehouse or retail stores. For our last mile customers, we receive, assemble, and prepare big and bulky items through a third-party agent network for final delivery to the end consumer.
We offer omnichannel delivery services through a network of over 150 sites strategically located throughout the U.S. that we own or that are leased by us, our customers or our agents. For our e-commerce customers, we receive, pick, pack and ship smaller items via parcel carriers to the end consumer's home or to our customer's warehouse or retail stores.
We are able to differentiate our DTS product offering by leveraging our FMS vehicles and maintenance services and integrating the DTS services with those of SCS to create a more comprehensive transportation solution for our customers.
As an alternative to using our services, companies may choose to manage their own private fleets or obtain alternative services from other third-party vendors. We differentiate our product offering by leveraging our FMS vehicles and maintenance services and integrating our services with those of our SCS business to create a more comprehensive transportation solution.
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.
Our Canadian operations are also highly coordinated with their U.S. and Mexico counterparts and manage approximately 5,100 border crossings each month. SCS Product Offerings Distribution Management .
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.
We deploy relevant vehicle safety systems in the vehicles we operate and install aftermarket safety monitoring systems that allow 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.
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.
Operations During 2024, our SCS business accounted for 42% of our consolidated revenue, and our customer accounts and warehousing square footage were as follows: December 31, 2024 (Square footage in millions) Customer Accounts (1) Number of Warehouses Square Footage (2) SCS United States 675 233 92 Foreign (3) 157 58 11 Total 832 291 103 ___________________ (1) Customer accounts excludes 489 brokerage customers.
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.
Our strategy is driven by the following key priorities: • provide best in class execution and quality through reliable and flexible supply chain solutions; • develop innovative solutions, capabilities, and customer-centric technology such as RyderShare™ ; • 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.
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.
Over the last few years, several trends have emerged that we believe increase the value of our product offerings and will increasingly lead companies with privately held fleets to outsource. These trends include: _________________________ (1) U.S.
Our operating locations serve multiple customers and have maintenance facilities that typically include a shop for preventive maintenance and repairs; a service island for fueling, safety inspections and preliminary maintenance checks; offices for sales and other personnel, and in many cases, a commercial rental vehicle counter.
Our operating locations serve multiple customers, and typically include maintenance facilities; service islands for fueling; safety inspections and preliminary maintenance checks; sales and administrative offices; and commercial rental vehicle counters. We also operate on-site at 158 customer locations where we provide vehicle maintenance solely for that customer's fleet. Canada .
Competition Our DTS business segment competes with other dedicated providers to furnish highly engineered solutions, often involving specialized handling or service requirements. To a lesser extent, DTS competes with truckload carriers providing dedicated solutions for standard freight.
Competition We compete with other dedicated providers to provide highly engineered solutions, involving specialized handling or service requirements. To a lesser extent, we also compete with truckload carriers providing dedicated solutions for standard freight. We compete based on a number of factors, including price, equipment options and features, maintenance, service and geographic coverage, driver availability and operational expertise.
The Federal Motor Carrier Safety Administration (FMCSA), under the DOT, manages a Compliance, Safety, Accountability initiative (CSA), partnering with state agencies designed to monitor and improve commercial vehicle motor safety, which uses roadside inspections and violations to measure motor carriers and drivers.
REGULATION Our business is subject to regulation by various federal, state, local and foreign governmental entities, including the Department of Transportation (DOT). The Federal Motor Carrier Safety Administration (FMCSA), an agency within the DOT, manages a Compliance, Safety, Accountability initiative (CSA), together with state agencies, designed to monitor and improve commercial vehicle motor safety.
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.
Although fuel sales do not significantly impact our FMS earnings, as the costs are largely a pass-through to our customers, we believe that leveraging our fuel buying power provides a valuable benefit to our customers. During 2024, fuel services revenue accounted for 13% of our FMS total revenue. Used Vehicles.
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.
Industry and market data used throughout Item 1 was obtained through a compilation of surveys and studies conducted by industry sources, consultants and analysts.
Consumers can then choose from multiple levels of delivery services, including minor installation of the item and disposal of the replaced item. We use proprietary scheduling Ryder View 2.0 software for maximum efficiency that optimizes routes and allows customers to select their appointment time.
For our last mile customers, we receive, assemble and coordinate final delivery of big and bulky items to the end consumer. We also offer minor installation and disposal services. Customers also benefit from our proprietary software, Ryder View 2.0, that optimizes routes and allows customers to schedule their appointment.
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.
We seek to execute our strategy by: • leveraging secular trends that favor outsourcing logistics and transportation services; • growing earnings from our contractual lease, dedicated and supply chain businesses; • continuously improving productivity and processes; • investing in customer-centric innovations that differentiate and enhance our solutions; • attracting, developing and retaining the best talent; and • executing our disciplined capital allocation priorities, including organic growth, targeted acquisitions and strategic investments, and returning capital to shareholders.
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.
Competition As an alternative to using our fleet management services, companies may choose to provide these services themselves or to obtain them from other third parties. We compete with finance lessors, truck and trailer manufacturers and independent dealers. We also compete with other companies on factors such as price, geographic coverage, equipment, maintenance options, and service reliability and quality.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeVolatility 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. We historically sponsored a number of defined benefit plans for employees not covered by union-administered plans, including certain employees in foreign countries.
Biggest changeNegative impacts on our suppliers or customers could in turn affect our ability to operate and serve our customers, which may adversely impact our business and operating results. 19 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.
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.
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; regulatory requirements; competitor pricing; wholesale market prices; customer requirements and preferences; and changes in underlying assumption factors.
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.
These contractual arrangements include pricing terms that are subject to a number of key operational assumptions, including: • 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.
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.
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, for example, reductions in our debt rating or stock price volatility could have a significant impact on our competitive position.
We seek to execute our strategy by providing innovative solutions, operational excellence, top customer service, superior talent and best-in-class information technology, while also attempting to mitigate risks to the business. Failure to execute our business strategy may negatively impact our ability to continue to create long-term shareholder value and may result in stock price volatility.
We seek to execute our strategy by providing customer centric innovative solutions, operational excellence, top customer service, superior talent and best-in-class information technology, while also attempting to mitigate risks to the business. Failure to execute our business strategy may negatively impact our ability to continue to create long-term shareholder value and may result in stock price volatility.
Our ability to raise capital may be materially reduced or our borrowing costs may significantly increase if, among other things, access to public investment-grade debt becomes limited or closed, we lose access to our global revolving credit facility, or funding costs increase due to the loss of an investment grade rating, a severe economic downturn, or rising interest rates.
Our ability to raise capital may be materially reduced or our borrowing costs may significantly increase if, among other things, access to public investment-grade debt becomes limited or closed, we lose access to our revolving credit facility, or funding costs increase due to the loss of an investment grade rating, a severe economic downturn, or rising interest rates.
Likewise, data privacy breaches from our systems could expose personally identifiable information of our employees or contractors, sensitive customer data, or vendor data to unauthorized persons, adversely impacting our customer service, employee and customer relationships, and our reputation. In addition, some of our software applications are utilized by third parties who provide outsourced administrative functions.
Likewise, data privacy breaches from our systems could expose the personally identifiable information of our employees or contractors, sensitive customer data, or vendor data to unauthorized persons, adversely impacting our customer service, employee and customer relationships, and our reputation. In addition, some of our software applications are utilized by third parties who provide outsourced administrative functions.
In addition, when we have materially decreased residual value estimates, our earnings over the vehicle's remaining useful life have decreased due to an increase in depreciation expense. Alternatively, we may realize gains on sales of used vehicles at the end of a vehicle's useful life when our residual value estimates are below used vehicle market prices.
In addition, when we have materially decreased residual value estimates, our earnings over the vehicle's remaining useful life have decreased due to an increase in depreciation expense. Alternatively, we may realize gains on sales of used vehicles at the end of a vehicle's useful life when our 11 residual value estimates are below used vehicle market prices.
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.
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, including misconduct, fraud or other improper activities, could tarnish our reputation and reduce the value of our brand.
While management determines residual value estimates with the goal of minimizing losses on sales of used vehicles or to record the best estimate of fair value at the end of a vehicle's useful life, there is no assurance our residual value estimates will be at or below used vehicle market sales.
While management determines residual value estimates with the goal of minimizing losses on sales of used vehicles and to record the best estimate of fair value at the end of a vehicle's useful life, there is no assurance our residual value estimates will be at or below used vehicle market sales.
Business and Operating Risks Decreased customer demand for transportation services due to adverse economic conditions, competition or other factors has impacted and could in the future adversely impact our business and operating results. The transportation industry is highly cyclical and susceptible to trends in economic activity.
Business and Operating Risks Decreased customer demand for transportation and logistics services due to adverse economic conditions, competition or other factors has impacted and could in the future adversely impact our business and operating results. The transportation industry is highly cyclical and susceptible to trends in economic activity.
Additionally, the occurrence or consequences of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our operations in that region. Our suppliers may also be affected by changes in the political and regulatory environment, both in the U.S. and internationally.
Additionally, the occurrence or consequences of any of these factors may restrict our ability to operate in the affected region or decrease the profitability of our operations in that region. Our suppliers and customers may also be affected by changes in the political and regulatory environment, both in the U.S. and internationally.
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.
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, overcapacity could result in lower revenues and higher costs and have an adverse impact on profitability.
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.
Depending on the circumstances of a particular supply chain 12 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.
If we are unable to maintain an adequate number of qualified technicians, whether through the retention of current technicians or the hiring of new qualified technicians, our business could be adversely affected. Management and Other Key Personnel.
If we are unable to maintain an adequate number of qualified 16 technicians, whether through the retention of current technicians or the hiring of new qualified technicians, our business could be adversely affected. Management and Other Key Personnel.
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.
These changes could exacerbate the effects of an act of terrorism on our business, 20 resulting in a significant business interruption, increased costs and liabilities and decreased revenues, or an adverse impact on results of operations.
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.
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, who may commit illegal acts, including the use of company assets for terrorist activities, fraud or a breach of data privacy laws.
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.
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; • geopolitical developments, such as 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.
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.
Accordingly, any sustained weakness in demand or a protracted economic downturn can negatively impact performance and operating results in used vehicle sales, rental and 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.
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.
If our workers were to engage in a work stoppage, strike or other slowdown, other employees were to become unionized, or the terms and conditions in future labor agreements were renegotiated, we could experience business disruptions or higher operating costs, which could have an adverse effect on our financial position, results of operations or cash flows.
Any material decrease in residual value estimates could have a material adverse impact on our financial results. In the past, we have realized losses on sales of used vehicles at the end of a vehicle's useful life when our residual value estimates were above used vehicle market prices due to rapidly changing market conditions.
Any material decrease in residual value estimates could have a material adverse impact on our financial results. In the past, we have realized losses on sales of used vehicles at the end of a vehicle's useful life when our residual value estimates were above used vehicle market prices such as due to rapidly changing market conditions.
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.
While we are actively engaged in deploying emerging technologies 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.
Our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or any increased productivity. We face risks related to cybersecurity attacks and other breaches of our systems and information technology. We depend on the integrity of our information and the proper functioning and availability of our information systems in operating our business.
