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RYDER SYSTEM INC

RYDER SYSTEM INCR決算レポート

NYSE · logistics

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

What changed in RYDER SYSTEM INC's 10-K — 2024 vs 2025

Top changes in RYDER SYSTEM INC's 2025 10-K

348 paragraphs added · 362 removed · 284 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

79 edited+14 added−12 removed26 unchanged
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.
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. 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.
While we typically service these vehicles at our own facilities, we also operate on-site maintenance facilities or provide mobile maintenance services at customer locations. 3 We also provide additional maintenance and repair services that are not included in our contractual maintenance programs and generally charge for those services on an hourly basis.
While we typically service these vehicles at our own facilities, we also operate on-site maintenance facilities or provide mobile maintenance services at customer locations. We also provide additional maintenance and repair services that are not included in our contractual maintenance programs and generally charge for those services on an hourly basis.
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.
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 our leadership team focusing on high performing and high potential talent, diverse talent and the succession plan for our critical roles.
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.
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 4 changes in vehicle technology. In recent years, the used vehicle sales market has been particularly weak.
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.
Sanchez (1) 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.
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 .
The 11 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 .
We invest in our employees by offering comprehensive health, welfare and retirement programs, along with wellness programs and well-being initiatives. In addition, we provide our professional drivers, technicians and warehouse workers with on-going training opportunities. For example, we pair our professional drivers with certified driver trainers during onboarding and provide position and customer-specific training.
We invest in our employees by offering comprehensive health, welfare and retirement programs, along with wellness programs and well-being initiatives. In addition, we provide our professional drivers, technicians and warehouse associates with on-going training opportunities. For example, we pair our professional drivers with certified driver trainers during onboarding and provide position and customer-specific training.
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.
Market Trends The U.S. commercial fleet market is estimated to include approximately 11 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.
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.
Their wages and benefits are governed by 94 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.
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.
Senior Vice President and Chief Information Officer from January 2003 to October 2005. 60 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.
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.
Vice President and Chief Financial Officer, Global FMS from August 2015 to August 2020. Vice President and Controller from September 2010 to August 2015. 52 Thomas M. Havens President, Fleet Management Solutions 2021 Senior Vice President and Global Chief of Operations for FMS from November 2012 to May 2021.
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.
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 logistics solutions; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions, including dedicated vehicles, professional drivers, management and administrative support.
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 .
Our Canadian operations are also highly coordinated with their U.S. and Mexico counterparts and manage approximately 5,000 border crossings each month. SCS Product Offerings Distribution Management .
Additional information about the regulations that we are subject to can be found in Item 1A, "Risk Factors" in this Annual Report on Form 10-K.
Additional information about the laws and regulations that we are subject to can be found in Item 1A, "Risk Factors" in this Annual Report on Form 10-K.
In addition, we also provide other benefits, including extending auto-liability insurance coverage and competitive fuel pricing. During 2024, commercial rental revenue accounted for 17% of our FMS total revenue. SelectCare . Through SelectCare, customers have access to our extensive network of maintenance facilities and trained technicians to maintain the vehicles they own or lease from third parties.
In addition, we also provide other benefits, including extending auto-liability insurance coverage and competitive fuel pricing. During 2025, commercial rental revenue accounted for 16% of our FMS total revenue. SelectCare . Through SelectCare, customers have access to our extensive network of maintenance facilities and trained technicians to maintain the vehicles they own or lease from third parties.
As of December 31, 2024, we ha d 231 DTS customer accounts in the U.S. Although a significant portion of our DTS operations are located at customer facilities, our DTS business also utilizes and benefits from our FMS services, including our extensive network of FMS maintenance facilities. Our DTS accounts typically operate in a limited geographic area for short-haul drives.
As of December 31, 2025, we ha d 210 DTS customer accounts in the U.S. Although a significant portion of our DTS operations are located at customer facilities, our DTS business also utilizes and benefits from our FMS services, including our extensive network of FMS maintenance facilities. Our DTS accounts typically operate in a limited geographic area for short-haul drives.
In addition, there is still significant demand for qualified truck drivers, dedicated capacity from quality transportation and logistics providers, and industry expertise related to asset utilization analysis and fleet rationalization studies offered as part of our DTS services. Operations/Product Offerings During 2024, our DTS business accounted for 19% of our consolidated revenue.
In addition, there is still significant demand for qualified truck drivers, dedicated capacity from quality transportation and logistics providers, and industry expertise related to asset utilization analysis and fleet rationalization studies offered as part of our DTS services. Operations/Product Offerings During 2025, our DTS business accounted for 18% of our consolidated revenue.
Senior Vice President of Ryder Dedicated from March 2014 to February 2015. Senior Vice President of Asset Management from January 2011 to February 2014. 54 Cristina Gallo-Aquino (2) Executive Vice President, Chief Financial Officer and Principal Accounting Officer 2025 Senior Vice President, Controller and Principal Accounting Officer from September 2020 to December 2024.
Senior Vice President of Ryder Dedicated from March 2014 to February 2015. Senior Vice President of Asset Management from January 2011 to February 2014. 55 Cristina Gallo-Aquino Executive Vice President, Chief Financial Officer and Principal Accounting Officer 2025 Senior Vice President, Controller and Principal Accounting Officer from September 2020 to December 2024.
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 services provided as part of an operationally integrated, multi-service supply chain solution to SCS customers are primarily reported in the SCS business segment. 1 ___________________ As of and for the year ended December 31, 2025. FMS total revenue includes eliminations We operate in highly competitive markets.
(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.
(2) Our SelectCare customers includ e approximately 1,000 ChoiceLease customers. Fuel Services. Our FMS customers have access to competitively priced diesel fuel at 401 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.
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 customer base reflects a variety of industries as shown below (as a percentage of operating revenue - a non-GAAP measure): 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.
For example, we centralize certain administrative support services, including our carrier procurement and contract management, in our logistics centers in Novi, Michigan and Fort Worth, Texas. In Mexico, we offer a full range of logistics services and manage approximately 21,500 border crossings each month between the U.S. and Mexico.
For example, we centralize certain administrative support services, including our carrier procurement and contract management, in our logistics centers in Novi, Michigan and Fort Worth, Texas. In Mexico, we offer a full range of logistics services and manage approximately 23,600 border crossings each month between the U.S. and Mexico.
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.
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 2025, fuel services revenue accounted for 12% of our FMS total revenue. Used Vehicles.
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.
Refer to Item 1A, "Risk Factors" for further information regarding risk associated with our human capital and the attraction, development and retention of personnel. 9 Safety Our safety culture is founded upon a core commitment to the safety, health and security of our employees, customers and the community.
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 seek to execute our strategy by: • leveraging secular trends that favor outsourcing logistics and transportation services; • offering market leading end-to-end supply chain solutions in North America; • growing earnings from our contractual lease, dedicated and supply chain businesses; • continuously improving productivity and processes; 2 • 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.
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.
During 2025, ChoiceLease revenue accounted for 60% 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.
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 .
We offer used vehicles from our 61 retail sales centers throughout the U.S. and Canada (23 of which are co-located at an FMS shop), at our branch locations and through our website at www.ryder.com/used-trucks .
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.
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; • focus consistently on network optimization and continuous improvement; and • recruit and retain professional drivers.
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.
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.
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.
During 2025, our contract manufacturing and contract packaging services and other services accounted for 6% of our SCS total revenue. 6 SCS Business Strategy Our strategy is to offer differentiated and proactive solutions utilizing expertise in our key industry verticals.
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.
Safety is embedded in our day-to-day operations, reinforced by many safety programs and continuous operational improvement, and supported by our safety organization. We have created and implemented policies, processes and training programs to minimize safety events, and we review and monitor our performance closely.
Our safety organization team oversees our overall safety strategy and consists of three divisions: Safety Standards & Technology, Field Safety Solutions, and U.S. Department of Transportation Compliance. Our safety organization 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 oversees our overall safety strategy and consists of three divisions: Safety Standards & Technology, Field Safety Solutions, and DOT 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.
Market Trends Logistics spending in North America in the key target markets in which we operate was approximately $2.9 trillion, of which $369 billion was outsourced. 2 As supply chains continue to expand and become more complex, the demand for outsourced logistics is expected to continue increasing as companies will require more sophisticated, cost-effective and reliable supply chain practices.
Market Trends Logistics spending in the U.S. in the key target markets in which we operate was approximately $1.5 trillion, of which $234 billion was outsourced. 2 As supply chains continue to expand and become more complex, the demand for outsourced logistics is expected to continue increasing as companies will require more sophisticated, cost-effective and reliable supply chain practices.
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.
At December 31, 2025, we have used vehicle inventory of 9,500 vehicles, slightly above 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.
Operations In 2024, our global FMS business accounted for 39% of our consolidated revenue. U.S. Our FMS customers in the U.S. range from small businesses to large enterprises operating in a variety of industries. As of December 31, 2024, we had 563 operating locations, excluding ancillary storage locations, in 49 states, the District of Columbia and Puerto Rico.
Operations In 2025, our global FMS business accounted for 38% of our consolidated revenue. Our FMS customers range from small businesses to large enterprises operating in a variety of industries. As of December 31, 2025, we had 789 operating locations, excluding ancillary storage locations, in 49 states, the District of Columbia, Puerto Rico and seven Canadian provinces.
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.
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.
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.
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 associates also receive regular safety and compliance training that is specific to their location. As of December 31, 2025, we had 51,600 total employees in North America.
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.
We currently employ 12,700 professional drivers and 4,600 technicians. We have 34,300 hourly employees in the U.S., 3,600 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.
DTS Business Strategy Our strategy is to offer custom solutions to customers who need specific vehicles, specialized handling, dedicated capacity or integrated transportation services.
(formerly RL Polk) & Ryder Internal Estimates. 7 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 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.
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. Training is also a key component of our safety program and is available to our professional drivers, technicians, warehouse associates and management, amongst others.
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.
