SEGMENT REPORTING

9 Months Ended

Sep. 30, 2019

Ryder is a global leader in transportation and supply chain management solutions. Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. We report our financial performance based on three business segments: (1) FMS, which provides full service leasing and leasing with flexible maintenance options, commercial rental, and contract or transactional maintenance services of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) DTS, which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers and engineering and administrative support; and (3) SCS, which provides integrated logistics solutions, including distribution, management, dedicated transportation and professional services primarily in North America. Dedicated transportation services provided as part of an integrated, multi-service, supply chain solution to SCS customers are reported in the SCS business segment.

Our primary measurement of segment financial performance, defined as segment “Earnings Before Tax” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes certain other items as discussed in Note 14, "Other Items Impacting Comparability." CSS represents those costs incurred to support all business segments, including finance and procurement, corporate services, human resources, information technology, public affairs, legal, marketing and corporate communications. The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each segment accountable for their allocated share of CSS costs. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation. CSS costs attributable to the business segments are predominantly allocated to FMS, DTS and SCS as follows:

•Finance, corporate services, and health and safety — allocated based upon estimated and planned resource utilization;

•Human resources — allocated under various methods, including based on estimated utilization and number of personnel supported;

•Information technology — principally allocated based upon utilization-related metrics such as number of users or minutes of CPU time. Customer-related project costs and expenses are allocated to the business segment responsible for the project; and

•Other — represents legal and other centralized costs and expenses including certain share-based incentive compensation costs. Expenses, where allocated, are based primarily on the number of personnel supported.

Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the DTS and SCS segments. EBT related to inter-segment equipment and services billed to DTS and SCS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated (presented as “Eliminations”). Inter-segment EBT allocated to DTS and SCS includes earnings related to equipment used in providing services to DTS and SCS customers.

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. The following tables set forth financial information for each of our segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three and nine months ended September 30, 2019 and 2018. Prior period segment amounts have been revised to reflect the adoption of ASC 842.


	FMS		DTS	SCS	Eliminations	Total
	(In thousands)
For the three months ended September 30, 2019
Revenue from external customers	$	1,247,121	359,211	617,600	—	2,223,932
Inter-segment revenue	150,225		—	—	(150,225)	—
Total revenue	$	1,397,346	359,211	617,600	(150,225)	2,223,932

Segment EBT ⁽¹⁾	$	(108,550)	18,490	34,595	(6,118)	(61,583)

Unallocated CSS						(11,432)
Non-operating pension costs⁽²⁾						(6,885)
Restructuring and other items, net ⁽³⁾						(11,360)

Earnings from continuing operations before income taxes						$	(91,260)

Segment capital expenditures paid⁽⁴⁾	$	723,555	727	9,965	—	734,247
Unallocated CSS capital expenditures paid						12,224
Capital expenditures paid						$	746,471


For the three months ended September 30, 2018
Revenue from external customers	1,190,534		340,604	628,544	—	2,159,682
Inter-segment revenue	147,237		—	—	(147,237)	—
Total revenue	1,337,771		340,604	628,544	(147,237)	2,159,682

Segment EBT	97,782		13,929	36,516	(16,063)	132,164

Unallocated CSS						(12,686)
Non-operating pension costs⁽²⁾						(1,161)
Restructuring and other items, net ⁽³⁾						546
Earnings from continuing operations before income taxes						118,863

Segment capital expenditures paid ⁽⁴⁾	769,426		473	2,652	—	772,551
Unallocated CSS capital expenditures paid						6,154
Capital expenditures paid						778,705

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(1)FMS EBT includes higher depreciation expense as a result of the change in vehicle residual value estimates. See Note 4, "Revenue Earning Equipment, net," for additional information.

(2)Non-operating pension costs include the amortization of net actuarial loss and prior service costs, interest costs and expected return on plan assets.

(3)See Note 14, "Other Items Impacting Comparability," for additional information.

(4)Excludes revenue earning equipment acquired under finance leases.


	FMS		DTS	SCS	Eliminations	Total
	(In thousands)
For the nine months ended September 30, 2019
Revenue from external customers	$	3,675,594	1,071,076	1,902,582	—	6,649,252
Inter-segment revenue	464,261		—	—	(464,261)	—
Total revenue	$	4,139,855	1,071,076	1,902,582	(464,261)	6,649,252

Segment EBT ⁽¹⁾	$	10,107	63,034	112,686	(42,586)	143,241

Unallocated CSS						(34,461)
Non-operating pension costs⁽²⁾						(20,060)
Restructuring and other items, net ⁽³⁾						(27,374)
Gain on sale of property ⁽³⁾						18,614
Earnings from continuing operations before income taxes						$	79,960

Segment capital expenditures paid⁽⁴⁾	$	2,890,773	1,587	35,459	—	2,927,819
Unallocated CSS capital expenditures paid						29,413
Capital expenditures paid						$	2,957,232


For the nine months ended September 30, 2018
Revenue from external customers	3,455,820		970,196	1,727,775	—	6,153,791
Inter-segment revenue	420,730		—	—	(420,730)	—
Total revenue	3,876,550		970,196	1,727,775	(420,730)	6,153,791

Segment EBT	228,681		45,433	98,912	(44,644)	328,382


Unallocated CSS						(34,336)
Non-operating pension costs⁽²⁾						(3,241)

Restructuring and other items, net ⁽³⁾						(17,349)
Earnings from continuing operations before income taxes						273,456

Segment capital expenditures paid ⁽⁴⁾	2,150,490		1,115	31,268	—	2,182,873
Unallocated CSS capital expenditures paid						17,133
Capital expenditures paid						2,200,006

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(1)FMS EBT includes higher depreciation expense as a result of the change in vehicle residual value estimates. See Note 4, "Revenue Earning Equipment, net," for additional information.

(2)Non-operating pension costs include the amortization of net actuarial loss and prior service costs, interest costs and expected return on plan assets.

(3)See Note 14, "Other Items Impacting Comparability," for additional information.

(4)Excludes revenue earning equipment acquired under capital leases.