Our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or any increased productivity. We face risks related to cybersecurity incidents and other breaches of our systems and information technology. We depend on the integrity of our information and the proper functioning and availability of our information systems in operating our business.
Our balanced growth strategy focuses on de-risking and optimizing the business model, enhancing returns and free cash flow, and driving long-term profitable growth, including by moving clients to outsource their logistics and transportation needs and thereby expand the market for our services, among other factors.
Our balanced growth strategy focuses on de-risking and optimizing the business model, enhancing returns and free cash flow, and driving long-term profitable growth, including by moving clients to outsource their logistics and transportation needs and thereby expanding the market for our services, among other factors.
Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth.
Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could adversely affect revenue and earnings growth.
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.
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 or geopolitical developments, our business and results of operations may be adversely affected.
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.
If we fail to recruit, retain and motivate our employees, including those 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.
There is significant competition for qualified professional drivers in the transportation industry. Additionally, interventions and enforcement under the CSA program may shrink the industry's pool of professional drivers as those drivers with unfavorable scores may no longer be eligible to drive for us.
There is significant competition for qualified professional drivers in the transportation industry. Additionally, interventions and enforcement under the CSA initiative may shrink the industry's pool of professional drivers as those drivers with unfavorable scores may no longer be eligible to drive for us.
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.
We are affected by various 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.
This trend could adversely affect our ability to obtain suitable insurance coverage or further increase the cost for such coverage significantly, each of which may adversely affect our financial condition, results of operations, liquidity or cash flows.
This trend could adversely affect our ability to obtain suitable insurance coverage or significantly increase the cost of such coverage, each of which may adversely affect our financial condition, results of operations, liquidity or cash flows.
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.
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 cyber incidents subject us to additional costs. Regulatory authorities continue to focus on how companies collect, process, use, store, share and transmit personal data.
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 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.
If we suffer a substantial loss in excess of our self-insured limits, the loss and related expenses may be covered by traditional insurance and excess insurance we have in place, but if not covered or above such coverages, losses could harm our business, financial condition or results of operations.
If we suffer a substantial loss in excess of our self-insured limits, the loss and related expenses may be covered by traditional insurance and excess insurance we have in place, but if not covered or above such coverage amounts, losses could harm our business, financial condition or results of operations.
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.
As of December 31, 2024, we had $7.8 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.
In addition, in the U.S., compliance with environmental regulations and the associated potential cost is complicated by the fact that states are following different approaches to the regulation of climate change. As a result, we cannot predict the ultimate effect on our operating results or cost structure until the timing, scope and extent of any such regulations become known.
In addition, compliance with environmental regulations and the associated potential cost is complicated by the fact that jurisdictions are following different approaches to the regulation of climate change. As a result, we cannot predict the ultimate effect on our operating results or cost structure until the timing, scope and extent of any such regulations become known.
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.
If uncertainty around macroeconomic conditions and the transportation and logistics industries increase, such as due to recessionary conditions, labor shortages, interest rate fluctuations or inflationary pressures, our future growth prospects, business and results of operations could be materially adversely affected.
For example, in a weak or volatile economy (such as during an economic recession or downturn), our customers may not need additional vehicles, may experience reduced shipping needs, or are often unwilling to commit or unable to fulfill long-term contracts.
In a weak or volatile economy (such as during an economic recession or downturn), our customers may not need additional vehicles, may experience reduced shipping or warehousing needs, or are often unwilling to commit or unable to fulfill long-term contracts.
Among our services and product offerings, demand for used vehicles, rental, and longer-term contractual services are particularly susceptible to changes in economic and market conditions.
Among our services and product offerings, demand for used vehicles, rental and contractual services are particularly susceptible to changes in economic and market conditions.
Moreover, these types of events could also expose us, our vendors, or our customers to loss or misuse of such information and restrict or prevent operations or financial reporting for a period of time. Depending on the type and scope of the intrusion or cybersecurity attack, we could face litigation or other potential liability and harm to our business.
Moreover, these types of events could also expose us, our vendors, or our customers to loss or misuse of information and restrict or prevent operations or 13 financial reporting for a period of time. Depending on the type and scope of the intrusion or cybersecurity incident, we could face litigation or other potential liability and harm to our business.
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.
Regulations adopted by federal, state or local governmental bodies, including the 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.
While we maintain an information security program that consists of industry standard safeguards and controls to help safeguard our confidential information, including security training and compliance protocols, we cannot prevent or mitigate all data breaches or cyberattacks.
While we maintain an information security program that consists of industry standard safeguards and controls to help safeguard our confidential information, including security training and compliance protocols, we cannot prevent or mitigate all data breaches or cyber incidents.
Severe weather or other natural occurrences could result in significant business interruptions and expenditures in excess of available insurance coverage. Our business is more susceptible to severe weather and other natural occurrences as we operate a capital-intensive business with a large number of vehicles and need to access roads and warehouses in order to service our customers.
Extreme weather or other natural occurrences could result in significant business interruptions and expenditures in excess of available insurance coverage. Our business is susceptible to extreme weather and other natural occurrences as we operate a capital-intensive business with a large number of vehicles and need to access roads, warehouses and other facilities in order to service our customers.
On the other hand, even absent any such regulation, increased awareness on the impact of climate change and any adverse publicity about emissions by the transportation industries could accelerate the adoption of new technology and potentially decrease customer demands for some of our services and used vehicles if consumers change their purchasing behaviors in response to the effects of climate change.
On the other hand, even absent any such law or regulation, increased awareness of the impact of climate change and any adverse publicity about emissions by the transportation industry could accelerate the adoption of new technology and potentially decrease customer demand for some of our services and used vehicles if consumers change their purchasing behaviors in response to the effects of climate change.
Severe weather may negatively affect our operations as it may damage our vehicles and facilities and prohibit our workforce from servicing our customers. In addition, fuel costs may rise and other significant business interruptions could occur.
Extreme weather and other natural occurrences may negatively affect our operations as it may damage our vehicles and facilities and prohibit our workforce from servicing our customers. In addition, fuel costs may rise and other significant business interruptions could occur.
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 changes could further increase our costs or operating complexity and our ability to offer certain services in the jurisdictions in which we operate.
If we do not correctly anticipate changes in social, political or regulatory conditions or their impact on the transportation industry, we may not alter our business practices in time to avoid adverse effects.
If we do not correctly anticipate changes in social, political or regulatory conditions or their impact on the transportation and logistics industries, we may not alter our business practices in time to avoid adverse effects.
Further, any deficiencies found in the technology system we use to support our controls or any difficulties encountered in their implementation or improvement may also adversely affect our financial reporting. We are continuously upgrading and consolidating our information technology systems by enhancing or replacing legacy systems.
Further, any vulnerabilities found in the technology systems we use to support our controls or any challenges encountered in their implementation or improvement may also adversely affect our financial reporting. We are continuously upgrading and consolidating our information technology systems by enhancing or replacing legacy systems.
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 failing to maintain a "satisfactory" safety rating, the DOT could levy fines and require us to cease all transportation services, which could have a material adverse effect on our business.
Although we have actively sought to control increases in these costs and funding requirements through investment policies and plan contributions, there can be no assurance that we will succeed, and continued cost and funding requirement pressure could reduce the profitability of our business and negatively impact our cash flows.
Although we are actively seeking to control increases in these costs and funding requirements through annuitization transactions, investment policies and plan contributions, there can be no assurance that we will succeed, and continued cost and funding requirement pressure could reduce the profitability of our business and negatively impact our cash flows.
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.
We have approximately 3,800 employees in the U.S. that are organized by labor unions whose wages and benefits are governed by 91 labor agreements that are renegotiated periodically.
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.
Our success depends on the functionality of information technology systems to support our business and service offerings. 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.
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.
With the increase in the use of social media outlets, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult to effectively respond. This unfavorable publicity could also require us to allocate significant resources to rebuild our reputation.
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.
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.
An increase in customer use of electric vehicles could reduce the demand for our vehicle maintenance services, diesel vehicles and related offerings. Likewise, self-driving vehicles may reduce the demand for our dedicated service offerings, where, in addition to a vehicle, we provide a driver as part of an integrated, full service customer solution.
An increase in customer use of electric vehicles, for example, could reduce the demand for our diesel vehicle and related maintenance and other offerings. Likewise, certain advancements in autonomous vehicles may reduce the demand for our dedicated service offerings, where, in addition to a vehicle, we provide a professional driver as part of an integrated, full service customer solution.
Such third parties may have access to confidential information that is critical to our business operations and services.
Such third parties may have access to confidential information important to our business operations and services.
These proceedings may be time-consuming, expensive and disruptive to normal business operations. The defense of such lawsuits could result in significant expense and the diversion of our management's time and attention from the operation of our business.
These proceedings may be time-consuming, expensive and disruptive to normal business operations. The defense of such lawsuits could result in significant expense and the diversion of our management's time and attention from the operation of our business, and our involvement could negatively impact our business reputation and our relationships with our customers, suppliers or employees.
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.
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.
Moreover, advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.
Moreover, advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments. In addition, the political or regulatory environment may affect the requirements or timing of adopting new technologies.
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.
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.
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.
Our self-insurance accruals are based on actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported.
We have had to take an asset impairment charge in the past when one of our SCS customers filed for bankruptcy, which adversely impacted our operating results.
We are also subject to credit risk associated with the concentration of our accounts receivable from our SCS and DTS customers. We have had to take an asset impairment charge in the past when one of our SCS customers filed for bankruptcy, which adversely impacted our operating results.
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.
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.
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.
The transportation and logistics industry is highly competitive. We face competition in all geographic markets and each industry sector in which we operate. 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.
While we continue to focus our efforts on diversifying our customer and carrier base, we may not be successful in doing so. During 17 2023, sales to our top ten SCS customers accounted for about 40% of our SCS total revenue and about 35% of our SCS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation).
While we continue to focus our efforts on diversifying our customer and carrier base, we may not be successful in doing so. During 2024, sales to our top ten customers in each of SCS and DTS accounted for approximately one-third of total revenue and operating revenue for each segment.
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 instance, regulations mandating the use of zero-emission vehicles or restricting the use of diesel- or gasoline-powered vehicles could reduce the resale value or availability and demand for certain of our vehicles. Additionally, the demand for maintenance services in FMS and offerings in our SCS and DTS businesses may also be adversely affected.
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.
Privacy security laws and regulations pose increasingly complex and rigorous compliance challenges, which impacts 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 respond adequately or in a timely manner to innovative changes in new technology in our industry.
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.
For example, some jurisdictions are considering or have implemented environmental disclosure requirements, emissions reduction (e.g., greenhouse gas and nitrogen oxide) and zero-emission 18 vehicle requirements and related taxes, and other increased compliance requirements.
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.
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.
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 FMCSA, periodically conducts compliance reviews and evaluates the safety rating assessed to motor carriers ("satisfactory," "conditional" or "unsatisfactory"). The receipt of a final "conditional" or "unsatisfactory" safety rating could have a material adverse effect on certain customer relationships.
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. 14 Strategic Risks We operate in a highly competitive industry, and our business may suffer if we are unable to adequately address potential downward pricing pressures and other competitive factors.
Legal and Regulatory Risks We face litigation risks that could have a material adverse effect on the operation of our business.