We may also become subject to new or more restrictive laws and regulations related to emissions or vehicle specifications, drivers' hours of service, wage and hour requirements, employee and independent contractor classification, security, including data privacy and cybersecurity, and ergonomics.
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.
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, automation capabilities, and customer-centric technology such as RyderShare™, RyderView 2.0™ and RyderShip™ ; • focus consistently on network optimization and continuous improvement; • execute on targeted sales and marketing growth strategies; and • expand product offerings to complement port-to-door solutions.
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.
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. 60 Karen M.
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.
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. FMS operates one of the leading full service leasing, commercial rental and contract maintenance businesses in North America.
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.
Fleet as of December 2024, Class 3-8, Polk/S&P Registration Data. 3 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.
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.
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.
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.
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.
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.
Additionally, we offer safety support to customers through Ryder Fleet Risk Services (FRS), which helps customers navigate the increasingly complex industry landscape through customized consultations, trainings and compliance support. 10 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Position Current Position Since Prior Business Experience Age Robert E.
Fleet as of December 2023, Class 3-8, IHS Markit Ltd. 2 • Demand for efficient and reliable vehicles have caused companies to place greater emphasis on the quality of their preventive maintenance and safety programs; • Maintaining and operating commercial vehicles has become more complex and expensive, as truck technology must comply with increasing state and federal emissions regulations; and • Companies must also manage global supply chain and labor challenges, as well as volatile used vehicle markets.
These trends include: • Demand for efficient and reliable vehicles have caused companies to place greater emphasis on the quality of their preventive maintenance and safety programs; • Maintaining and operating commercial vehicles has become more complex and expensive, as truck technology must comply with increasing state and federal emissions regulations; • Companies must also manage global supply chain and labor challenges, as well as volatile used vehicle markets; and • The cost and total capital required for owning vehicles continues to rise with every technological change requiring increasing cash outlays.
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.
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. 58 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. 60 ___________________ (1) As announced in December 2025, effective as of March 31, 2026, Mr.
The current phase of our balanced growth strategy is driven by three priorities: (i) create value through operational excellence, (ii) invest in customer-centric innovation, and (iii) further improve full-cycle returns and generate profitable growth.
We aim to achieve this by growing with existing customers and new prospects who internally manage their supply chain services. The current phase of our balanced growth strategy is driven by three priorities: (i) create value through operational excellence, (ii) invest in customer-centric innovation, and (iii) further improve full-cycle returns and generate profitable growth.
Key aspects of our value proposition are our operational execution, leveraged assets and infrastructure, technical and industry expertise and customer-facing visibility platforms.
These services are available individually, in various combinations, or as part of a comprehensive integrated solution. Key aspects of our value proposition are our operational execution, leveraged assets and infrastructure, technical and industry expertise and customer-facing visibility platforms.
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 .
Our operating locations serve multiple customers, and typically include maintenance facilities; service islands for fueling; sales and administrative offices; and commercial rental vehicle counters. As of December 31, 2025, 20% of our operating locations are at customer sites where we provide vehicle maintenance solely for that customer's fleet. FMS Product Offerings ChoiceLease .
Our customers benefit from a dedicated transportation solution that mitigates the labor and regulatory challenges associated with maintaining a private fleet, such as driver recruitment and retention, hours of service requirements, Department of Transportation (DOT) audits and workers' compensation. 6 Market Trends The outsourced U.S. dedicated market was estimated to be $30 billion 3 from an addressable market of approximately $660 billion. 4 Many of the same trends that impact our FMS business affect our DTS business.
Our customers benefit from a dedicated transportation solution that mitigates the labor and regulatory challenges associated with maintaining a private fleet, such as driver recruitment and retention, hours of service requirements, Department of Transportation (DOT) audits and workers' compensation.
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.
Our technicians also receive training to improve their maintenance skills to ensure compliance with best-in-line safety measures. For our warehouse associates, we provide training on various safety techniques along with regular OSHA training. Our proprietary, web-based safety management system delivers monthly proactive safety programs and compliance tasks that are tailored to each location.
Competition As an alternative to using our services, companies may choose to internally manage their own supply chains and logistics operations, or obtain alternative services from other third parties.
Competition As an alternative to using our services, companies may choose to internally manage their own supply chains and logistics operations, or obtain alternative services from other third parties. We compete with a few 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.
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.
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. CYCLICALITY Our business is impacted by economic and market conditions. In a strong economic environment, there is generally more demand for our services.
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.
Jones Executive Vice President and Chief Marketing Officer 2014 Senior Vice President and Chief Marketing Officer from September 2013 to October 2014. 63 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. 51 Sanford J.
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 .
We also offer additional services related to routing and scheduling, fleet design, safety, regulatory compliance, risk management, technology and communication systems support. 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.
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.
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).
We offer transportation management and brokerage services, including shipment optimization, load scheduling and delivery confirmation through a series of technology and web-based solutions. Our transportation consultants focus on carrier procurement for all modes of transportation, with an emphasis on truck-based transportation, and also provide additional services like rate negotiation, freight bill audits and payment services.
Our transportation consultants focus on carrier procurement for all modes of transportation, with an emphasis on truck-based transportation, and also provide additional services like rate negotiation, freight bill audits and payment services. During 2025, we purchased or executed $9.8 billion in freight moves on our customers' behalf, including $334 million in brokerage services.
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.
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. 58 Tom Regan Executive Vice President, Dedicated Transportation Solution 2025 Senior Vice President, Automotive, Aerospace, & Industrial for SCS from August 2022 to August 2025.
By outsourcing their needs to us, our customers can focus on their core business, improve their efficiency and productivity and lower their costs.
INDUSTRY AND OPERATIONS Fleet Management Solutions Value Proposition Our FMS business provides a variety of fleet solutions that are designed to improve our customers' competitive positions. By outsourcing their needs to us, our customers can focus on their core business, improve their efficiency and productivity and lower their costs.
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.
The following table provides information regarding the number of vehicles and customers by FMS product offering: December 31, 2025 Vehicles Customers ChoiceLease 141,700 11,700 Commercial rental (1) 31,600 27,200 SelectCare (2) 44,100 1,700 ___________________ (1) Commercial rental customers represent those who rented a vehicle for more than three days during the year and include 5,000 ChoiceLease customers.
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.
During 2025, transportation management solutions accounted for 12% of our SCS total revenue. E-commerce and Last Mile. We offer omnichannel delivery services through a network of over 165 sites strategically located throughout the U.S. that we own or that are leased by us, our customers or our agents.
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).
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). Dedicated Transportation Solutions Value Proposition Our DTS business provides specialized dedicated transportation services.
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.
The safety policies and procedures in place require that all managers, supervisors and employees incorporate safe processes in all aspects of our business. Monthly safety scorecards are tracked and reviewed by management for progress toward key safety objectives.
By servicing all of our customers' maintenance needs, we create stronger, long-term relationships and can provide a wide range of outsourcing solutions. In 2023, we launched Torque by Ryder ® , an on-demand retail mobile maintenance solution offered in select U.S. markets that enables our customers to order on-site maintenance services with no long-term contractual commitment.
We offer several bundles of services, including full service contract maintenance, as well as preventive and on-demand maintenance. We also offer on-demand retail mobile maintenance in select U.S. markets that enables our customers to order on-site maintenance services with no long-term contractual commitment through our Torque by Ryder™ service offering.
The Cardinal Logistics acquisition increased our scale and customer network density and supports our strategy to accelerate profitable growth in our dedicated business. We provide custom transportation analysis using advanced logistics planning and operating tools. Based on this analysis, our logistics specialists create a distribution system that optimizes freight flow while meeting customer service goals.
We provide custom transportation analysis using advanced logistics planning and operating tools. Based on this analysis, our logistics specialists create a distribution system that optimizes freight flow while meeting customer service goals. If a distribution system includes multiple modes of transportation (air, rail, sea and highway), we select appropriate transportation modes and carriers, and monitor and audit carrier performance.
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.
Our lease offering provides customers with bundled vehicle and maintenance services while our customers furnish and supervise their own drivers and exercise control over the vehicles. Customers are able to select the terms of their lease and their preferred level of maintenance services, from full service to on-demand maintenance.
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.
During 2025, distribution management and value-added services accounted for approximately 36% of our SCS total revenue. Dedicated Transportation. We offer specialized dedicated transportation services as part of an integrated supply chain solution with our equipment and professional drivers or with outside carriers.
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.
The Federal Motor Carrier 8 Safety Administration (FMCSA), an agency within the DOT, manages the Compliance, Safety, Accountability program (CSA), designed to monitor and improve commercial vehicle motor safety. 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.
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.
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. 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.
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.
We must comply with licensing and other requirements imposed by the DHS, and our supply chain security program is certified by the U.S. Customs and Border Protection Customs-Trade Partnership Against Terrorism certification, Canada’s Partners in Protection program, and Mexico’s Authorized Economic Operator program.
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.
(2) Armstrong & Associates – Working Through the Uncertainty, Latest Third-Party Logistics Market Results and Outlook, June 2025. 5 Operations During 2025, our SCS business accounted for 43% of our consolidated revenue, and our customer accounts and warehousing square footage were as follows: December 31, 2025 (Square footage in millions) Customer Accounts (1) Number of Warehouses Square Footage (2) United States 552 254 93 Mexico and Canada (3) 170 65 12 Total 722 319 105 ___________________ (1) Customer accounts excludes 285 brokerage customers.
We have a balanced growth strategy focused on de-risking and optimizing the business model, enhancing returns and free cash flow, and driving long-term profitable growth. We aim to achieve this by growing with existing customers and new prospects who internally manage their supply chain services.
We offer the most comprehensive port-to-door solutions and transportation services in North America to help solve many of the challenges facing companies today. We have a balanced growth strategy focused on de-risking and optimizing the business model, enhancing returns and free cash flow, and driving long-term profitable growth.
ITEM 1. BUSINESS OVERVIEW Ryder System, Inc. (Ryder) is a leading provider of outsourced logistics and transportation services to customers throughout North America.
