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 to each segment based upon estimated and planned resource utilization for each segment;

•Human resources — individual costs within this category are allocated under various methods, including allocation based on estimated utilization and number of personnel supported for each segment;

•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. Such expenses, if allocated to a segment, are based primarily on the number of personnel supported in each segment.

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" in the table below).

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, 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. Prior period Segment EBT amounts and non-operating pension costs have been reclassified to conform to the current period presentation. These reclassifications were immaterial to the financial statements taken as a whole.



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the three months ended September 30, 2017
Revenue from external customers	$	1,080,191	272,334	496,004	—		1,848,529
Inter-segment revenue	115,607		—	—	(115,607	)	—
Total revenue	$	1,195,798	272,334	496,004	(115,607	)	1,848,529

Segment EBT	$	100,693	13,770	22,052	(14,464	)	122,051
Unallocated CSS							(11,041		)
Non-operating pension costs							(6,958		)
Restructuring and other items, net ⁽¹⁾							(9,709		)
Earnings from continuing operations before income taxes							$	94,343

Segment capital expenditures paid	$	431,093	1,878	16,705	—		449,676
Unallocated CSS capital expenditures paid							7,917
Capital expenditures paid							$	457,593


For the three months ended September 30, 2016
Revenue from external customers	$	1,046,599	260,921	416,898	—		1,724,418
Inter-segment revenue	108,412		—	—	(108,412	)	—
Total revenue	$	1,155,011	260,921	416,898	(108,412	)	1,724,418

Segment EBT	$	112,507	17,584	30,956	(12,606	)	148,441
Unallocated CSS							(9,275		)
Non-operating pension costs							(7,468		)
Earnings from continuing operations before income taxes							$	131,698

Segment capital expenditures paid	$	375,779	1,060	8,181	—		385,020
Unallocated CSS capital expenditures paid							6,157
Capital expenditures paid							$	391,177

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(1)	Refer to Note 13, Other Items Impacting Comparability for additional information.



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the nine months ended September 30, 2017
Revenue from external customers	$	3,148,809	811,620	1,429,477	—		5,389,906
Inter-segment revenue	343,038		—	—	(343,038	)	—
Total revenue	$	3,491,847	811,620	1,429,477	(343,038	)	5,389,906

Segment EBT	$	220,973	39,892	75,359	(38,053	)	298,171
Unallocated CSS							(32,965		)
Non-operating pension costs							(20,875		)
Restructuring and other items, net ⁽¹⁾							(9,340		)
Earnings from continuing operations before income taxes							$	234,991

Segment capital expenditures paid	$	1,255,789	2,989	34,839	—		1,293,617
Unallocated CSS capital expenditures paid							19,228
Capital expenditures paid							$	1,312,845


For the nine months ended September 30, 2016
Revenue from external customers	$	3,086,144	764,025	1,207,665	—		5,057,834
Inter-segment revenue	318,308		—	—	(318,308	)	—
Total revenue	$	3,404,452	764,025	1,207,665	(318,308	)	5,057,834

Segment EBT	$	306,554	48,300	79,105	(37,116	)	396,843
Unallocated CSS							(29,960		)
Non-operating pension costs							(22,048		)
Pension-related charge ⁽²⁾							(7,650		)
Earnings from continuing operations before income taxes							$	337,185

Segment capital expenditures paid	$	1,438,104	1,940	52,643	—		1,492,687
Unallocated CSS capital expenditures paid							18,672
Capital expenditures paid							$	1,511,359

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(1)	Refer to Note 13, Other Items Impacting Comparability for additional information.


(2)	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.