Moreover, a current or future labor dispute involving our vendors or customers, or that could otherwise affect our operations, could affect our business, financial condition or results of operations. Legal and Regulatory Risks We face litigation risks that could have a material adverse effect on the operation of our business.
Notwithstanding our efforts, new or enhanced service offerings may not meet customer demands, prove to be profitable, or succeed in the long term. If we do not respond to current customer needs and establish new, and further develop existing, customer relationships, our ability to maintain a competitive advantage and continue to grow our business profitability could be negatively affected.
If we do not respond to current customer needs and establish new, and further develop existing, customer relationships, our ability to maintain a competitive advantage and continue to grow our business profitability could be negatively affected. 15 We and the vehicle equipment manufacturers in our FMS business rely on a small number of suppliers.
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.
Environmental, Climate and Weather Risks Our business may be affected by climate change and legal, regulatory or other market responses to such change. Federal, state, local and international legislative and regulatory efforts to address the effects of climate change have affected and will likely continue to affect our business.
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.
Our failure to comply with applicable laws and regulations may expose us to legal liability, fines or other penalties. Compliance with 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.
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.
Additionally, we are subject to environmental laws and regulations imposed by various state and federal jurisdictions, such as the EPA, including requirements related to emissions and vehicle mandates. We must also comply with domestic and international laws and regulations related to tax, and we are further subject to anti-bribery, anti-corruption and anti-money laundering laws, including the U.S.
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.
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. Disruptions in global supply chains have impacted, and may continue to impact, our business, results of operations and financial condition.
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.
In addition, when global supply chains have been disrupted, we have experienced increased inflationary pressures that increased costs in certain areas like payroll, real estate or lease costs and other third-party services. 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.
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.
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, 2024, the aggregate projected benefit obligations of our global defined pension plans was $1.6 billion, and the plan assets of our global defined benefit pension plans was $1.5 billion.
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.
Foreign Corrupt Practices Act and Office of Foreign Assets Control (OFAC) restrictions. With respect to our operations in Canada and Mexico, we are subject to local laws and regulatory requirements, including tax and anti-bribery laws, 17 which may vary significantly from country to country.
In contrast, in our ChoiceLease product line, we typically do not purchase vehicles until we have an executed contract with a customer. We may fail to respond adequately or in a timely manner to innovative changes in new technology in our industry.
In contrast, in our ChoiceLease product line, we typically do not purchase vehicles until we have an executed contract with a customer. Failure to maintain, upgrade and consolidate our information technology networks, or maintain adequate controls over such technology systems, could adversely affect us.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese reports may include updates on our enterprise-wide cybersecurity strategy, policies, processes and standards, as well as potential cybersecurity or information technology risks and threats. Our cybersecurity program is also evaluated at least annually by external experts, and the results of those reviews are reported to our leadership team and the board of directors.
Biggest changeOur cybersecurity program is also evaluated at least annually by external experts, and the results of those reviews are reported to our leadership team and the board of directors. Cybersecurity risk is also evaluated as an enterprise-wide risk via our enterprise risk management program, which is reviewed by our leadership team and the board of directors.
Risk Factors for further information regarding risk related to cybersecurity attacks and other breaches of our systems and information technology.
Risk Factors for further information regarding risk related to cybersecurity incidents and other breaches of our systems and information technology.
We also require employees in certain roles to complete additional role-based, specialized cybersecurity trainings. While we have experienced cybersecurity threats and breaches targeting our information technology systems and networks and those of our third-party providers, to date, these incidents have not had a material impact on our financial condition or results of operations.
While we have experienced cybersecurity threats and breaches targeting our information technology systems, networks and information, and those of our third-party providers and customers, to date, these incidents have not had a material impact on our financial condition or results of operations.
The CISO provides quarterly reports to the audit committee of our board of directors, which is responsible for overseeing cybersecurity and information technology and 22 notifying the board of directors of any significant risks or updates.
The CISO provides quarterly reports to the audit committee of our board of directors, which is responsible for overseeing cybersecurity and information technology and notifying the board of directors of any significant risks or updates. These reports may include updates on our enterprise-wide cybersecurity strategy, policies, processes and standards, as well as potential cybersecurity or information technology risks and threats.
Cybersecurity risk is also evaluated as an enterprise-wide risk via our enterprise risk management program, which is reviewed by our leadership team and the board of directors. All employees are required to complete semiannual cybersecurity trainings and have access to more frequent cybersecurity trainings through online simulations.
All employees are required to complete semiannual cybersecurity trainings and have access to more frequent cybersecurity trainings through online simulations. We also require employees in certain roles to complete additional role-based, specialized cybersecurity trainings.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese facilities are generally administrative offices, of which we own three and lease the remaining locations.
Biggest changeThese facilities are generally administrative offices, of which we own three and lease the remaining locations. 21 Table of Contents
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.
We also maintain 359 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 13 U.S. locations primarily used for Central Support Services.
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.
ITEM 2. PROPERTIES Our properties consist primarily of vehicle maintenance and repair facilities, warehouses and other real estate and improvements. We maintain 639 FMS properties in the U.S., Puerto Rico and Canada; we own 447 of these and lease the remaining properties.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Added
Securities Litigation Relating to Residual Value Estimates As discussed in Note 21, "Contingencies and Other Matters," between June 2020 and February 2021, five shareholder derivative complaints were filed against certain of our current and former officers and directors (the "Derivative Cases"). In December 2024, the parties to the Derivative Cases executed definitive settlement documentation and submitted them for court approval.
Added
On January 21, 2025, the court entered an order preliminarily approving the settlement and authorizing the notice of settlement. See In re Ryder System, Inc. Stockholder Derivative Action , Lead Case No. 2020-013618-CA-01 (Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida).
Added
A hearing to determine whether the court should issue a final order approving the proposed settlement has been scheduled for April 1, 2025. The Stipulation and Agreement of Settlement, with its exhibits, as well as the court-approved Notice of Pendency and Proposed Settlement can be found on the investor relations page of the Company's website, at investors.ryder.com .

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePast 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.
Biggest changePast performance is not necessarily an indicator of future results. 22 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, 2024: 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, 2024 170,221 $ 145.44 170,221 3,076,493 November 1 through November 30, 2024 94,720 153.39 91,768 2,984,725 December 1 through December 31, 2024 686 158.15 — 2,984,725 Total 265,627 $ 148.30 261,989 ______________________ (1) We currently maintain two share repurchase programs approved by our board of directors in October 2023 and October 2024.
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.
The stock performance graph assumes for comparison that the value of our common stock and of each index was $100 on December 31, 2019, and that all dividends were reinvested.
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.
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, 2025, there were 4,649 common stockholders of record.
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.
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, 2019 to December 31, 2024.
Share repurchases under both programs can be made from time to time using our working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934.
Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs. Share repurchases can be made from time to time using our working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934.
Removed
Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs.

Item 6. [Reserved]

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

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Biggest changeMANAGEMENT'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.
Biggest changeFurther 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. 2024 HIGHLIGHTS COMPARED WITH 2023 • Diluted EPS from continuing operations of $11.06, up from $8.73 in prior year, which reflected a non-cash FMS U.K. business exit charge • Comparable EPS (a non-GAAP measure) from continuing operations of $12.00 compared to $12.95 in prior year, reflecting higher earnings in contractual lease, supply chain, and dedicated businesses and weaker market conditions in rental and used vehicle sales • Adjusted Return on Equity (ROE) (a non-GAAP measure) of 16%, compared to 19% in prior year • Total revenue of $12.6 billion, up 7%, and operating revenue (a non-GAAP measure) of $10.3 billion, up 8%, reflecting acquisitions • Net cash provided by operating activities from continuing operations of $2.3 billion and free cash flow (a non-GAAP measure) of $133 million Business Trends During 2024, the strength and diversification of our contractual portfolio in lease, supply chain and dedicated helped mitigate the impact of weak market conditions from used vehicle sales and commercial rental demand.
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.
ITEM 6. [RESERVED] 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.
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.
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. This MD&A includes certain non-GAAP financial measures.
The following MD&A describes the principal factors affecting our results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates.
The following MD&A describes the principal factors affecting our results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates during 2024, compared with 2023.
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
While we are experiencing positive momentum from long-term secular trends in our businesses, other unknown effects from inflationary cost pressures, labor interruptions, disruptions in vehicle and vehicle part production and the higher interest rate environment may negatively impact demand for our business, financial results, and significant judgments and estimates. 24 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.
Currency Translation Adjustment Loss Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Currency translation adjustment loss $ — $ 188 $ — NM NM Refer to Note 16, "Accumulated Other Comprehensive Loss" for a discussion on the currency translation adjustment loss in 2023.
We expect DTS revenue in 2024 to significantly benefit from the acquisition of CLH Parent Corporation (Cardinal Logistics).
In our DTS business, the Cardinal Logistics acquisition drove revenue growth in 2024, and we expect this acquisition to benefit DTS earnings in 2025 as we realize synergies from the acquisition.
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 report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing, commercial rental and vehicle maintenance services; (2) Supply Chain Solutions (SCS), which provides fully integrated port-to-door logistics solutions; and 23 ITEM 7.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions, including dedicated vehicles, professional drivers, management and administrative support. 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 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.
Rental demand and used vehicle pricing declined from the prior year with rental utilization at 70% during 2024, as compared to 75% in the prior year. We anticipate a very modest improvement in freight market conditions in the latter half of 2025.
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.
We continue to benefit from favorable long-term secular trends in logistics and transportation solutions; however, we are experiencing near-term sales headwinds that reflect the extended freight downturn and overall economic uncertainty. The favorable secular trends provide long-term revenue and earnings growth opportunities for our FMS, SCS, and DTS business segments, and we expect to benefit from the cycle upturn.
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.
In our SCS business, the acquisition of IFS Holdings, LLC, a holding company for Impact Fulfillment Services, LLC (IFS), as well as the brokerage and logistics business from the Cardinal Logistics acquisition drove SCS revenue growth in 2024.
Removed
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.
Added
A detailed discussion of the year 2023 compared with 2022 is not included herein and can be found in the MD&A section in our 2023 Annual Report on Form 10-K, filed with the SEC on February 20, 2024, which is incorporated herein by reference.
Removed
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.
Added
In our FMS business, strong lease performance was driven by our lease pricing and maintenance cost savings initiatives which delivered improved portfolio returns. ChoiceLease vehicle fleet grew during 2024, as a result of the CLH Parent Corporation (Cardinal Logistics) acquisition.
Removed
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.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS SUMMARY Change (Dollars in millions, except per share amounts) 2024 2023 2022 2024/2023 2023/2022 Total revenue $ 12,636 $ 11,783 $ 12,011 7% (2)% Operating revenue (1) 10,266 9,497 9,280 8% 2% Earnings from continuing operations before income taxes (EBT) $ 661 $ 618 $ 1,216 7% (49)% Comparable EBT (1) 715 815 1,144 (12)% (29)% Earnings from continuing operations 489 406 863 21% (53)% Comparable earnings from continuing operations (1) 531 602 833 (12)% (28)% Comparable EBITDA (1) 2,776 2,665 2,722 4% (2)% Earnings (loss) per common share (EPS) — Diluted Continuing operations $ 11.06 $ 8.73 $ 16.96 27% (49)% Comparable (1) 12.00 12.95 16.37 (7)% (21)% Cash dividend per share 3.04 2.66 2.40 14% 11% Book value per share (2) 74.07 69.91 63.45 6% 10% Total debt $ 7,779 $ 7,114 $ 6,352 9% 12% Total shareholders’ equity 3,117 3,069 2,937 2% 4% Debt to equity 250 % 232 % 216 % Adjusted return on equity (1) 16 % 19 % 29 % Net cash provided by operating activities from continuing operations 2,265 2,353 2,310 Free cash flow (1) 133 (54) 921 Total capital expenditures (3) 2,694 3,279 2,652 ____________________ (1) Non-GAAP financial measure.