ITEM 1. BUSINESS OVERVIEW Ryder System, Inc. (Ryder) is a leading provider of outsourced logistics and transportation services throughout North America. We offer port‑to‑door solutions that integrate every step of the supply chain, including international inbound flows and cross‑border logistics, fleet and transportation management, warehousing, manufacturing support and multi-channel final delivery.
Diez was appointed President and Chief Operating Officer, effective January 1, 2025. (2) Cristina Gallo-Aquino was appointed Executive Vice President, Chief Financial Officer and Principal Accounting Officer, effective January 1, 2025. FURTHER INFORMATION For further discussion concerning our business, see the information included in Items 7 and 8 of this Annual Report.
Sanchez will retire as CEO and assume the role of Executive Chair. At such time, Mr. Diez will succeed him as CEO and be appointed to the Board. FURTHER INFORMATION For further discussion concerning our business, see the information included in Items 7 and 8 of this Annual Report.
If a distribution system includes multiple modes of transportation (air, rail, sea and highway), we select appropriate transportation modes and carriers, and monitor and audit carrier performance. In addition, customers from our SCS business that utilize our dedicated transportation services benefit from our cost-effective solutions that help aggregate loads, consolidate shipments or optimize backhaul opportunities.
In addition, customers from our SCS business that utilize our dedicated transportation services benefit from our cost-effective solutions that help aggregate loads, consolidate shipments or optimize backhaul opportunities. (3) Armstrong & Associates – Working Through the Uncertainty, Latest Third-Party Logistics Market Results and Outlook, June 2025. (4) Addressable market as of December 2024, Class 3-8, IHS Markit Ltd.
Removed
Cardinal Logistics Acquisition In 2024, we acquired CLH Parent Corporation (Cardinal Logistics), a leading customized dedicated contract carrier in the United States (U.S.) primarily providing dedicated transportation services and professional drivers, as well as freight brokerage services. The acquisition increased our scale and network density, supporting our strategy to accelerate profitable growth in our dedicated business.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our business is highly susceptible to disruptions in global supply chains as services are directly tied to the production and sale of goods.
Our business is highly susceptible to disruptions in global supply chains as our services are directly tied to the production and sale of goods.
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 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.
In addition, in the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. For example, significant judgment is required in determining our worldwide provision for income taxes, and our tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions.
In addition, in the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. For example, significant judgment is required in determining our provision for income taxes, and our tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions.
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.
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 prices.
Insurance to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, and may not be sufficient to cover all of our damages or may not be available at commercially reasonable rates.
Insurance to protect against loss of business and other related consequences resulting from 21 these natural occurrences is subject to coverage limitations, and may not be sufficient to cover all of our damages or may not be available at commercially reasonable rates.
In addition, we are committed to creating a positive and collaborative work environment throughout our organization. If we do not, or are perceived not to, have such a work environment, our reputation or ability to recruit and retain talent may be adversely impacted.
In addition, we are committed to creating a positive and collaborative work environment throughout our organization. If we do not, or are perceived not to, have such a work environment, our reputation or ability to recruit and retain talent may be 20 adversely impacted.
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 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.
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.
Moreover, when global supply chains have been disrupted, we have experienced increased inflationary pressures that increased costs in certain other 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.
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.
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 14 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.
Among our services and product offerings, demand for used vehicles, rental and 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 sales are particularly susceptible to changes in economic and market conditions.
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.
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. 16 We and the vehicle equipment manufacturers in our FMS business rely on a small number of suppliers.
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.
In addition, when we have materially decreased residual value estimates, our earnings over the vehicle's remaining useful life have decreased due to an 12 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.
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.
While we continue to focus our efforts on diversifying our customer and carrier base, we may not be successful in doing so. During 2025, 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.
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.
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 existing drivers with unfavorable scores may no longer be eligible to drive for us.
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.
Depending on the circumstances of a particular supply chain 13 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.
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.
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 jurisdictions with differing statutory tax rates and changes in our overall profitability.
Disruptions in global supply chains have impacted each of our business segments as the supply and demand of commercial vehicles directly impacts our FMS business, and the production and supply of certain goods impacts the businesses of our customers in SCS and DTS, and therefore our own business.
Disruptions in global supply chains have impacted each of our business segments as the supply and demand of commercial vehicles and vehicle parts directly impacts our FMS business, and the production and supply of certain goods impacts the businesses of our customers in SCS and DTS, and therefore our own business.
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.
Any material decrease in residual value accounting 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.
For a detailed discussion on our accounting policies and assumptions relating to depreciation and residual values, please see "Critical Accounting Estimates - Residual Value Estimates and Depreciation" in Management's Discussion and Analysis of Financial Condition and Results of Operations.
For a detailed discussion on our accounting policies and assumptions relating to depreciation and residual values, please see "Critical Accounting Estimates - Vehicle Residual Values" 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.
For a detailed discussion on our accounting policies and assumptions relating to our self-insurance reserves, please see the "Critical Accounting Estimates - Self-Insurance Obligations" section in Management's Discussion and Analysis of Financial Condition and Results of Operations. 15 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.
These higher labor costs as well as higher subcontracted transportation costs have negatively impacted our earnings in both DTS and SCS. If labor shortages continue for an extended period of time, our earnings may be further adversely impacted. Professional Drivers. We hire professional drivers primarily for our SCS and DTS business segments.
These higher labor costs as well as higher subcontracted transportation costs have negatively impacted our earnings in both DTS and SCS. If labor shortages exist for an extended period of time, our earnings may be adversely impacted. Professional Drivers. We hire professional drivers primarily for our SCS and DTS business segments.
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.
As of December 31, 2025, we had $7.6 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.
Human Capital If we are unable to mitigate labor shortage challenges, our financial results may continue to be negatively impacted. We have experienced high labor costs due to labor shortage challenges across all of our business segments, particularly our DTS and SCS segments.
Human Capital If we are unable to mitigate labor shortage challenges, our financial results may continue to be negatively impacted. In the past, we have experienced high labor costs due to labor shortage challenges across all of our business segments, particularly our DTS and SCS segments.
General Risk Factors Our business may be affected by uncertainty or changes in U.S. or global social, political or regulatory conditions. Adverse developments in laws, policies or practices in the U.S. and internationally can negatively impact our business and the businesses of our customers.
Our business may be affected by uncertainty or changes in U.S. or global social, political or regulatory conditions. Adverse developments in laws, policies or practices in the U.S. and internationally can negatively impact our business and the businesses of our customers.
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.
These matters may be time-consuming, expensive and disruptive to normal business operations. The defense of such matters could result in significant expense and the diversion of our management's time and attention from the operation of our business. In addition, our involvement could negatively impact our business reputation and our relationships with our customers, suppliers or employees.
We face litigation risks regarding a variety of issues, including accidents involving our trucks and injuries to employees, alleged violations of federal and state labor and employment law including class-action lawsuits alleging wage and hour violations, independent contractor misclassification and improper pay, securities laws, environmental liability, commercial claims, cyber and other matters.
We face litigation risks regarding a variety of issues, including accidents involving our trucks and injuries to employees, alleged violations of federal and state labor and employment law such as class-action lawsuits alleging wage and hour violations, independent contractor misclassification and improper pay, intellectual property infringement, securities laws, environmental liability, commercial claims, cyber and other matters.
On the other hand, when global supply chain disruptions caused a semiconductor shortage, we experienced a significant increase in demand for rental and used vehicles, as well as lease, due to the limited supply of commercial vehicles.
When global supply chain disruptions later caused a semiconductor shortage, we then experienced a significant increase in demand for rental and used vehicles, as well as lease, due to the limited supply of commercial vehicles.
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.
We have approximately 3,600 employees in the U.S. that are organized by labor unions whose wages and benefits are governed by 94 labor agreements that are renegotiated periodically.
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.
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.
We may also fail to ensure that companies we acquire, that may not have historically maintained internal compliance controls, risk mitigation processes, or policies or procedures, comply with regulatory and legal requirements consistent with our standards.
Moreover, we may also fail to ensure that companies we acquire, that may not have historically maintained internal compliance controls, risk mitigation processes, or policies or procedures, comply with laws and regulations consistent with our standards.
In our SCS and DTS businesses, our logistics and transportation services are tied to the demand of our customers' goods. If demand for our customers' products declines, our customers may experience a decline in volumes, which may impact our financial results.
In our SCS and DTS businesses, our logistics and transportation services are tied to the demand for our customers' goods. If demand for our customers' products declines such as due to increased prices as a result of tariffs, our customers may experience a decline in volumes, which may impact our financial results.
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.
Further, compliance with environmental laws and regulations is complicated by various jurisdictions 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, labor shortages, 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 increases, such as due to recessionary conditions, changes in international trade policy, labor shortages, tariffs, interest rate fluctuations, inflationary pressures or changes in technology, our future growth prospects, business and results of operations could be materially adversely affected.
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.
With the increase in social media and citizen journalism, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult to respond effectively. This unfavorable publicity could also require us to allocate significant resources to reinforce and protect our reputation.
Similarly, compliance with new environmental laws or regulations may also impose new restrictions on our business or require us to take certain actions that may increase our costs and adversely affect our business.
Similarly, compliance with environmental laws or regulations may also impose new restrictions on our business or require us to take certain actions that may increase our costs and adversely affect our business, such as emission reduction and zero-emission vehicle requirements.
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.
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. Warehouse Associates.
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.
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.
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.
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, public policy changes may affect the requirements or timing of adopting new technologies, as well as product availability from manufacturers.
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.
We are also subject to safety, health and environmental laws and regulations imposed by various jurisdictions and agencies, such as the FDA, USDA, EPA and OSHA, including requirements related to emissions and vehicle specifications. We must also comply with domestic and international laws and regulations related to tax, anti-bribery, anti-corruption and anti-money laundering laws, such as the U.S.
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.
