SEGMENT REPORTING

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 in three business segments: (1) Fleet Management Solutions (FMS), which provides leasing, commercial rental and maintenance of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) Dedicated Transportation Solutions (DTS), which provides vehicles and drivers as part of a dedicated transportation solution in the U.S.; and (3) Supply Chain Solutions (SCS), which provides comprehensive supply chain solutions including distribution and transportation services in North America and Asia. 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 non-operating pension costs and restructuring and other items, net, as discussed in Note 13, "Other Items Impacting Comparability." CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, public affairs, information technology, health and safety, legal, marketing and corporate communications. The objective of the EBT measurement is to provide clarity on the profitability of each segment and, ultimately, to hold leadership of each segment accountable for their allocated share of CSS costs. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included among the unallocated overhead remaining within CSS are the 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 — individual costs within this category are allocated under various methods, including allocation 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. Inter-segment revenue and EBT are accounted for at rates similar to those executed with third parties. 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”).

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 six months ended June 30, 2017 and 2016. 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.



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the three months ended June 30, 2017
Revenue from external customers	$	1,049,878	272,612	470,724	—		1,793,214
Inter-segment revenue	113,701		—	—	(113,701	)	—
Total revenue	$	1,163,579	272,612	470,724	(113,701	)	1,793,214

Segment EBT	$	68,090	14,849	25,858	(12,373	)	96,424
Unallocated CSS							(11,719		)
Non-operating pension costs⁽¹⁾							(6,587		)
Restructuring and other items, net							2,574
Earnings from continuing operations before income taxes							$	80,692

Segment capital expenditures paid ⁽²⁾	$	480,340	343	7,136	—		487,819
Unallocated CSS capital expenditures paid							6,094
Capital expenditures paid							$	493,913


For the three months ended June 30, 2016
Revenue from external customers	$	1,043,430	258,262	402,052	—		1,703,744
Inter-segment revenue	108,083		—	—	(108,083	)	—
Total revenue	$	1,151,513	258,262	402,052	(108,083	)	1,703,744

Segment EBT	$	111,155	16,460	28,362	(12,766	)	143,211
Unallocated CSS							(11,012		)
Non-operating pension costs⁽¹⁾							(7,770		)
Pension-related charge ⁽³⁾							(7,650		)
Earnings from continuing operations before income taxes							$	116,779

Segment capital expenditures paid ⁽²⁾	$	502,040	363	37,139	—		539,542
Unallocated CSS capital expenditures paid							5,609
Capital expenditures paid							$	545,151

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


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


(3)	During the second quarter of 2016, we determined that certain pension benefit improvements made in 2009 were not fully reflected in our projected benefit obligation. We recognized a charge of $7.7 million related to these benefit improvements.



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the six months ended June 30, 2017
Revenue from external customers	$	2,068,618	539,286	933,473	—		3,541,377
Inter-segment revenue	227,431		—	—	(227,431	)	—
Total revenue	$	2,296,049	539,286	933,473	(227,431	)	3,541,377

Segment EBT	$	120,280	26,122	53,307	(23,589	)	176,120
Unallocated CSS							(21,924		)
Non-operating pension costs ⁽¹⁾							(13,917		)
Restructuring and other items, net							369
Earnings from continuing operations before income taxes							$	140,648

Segment capital expenditures paid ⁽²⁾	$	824,695	1,111	18,134	—		843,940
Unallocated CSS capital expenditures paid							11,312
Capital expenditures paid							$	855,252


For the six months ended June 30, 2016
Revenue from external customers	$	2,039,545	503,104	790,767	—		3,333,416
Inter-segment revenue	209,896		—	—	(209,896	)	—
Total revenue	$	2,249,441	503,104	790,767	(209,896	)	3,333,416

Segment EBT	$	194,047	30,716	48,149	(24,510	)	248,402
Unallocated CSS							(20,685		)
Non-operating pension costs ⁽¹⁾							(14,580		)
Pension-related charge ⁽³⁾							(7,650		)
Earnings from continuing operations before income taxes							$	205,487

Segment capital expenditures paid ⁽²⁾	$	1,062,325	880	44,462	—		1,107,667
Unallocated CSS capital expenditures paid							12,515
Capital expenditures paid							$	1,120,182

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


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


(3)	During the second quarter of 2016, we determined that certain pension benefit improvements made in 2009 were not fully reflected in our projected benefit obligation. We recognized a charge of $7.7 million related to these benefit improvements.