Removed
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.
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
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.
Added
(3) Includes capital expenditures that have been accrued, but not yet paid. In 2024, total revenue increased 7% to $12.6 billion, reflecting higher operating revenue and higher subcontracted transportation. Operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 8% to $10.3 billion, reflecting recent acquisitions, partially offset by lower commercial rental revenue in FMS.
Removed
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.
Added
EBT increased to $661 million from $618 million, due to a 2023, one-time, non-cash $188 million currency translation adjustment loss related to the FMS U.K. business, partially offset by a decrease in comparable EBT (a non-GAAP measure).
Removed
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.
Added
Comparable EBT decreased to $715 million from $815 million, reflecting weaker conditions in rental and used vehicles, partially offset by higher earnings in contractual lease, supply chain and dedicated businesses.
Removed
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.
Added
FULL YEAR CONSOLIDATED RESULTS Services Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Services revenue $ 8,345 $ 7,297 $ 7,118 14% 3% Cost of services 7,099 6,266 6,153 13% 2% Gross margin $ 1,246 $ 1,031 $ 965 21% 7% Gross margin % 15% 14% 14% Services revenue represents all the revenues associated with our SCS and DTS business segments, including subcontracted transportation and fuel, as well as SelectCare.
Added
Services revenue increased 14% in 2024, due to increases in DTS and SCS revenue primarily driven by recent acquisitions. 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 25 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and maintenance costs. Cost of services increased 13% in 2024, reflecting higher revenue, partially offset by a $35 million SCS asset impairment charge in the prior year.
Added
Services gross margin and gross margin as a percentage increased in 2024, primarily driven by operational improvements in SCS and a $35 million SCS asset impairment charge in the prior year.
Added
Lease & Related Maintenance and Rental Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Lease & related maintenance and rental revenue $ 3,835 $ 3,937 $ 4,174 (3)% (6)% Cost of lease & related maintenance and rental 2,623 2,684 2,774 (2)% (3)% Gross margin $ 1,212 $ 1,253 $ 1,400 (3)% (11)% Gross margin % 32% 32% 34% Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment.
Added
Revenue decreased 3% in 2024, reflecting lower commercial rental demand partially offset by ChoiceLease growth.
Added
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.
Added
Cost of lease & related maintenance and rental decreased 2% in 2024 reflecting lower operating costs on a 10% smaller average commercial rental fleet, lower maintenance costs on a younger fleet and maintenance cost savings initiatives. Lease & related maintenance and rental gross margin decreased primarily due to lower commercial rental demand.
Added
Lease & related maintenance and rental gross margin as a percentage of revenue remained consistent at 32% as lower commercial rental utilization was offset by improved lease performance and maintenance cost savings initiatives.
Added
Fuel Services Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Fuel services revenue $ 456 $ 549 $ 719 (17)% (24)% Cost of fuel services 441 534 694 (17)% (23)% Gross margin $ 15 $ 15 $ 25 —% (40)% Gross margin % 3 % 3 % 3 % Fuel services revenue represents fuel services provided to our FMS customers.
Added
Fuel services revenue decreased 17% in 2024, primarily reflecting lower fuel prices passed through to customers and 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 17% in 2024 as a result of 11% lower fuel prices and 2% lower gallons sold. Fuel services gross margin remained consistent at $15 million and gross margin as a percentage of revenue remained unchanged at 3% in 2024.
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 2024. 26 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selling, General and Administrative Expenses Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Selling, general and administrative expenses (SG&A) $ 1,478 $ 1,421 $ 1,415 4% —% Percentage of total revenue 12 % 12 % 12 % SG&A expenses increased to $1.5 billion primarily due to the impact from recent acquisitions.
Added
SG&A expenses as a percentage of total revenue remained at 12% in 2024.
Added
Non-Operating Pension Costs, net Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Non-operating pension costs, net $ 41 $ 40 $ 11 NM NM ———————————— NM - Denotes Not Meaningful throughout the MD&A 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
Refer to Note 19, "Employee Benefit Plans" for further discussion.
Added
Used Vehicle Sales, net Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Used vehicle sales, net $ (72) $ (196) $ (450) (63)% (56)% 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
Used vehicle sales, net gains decreased in 2024 due to lower proceeds per unit on sales of used vehicles and lower volume sold. Average proceeds per unit decreased in 2024 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: 2024/2023 2023/2022 Tractors (21)% (37)% Trucks (23)% (28)% Interest Expense Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Interest expense $ 386 $ 296 $ 228 30% 30% Effective interest rate 5.1% 4.4% 3.5% Interest expense increased 30% in 2024, primarily reflecting higher market interest rates on new debt issuances and refinancings, as well as increased debt borrowings to fund share repurchases and recent acquisitions.
Added
Miscellaneous Income, net Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Miscellaneous income, net $ (34) $ (47) $ (32) (28)% 47% 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. The higher 27 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Miscellaneous income, net in 2023 is primarily due to the gains from the sale of our corporate headquarters building and U.K. properties sold as part of our FMS U.K. business exit.
Added
Restructuring and Other Items, net Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Restructuring and other items, net $ 13 $ (21) $ 2 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) 2024 2023 2022 2024/2023 2023/2022 Provision for income taxes $ 172 $ 212 $ 353 (19)% (40)% Effective tax rate on continuing operations 26.0 % 34.3 % 29.1 % Comparable tax rate on continuing operations (1) 25.7 % 26.1 % 27.2 % _______________ (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. Our effective tax rate from continuing operations was 26.0% in 2024 as compared to 34.3% in the prior year.
Added
The higher effective rate in the prior year is due to a one-time, nondeductible cumulative currency translation adjustment loss related to the completion of the FMS U.K. business exit. Our comparable tax rate on continuing operations, which excludes the impact of the prior year currency translation adjustment loss, declined slightly to 25.7% in 2024 from 26.1% in the prior year.
Added
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. 28 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) 2024 2023 2022 2024/2023 2023/2022 Revenue: Fleet Management Solutions $ 5,888 $ 5,930 $ 6,327 (1)% (6)% Supply Chain Solutions 5,300 4,875 4,720 9% 3% Dedicated Transportation Solutions 2,446 1,785 1,786 37% —% Eliminations (998) (807) (822) 24% (2)% Total $ 12,636 $ 11,783 $ 12,011 7% (2)% Operating Revenue: (1) Fleet Management Solutions $ 5,116 $ 5,053 $ 5,213 1% (3)% Supply Chain Solutions 3,965 3,625 3,254 9% 11% Dedicated Transportation Solutions 1,870 1,298 1,239 44% 5% Eliminations (685) (479) (426) 43% 12% Total $ 10,266 $ 9,497 $ 9,280 8% 2% Earnings from continuing operations before income taxes: Fleet Management Solutions $ 516 $ 665 $ 1,057 (22)% (37)% Supply Chain Solutions 332 231 218 44% 6% Dedicated Transportation Solutions 125 121 103 4% 17% Eliminations (134) (95) (114) 41% 17% 839 922 1,264 (9)% (27)% Unallocated Central Support Services (71) (72) (83) —% (13)% Intangible amortization expense (2) (53) (35) (37) 52% 4% Non-operating pension costs, net (3) (41) (40) (11) NM NM Other items impacting comparability, net (4) (13) (157) 83 NM NM Earnings from continuing operations before income taxes $ 661 $ 618 $ 1,216 7% (49)% ______________________ (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 information technology, finance, marketing, human resources, legal, and safety. 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 29 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) 2024 2023 2022 2024/2023 2023/2022 Equipment Contribution: Supply Chain Solutions $ 45 $ 43 $ 46 5% (7)% Dedicated Transportation Solutions 89 52 68 70% (24)% Total $ 134 $ 95 $ 114 41% (17)% Vehicles acquired from Cardinal Logistics are included in FMS revenue earning equipment and leased to our DTS segment.
Added
EBT related to inter-segment equipment and services on the Cardinal vehicles drove the increase in DTS equipment contribution during 2024.
Added
Fleet Management Solutions Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 ChoiceLease $ 3,446 $ 3,181 $ 3,101 8% 3% Commercial rental (1) 976 1,178 1,338 (17)% (12)% SelectCare and other 694 694 624 —% 11% FMS Europe (2) — — 150 —% (100)% Fuel services revenue 772 877 1,114 (12)% (21)% FMS total revenue $ 5,888 $ 5,930 $ 6,327 (1)% (6)% FMS operating revenue (3) $ 5,116 $ 5,053 $ 5,213 1% (3)% FMS EBT $ 516 $ 665 $ 1,057 (22)% (37)% FMS EBT as a % of FMS total revenue 8.8% 11.2% 16.7% (240) bps (550) bps FMS EBT as a % of FMS operating revenue (3) 10.1% 13.2% 20.3% (310) bps (710) bps _______________ (1) During 2024, 2023 and 2022, rental revenue from lease customers in place of a lease vehicle represented 31%, 34%, and 33% 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 1% in 2024, primarily due to lower fuel service revenue passed through to customers partially offset by higher operating revenue (a non-GAAP measure excluding fuel services revenue). FMS operating revenue increased 1% in 2024, reflecting ChoiceLease growth, including the inter-segment lease revenue with DTS from the Cardinal Logistics acquisition.
Added
The increase in FMS operating revenue was partially offset by lower rental demand.
Added
The following table summarizes the components of the change in revenue on a percentage basis versus the prior years: 2024 2023 2022 Total Operating (1) Total Operating (1) Total Operating (1) Organic, including price and volume (2) % (3) % — % — % 6 % 8 % Acquisition / (U.K. business exit) 3 4 (2) (3) (2) (2) Fuel (2) — (4) — 7 — Net change (1) % 1 % (6) % (3) % 11 % 6 % 30 ITEM 7.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS _______________ (1) 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 EBT decreased 22% in 2024, reflecting weaker commercial rental demand and lower gains on used vehicle sales due to lower pricing and volume, partially offset by higher ChoiceLease performance and benefits from maintenance cost savings initiatives. Lower gains on used vehicles sales reflect a 23% and 21% decrease in used truck and tractor pricing, respectively.
Added
Used vehicle inventory levels increased to 9,000 vehicles but is still in line with our long term target range of 7,000 - 9,000 vehicles. Rental power fleet utilization decreased to 70% from 75% in prior year. The average power fleet was 9% smaller in 2024.