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 have an adverse impact on profitability. Undercapacity could impact our ability to reliably provide rental vehicles to our customers and may negatively affect our reputation.
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.
Negative domestic and international global trade conditions as a result of social, political or regulatory changes or perceptions could materially affect our business, financial conditions and results of operations. 18 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 tariff policies, including recently imposed tariffs on imported vehicles, vehicle parts and industrial goods, trade restrictions and trade agreements, such as the U.S.-Mexico-Canada Agreement; • 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.
Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.
Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows. 17 We operate in a highly regulated industry, and changes in laws and 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.
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.
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. Extreme weather or other natural occurrences could result in significant business interruptions and expenditures in excess of available insurance coverage.
These and other similar efforts may impose restrictions on our activities or require us to take certain actions, all of which may, over time, increase our costs and adversely affect our business and results of operations.
These and other similar efforts may impose restrictions on our activities or require us to take certain actions, all of which may, over time, increase our costs and adversely affect our business and results of operations. Additionally, the demand for maintenance services in FMS and offerings in our SCS and DTS businesses may also be adversely affected.
To determine the residual value estimates and useful life of our vehicle fleet, management is required to make judgments about future events that are subject to risks and uncertainties outside of their control.
We bear the risk that we will not be able to resell our used vehicles at a price at or above their residual value estimates. To determine the residual value estimates and useful life of our vehicle fleet, management is required to make judgments about future events that are subject to risks and uncertainties outside of their control.
Macroeconomic factors, as well as changes in investment returns and discount rates used to calculate pension expense and related assets and liabilities, can be volatile and may have an unfavorable impact on our costs and funding requirements.
Macroeconomic factors, as well as changes in investment returns and discount rates, can be volatile and may have an unfavorable impact on the funded status of our pension plans, our pension expense and future funding requirements.
For example, we make real estate commitments to support our SCS multi-client warehouse network based on anticipated customer demand to drive the highest level of utilization and revenue per warehouse. If we miss our projections and have excess capacity in our warehouses, it could result in a decrease in revenue that could adversely affect our financial condition and operating results.
For example, we make real estate commitments to support our SCS multi client warehouse network based on anticipated customer demand to drive the highest level of utilization and revenue per warehouse. If customer demand is lower than expected we may have excess capacity in our warehouses.
Any changes could further increase our costs or operating complexity and our ability to offer certain services in the jurisdictions in which we operate.
In addition, new laws or regulations may be adopted or interpretative changes to existing laws and regulations could be issued at any time, which could further increase our costs or operating complexity and our ability to offer certain services in the jurisdictions in which we operate.
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.
However, if there is a limited supply of commercial vehicles for an extended period of time, we may experience limited rental and lease fleet growth and a limited inventory of used vehicles. If OEMs then produce an oversupply of new commercial vehicles, our FMS business may experience reduced rental demand and used vehicle sales.
Undercapacity could impact our ability to reliably provide rental vehicles to our customers and may negatively affect our reputation. We employ a sales force and operations team on a full-time basis to manage and optimize this product line; however, their efforts may not be sufficient to overcome unforeseen changes in market demand in the rental business.
We employ a sales force and operations team on a full-time basis to manage and optimize this product line; however, their efforts may not be sufficient to overcome unforeseen changes in market demand in the rental business. In contrast, in our ChoiceLease product line, we typically do not purchase vehicles until we have an executed contract with a customer.
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.
Although we are actively seeking to control increases in our pension expense and future funding requirements through annuitization transactions, liability-driven investment strategies 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. 19 Our failure to comply with U.S. or foreign tax laws or a government challenging our tax position could adversely affect our business and future operating results.
Moreover, 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.
Legal, Regulatory and Financial Risks We face litigation risks that could have a material adverse effect on the operation of our business.
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.
Foreign Corrupt Practices Act and Office of Foreign Assets Control (OFAC) restrictions. Our failure to comply with applicable laws and regulations, which may vary significantly by jurisdiction, 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.
In addition, compliance and enforcement initiatives implemented by the FMCSA related to driver time, fitness and safety may shrink the industry's pool of professional drivers. In addition, new laws or regulations may be adopted or interpretative changes to existing regulations could be issued at any time.
In addition, compliance and enforcement initiatives implemented by the FMCSA related to drivers' hours of service, fitness and safety may shrink the industry's pool of professional drivers.
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.
In addition, any adverse publicity about emissions by the transportation industry, for example, could accelerate the adoption of new technology and potentially decrease customer demand for some of our services and used vehicles.
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.
This could result in a decrease in revenue that could adversely affect our financial condition and operating results. 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 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.
We are also subject to credit risk associated with the concentration of our accounts receivable from our SCS and DTS customers.
In general, we rely in large part upon global credit and financial markets to fund our operations and contractual commitments as well as to refinance existing debt. These markets can experience high levels of volatility, and our access to capital could be constrained for extended periods.
These markets can experience high levels of volatility, and our access to capital could be constrained for extended periods.
For example, in the U.S., the DOT exercises broad powers over our motor carrier operations and safety. We are also subject to health and safety regulations imposed by state and federal agencies, such as the FDA, the USDA and OSHA.
Our business is subject to laws and regulations in the jurisdictions in which we operate and is regulated by various agencies, including the DOL, DOT, HHS, USDA and SEC. For example, the DOT exercises broad powers over our motor carrier operations and safety.
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.
As of December 31, 2025, the aggregate present value of obligations of our global defined pension plans was $1.6 billion, and the fair value of the plan assets of our global defined benefit pension plans was $1.5 billion.
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.
If we are unable to quickly adapt to and adopt innovations desired by our customers, it may result in a significant loss of demand for our service offerings. Certain innovations, such as an increase in customer use of zero-emission vehicles, for example, could reduce the demand for our diesel vehicle and related maintenance and other offerings.
We may be negatively impacted by adverse events in the global credit and financial markets, by an investment rating downgrade, or by the loss of an investment grade rating. Our FMS business is highly capital intensive, and its profitability could be adversely affected if we are unable to obtain sufficient capital to fund its operations.
Our FMS business is highly capital intensive, and its profitability could be adversely affected if we are unable to obtain sufficient capital to fund its operations. In general, we rely in large part upon U.S. credit and financial markets to fund our operations and contractual commitments as well as to refinance existing debt.
Damage to our reputation through unfavorable publicity or the actions of our employees could adversely affect our financial condition. Our success depends on our ability to consistently deliver operational excellence and strong customer service.
Our success is built on our ability to consistently deliver operational excellence and strong customer service.
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.
Failure to maintain, upgrade and consolidate our information technology networks, or maintain adequate controls over such technology systems, could adversely affect us. Our success depends on the functionality of information technology systems to support our business and service offerings.
Negative 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.
Negative 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. We may be negatively impacted by adverse events in the U.S. credit and financial markets, by an investment rating downgrade, or by the loss of an investment grade rating.
The funded status of the plans, equal to the difference between the present value of plan obligations and assets, is a significant factor in determining pension expense and the ongoing funding requirements of those plans.
The calculation of pension expense and pension plan funding requirements are influenced by multiple factors, including the funded status of our plans, which equals the difference between the plans' projected benefit obligations and the fair value of the plans' assets.
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.
Measures implemented in response to public health crises, geopolitical developments, labor strikes, and changes in international trade policy, among others, may disrupt global supply chains which may then adversely affect our business and results of operations.
Removed
However, we may experience limited rental and lease fleet growth and have a limited inventory of used vehicles for sale during an extended period of limited supply of commercial vehicles.
Added
For example, the transportation and logistics industries may be impacted by innovations in advanced vehicle, machine learning and artificial intelligence technologies (e.g., zero-emission vehicles, autonomous or driver-assist technologies, and warehouse automation), as well as technologies we cannot yet foresee.
Removed
For example, advanced vehicle technologies include electric vehicles, autonomous or semi-autonomous vehicles, as well as driver assist technologies. Additionally, e-commerce services, last-mile home delivery, and asset- and freight-sharing services continue to garner demand and interest.
Added
Advancements in warehouse automation technology, such as autonomous mobile robots (AMRs), have impacted, and may continue to impact, our supply chain business.
Removed
In addition, there may be other innovations that could impact the transportation, trucking and supply chain and logistics industries, such as machine learning and artificial intelligence, as well as other technologies we cannot yet foresee. Our inability to quickly adapt to and adopt innovations desired by our customers may result in a significant loss of demand for our service offerings.
Added
If warehouse automation technologies reduce the number of warehouse associates needed at a facility, it could adversely affect our financial condition and operational results as it could decrease SCS revenue or lead to a decrease in demand for our services.
Removed
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. Our business is subject to laws and regulation by various federal, state, local and foreign governmental agencies.
Added
For example, in our FMS business, the recent introduction of tariffs has modestly increased our maintenance costs as the prices of certain vehicle parts has increased. To the extent we are unable to mitigate these or other cost increases, our operating results in our FMS business could be adversely affected.
Removed
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.
Added
Volatility in assumptions, discount rates and investment returns related to our pension plans may adversely affect the funding status of the pension plans, future funding requirements and our pension expense under our defined benefit pension plans. We sponsor a number of defined benefit plans for employees not covered by union-administered plans, including certain employees in foreign countries.
Removed
Our failure to comply with U.S. or foreign tax laws or a government challenging our tax position could adversely affect our business and future operating results.
Added
We also hire warehouse associates in our SCS business segment to support the movement of goods in warehouses, particularly in our omnichannel and consumer packaged goods verticals. In recent years, there has been ongoing competition for warehouse associates in the logistics industry. At times, our business has experienced increased demand and competition for labor, which drives up costs.
Removed
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.

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Item 2. Properties

Properties — owned and leased real estate

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Our FMS properties are primarily comprised of maintenance facilities generally including a shop for preventive maintenance and repairs, a service island for fueling, safety inspections and preliminary maintenance checks, used vehicle retail sales centers, and in many cases, a commercial rental vehicle counter. Additionally, we manage 172 on-site maintenance facilities, located at customer locations.
