REVENUE EARNING EQUIPMENT, NET

3 Months Ended

Mar. 31, 2022

Revenue Earning Equipment [Abstract]


	Estimated Useful Lives	March 31, 2022						December 31, 2021
		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net
	(In years)	(In thousands)
Held for use:
Trucks	3 — 7	$	5,288,297	$	(2,089,227)	$	3,199,070	$	5,223,127	$	(2,055,135)	$	3,167,992
Tractors	4 — 7.5	7,247,049		(3,071,862)		4,175,187		7,256,002		(3,059,206)		4,196,796
Trailers and other	9.5 — 12	1,839,053		(894,753)		944,300		1,780,487		(868,820)		911,667
Held for sale		273,321		(201,172)		72,149		209,506		(162,922)		46,584
Total		$	14,647,720	$	(6,257,014)	$	8,390,706	$	14,469,122	$	(6,146,083)	$	8,323,039

Residual Value Estimate Changes

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue

earning equipment for the purposes of recording depreciation expense. Reductions in estimated residual values or useful lives

will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual

values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the

estimated residual values and useful lives of revenue earning equipment is based on vehicle class, (i.e., generally subcategories

of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market

prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. A variety of

factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales

pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology;

competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors. We have disciplines related to the management and maintenance of our vehicles designed to

manage the risk associated with the residual values of our revenue earning equipment.

The following table provides a summary of incremental depreciation expense that has been recorded related to our previous residual value estimate changes as well as used vehicle sales results (rounded to the closest million):


	Three months ended March 31,
	2022		2021
	(In thousands)
Depreciation expense related to estimate changes	$	49,000	$	88,000

Used vehicle sales, net (1)	(113,000)		(29,000)

(1)Used vehicle sales, net in the first quarter of 2022 included $8M of gains on sales of vehicles in the U.K. Refer to Note 15, "Other Items Impacting Comparability,"

Used Vehicle Sales and Valuation Adjustments

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value, which we refer to as "valuation adjustments," are recognized at the time they are deemed to meet the held for sale criteria and are presented within “Used vehicle sales, net” in the Condensed Consolidated Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for each class of similar assets and vehicle condition if available or third-party market pricing. In addition, we also consider expected declines in market prices when valuing the vehicles held for sale, as well as forecasted sales channel mix (retail/wholesale).

The following table presents revenue earning equipment held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:


					Losses from Valuation Adjustments
					Three months ended March 31,
	March 31, 2022		December 31, 2021		2022		2021
	(In thousands)
Revenue earning equipment held for sale (1):

Trucks	$	507	$	931	$	526	$	890
Tractors	590		1,485		690		84
Trailers and other	263		1,309		280		2,047
Total assets at fair value	$	1,360	$	3,725	$	1,496	$	3,021

————————————

(1)Reflects only the portion where net book values exceeded fair values and valuation adjustments were recorded. The net book value of assets held for sale that were less than fair value was $71 million and $43 million as of March 31, 2022 and December 31, 2021, respectively.

The components of used vehicle sales, net were as follows:


	Three months ended March 31,
	2022		2021
	(In thousands)
Gains on vehicle sales, net	$	(114,490)	$	(31,872)
Losses from valuation adjustments	1,496		3,021
Used vehicle sales, net	$	(112,994)	$	(28,851)