Added
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 2024 2023 2022 2024/2023 2023/2022 End of period vehicle count By type: Trucks (1) 80,500 75,600 72,100 6% 5% Tractors (2) 66,700 69,000 69,300 (3)% —% Trailers and other (3) 44,700 40,800 41,200 10% (1)% Total 191,900 185,400 182,600 4% 2% By ownership: Owned 186,200 184,400 181,300 1 % 2 % Leased 5,700 1,000 1,300 470 % (23) % Total 191,900 185,400 182,600 4 % 2 % By product line: ChoiceLease 145,300 138,900 134,600 5% 3% Commercial rental 35,500 36,400 41,800 (2)% (13)% Service vehicles and other 2,100 2,100 2,100 —% —% 182,900 177,400 178,500 3% (1)% Held for sale 9,000 8,000 4,100 13% 95% Total 191,900 185,400 182,600 4% 2% Memo: U.K.
Added
Vehicle Count — — 1,000 N/A (100)% Customer vehicles under SelectCare contracts (4) 41,800 51,600 54,600 (19)% (5)% Average vehicle count By product line: ChoiceLease 145,000 137,800 134,000 5% 3% Commercial rental 35,300 39,300 40,800 (10)% (4)% Service vehicles and other 2,100 2,000 2,000 5% —% 182,400 179,100 176,800 2% 1% Held for sale 9,200 6,500 3,400 42% 91% Total 191,600 185,600 180,200 3% 3% Customer vehicles under SelectCare contracts (4) 48,900 52,700 54,800 (7)% (4)% Customer vehicles under SelectCare on-demand (5) 6,900 10,600 15,400 (35)% (31)% Total vehicles serviced 247,400 248,900 250,400 (1)% (1)% 31 ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS _______________ (1) Generally comprised of Class 1 through Class 7 type vehicles with a Gross Vehicle Weight (GVW) up to 33,000 pounds. (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.
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(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. 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.
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Note: Average vehicle counts were computed using a 24-point average based on monthly information.

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Item 7. Management's Discussion & Analysis

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

93 edited+6 added−84 removed79 unchanged
Biggest changeThis 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.
Biggest changeThis Annual Report contains forward-looking statements including statements regarding: • our expectations regarding used vehicle sales and commercial rental; • our expectations with respect to the freight cycle and market conditions, including general economic uncertainty; • our expectations with respect to demand for outsourced logistics and the impacts of outsourcing and other secular trends in our SCS and DTS business segments and on our business and financial results; • our expectations regarding the supply of vehicles and vehicle parts and its effect on pricing and demand; • our expectations regarding the impact of labor shortages and interruptions and subcontracted transportation costs; • our expectations regarding ChoiceLease revenue and earnings; • our expectations in our SCS and DTS business segments related to revenue, earnings growth and contract sales activity; • our expectations of cash flow from operating activities, free cash flow and full-year guidance; • 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; • 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; • our ability to meet our objectives with the share repurchase programs; • the anticipated impact of fuel and energy prices, interest rate movements, and exchange rate fluctuations; • our expectations as to return on pension plan assets and future pension expense; • 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; • our intent to permanently reinvest the earnings of our foreign subsidiaries; • our expectations regarding the benefits from our strategic investments and initiatives, including our maintenance and lease pricing initiatives; • our expectations regarding recent acquisitions, including Cardinal Logistics; • the anticipated impact of inflationary pressures; • our expectations of the long-term residual values of revenue earnings equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a potential cyclical downturn or changes to the estimated useful lives; and • our expectations regarding U.S. federal, state and foreign tax positions and the realizability of deferred tax assets and changes in foreign tax rates.
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.
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.
Our review of the estimated residual values and useful lives of revenue earning equipment is based on vehicle class, (i.e., generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors.
Our review of the estimated residual values of revenue earning equipment is based on vehicle class, (i.e., generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors.
Based on the results of our analysis, we may adjust the estimated residual values and useful lives of certain classes of our revenue earning equipment each year. Reductions in estimated residual values or useful lives will increase depreciation expense over the remaining useful life of the vehicle.
Based on the results of our analysis, we may adjust the estimated residual values and useful lives of certain classes of our revenue earning equipment each year. Reductions in estimated residual values will increase depreciation expense over the remaining useful life of the vehicle.
A significant downgrade below investment grade would not affect our ability to borrow amounts under our global revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.
A significant downgrade below investment grade would not affect our ability to borrow amounts under our revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.
Refer to Note 10, “Accrued Expenses and Other Liabilities,” in the Notes to Consolidated Financial Statements for changes to the self-insurance accruals during the year. Goodwill Impairment.
Refer to Note 10, “Accrued Expenses and Other Liabilities,” in the Notes to Consolidated Financial Statements for changes to the self-insurance accruals during the year. Goodwill.
We update our mortality assumptions as deemed necessary by taking into consideration relevant actuarial studies as they become available as well as reassessing our own historical experience. Disclosure of the significant assumptions used in arriving at the 2023 net pension expense is presented in Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements.
We update our mortality assumptions as deemed necessary by taking into consideration relevant actuarial studies as they become available as well as reassessing our own historical experience. Disclosure of the significant assumptions used in arriving at the 2024 net pension expense is presented in Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements.
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. ◦ Changes in accounting rules, assumptions and accruals. • Other risks detailed from time to time in our SEC filings, including in "Item 1A.
On October 1, 2023, we completed our annual goodwill impairment test for all reporting units and determined that the fair values more likely than not exceeded their respective carrying values for each reporting unit. We conducted a quantitative analysis for our FMS reporting unit and qualitative analyses for our SCS and DTS reporting units. Income Taxes.
On October 1, 2024, we completed our annual goodwill impairment test for all reporting units and determined that the fair values more likely than not exceeded their respective carrying values for each reporting unit. We conducted a quantitative analysis for our SCS and DTS reporting units and qualitative analyses for our FMS reporting unit. Income Taxes.
However, non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity is provided in the following reconciliations. Cash Flow Measures: Total Cash Generated and Free Cash Flow Cash Provided by Operating Activities from Continuing Operations 45 ITEM 7.
However, non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity is provided in the following reconciliations. Cash Flow Measures: Total Cash Generated and Free Cash Flow Cash Provided by Operating Activities from Continuing Operations 43 ITEM 7.
Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited. * See Total Cash Generated and Free Cash Flow reconciliations in the Financial Resources and Liquidity section of Management's Discussion and Analysis. 48 ITEM 7.
Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited. * See Total Cash Generated and Free Cash Flow reconciliations in the Financial Resources and Liquidity section of Management's Discussion and Analysis. 45 ITEM 7.
We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue earning equipment for the purposes of recording depreciation expense as described in Note 6, “Revenue Earning Equipment, Net" in the Notes to Consolidated Financial Statements.
We periodically review and adjust, as appropriate, the estimated residual values of existing revenue earning equipment for the purposes of recording depreciation expense as described in Note 6, “Revenue Earning Equipment, Net" in the Notes to Consolidated Financial Statements.
We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section or in the MD&A above. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section. 44 ITEM 7.
We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section or in the MD&A above. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section. 42 ITEM 7.
Subcontracted transportation: We exclude subcontracted transportation from the calculation of our operating revenue measures, as these services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability.
Subcontracted transportation: We exclude subcontracted transportation from the calculation of our operating revenue measures, as these costs are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability.
In order to estimate the discount rate relevant to our plan, we use models that match projected benefits payments of our primary U.S. plan to interest payments and maturities from a hypothetical portfolio of high quality corporate bonds. Long-term rate of return assumptions are based on a review of our asset allocation strategy and long-term expected asset returns.
In order to estimate the discount rate relevant to our plan, we use models that match projected benefits payments of our primary plans to interest payments and maturities from a hypothetical portfolio of high quality corporate bonds. Long-term rate of return assumptions are based on a review of our asset allocation strategy and long-term expected asset returns.
While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS. 46 ITEM 7.
While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS.
(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.
(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. 46 ITEM 7.
The variety of financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements, and bank credit facilities. Our principal sources of financing are issuances of unsecured commercial paper and medium-term notes. 38 ITEM 7.
The variety of financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements, and bank credit facilities. Our principal sources of financing are issuances of unsecured commercial paper and medium-term notes.
Operating property and equipment expenditures primarily relate to spending on items such as vehicle maintenance facilities and equipment, computer and telecommunications equipment, investments in technologies, and warehouse facilities and equipment. 37 ITEM 7.
Operating property and equipment expenditures primarily relate to spending on items such as vehicle maintenance facilities and equipment, computer and telecommunications equipment, investments in technologies, and warehouse facilities and equipment. 35 ITEM 7.
Refer to Note 13, “Debt,” in the Notes to Consolidated Financial Statements for information around the global revolving credit facility, the trade receivables financing program, issuance of medium-term notes under our shelf registration statement, asset-backed financing obligations and debt maturities. Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings.
Refer to Note 13, “Debt,” in the Notes to Consolidated Financial Statements for information around the revolving credit facility, the trade receivables financing program, issuance of medium-term notes under our shelf registration statement, asset-backed financing obligations and debt maturit ies. Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings.
Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Comparable EBITDA is defined as net earnings, first adjusted to exclude discontinued operations and the following items, all from continuing operations: (1) non-operating pension costs, net and (2) any other items that are not representative of our business operations (these items are the same items that are excluded from comparable earnings measures for the relevant periods as described immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) amortization.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Comparable EBITDA is defined as net earnings, first adjusted to exclude discontinued operations and the following items, all from continuing operations: (1) non-operating pension costs, net and (2) any other items that are not representative of our business operations (these items are the same items that are excluded from comparable earnings measures for the relevant periods as described immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) intangible amortization.
We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities. Free Cash Flow is defined as the net amount of cash generated from operating activities and investing activities (excluding changes in restricted cash and acquisitions) from continuing operations.
We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities. Free Cash Flow is defined as the net amount of cash generated from operating activities and investing activities (excluding acquisitions) from continuing operations.
This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and included in “Accumulated other comprehensive loss.” We had a pre-tax accumulated actuarial loss of $830 million and $759 million as of December 31, 2023 and 2022, respectively.
This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and included in “Accumulated other comprehensive loss.” We had a pre-tax accumulated actuarial loss of $777 million and $830 million as of December 31, 2024 and 2023, respectively.
To the extent the amount of cumulative actuarial gains and losses exceed 10% of the greater of the benefit obligation or plan assets, the excess amount is primarily amortized over the average remaining life expectancy of participants. As of December 31, 2023, the amount of the actuarial loss subject to amortization in 2024 and future years is $644 million.
To the extent the amount of cumulative actuarial gains and losses exceed 10% of the greater of the benefit obligation or plan assets, the excess amount is primarily amortized over the average remaining life expectancy of participants. As of December 31, 2024, the amount of the actuarial loss subject to amortization in 2025 and future years is $615 million.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in the tax return in future years for which we have already recognized the tax benefit in the financial statements. Deferred tax assets were $541 million and $562 million as of December 31, 2023 and 2022, respectively.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in the tax return in future years for which we have already recognized the tax benefit in the financial statements. Deferred tax assets were $446 million and $541 million as of December 31, 2024 and 2023, respectively.