Our FMS properties are primarily comprised of maintenance facilities generally including a shop for preventive maintenance and repairs, a service island for fueling, safety inspections and preliminary maintenance checks, used vehicle retail sales centers, and in many cases, a commercial rental vehicle counter. Included in these FMS properties are 155 on-site maintenance facilities, located at customer locations.
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 2. PROPERTIES Our properties consist primarily of vehicle maintenance and repair facilities, warehouses and other real estate and improvements. We manage 827 FMS properties in the U.S., Puerto Rico and Canada; we own 470 of these properties.
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.
We also manage 524 locations in the U.S., Canada and Mexico in connection with our SCS business, which includes 246 customer locations. Almost all of our SCS locations are leased and generally include a warehouse, administrative offices and an equipment domicile. Our Mexico locations may also include repair shops.
These facilities are generally administrative offices, of which we own three and lease the remaining locations. 21 Table of Contents
Additionally, we maintain 14 U.S. locations primarily used for Central Support Services. These facilities are generally administrative offices, of which we own four and lease the remaining locations. 22 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
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.
Removed
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).
Removed
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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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.
The stock performance graph assumes for comparison that the value of our common stock and of each index was $100 on December 31, 2020, 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, 2025, there were 4,649 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, 2026, there were 4,362 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, 2019 to December 31, 2024.
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, 2020 to December 31, 2025.
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.
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.
Past 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.
Past performance is not necessarily an indicator of future results. 23 Purchases of Equity Securities The following table provides information with respect to purchases we made of our common stock during the quarter ended December 31, 2025: Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Aggregate Maximum Number of Shares That May Yet Be Purchased Under the Discretionary and Anti-Dilutive Programs (2) October 1 through October 31, 2025 305,920 $ 169.29 305,920 3,194,080 November 1 through November 30, 2025 680,971 168.71 680,000 2,514,080 December 1 through December 31, 2025 100 191.99 — 2,514,080 Total 986,991 $ 168.90 985,920 ______________________ (1) Amounts exclude the commissions and excise tax.
Added
(2) We currently maintain two share repurchase programs approved by our board of directors in October 2025. 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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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. 32
Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.
The 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.
The following MD&A describes the principal factors affecting our results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates during 2025, compared with 2024.
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.
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.
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.
A detailed discussion of the year 2024 compared with 2023 is not included herein and can be found in the MD&A section in our 2024 Annual Report on Form 10-K, filed with the SEC on February 12, 2025, which is incorporated herein by reference.
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.
Fuel services revenue decreased 11% in 2025, primarily reflecting lower fuel costs 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.
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").
Used Vehicle Sales, net Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Used vehicle sales, net $ (22) $ (72) $ (196) (69)% (63)% 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").
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.
Refer to Note 11, “Income Taxes” in the Notes to Consolidated Financial Statements for a discussion of changes in our provision for income taxes and effective tax rate from continuing operations. 30
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.
Miscellaneous Income, net Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Miscellaneous income, net $ (26) $ (34) $ (47) (24)% (28)% 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.
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.
FULL YEAR CONSOLIDATED RESULTS Services Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Services revenue $ 8,378 $ 8,345 $ 7,297 —% 14% Cost of services 7,129 7,099 6,266 —% 13% Gross margin $ 1,249 $ 1,246 $ 1,031 —% 21% Gross margin % 15% 15% 14% Services revenue represents all the revenues associated with our SCS and DTS business segments, including subcontracted transportation and fuel, as well as SelectCare and fleet support services associated with our FMS business segment.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Restructuring and Other Items, net Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Restructuring and other items, net $ 9 $ 13 $ (21) 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.
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.
Provision for Income Taxes Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Provision for income taxes $ 184 $ 172 $ 212 7% (19)% Effective tax rate on continuing operations 26.8 % 26.0 % 34.3 % Comparable tax rate on continuing operations (1) 26.0 % 25.7 % 26.1 % _______________ (1) Non-GAAP financial measure.
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.
Lease & Related Maintenance and Rental Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Lease & related maintenance and rental revenue $ 3,881 $ 3,835 $ 3,937 1% (3)% Cost of lease & related maintenance and rental 2,589 2,623 2,684 (1)% (2)% Gross margin $ 1,292 $ 1,212 $ 1,253 7% (3)% Gross margin % 33% 32% 32% Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS SUMMARY Change (Dollars in millions, except per share amounts) 2025 2024 2023 2025/2024 2024/2023 Total revenue $ 12,665 $ 12,636 $ 11,783 —% 7% Operating revenue (1) 10,406 10,266 9,497 1% 8% Earnings from continuing operations before income taxes (EBT) $ 685 $ 661 $ 618 4% 7% Comparable EBT (1) 730 715 815 2% (12)% Earnings from continuing operations 501 489 406 2% 21% Comparable earnings from continuing operations (1) 540 531 602 2% (12)% Comparable EBITDA (1) 2,867 2,776 2,665 3% 4% Earnings per common share (EPS) — Diluted Continuing operations $ 11.99 $ 11.06 $ 8.73 8% 27% Comparable (1) 12.92 12.00 12.95 8% (7)% Cash dividend per share 3.44 3.04 2.66 13% 14% Book value per share (2) 77.43 74.07 69.91 5% 6% Total debt $ 7,645 $ 7,779 $ 7,114 (2)% 9% Total shareholders’ equity 3,052 3,117 3,069 (2)% 2% Debt to equity 250 % 250 % 232 % Adjusted return on equity (1) 17 % 16 % 19 % Net cash provided by operating activities from continuing operations 2,594 2,265 2,353 Free cash flow (1) 946 133 (54) Total capital expenditures (3) 2,055 2,694 3,279 ____________________ (1) Non-GAAP financial measure.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Non-Operating Pension Costs, net Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Non-operating pension costs, net $ 36 $ 41 $ 40 NM NM Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized.
Cost of lease & related maintenance and rental excludes interest costs from vehicle financing, which are reported within "Interest expense" in our Consolidated Statements of Earnings.
Cost of lease & related maintenance and rental excludes interest costs from vehicle financing, which are reported within "Interest expense" in our Consolidated Statements of Earnings. Cost of lease & related maintenance and rental decreased 1% in 2025, primarily reflecting lower maintenance costs and a smaller lease and rental fleet.
SG&A expenses as a percentage of total revenue remained at 12% in 2024.
SG&A expenses as a percentage of total revenue remained at 12% in 2025. 28 ITEM 7.
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.
We continue to benefit from favorable long-term secular trends in logistics and transportation solutions; however, we are experiencing near-term revenue growth headwinds that reflect the extended freight downturn and overall economic uncertainty.
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.
While we are experiencing positive momentum in our businesses, other unknown effects from inflationary cost pressures, regulatory uncertainty, labor interruptions, introduction of tariffs and taxes, and the continued higher interest rate environment may negatively impact demand for our business, financial results, and significant judgments and estimates. 26 ITEM 7.
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.
Fuel Services Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Fuel services revenue $ 406 $ 456 $ 549 (11)% (17)% Cost of fuel services 391 441 534 (11)% (17)% Gross margin $ 15 $ 15 $ 15 —% —% Gross margin % 4 % 3 % 3 % Fuel services revenue represents fuel services provided to our FMS customers.
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.
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 logistics solutions; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions, including dedicated vehicles, professional drivers, management and administrative support.
Revenue decreased 3% in 2024, reflecting lower commercial rental demand partially offset by ChoiceLease growth.
Revenue increased 1% in 2025, reflecting ChoiceLease revenue growth, partially offset by lower rental demand.
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. 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.
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. 2025 HIGHLIGHTS • Diluted EPS from continuing operations of $11.99, up 8% from prior year • Comparable EPS (a non-GAAP measure) from continuing operations of $12.92, up 8% from prior year, reflecting higher contractual earnings across all business segments, as well as share repurchases, partially offset by lower used vehicle sales and rental results • Adjusted Return on Equity (ROE) (a non-GAAP measure) of 17%, compared to 16% in prior year • Total revenue of $12.7 billion, consistent with prior year • Operating revenue (a non-GAAP measure) of $10.4 billion, up 1%, primarily reflecting contractual revenue growth in SCS and FMS • Net cash provided by operating activities from continuing operations of $2.6 billion and free cash flow (a non-GAAP measure) of $946 million 25 ITEM 7.
(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.
(3) Includes capital expenditures that have been accrued, but not yet paid. In 2025, total revenue was $12.7 billion, consistent with prior year. Operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 1% to $10.4 billion, primarily reflecting contractual revenue growth in SCS and FMS.
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.
Used vehicle sales, net decreased in 2025, due to lower pricing and volume, reflecting weaker market conditions, and lower retail sales mix. Average proceeds per unit decreased in 2025 from the prior year.
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.
However, fuel services margin is impacted by sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established based on current market fuel costs. Fuel services gross margin as a percentage of revenue was positively impacted by these price change dynamics in 2025.
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.
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.
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.
Services revenue in 2025, remained consistent with prior year as new business and higher customer volumes in SCS was largely offset by lost business in DTS. 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, lease expense, insurance and maintenance costs.
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.
Lease & related maintenance and rental gross margin and gross margin as a percentage of revenue increased primarily due to higher ChoiceLease pricing and maintenance cost-savings initiatives.
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.
Selling, General and Administrative Expenses Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Selling, general and administrative expenses (SG&A) $ 1,470 $ 1,478 $ 1,421 (1)% 4% Percentage of total revenue 12 % 12 % 12 % SG&A expenses decreased 1% primarily reflecting lower travel expenses and acquisition synergies, partially offset by higher medical costs.
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.
The following table presents the average used vehicle proceeds per unit changes, using constant currency, compared with the prior year: Proceeds per unit change (1) 2025/2024 2024/2023 Tractors (11)% (21)% Trucks (15)% (23)% ———————————— (1) Represents percentage change compared to prior year period in average sales proceeds on used vehicle sales using constant currency.
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.
