SEGMENT REPORTING

6 Months Ended

Jun. 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. 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”).

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 six months ended June 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 June 30, 2019
Revenue from external customers	$	1,233,438	362,244	649,311	—		2,244,993
Inter-segment revenue	157,472		—	—	(157,472	)	—
Total revenue	$	1,390,910	362,244	649,311	(157,472	)	2,244,993

Segment EBT	$	57,746	27,132	45,774	(19,166	)	111,486

Unallocated CSS							(10,482		)
Non-operating pension costs⁽¹⁾							(6,713		)
Restructuring and other items, net ⁽²⁾							(9,836		)
Gain on sale of property ⁽²⁾							18,614
Earnings from continuing operations before income taxes							$	103,069

Segment capital expenditures paid⁽³⁾	$	1,161,089	517	12,738	—		1,174,344
Unallocated CSS capital expenditures paid							9,706
Capital expenditures paid							$	1,184,050


For the three months ended June 30, 2018
Revenue from external customers	1,154,758		330,622	604,524	—		2,089,904
Inter-segment revenue	140,971		—	—	(140,971	)	—
Total revenue	1,295,729		330,622	604,524	(140,971	)	2,089,904

Segment EBT	76,556		18,452	36,885	(15,309	)	116,584

Unallocated CSS							(11,058		)
Non-operating pension costs⁽¹⁾							(858		)
Restructuring and other items, net ⁽²⁾							(2,774		)
Earnings from continuing operations before income taxes							101,894

Segment capital expenditures paid⁽³⁾	735,695		393	16,323	—		752,411
Unallocated CSS capital expenditures paid							6,146
Capital expenditures paid							758,557

————————————


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


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


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



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the six months ended June 30, 2019
Revenue from external customers	$	2,428,473	711,865	1,284,982	—		4,425,320
Inter-segment revenue	314,036		—	—	(314,036	)	—
Total revenue	$	2,742,509	711,865	1,284,982	(314,036	)	4,425,320

Segment EBT	118,657		44,544	78,091	(36,468	)	204,824

Unallocated CSS							(23,029		)
Non-operating pension costs⁽¹⁾							(13,175		)
Restructuring and other items, net ⁽²⁾							(16,014		)
Gain on sale of property ⁽²⁾							18,614
Earnings from continuing operations before income taxes							$	171,220

Segment capital expenditures paid⁽³⁾	$	2,167,218	860	25,494	—		2,193,572
Unallocated CSS capital expenditures paid							17,189
Capital expenditures paid							$	2,210,761


For the six months ended June 30, 2018
Revenue from external customers	2,265,286		629,592	1,099,231	—		3,994,109
Inter-segment revenue	273,493		—	—	(273,493	)	—
Total revenue	2,538,779		629,592	1,099,231	(273,493	)	3,994,109

Segment EBT	130,899		31,504	62,396	(28,581	)	196,218

Unallocated CSS							(21,650		)
Non-operating pension costs⁽¹⁾							(2,080		)
Restructuring and other items, net ⁽²⁾							(17,895		)
Earnings from continuing operations before income taxes							154,593

Segment capital expenditures paid ⁽³⁾	1,381,064		642	28,616	—		1,410,322
Unallocated CSS capital expenditures paid							10,979
Capital expenditures paid							1,421,301

————————————


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


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

(3)

Excludes revenue earning equipment acquired under capital leases.