Our debt ratings and rating outlooks as of December 31, 2023 were as follows: Rating Summary Short-term Short-term Outlook Long-term Long-term Outlook Standard & Poor’s Ratings Services A2 — BBB+ Stable Moody’s Investors Service P2 Stable Baa2 Stable Fitch Ratings F2 — BBB+ Positive As of December 31, 2023, we had the following amounts available to fund operations under the following facilities: (In millions) Global revolving credit facility $828 Trade receivables financing program $167 In accordance with our funding philosophy, we generally attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our vehicle assets.
Our debt ratings and rating outlooks as of December 31, 2024 were as follows: Rating Summary Short-term Long-term Long-term Outlook Standard & Poor’s Ratings Services A2 BBB+ Stable Moody’s Investors Service P2 Baa2 Positive Fitch Ratings F2 BBB+ Positive As of December 31, 2024, we had the following amounts available to fund operations under the following facilities: (In millions) Revolving credit facility $532 Trade receivables financing program $181 In accordance with our funding philosophy, we generally attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our vehicle assets.
We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreements) was 16% and 19% as of December 31, 2023 and 2022, respectively.
We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreements) was 18% and 16% as of December 31, 2024 and 2023, respectively.
Conversely, an increase in estimated residual values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle.
Conversely, an increase in estimated residual values will decrease depreciation expense over the remaining useful life of the vehicle.
Comparable EBITDA should not be considered a substitute for, or superior to, the measures of financial performance determined in accordance with GAAP. 47 ITEM 7.
Comparable EBITDA should not be considered a substitute for, or superior to, the measures of financial performance determined in accordance with GAAP.
We recognized $963 million in 2023, and $1.0 billion in both 2022 and 2021. The stand-alone price for both the lease and non-lease components could vary in the future based on both external market conditions and our pricing strategies as a result of the market conditions. Pension Plans.
We recognized $972 million in 2024, $963 million in 2023 and $1.0 billion in 2022. The stand-alone price for both the lease and non-lease components could vary in the future based on both external market conditions and our pricing strategies as a result of the market conditions. Pension Assumptions.
See the “Critical Accounting Estimates — Pension Plans” section for further discussion on pension accounting estimates. Income Tax Cash Obligations During 2023, total income taxes paid were $96 million. In the future, our income tax cash obligations may increase.
See the “Critical Accounting Estimates — Pension Plans” section for further discussion on pension accounting estimates. Income Tax Cash Obligations During 2024, total income taxes paid were $207 million. In the future, our income tax cash obligations may increase.
We recognize a valuation allowance against deferred tax assets to reduce such assets to amounts expected to be realized. As of December 31, 2023 and 2022, the deferred tax valuation allowance was $87 million and $88 million, respectively.
We recognize a valuation allowance against deferred tax assets to reduce such assets to amounts expected to be realized. As of December 31, 2024 and 2023, the deferred tax valuation allowance was $12 million and $87 million, respectively.
As part of our calculation of the provision for income taxes, we determine whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position.
As part of our calculation of the provision for income taxes, we determine whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. We accrue the largest 41 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparable Earnings Measures: Comparable Earnings before Income Taxes (EBT) Comparable Earnings Comparable Earnings per Diluted Common Share (EPS) Comparable Tax Rate Adjusted Return on Equity (ROE) Comparable EBT, Comparable Earnings and Comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs, net and (2) other items impacting comparability (as further described below).
Comparable Earnings Measures: Comparable Earnings before Income Taxes (EBT) Comparable Earnings Comparable Earnings per Diluted Common Share (EPS) Comparable Tax Rate Adjusted Return on Equity (ROE) Comparable EBT, Comparable Earnings and Comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs, net and (2) other items impacting comparability (as further described below).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table summarizes the components of the change in revenue on a percentage basis versus the prior years: 2023 2022 2021 Total Operating (1) Total Operating (1) Total Operating (1) Organic, including price and volume 2 % 9 % 25 % 22 % 22 % 17 % Acquisition 1 2 23 25 1 1 Fuel — — 2 — 1 — Net change 3 % 11 % 50 % 47 % 24 % 18 % _______________ (1) Non-GAAP financial measure.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table summarizes the components of the change in revenue on a percentage basis versus the prior years: 2024 2023 2022 Total Operating (1) Total Operating (1) Total Operating (1) Organic, including price and volume (1) % — % 2 % 9 % 25 % 22 % Acquisitions 10 9 1 2 23 25 Fuel — — — — 2 — Net change 9 % 9 % 3 % 11 % 50 % 47 % _______________ (1) Non-GAAP financial measure.
We recognized a benefit of $17 million in 2023, a benefit of $25 million in 2022 and a benefit of $6 million in 2021 from the development of estimated prior years' self-insured loss reserves. Based on self-insurance accruals at December 31, 2023, a 5% adverse change in actuarial claim loss estimates would increase operating expense in 2024 by $20 million.
We recognized a charge of $15 million in 2024, a benefit of $17 million in 2023 and a benefit of $25 million in 2022 from the development of estimated prior years' self-insured loss reserves. Based on self-insurance accruals at December 31, 2024, a 5% adverse change in actuarial claim loss estimates would increase operating expense in 2025 by $24 million.
For the lease component, we estimate the stand-alone selling price using the projected cash outflows related to the underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return considering the weighted average cost of capital. For the non-lease component of the contract, we estimate the stand-alone selling price of the maintenance 41 ITEM 7.
For the lease component, we estimate the stand-alone selling price using the projected cash outflows related to the underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return considering the weighted average cost of capital.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ◦ 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, such as tariffs, trade restrictions or trade agreements, that could negatively impact our financial and operating results. ◦ Financial institution disruptions and geopolitical events or conflicts. • 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 and 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. 50 ITEM 7.
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.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flow Measures: Total Cash Generated Free Cash Flow We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
Cash Flow Measures: Total Cash Generated Free Cash Flow We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
In 2024, our long-term expected rate of return assumption (net of fees) for our primary U.S. plan will remain at 5.40%. Accounting guidance applicable to pension plans does not require immediate recognition of the effects of a deviation between these assumptions and actual experience or the revision of an estimate.
In 2025, our long-term expected rate of return assumption (net of fees) for our primary U.S. plan will be 6.15%. Accounting guidance applicable to pension plans does not require immediate recognition of the effects of a deviation between these assumptions and actual experience or the revision of an estimate.
In determining our annual estimate of periodic pension cost, we are required to make an evaluation of critical factors such as discount rate, expected long-term rate of return on assets, retirement rate and mortality.
In determining our annual estimate of periodic pension cost, we are required to make an evaluation of critical factors such as discount rate, expected long-term rate of return on assets, retirement rate and mortality. Discount rates are based upon a 39 ITEM 7.
As the funded status of each plan improves, we (1) gradually increase the liability hedging portfolio, which consists of high quality, longer-term fixed income securities and (2) reduce our allocation of equity investments. The composition of our U.S. pension assets was 21% equity securities and alternative assets, 78% debt securities and 1% cash as of December 31, 2023.
As the funded status of the plan improves, we (1) gradually increase the liability hedging portfolio, which consists of high quality, fixed income securities and (2) reduce our allocation of equity investments. The composition of our U.S. pension assets was 22% equity securities and alternative assets, 77% debt securities and 1% cash as of December 31, 2024.
There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in 43 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS the future.
There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future.
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 the effective tax rate to the comparable tax rate: 2024 2023 2022 Effective tax rate on continuing operations (1) 26.0% 34.3% 29.1% Tax adjustments and income tax effects of non-GAAP adjustments (2) (0.3)% (8.2)% (1.9)% Comparable tax rate on continuing operations (1) 25.7% 26.1% 27.2% _______________ (1) The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, respectively.
In 2024, we expect to amortize $31 million of net actuarial loss as a component of pension expense. The effect on years beyond 2024 will depend substantially upon the actual experience of our plans in future years. 42 ITEM 7.
In 2025, we expect to amortize $30 million of net actuarial loss as a component of pension expense. The effect on years beyond 2025 will depend substantially upon the actual experience of our plans in future years.
(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) Includes income taxes on discontinued operations. (3) Represents the impact of Other items impacting comparability, net of tax, to equity for the respective period. (4) Adjusted ROE is calculated by dividing Adjusted net earnings into Adjusted average shareholders' equity.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a summary of capital expenditures: (In millions) 2023 2022 2021 Revenue earning equipment: ChoiceLease $ 2,562 $ 1,824 $ 1,194 Commercial rental 438 541 651 3,000 2,365 1,845 Operating property and equipment 279 287 167 Gross capital expenditures (1) 3,279 2,652 2,012 Changes in accounts payable related to purchases of property and revenue earning equipment (45) (21) (71) Cash paid for purchases of property and revenue earning equipment $ 3,234 $ 2,631 $ 1,941 _______________ (1) Excludes $26 million, $12 million and $15 million in 2023, 2022 and 2021, respectively, in assets held under finance leases resulting from new or the extension of existing finance leases and other additions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a summary of capital expenditures: (In millions) 2024 2023 2022 Revenue earning equipment: ChoiceLease $ 2,042 $ 2,562 $ 1,824 Commercial rental 525 438 541 2,567 3,000 2,365 Operating property and equipment 127 279 287 Gross capital expenditures (1) 2,694 3,279 2,652 Changes in accounts payable related to purchases of property and revenue earning equipment (11) (45) (21) Cash paid for purchases of property and revenue earning equipment $ 2,683 $ 3,234 $ 2,631 _______________ (1) Excludes $46 million, $26 million and $12 million in 2024, 2023 and 2022, respectively, in assets held under finance leases resulting from new or the extension of existing finance leases and other additions.
We accrue the largest amount of the benefit that has a cumulative probability of greater than 50% of being sustained. These accruals require management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary materially from these estimates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS amount of the benefit that has a cumulative probability of greater than 50% of being sustained. These accruals require management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary materially from these estimates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A sensitivity analysis of 2024 net pension expense to changes in key underlying assumptions for our primary plan, the U.S. pension plan, is presented below: Assumed Rate Change Impact on 2024 Net Pension Expense Effect on December 31, 2023 Projected Benefit Obligation Expected long-term rate of return on assets 5.40% +/- 0.25 +/- $3 million N/A Discount rate 5.15% + 0.25 NM - $31 million Discount rate 5.15% - 0.25 NM + $32 million Self-Insurance Accruals.
A sensitivity analysis of 2025 net pension expense to changes in key underlying assumptions for our primary plan, the U.S. pension plan, is presented below: Assumed Rate Change Impact on 2025 Net Pension Expense Effect on December 31, 2024 Projected Benefit Obligation Expected long-term rate of return on assets 6.15% +/- 0.25 +/- $3 million N/A Discount rate 5.65% +/- 0.25 NM +/- $27 million Self-Insurance Obligations.
We assess goodwill for impairment, as described in Note 1, “Summary of Significant Accounting Policies — Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements, on an annual basis or more often if deemed necessary. As of December 31, 2023, total goodwill was $940 million.
We assess goodwill for impairment, as described in Note 1, “Summary of Significant Accounting Policies — Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements, on an annual basis or more often if deemed necessary. As of December 31, 2024, total goodwill was $1.2 billion. To determine whether goodwill is impaired, we 40 ITEM 7.
We expect free cash flow (a non-GAAP measure) to decrease to approximately negative $325 million reflecting an increase in capital expenditures due to higher investments in the ChoiceLease and commercial rental fleet. Purchase Obligations The majority of our purchase obligations are pay-as-you-go transactions made in the ordinary course of business.