Cost of fuel services decreased 11% in 2025, reflecting lower fuel costs and fewer gallons sold. Fuel services gross margin remained consistent and gross margin as a percentage of revenue increased in 2025. Fuel is largely a pass-through to customers for which we realize minimal changes in margin during periods of steady market fuel prices.
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.
EBT increased to $685 million and comparable EBT (a non-GAAP measure) increased to $730 million, primarily due to higher contractual earnings, partially offset by lower used vehicle sales and rental results reflecting weaker market conditions.
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.
Cost of services in 2025 remained consistent with the prior year. 27 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Services gross margin and gross margin as a percentage remained consistent in 2025.
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.
Our effective tax rate from continuing operations was 26.8% in 2025 as compared to 26.0% in the prior year, and our comparable tax rate on continuing operations was 26.0% in 2025 compared to 25.7% in the prior year. The increases in tax rates were primarily due to discrete tax benefits in 2024.
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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.
Added
ITEM 6. [RESERVED] 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 7.
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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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Business Trends During 2025, the strength and resiliency of our transformed business model as well as consistent execution of strategic initiatives delivered earnings growth and helped mitigate the impact of weak market conditions on used vehicle sales and commercial rental demand.
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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.
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The continued execution of our strategic initiatives focused on lease pricing, maintenance cost savings, acquisitions synergies and optimization of our Omnichannel network drove contractual earnings growth in all business segments.
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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.
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These favorable secular trends and the value our solutions bring to our customers remain strong and provide long-term revenue and earnings growth opportunities for all of our business segments. Our balanced growth strategy provides a solid foundation for ongoing contractual earnings growth while also positioning us to benefit from a cycle upturn.
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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).
Added
In 2026, we are well positioned for growth in SCS as we achieved record sales in 2025. In FMS and DTS, we expect contractual sales trends to improve as freight markets normalize.
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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.
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Interest Expense Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Interest expense $ 404 $ 386 $ 296 5% 30% Effective interest rate 5.2% 5.1% 4.4% Interest expense increased 5% in 2025, reflecting higher average debt and higher interest rates on newer issuances compared to maturing debt.
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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
Miscellaneous income, net decreased in 2025, primarily due to prior year gain on the sale of assets and insurance recoveries. Currency Translation Adjustment Loss Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Currency translation adjustment loss $ — $ — $ 188 NM NM ———————————— NM - Denotes Not Meaningful throughout the MD&A 29 ITEM 7.
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Fuel services gross margin was not significantly impacted by these price change dynamics in 2024. 26 ITEM 7.
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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.
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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.
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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.
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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.
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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.
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(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.
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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.
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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.
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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.
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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.
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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.
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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”).
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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.
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EBT related to inter-segment equipment and services on the Cardinal vehicles drove the increase in DTS equipment contribution during 2024.
Removed
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.
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(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.
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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.
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The increase in FMS operating revenue was partially offset by lower rental demand.
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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.
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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.
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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.
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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.
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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.
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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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The following table provides information on our North America active ChoiceLease fleet (number of units rounded to nearest hundred) and our commercial rental power fleet (excludes trailers): Change 2024 2023 2022 2024/2023 2023/2022 Active ChoiceLease fleet End of period vehicle count (1) 135,000 129,800 128,400 4% 1% Full year average vehicle count (1) 135,900 129,800 128,700 5% 1% Commercial rental statistics Commercial rental utilization - power fleet (2) 70 % 75 % 83 % (500) bps (800) bps _______________ (1) Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units..
Removed
(2) Rental utilization is calculated using the number of days units are rented divided by the number of days units are available to rent based on the days in the calendar year.
Removed
Supply Chain Solutions Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Omnichannel retail $ 1,197 $ 1,207 $ 1,215 (1)% (1)% Automotive 1,080 1,061 870 2% 22% Consumer packaged goods 1,149 926 806 24% 15% Industrial and other 539 431 363 25% 19% Subcontracted transportation and fuel 1,335 1,250 1,466 7% (15)% SCS total revenue $ 5,300 $ 4,875 $ 4,720 9% 3% SCS operating revenue (1) $ 3,965 $ 3,625 $ 3,254 9% 11% SCS EBT $ 332 $ 231 $ 218 44% 6% SCS EBT as a % of SCS total revenue 6.3% 4.7% 4.6% 160 bps 10 bps SCS EBT as a % of SCS operating revenue (1) 8.4% 6.4% 6.7% 200 bps (30) bps End of period vehicle count: Power vehicles 3,900 4,200 4,200 (7)% —% Trailers 9,100 9,600 8,900 (5)% 8% Total 13,000 13,800 13,100 (6)% 5% _______________ (1) Non-GAAP financial measure.

Item 7. Management's Discussion & Analysis

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

84 edited+33 added−12 removed82 unchanged
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.
We generally recognize revenue over time as we provide the promised products or services to our customers in an amount we expect to receive in exchange for those products or services.
We generally recognize revenue over time as we provide the promised services to our customers in an amount we expect to receive in exchange for those products or services.
We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations.
We enter into contracts that can include various combinations of services, which are generally capable of being distinct and accounted for as separate performance obligations.
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.
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 2025 net pension expense is presented in Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements.
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.
Our review of the estimated residual values of revenue earning equipment is based on vehicle class (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.
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.
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 44 ITEM 7.
Other Obligations and Commitments The following table provides other material cash requirements from contractual obligations and commitments and the related reference in the Notes to Consolidated Financial Statements for further information: Description Reference Reference Title Insurance obligations (primarily self-insurance) Note 10 Accrued Expenses and Other Liabilities Operating leases Note 12 Leases Debt Note 13 Debt Employee benefit plans Note 19 Employee Benefit Plans We believe that our operating cash flows and access to the debt markets, as further discussed in "Financing and Other Funding Transactions" below, are sufficient to meet our contractual obligations.
Other Obligations and Commitments The following table provides other material cash requirements from contractual obligations and commitments and the related reference in the Notes to Consolidated Financial Statements for further information: Description Reference Reference Title Insurance obligations (primarily self-insurance) Note 10 Accrued Expenses and Other Liabilities Operating leases Note 12 Leases Debt Note 13 Debt Employee benefit plans Note 19 Employee Benefit Plans We believe that our operating cash flows and access to the debt markets, as further discussed in "Financing and Other Funding Transactions" below, are sufficient to meet our contractual obligations. 37 ITEM 7.
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.
We recognized $1.0 billion in 2025, $972 million in 2024 and $963 million in 2023. 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.
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.
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. 46 ITEM 7.
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.
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 maturities. Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings.
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.
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, carrier rate fluctuations result in minimal changes to our profitability.
This 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.
This 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 expectations regarding the benefits from our strategic investments and initiatives, including our maintenance and lease pricing initiatives; • our expectations regarding acquisitions; • the anticipated impact of tariffs and 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 50 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Specifically, we refer to the following non-GAAP financial measures in this Form 10-K: Non-GAAP Financial Measure Comparable GAAP Measure Operating Revenue Measures: Operating Revenue Total Revenue FMS Operating Revenue FMS Total Revenue SCS Operating Revenue SCS Total Revenue DTS Operating Revenue DTS Total Revenue FMS EBT as a % of FMS Operating Revenue FMS EBT as a % of FMS Total Revenue SCS EBT as a % of SCS Operating Revenue SCS EBT as a % of SCS Total Revenue DTS EBT as a % of DTS Operating Revenue DTS EBT as a % of DTS Total Revenue Comparable Earnings Measures: Comparable Earnings Before Income Tax Earnings Before Income Tax Comparable Earnings Earnings from Continuing Operations Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Net Earnings Comparable EPS EPS from Continuing Operations Comparable Tax Rate Effective Tax Rate from Continuing Operations Adjusted Return on Equity (ROE) Not Applicable.
Specifically, we refer to the following non-GAAP financial measures in this Form 10-K: Non-GAAP Financial Measure Comparable GAAP Measure Operating Revenue Measures: Operating Revenue Total Revenue FMS Operating Revenue FMS Total Revenue SCS Operating Revenue SCS Total Revenue DTS Operating Revenue DTS Total Revenue FMS EBT as a % of FMS Operating Revenue FMS EBT as a % of FMS Total Revenue SCS EBT as a % of SCS Operating Revenue SCS EBT as a % of SCS Total Revenue DTS EBT as a % of DTS Operating Revenue DTS EBT as a % of DTS Total Revenue Comparable Earnings Measures: Comparable Earnings Before Income Tax Earnings Before Income Tax Comparable Earnings Earnings from Continuing Operations Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Net Earnings Comparable EPS EPS from Continuing Operations Comparable Tax Rate Effective Tax Rate from Continuing Operations Adjusted Return on Equity (ROE) Not Applicable.
These ratings are intended to provide guidance to investors in determining the credit risk associated with our particular securities based on current information obtained by the rating agencies from us or from other sources.
These ratings are inten ded to provide guidance to investors in determining the credit risk associated with our particular securities based on current information obtained by the rating agencies from us or from other sources.
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.
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.
We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations. 44 ITEM 7.
We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations. 45 ITEM 7.
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.
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 $753 million and $777 million as of December 31, 2025 and 2024, 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, 2024, the amount of the actuarial loss subject to amortization in 2025 and future years is $615 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, 2025, the amount of the actuarial loss subject to amortization in 2026 and future years is $591 million.
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.
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. 38 ITEM 7.
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.
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% as of December 31, 2025 and 2024.
Off-Balance Sheet Arrangements Guarantees. Refer to Note 14, “Guarantees,” in the Notes to Consolidated Financial Statements for a discussion of our agreements involving guarantees. Financing and Other Funding Transactions We utilize external capital primarily to support working capital needs and growth in our asset-based product lines.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Off-Balance Sheet Arrangements Guarantees. Refer to Note 14, “Guarantees,” in the Notes to Consolidated Financial Statements for a discussion of our agreements involving guarantees. Financing and Other Funding Transactions We utilize external capital primarily to support working capital needs and growth in our asset-based product lines.
(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.
(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 by Adjusted average shareholders' equity. 49 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.
In 2026, we expect to amortize $31 million of net actuarial loss as a component of pension expense. The effect on years beyond 2026 will depend substantially upon the actual experience of our plans in future years.
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.
We recognize a valuation allowance against deferred tax assets to reduce such assets to amounts expected to be realized. As of December 31, 2025 and 2024, the deferred tax valuation allowance was $14 million and $12 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. We accrue the largest 41 ITEM 7.
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.
This Annual Report on Form 10-K includes information extracted from consolidated financial information that is not required by U.S. GAAP to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures” as defined by SEC rules.
This Annual Report on Form 10-K includes information extracted from consolidated financial information that is not required by U.S. GAAP to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures” as defined by SEC rules. Non-GAAP financial measures should be 43 ITEM 7.
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.
Based on the results of our analysis, we may adjust the estimated residual values 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. Conversely, an increase in estimated residual values will decrease depreciation expense over the remaining useful life of the vehicle.
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.
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 $677 million and $728 million as of December 31, 2025 and 2024, respectively.
Estimates of future cash flows are dependent on our knowledge and experience about past and current events and significant judgments and assumptions about conditions we expect to exist, including revenue growth rates, margins, long-term growth rates, capital requirements, proceeds from the sale of used vehicles, the ability to utilize our tax net operating losses, and the discount rate.
Estimates of future cash flows are dependent on our knowledge and experience about past and current events and significant judgments and assumptions about conditions we expect to exist, including revenue growth rates, margins, long-term growth rates, capital requirements, proceeds from the sale of used vehicles, the ability to utilize our tax net 42 ITEM 7.
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.
A sensitivity analysis of 2026 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 2026 Net Pension Expense Effect on December 31, 2025 Projected Benefit Obligation Expected long-term rate of return on assets 5.90% +/- 0.25 % +/- $3 million N/A Discount rate 5.45% +/- 0.25 % NM +/- $26 million Self-Insurance Obligations.
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.
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 13% equity securities and alternative assets, 86% fixed income securities and 1% cash as of December 31, 2025.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts.
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.
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) 2025 2024 2023 EBT $ 685 $ 661 $ 618 Non-operating pension costs, net (1) 36 41 40 Acquisition costs — 7 2 FMS U.K. business exit — — (32) Currency translation adjustment loss — — 188 Other, net 9 6 (1) Comparable EBT $ 730 $ 715 $ 815 Earnings $ 501 $ 489 $ 406 Non-operating pension costs, net (1) 29 31 31 Acquisition costs — 6 2 FMS U.K. business exit — — (19) Currency translation adjustment loss — — 183 Other, net (2) 10 5 (1) Comparable Earnings $ 540 $ 531 $ 602 Diluted EPS $ 11.99 $ 11.06 $ 8.73 Non-operating pension costs, net (1) 0.71 0.69 0.68 Acquisition costs — 0.13 0.04 FMS U.K. business exit — — (0.40) Currency translation adjustment loss — — 3.93 Other, net (2) 0.22 0.12 (0.03) Comparable EPS $ 12.92 $ 12.00 $ 12.95 _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our debt ratings and rating outlooks as of December 31, 2025 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+ Stable As of December 31, 2025, we had the following amounts available to fund operations under the following facilities: (In millions) Revolving credit facility $ 735 Trade receivables financing program 201 Total $ 936 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 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 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, 2025, total goodwill was $1.2 billion.
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.
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.
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.
On October 1, 2025, 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 qualitative analyses for all reporting units. Income Taxes.
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.
The following table provides a reconciliation of the effective tax rate to the comparable tax rate: 2025 2024 2023 Effective tax rate on continuing operations (1) 26.8 % 26.0 % 34.3 % Tax adjustments and income tax effects of non-GAAP adjustments (2) (0.8) % (0.3) % (8.2) % Comparable tax rate on continuing operations (1) 26.0 % 25.7 % 26.1 % _______________ (1) The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, found on the previous table.
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 provides a reconciliation of Net earnings to comparable EBITDA: (In millions) 2025 2024 2023 Net earnings $ 499 $ 489 $ 406 Loss from discontinued operations, net of tax 2 — — Provision for income taxes 184 172 212 EBT 685 661 618 Non-operating pension costs, net (1) 36 41 40 Acquisition costs (2) — 7 2 FMS U.K. business exit (2) — — (32) Currency translation adjustment loss (2) — — 188 Other, net (2) 9 6 (1) Comparable EBT 730 715 815 Interest expense 404 386 296 Depreciation 1,703 1,694 1,712 Used vehicle sales, net (3) (22) (72) (193) Intangible amortization 52 53 35 Comparable EBITDA $ 2,867 $ 2,776 $ 2,665 _______________ (1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance or liquidity prepared in accordance with U.S. GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS considered in addition to, but not as a substitute for or superior to, other measures of financial performance or liquidity prepared in accordance with U.S. GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies.
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.
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.
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.
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 ◦ 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.
These risk factors, among others, include the following: • Market Conditions: ◦ Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services and products, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets. ◦ Decreases in freight demand which would impact both our transactional and variable-based contractual business. ◦ Changes in our customers' operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services and products. ◦ Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions. ◦ Volatility in customer volumes and shifting customer demand in the industries we service. ◦ Changes in current financial, tax or other regulatory requirements, 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 and accurate access to data. ◦ The inability of our information security program to safeguard our and our stakeholders' 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. 51 ITEM 7.
Our estimates of cash flows are also based on historical and future operating performance, economic conditions and actions we expect to take. In addition to these factors, our SCS and DTS reporting units are dependent on several key customers or industry sectors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS operating losses, and the discount rate. Our estimates of cash flows are also based on historical and future operating performance, economic conditions and actions we expect to take. In addition to these factors, our SCS and DTS reporting units are dependent on several key customers or industry sectors.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Dedicated Transportation Solutions Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 DTS total revenue $ 2,343 $ 2,446 $ 1,785 (4)% 37% DTS operating revenue (1) $ 1,841 $ 1,870 $ 1,298 (2)% 44% DTS EBT $ 140 $ 125 $ 121 12% 4% DTS EBT as a % of DTS total revenue 6.0% 5.1% 6.8% 90 bps (170) bps DTS EBT as a % of DTS operating revenue (1) 7.6% 6.7% 9.3% 90 bps (260) bps End of period vehicle count: Power vehicles 6,900 7,500 5,200 (8)% 44% Trailers 11,100 11,600 5,700 (4)% 104% Total 18,000 19,100 10,900 (6)% 75% _______________ (1) Non-GAAP financial measure.
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.
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) other items impacting comparability (in each of (1) and (2), as defined in comparable earnings measures immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) intangible amortization.
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.
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.
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.
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 (a non-GAAP measure) for 2026: (In millions) Forecast 2026 Net cash provided by operating activities from continuing operations $ 2,700 Proceeds from sales of property and revenue earning equipment (1) 500 Total cash generated 3,200 Purchases of property and revenue earning equipment (1) (2,400) Forecasted free cash flow $ 800 _____________________ (1) Included in cash flows from investing activities.
We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are determined, the contract has commercial substance, and collectibility of consideration is probable.
We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are determined, the contract has commercial substance, and collectibility of consideration 40 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS is probable.
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.
The following is a summary of capital expenditures: (In millions) 2025 2024 2023 Revenue earning equipment: ChoiceLease $ 1,508 $ 2,042 $ 2,562 Commercial rental 311 525 438 1,819 2,567 3,000 Operating property and equipment 236 127 279 Gross capital expenditures (1) 2,055 2,694 3,279 Changes in accounts payable related to purchases of property and revenue earning equipment 80 (11) (45) Cash paid for purchases of property and revenue earning equipment $ 2,135 $ 2,683 $ 3,234 _______________ (1) Excludes $78 million, $46 million and $26 million in 2025, 2024 and 2023, respectively, in assets held under finance leases resulting from new or the extension of existing finance leases and other additions.
(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.
(2) Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related. 47 ITEM 7.
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.
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) 2025 2024 2023 SCS total revenue $ 5,459 $ 5,300 $ 4,875 Subcontracted transportation (1,218) (1,181) (1,080) Fuel (150) (154) (170) SCS operating revenue $ 4,091 $ 3,965 $ 3,625 SCS EBT $ 355 $ 332 $ 231 SCS EBT as a % of SCS total revenue 6.5% 6.3% 4.7% SCS EBT as a % of SCS operating revenue 8.7% 8.4% 6.4% The following table provides a reconciliation of DTS total revenue to DTS operating revenue: Years ended December 31, (In millions) 2025 2024 2023 DTS total revenue $ 2,343 $ 2,446 $ 1,785 Subcontracted transportation (270) (327) (300) Fuel (232) (249) (187) DTS operating revenue $ 1,841 $ 1,870 $ 1,298 DTS EBT $ 140 $ 125 $ 121 DTS EBT as a % of DTS total revenue 6.0% 5.1% 6.8% DTS EBT as a % of DTS operating revenue 7.6% 6.7% 9.3% 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) 2025 2024 2023 Net earnings $ 499 $ 489 $ 406 Other items impacting comparability, net (1) 9 13 157 Tax impact (2) 1 (2) 8 Adjusted net earnings $ 509 $ 500 $ 571 Average shareholders’ equity $ 3,070 $ 3,078 $ 3,041 Average adjustments to shareholders’ equity (3) 5 2 (19) Adjusted average shareholders’ equity $ 3,075 $ 3,080 $ 3,022 Adjusted ROE (4) 17% 16% 19% _______________ (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 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.
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.
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).
The present value of estimated global pension contributions that will be required over the next 5 years totals approximately $24 million (pre-tax).