We expect free cash flow (a non-GAAP measure) to increase to approximately $400 million reflecting higher cash generated and lower investments in the ChoiceLease fleet. Purchase Obligations The majority of our purchase obligations are pay-as-you-go transactions made in the ordinary course of business.
To determine whether goodwill is impaired, we are required to assess the fair value of each reporting unit and compare it to its carrying value. A reporting unit is a component of an operating segment for which discrete financial information is available and management regularly reviews its operating performance.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS are required to assess the fair value of each reporting unit and compare it to its carrying value. A reporting unit is a component of an operating segment for which discrete financial information is available and management regularly reviews its operating performance.
Our estimates reflect anticipated market conditions and are intended to reduce the probability of losses or need for additional depreciation during a potential cyclical downturn.
The current residual value estimates of our total fleet are at historically low levels. Our estimates reflect anticipated market conditions and are intended to reduce the probability of losses or need for additional depreciation during a potential cyclical downturn.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of Net earnings to comparable EBITDA: (In millions) 2024 2023 2022 Net earnings $ 489 $ 406 $ 867 Earnings from discontinued operations, net of tax — — (4) Provision for income taxes 172 212 353 EBT 661 618 1,216 Non-operating pension costs, net (1) 41 40 11 Acquisition costs (2) 7 2 6 FMS U.K. business exit (2) — (32) (82) Currency translation adjustment loss (2) — 188 — Other, net (2) 6 (1) (7) Comparable EBT 715 815 1,144 Interest expense 386 296 228 Depreciation 1,694 1,712 1,713 Used vehicle sales, net (3) (72) (193) (400) Intangible amortization 53 35 37 Comparable EBITDA $ 2,776 $ 2,665 $ 2,722 _______________ (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 shows the components of our free cash flow: Years ended December 31, (In millions) 2023 2022 2021 Net cash provided by operating activities from continuing operations $ 2,353 $ 2,310 $ 2,175 Sales of revenue earning equipment (1) 764 1,182 748 Sales of operating property and equipment (1) 63 53 74 Other (1) — 7 1 Total cash generated (2) 3,180 3,552 2,998 Purchases of property and revenue earning equipment (1) (3,234) (2,631) (1,941) Free cash flow (2) $ (54) $ 921 $ 1,057 _______________ (1) Includes cash inflows from other investing activities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows the components of our free cash flow (a non-GAAP measure): (In millions) 2024 2023 2022 Net cash provided by operating activities from continuing operations $ 2,265 $ 2,353 $ 2,310 Sales of revenue earning equipment (1) 532 764 1,182 Sales of operating property and equipment (1) 19 63 53 Other (1) — — 7 Total cash generated (2) 2,816 3,180 3,552 Purchases of property and revenue earning equipment (1) (2,683) (3,234) (2,631) Free cash flow (2) $ 133 $ (54) $ 921 _______________ (1) Includes cash inflows from other investing activities.
The funded status of our defined benefit pension plans decreased to 88% in 2023 from 94% in 2022, primarily reflecting a decrease in discount rates used to value our obligations at year-end 2023. We expect 2024 defined benefit pension expense to remain at approximately $41 million.
The funded status of our defined benefit pension plans increased to 91% in 2024 from 88% in 2023, primarily reflecting an increase in discount rates used to value our obligations at year-end 2024. We expect 2025 defined benefit pension expense to decrease to $37 million.
Federal, state and foreign income taxes, withholding taxes and the tax impact of foreign currency exchange gains or losses were considered on the remaining U.K. and Germany undistributed earnings as of December 31, 2023 , and there was no impact to deferred taxes. During 2023 , we repatria ted $78 million o f foreign earnings from the U.K.
During 2024, we repatriated $14 million of current year foreign earnings from Mexico with minimal tax costs. Federal, state and foreign income taxes, withholding taxes and the tax impact of foreign currency exchange gains or losses were considered on the remaining U.K. undistributed earnings as of December 31, 2024, and there was no impact to deferred taxes.
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.
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 (In millions, except per share amounts) 2024 2023 2022 EBT $ 661 $ 618 $ 1,216 Non-operating pension costs, net (1) 41 40 11 Acquisition costs (2) 7 2 6 FMS U.K. business exit (2) — (32) (82) Currency translation adjustment loss — 188 — Other, net (2) 6 (1) (7) Comparable EBT $ 715 $ 815 $ 1,144 Earnings $ 489 $ 406 $ 863 Non-operating pension costs, net (1) 31 31 7 Acquisition costs (2) 6 2 5 FMS U.K. business exit (2) — (19) (36) Currency translation adjustment loss — 183 — Other, net (2) 5 (1) (6) Comparable Earnings $ 531 $ 602 $ 833 Diluted EPS $ 11.06 $ 8.73 $ 16.96 Non-operating pension costs, net (1) 0.69 0.68 0.14 Acquisition costs (2) 0.13 0.04 0.10 FMS U.K. business exit (2) — (0.40) (0.71) Currency translation adjustment loss — 3.93 — Other, net (2) 0.12 (0.03) (0.12) Comparable EPS $ 12.00 $ 12.95 $ 16.37 _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
Dedicated Transportation Solutions Change (Dollars in millions) 2023 2022 2021 2023/2022 2022/2021 DTS total revenue $ 1,785 $ 1,786 $ 1,457 —% 23% DTS operating revenue (1) $ 1,298 $ 1,239 $ 1,055 5% 17% DTS EBT $ 121 $ 103 $ 49 18% 110% DTS EBT as a % of DTS total revenue 6.8% 5.8% 3.4% 100 bps 240 bps DTS EBT as a % of DTS operating revenue (1) 9.3% 8.3% 4.6% 100 bps 370 bps End of period vehicle count: Power vehicles 5,200 5,400 5,300 (4)% 2% Trailers 5,700 6,000 6,000 (5)% —% Total 10,900 11,400 11,300 (4)% 1% _______________ (1) Non-GAAP financial measure.
Dedicated Transportation Solutions Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 DTS total revenue $ 2,446 $ 1,785 $ 1,786 37% —% DTS operating revenue (1) $ 1,870 $ 1,298 $ 1,239 44% 5% DTS EBT $ 125 $ 121 $ 103 4% 18% DTS EBT as a % of DTS total revenue 5.1% 6.8% 5.8% (170) bps 100 bps DTS EBT as a % of DTS operating revenue (1) 6.7% 9.3% 8.3% (260) bps 100 bps End of period vehicle count: Power vehicles 7,500 5,200 5,400 44% (4)% Trailers 11,600 5,700 6,000 104% (5)% Total 19,100 10,900 11,400 75% (4)% _______________ (1) Non-GAAP financial measure.
Discount rates are based upon a duration analysis of expected benefit payments and the equivalent average yield for high quality corporate fixed income investments as of our annual measurement date at December 31.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS duration analysis of expected benefit payments and the equivalent average yield for high quality corporate fixed income investments as of our annual measurement date at December 31.
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.
In 2023, and 2022, Used vehicle sales, net gain of $2 million and $49 million, respectively, related to the FMS U.K. business exit is included above in "Other Items Impacting Comparability." The following table provides a reconciliation of total revenue to operating revenue: (In millions) 2024 2023 2022 Total revenue $ 12,636 $ 11,783 $ 12,011 Subcontracted transportation and fuel (2,370) (2,286) (2,731) Operating revenue $ 10,266 $ 9,497 $ 9,280 The following table provides a reconciliation of FMS total revenue to FMS operating revenue: (In millions) 2024 2023 2022 FMS total revenue $ 5,888 $ 5,930 $ 6,327 Fuel services revenue (772) (877) (1,114) FMS operating revenue $ 5,116 $ 5,053 $ 5,213 FMS EBT $ 516 $ 665 $ 1,057 FMS EBT as a % of FMS total revenue 8.8% 11.2% 16.7% FMS EBT as a % of FMS operating revenue 10.1% 13.2% 20.3% 47 ITEM 7.
Different estimates that could have been applied in the current period or changes in the accounting estimates that are reasonably likely can result in a material impact on our financial condition and operating results in the current and future periods.
Different estimates that could have been applied in the current period or changes in the accounting estimates that are reasonably likely can result in a material impact on our financial condition and operating results in the current and future periods. We review the development, selection and disclosure of these critical accounting estimates with Ryder’s Audit Committee on an annual basis.
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.
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: (In millions) 2024 2023 2022 SCS total revenue $ 5,300 $ 4,875 $ 4,720 Subcontracted transportation and fuel (1,335) (1,250) (1,466) SCS operating revenue $ 3,965 $ 3,625 $ 3,254 SCS EBT $ 332 $ 231 $ 218 SCS EBT as a % of SCS total revenue 6.3% 4.7% 4.6% SCS EBT as a % of SCS operating revenue 8.4% 6.4% 6.7% The following table provides a reconciliation of DTS total revenue to DTS operating revenue: (In millions) 2024 2023 2022 DTS total revenue $ 2,446 $ 1,785 $ 1,786 Subcontracted transportation and fuel (576) (487) (547) DTS operating revenue $ 1,870 $ 1,298 $ 1,239 DTS EBT $ 125 $ 121 $ 103 DTS EBT as a % of DTS total revenue 5.1% 6.8% 5.8% DTS EBT as a % of DTS operating revenue 6.7% 9.3% 8.3% The following tables provide numerical reconciliations of net earnings to adjusted net earnings and average shareholders' equity to adjusted average shareholders' equity, and of the non-GAAP elements used to calculate the adjusted return on equity (Adjusted ROE) to the corresponding GAAP measures: (In millions) 2024 2023 2022 Net earnings $ 489 $ 406 $ 867 Other items impacting comparability, net (1) 13 157 (83) Tax impact (2) (2) 8 46 Adjusted net earnings $ 500 $ 571 $ 830 Average shareholders’ equity $ 3,078 $ 3,041 $ 2,845 Average adjustments to shareholders’ equity (3) 2 (19) (12) Adjusted average shareholders’ equity $ 3,080 $ 3,022 $ 2,833 Adjusted ROE (4) 16% 19% 29% _______________ (1) Refer to Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
FINANCIAL RESOURCES AND LIQUIDITY Cash Flows The following is a summary of our cash flows from continuing operations: Years ended December 31, (In millions) 2023 2022 2021 Net cash provided by (used in): Operating activities $ 2,353 $ 2,310 $ 2,175 Investing activities (2,663) (1,850) (1,450) Financing activities 256 (861) (204) Effect of exchange rate changes on cash (9) (4) (1) Net change in cash, cash equivalents, and restricted cash $ (63) $ (405) $ 520 Years ended December 31, (In millions) 2023 2022 2021 Net cash provided by operating activities from continuing operations Earnings from continuing operations $ 406 $ 863 $ 522 Non-cash and other, net 2,088 1,903 1,824 Currency translation adjustment loss 188 — — Collections on sales-type leases 126 135 139 Changes in operating assets and liabilities (455) (591) (310) Net cash provided by operating activities from continuing operations $ 2,353 $ 2,310 $ 2,175 Net cash provided by operating activities from continuing operations was unchanged at $2.4 billion in 2023.
FINANCIAL RESOURCES AND LIQUIDITY Cash Flows The following is a summary of our cash flows from continuing operations: (In millions) 2024 2023 2022 Net cash provided by (used in): Operating activities $ 2,265 $ 2,353 $ 2,310 Investing activities (2,446) (2,663) (1,850) Financing activities 153 256 (861) Effect of exchange rate changes on cash (21) (9) (4) Net change in cash, cash equivalents, and restricted cash $ (49) $ (63) $ (405) (In millions) 2024 2023 2022 Net cash provided by operating activities from continuing operations Earnings from continuing operations $ 489 $ 406 $ 863 Non-cash and other, net 2,260 2,088 1,903 Currency translation adjustment loss — 188 — Collections on sales-type leases 148 126 135 Changes in operating assets and liabilities (632) (455) (591) Net cash provided by operating activities from continuing operations $ 2,265 $ 2,353 $ 2,310 Net cash provided by operating activities from continuing operations was $2.3 billion in 2024, compared with $2.4 billion in 2023, due to the timing of vendor payments and prefunding of future required pension contributions.
If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements or by seeking other funding sources.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS impair our ability to access these markets on terms commercially acceptable to us. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements or by seeking other funding sources.
Due to the underfunded status of our defined benefit plans, we had an accumulated net pension equity charge (after-tax) of $637 million and $566 million as of December 31, 2023 and 2022, respectively.
The ultimate amount of contributions is also dependent upon the requirements of applicable laws and regulations. Due to the underfunded status of our defined benefit plans, we had an accumulated net pension equity charge (after-tax) of $597 million and $637 million as of December 31, 2024 and 2023, respectively.
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.
The following table provides a reconciliation of forecasted net cash provided by operating activities to forecasted total cash generated and forecasted free cash flow (a non-GAAP measure) for 2025: (In millions) Forecast 2025 Net cash provided by operating activities from continuing operations $ 2,500 Proceeds from sales of property and revenue earning equipment (1) 500 Total cash generated 3,000 Purchases of property and revenue earning equipment (1) (2,600) Forecasted free cash flow $ 400 _____________________ (1) Included in cash flows from investing activities. 48 ITEM 7.
We intend to continue to permanently reinvest the earnings of our remaining foreign subsidiaries indefinitely. We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future.
We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, volatility or disruption in the public unsecured debt market or the commercial paper market may 36 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion, which should be read in conjunction with the descriptions in the Notes to Consolidated Financial Statements, is furnished for additional insight into certain accounting estimates that we consider to be critical. Residual Value Estimates and Depreciation.
The following discussion, which should be read in conjunction with the descriptions in the Notes to Consolidated Financial Statements, is furnished for additional insight into certain accounting estimates that we consider to be critical. Vehicle Residual Values. At the time we acquire a vehicle, we estimate the residual value at the end of its useful life.
Depreciation Sensitivity Based on our fleet of revenue earning equipment as of December 31, 2023, a hypothetical 10% reduction in estimated residual values would increase depreciation expense over the remaining life of our fleet by approximately $340 million. The current residual value estimates of our total fleet are at historically low levels.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Depreciation Sensitivity Based on our fleet of revenue earning equipment as of December 31, 2024, a hypothetical 10% reduction in estimated residual values would increase depreciation expense over the remaining life of our fleet by approximately $340 million.
While it is likely that our income tax cash obligations may increase at some point in the future, we cannot reasonably estimate the timing or impact of these factors. Share Repurchase Programs and Cash Dividends In October 2023, our board of directors approved two new share repurchase programs.
While it is likely that our income tax cash obligations may increase at some point in the future, we cannot reasonably estimate the timing or impact of these factors. Share Repurchase Programs and Cash Dividends Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs.
Changes in interest rates and the market value of the securities held by the plans could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and required contributions in future years. The ultimate amount of contributions is also dependent upon the requirements of applicable laws and regulations.
Changes in interest rates and the market value of the securities held by the plans could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense 37 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and required contributions in future years.
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. 34 ITEM 7.
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. DTS total revenue increased in 2024 primarily due to higher operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation revenues).
During 2023, we increased our annualized dividend rate 15% to $2.84 per share of common stock. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (U.S. GAAP) requires us to make estimates and assumptions. Our significant accounting policies are described in the Notes to Consolidated Financial Statements.
In 2024, 2023, and 2022, our annualized dividend was $3.04, $2.66, and $2.40 per share of common stock, respectively. During 2024, we increased our annualized dividend rate 14% to $3.24 per share of common stock. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (U.S.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS component using an expected cost-plus margin approach. The expected costs are based on our historical costs of providing maintenance services in our ChoiceLease arrangements.
For the non-lease component of the contract, we estimate the stand-alone selling price of the maintenance component using an expected cost-plus margin approach. The expected costs are based on our historical costs of providing maintenance services in our ChoiceLease arrangements.
Certain of these policies require the application of subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates and assumptions are based on historical experience, changes in the business environment, and other factors that we believe to be reasonable under the circumstances.
These estimates and assumptions are based on historical experience, changes in the business environment, and other factors that we believe to be reasonable under the circumstances.
During 2023, total pension contributions were $21 million, compared with $23 million in 2022. We estimate total 2024 required contributions to our pension plans to be approximately $4 million and we do not expect to make voluntary contributions. The present value of estimated global pension contributions that would be required over the next 5 years totals approximately $59 million (pre-tax).
We estimate total 2025 required contributions to our pension plans to be approximately $13 million. The present value of estimated global pension contributions that will be required over the next 5 years totals approximately $25 million (pre-tax).
Free cash flow (a non-GAAP measure) decreased to negative $54 million in 2023 from $921 million in 2022, primarily reflecting an increase in capital expenditures and prior year proceeds of approximately $400 million from exit of the FMS U.K. business. Net cash provided by operating activities from continuing operations to remain at approximately $2.4 billion in 2024.
Free cash flow (a non-GAAP measure) increased to $133 million in 2024 from negative $54 million in 2023, reflecting reduced capital expenditures partially offset by lower proceeds from sales of used vehicles and property and lower cash from operating activities. Net cash provided by operating activities from continuing operations will increase to approximately $2.5 billion in 2025.
The decrease in the percentage of variable-rate debt was primarily attributable to an increase in fixed-rate debt used to fund vehicle purchases and the IFS acquisition. Our debt to equity ratios were 232% and 216% as of December 31, 2023 and 2022, respectively. The debt to equity ratio represents total debt divided by total equity.
Our debt to equity ratios were 250% and 232% as of December 31, 2024 and 2023, respectively. The debt to equity ratio represents total debt divided by total equity. The increase in the debt to equity ratio primarily reflects share repurchases and the Cardinal Logistics acquisition funded with debt.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 10% increase in market interest rates would impact the fair value of our variable-rate debt and pre-tax earnings by $7 million as of December 31, 2023. 55 We are also subject to interest rate risk with respect to our pension and postretirement benefit obligations, as changes in interest rates will effectively increase or decrease our liabilities associated with these benefit plans, which also results in changes to the amount of pension and postretirement benefit expense recognized on an annual basis.
Biggest changeWe are also subject to interest rate risk with respect to our pension and postretirement benefit obligations, as changes in interest rates will effectively increase or decrease our liabilities associated with these benefit plans, which also results in changes to the amount of pension and postretirement benefit expense recognized on an annual basis. 51 Foreign Currency Exchange Risk Exposure to market risk for changes in foreign currency exchange rates relates primarily to our foreign operations’ buying, selling and financing in currencies other than local currencies and to the carrying value of net investments in foreign subsidiaries.
However, profitability may be positively or negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on current market fuel costs. We believe the exposure to fuel price fluctuations would not materially impact our results of operations, cash flows or financial position. 56
However, profitability may be positively or negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on current market fuel costs. We believe the exposure to fuel price fluctuations would not materially impact our results of operations, cash flows or financial position. 52
As of December 31, 2023, we also had various fuel purchase arrangements in place to ensure delivery of fuel at market rates in the event of fuel shortages. We are exposed to fluctuations in market fuel prices in these arrangements since none of the arrangements fix the price of fuel to be purchased.
As of December 31, 2024, we also had various fuel purchase arrangements in place to ensure delivery of fuel at market rates in the event of fuel shortages. We are exposed to fluctuations in market fuel prices in these arrangements since none of the arrangements fix the price of fuel to be purchased.
As of December 31, 2023, we had $1.1 billion of variable-rate debt, including $500 million of fixed-rate debt instruments swapped to SOFR-based floating-rate debt. Changes in the fair value of the interest rate swaps were offset by changes in the fair value of the debt instruments and no net gain or loss was recognized in earnings.
As of December 31, 2024, we had $1.4 billion of variable-rate debt, including $500 million of fixed-rate debt instruments swapped to SOFR-based floating-rate debt. Changes in the fair value of the interest rate swaps were offset by changes in the fair value of the debt instruments and no net gain or loss was recognized in earnings.
From time to time, we also use interest rate swap agreements to manage our fixed-rate and variable-rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. The fair value of our derivatives liability was $34 million as of December 31, 2023.
From time to time, we also use interest rate swap agreements to manage our fixed-rate and variable-rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. The fair value of our derivatives liability was $25 million as of December 31, 2024.
A hypothetical 10% change in market interest rates would impact the fair value of our fixed-rate debt by approximately $92 million and impact pre-tax earnings by $26 million as of December 31, 2023, respectively.
A hypothetical 10% change in market interest rates would impact the fair value of our fixed-rate debt by approximately $103 million and impact pre-tax earnings by $31 million as of December 31, 2024, respectively.
As of December 31, 2023, we had $5.6 billion of fixed-rate debt outstanding (excluding finance leases and U.S. asset- backed securities) with a weighted-average interest rate of 4.54% and a fair value of $5.7 billion.
As of December 31, 2024, we had $6.1 billion of fixed-rate debt outstanding (excluding finance leases and U.S. asset- backed securities) with a weighted-average interest rate of 5.07% and a fair value of $6.2 billion.
The principal foreign currency exchange rate risks to which we are exposed include the Canadian dollar and Mexican peso. We manage our exposure to foreign currency exchange rate risk related to our foreign operations’ buying, selling and financing in currencies other than local currencies by naturally offsetting assets and liabilities not denominated in local currencies to the extent possible.
We manage our exposure to foreign currency exchange rate risk related to our foreign operations’ buying, selling and financing in currencies other than local currencies by naturally offsetting assets and liabilities not denominated in local currencies to the extent possible.
The fair value of our variable-rate debt as of December 31, 2023 was $1.1 billion.
The fair value of our variable-rate debt as of December 31, 2024 was $1.4 billion. A hypothetical 10% increase in market interest rates would impact the fair value of our variable-rate debt and pre-tax earnings by $7 million as of December 31, 2024.
Removed
Foreign Currency Exchange Risk Exposure to market risk for changes in foreign currency exchange rates relates primarily to our foreign operations’ buying, selling and financing in currencies other than local currencies and to the carrying value of net investments in foreign subsidiaries. The majority of our transactions are denominated in U.S. dollars.
Added
The majority of our transactions are denominated in U.S. dollars. The principal foreign currency exchange rate risks to which we are exposed include the Canadian dollar and Mexican peso.

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