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 following table shows the components of our free cash flow (a non-GAAP measure): (In millions) 2025 2024 2023 Net cash provided by operating activities from continuing operations $ 2,594 $ 2,265 $ 2,353 Sales of revenue earning equipment (1) 468 532 764 Sales of operating property and equipment (1) 18 19 63 Other (1) 1 — — Total cash generated (2) 3,081 2,816 3,180 Purchases of property and revenue earning equipment (1) (2,135) (2,683) (3,234) Free cash flow (2) $ 946 $ 133 $ (54) _______________ (1) Included in cash flows from investing activities.
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.
We expect free cash flow (a non-GAAP measure) to decrease to approximately $800 million reflecting higher investments in the ChoiceLease fleet, partially offset by higher cash generated. 36 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Purchase Obligations The majority of our purchase obligations are pay-as-you-go transactions made in the ordinary course of business.
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.
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.
Net cash provided by financing activities from continuing operations decreased to $153 million in 2024, compared to $256 million in 2023, primarily reflecting lower borrowing needs. 34 ITEM 7.
Net cash used in financing activities from continuing operations was $912 million in 2025, compared to net cash provided by financing activities from continuing operations of $153 million in 2024, primarily reflecting lower borrowing needs.
(2) Refer to Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additio nal information.
(2) In 2025, includes the income tax effects of other items impacting comparability and non-recurring income tax adjustments. Refer to Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additio nal information.
In May 2024, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 5.50%, and maturing on June 1, 2029. In August 2024, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 4.95%, and maturing on September 1, 2029.
In February 2025, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 5.00%, and maturing on March 15, 2030. In May 2025, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 4.85%, and maturing on June 15, 2030.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL RESOURCES AND LIQUIDITY Cash Flows The following is a summary of our cash flows from continuing operations: (In millions) 2025 2024 2023 Net cash provided by (used in) : Operating activities $ 2,594 $ 2,265 $ 2,353 Investing activities (1,650) (2,446) (2,663) Financing activities (912) 153 256 Effect of exchange rate changes on cash 13 (21) (9) Net change in cash, cash equivalents, and restricted cash $ 45 $ (49) $ (63) (In millions) 2025 2024 2023 Net cash provided by operating activities from continuing operations Earnings from continuing operations $ 501 $ 489 $ 406 Non-cash and other, net 2,423 2,260 2,088 Currency translation adjustment loss — — 188 Collections on sales-type leases 166 148 126 Changes in operating assets and liabilities (496) (632) (455) Net cash provided by operating activities from continuing operations $ 2,594 $ 2,265 $ 2,353 Net cash provided by operating activities from continuing operations was $2.6 billion in 2025, compared with $2.3 billion in 2024, primarily reflecting lower income tax payments and working capital needs.
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 expect 2026 defined benefit pension expense to decrease to $35 million. See the “Critical Accounting Estimates — Pension Assumptions” section for further discussion on pension accounting estimates. Income Tax Cash Obligations During 2025, total income taxes paid were $52 million. In the future, our income tax cash obligations may increase.
Net cash used in investing activities from continuing operations decreased to $2.4 billion in 2024 compared with $2.7 billion in 2023, reflecting lower capital expenditures and decreased cash proceeds from sales of used vehicles and property.
Net cash used in investing activities from continuing operations decreased to $1.7 billion in 2025 compared with $2.4 billion in 2024, primarily reflecting lower capital expenditures and the prior year acquisition of Cardinal Logistics.
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.
These updates will not have a material impact to annual depreciation expense. Depreciation Sensitivity Based on our fleet of revenue earning equipment as of December 31, 2025, a hypothetical 10% reduction in estimated residual values would increase depreciation expense over the remaining life of our fleet by approximately $340 million.
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).
(2) 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.
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.
Free cash flow (a non-GAAP measure) increased to $946 million in 2025 from $133 million in 2024, primarily reflecting reduced capital expenditures and higher cash from operating activities. Net cash provided by operating activities from continuing operations is expected to increase to approximately $2.7 billion in 2026.
We utilize capital for the purchase of vehicles in our commercial rental product line to replenish and expand the fleet available for shorter-term use by contractual or occasional customers.
We utilize capital for the purchase of vehicles in our commercial rental product line to replenish and expand the fleet available for shorter-term use by contractual or occasional customers. 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.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ◦ 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 qualified professional drivers due to labor shortages influenced by FMCSA regulatory requirements, including English proficiency standards for non-domiciled commercial drivers, that may result in higher labor costs and turnover rates. ◦ Difficulties in attracting and retaining warehouse associates and technicians due to labor shortages, which may result in higher costs to procure 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. ◦ 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.
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.
Changes in interest rates and the market value of the assets 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.
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.
Due to the underfunded status of our defined benefit plans, we had an accumulated net pension equity charge (after-tax) of $575 million and $597 million as of December 31, 2025 and 2024, respectively. The funded status of our defined benefit pension plans increased to 94% in 2025 from 91% in 2024, primarily due to contributions made during 2025.
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.
During 2025, we increased our annualized dividend rate 12% to $3.64 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.
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.
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.
Gross capital expenditures decreased to $2.7 billion in 2024, reflecting reduced investments in the ChoiceLease fleet due to lower sales activity. We expect gross capital expenditures to remain at approximately $2.7 billion in 2025, reflecting lower investments in the rental fleet, offset by investments in the lease fleet.
Gross capital expenditures decreased to $2.1 billion in 2025, reflecting reduced investments in the ChoiceLease and rental vehicles. We expect gross capital expenditures to increase to approximately $2.4 billion in 2026, reflecting higher investments in the lease fleet.
Pension Information Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for background and further information regarding our company-sponsored defined benefit retirement plans. During 2024, total pension contributions were $56 million, which primarily related to a prefunding of future required pension contributions, compared with $21 million in 2023.
Our debt to equity ratios were 250% as of December 31, 2025 and 2024. The debt to equity ratio represents total debt divided by total equity. Pension Information Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for background and further information regarding our company-sponsored defined benefit retirement plans.
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.
Based on self-insurance accruals at December 31, 2025, a 5% adverse change in actuarial claim loss estimates would increase operating expense in 2026 by $25 million. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Central Support Services Change (Dollars in millions) 2024 2023 2022 2024/2023 2023/2022 Total CSS $ 417 $ 419 $ 419 —% —% Allocation of CSS to business segments (346) (347) (336) —% 3% Unallocated CSS $ 71 $ 72 $ 83 —% (13)% Total CSS costs and Unallocated CSS costs remained relatively unchanged in 2024.
Central Support Services Change (Dollars in millions) 2025 2024 2023 2025/2024 2024/2023 Total CSS $ 438 $ 417 $ 419 5% —% Allocation of CSS to business segments (355) (346) (347) 3% —% Unallocated CSS $ 83 $ 71 $ 72 16% —% Total CSS costs increased 5% in 2025, primarily due to higher incentive compensation and marketing costs.
As of December 31, 2024, cash and equivalents totaled $154 million and approximately $107 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. We consider our U.K. earnings to be no longer indefinitely reinvested. We consider the historical earnings of Mexico, along with our remaining foreign jurisdictions to be permanently reinvested.
As of December 31, 2025, cash and equivalents totaled $198 million and approximately $139 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. In 2025, we repatriated $40 million of current year earnings from our Canada subsidiaries with minimal tax cost.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
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.
We recognized a charge of $3 million in 2025, a benefit of $15 million in 2024 and a benefit of $17 million in 2023 from the de velopment of estimated prior years' self-insured loss reserves.
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.
The following table provides a reconciliation of total revenue to operating revenue: (In millions) 2025 2024 2023 Total revenue $ 12,665 $ 12,636 $ 11,783 Subcontracted transportation revenue (1,473) (1,499) (1,380) Fuel (786) (871) (906) Operating revenue $ 10,406 $ 10,266 $ 9,497 The following table provides a reconciliation of FMS total revenue to FMS operating revenue: (In millions) 2025 2024 2023 FMS total revenue $ 5,845 $ 5,888 $ 5,930 Fuel revenue (718) (772) (877) FMS operating revenue $ 5,127 $ 5,116 $ 5,053 FMS EBT $ 501 $ 516 $ 665 FMS EBT as a % of FMS total revenue 8.6% 8.8% 11.2% FMS EBT as a % of FMS operating revenue 9.8% 10.1% 13.2% 48 ITEM 7.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Changes in the relative sensitivity of the fair value of our financial instrument portfolio for these theoretical changes in the level of interest rates are primarily driven by changes in our debt maturities, interest rate profile and amount.
Changes in the relative sensitivity of the fair value of our financial instrument 52 portfolio for these theoretical changes in the level of interest rates are primarily driven by changes in our debt maturities, interest rate profile and amount.
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
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. 53
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.
As of December 31, 2025, 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 $25 million as of December 31, 2024.
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 $11 million as of December 31, 2025.
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.
A hypothetical 10% change in market interest rates would impact the fair value of our fixed-rate debt by $83 million and impact pre-tax earnings by $31 million as of December 31, 2025, respectively.
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.
As of December 31, 2025, 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 5.10% and a fair value of $6.3 billion.
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 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.
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.
The fair value of our variable-rate debt as of December 31, 2025 was $1.4 billion. A hypothetical 10% increase in market interest rates would not impact the fair value of our variable-rate debt or change pre-tax earnings by a material amount as of December 31, 2025.
Changes in the price of fuel are generally passed on to our customers for which we realize minimal changes in profitability during periods of steady market fuel prices.
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. Changes in the price of fuel are generally passed on to our customers for which we realize minimal changes in profitability during periods of steady market fuel prices.
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. 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.
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.
We generally do not hedge the foreign currency exposure related to our net investment in foreign subsidiaries.
We generally do not hedge the foreign currency exposure related to our net investment in foreign subsidiaries. Market Fuel Price Risk Exposure to market risk for fluctuations in market fuel prices relates to various fuel purchase arrangements in place to ensure delivery of fuel at market rates in the event of fuel shortages.
Removed
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.
Added
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.
Removed
Exposure to market risk for fluctuations in market fuel prices relates to a small portion of our service contracts for which the cost of fuel is integral to service delivery and the service contract does not have a mechanism to adjust for increases in market fuel prices.
Removed
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.

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