XML 24 R13.htm IDEA: XBRL DOCUMENT v3.21.2
REVENUE EARNING EQUIPMENT, NET
 6 Months Ended
Jun. 30, 2021
Revenue Earning Equipment [Abstract]  
REVENUE EARNING EQUIPMENT, NET REVENUE EARNING EQUIPMENT, NET
 Estimated Useful LivesJune 30, 2021December 31, 2020
 CostAccumulated
Depreciation
Net
CostAccumulated
Depreciation
Net
 (In years)(In thousands)
Held for use:
Trucks
3 — 7
$5,195,420 $(1,945,096)$3,250,324 $5,061,266 $(1,818,594)$3,242,672 
Tractors
   4 — 7.5
7,247,325 (3,040,912)4,206,413 7,013,595 (2,853,591)4,160,004 
Trailers and other
9.5 — 12
1,765,247 (768,590)996,657 2,046,768 (804,006)1,242,762 
Held for sale370,339 (292,634)77,705 644,132 (512,555)131,577 
Total$14,578,331 $(6,047,232)$8,531,099 $14,765,761 $(5,988,746)$8,777,015 

Policy and Accelerated Depreciation
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. A reduction in estimated residual values or useful lives will result in an increase in depreciation expense over the remaining life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is established with a long-term view, which we refer to as "policy depreciation." Our policy depreciation is based on a variety of factors, including vehicle class, generally subcategories of trucks, tractors and trailers, by weight, usage and other factors; historical, current, and internal and third-party expected future market prices; expected lives of vehicles; and expected sales of used vehicles in the wholesale and retail markets. Factors that could cause actual results to materially differ from estimates, include changes in technology; changes in supply and demand; competitor pricing; regulatory requirements; driver shortages, 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.
We also assess estimates of residual values of vehicles expected to be made available for sale in the near-term (generally 12 to 24 months) based on near-term market rates and conditions and may adjust estimates of residual values for these vehicles, which we refer to as "accelerated depreciation."

During the second quarter of 2021, we completed a review of the residual values and useful lives of revenue earning equipment. Based on the results of our analysis, we primarily adjusted our residual value estimates for certain tractors and useful lives of certain classes of our revenue earning equipment, which impacted approximately 15% of our total fleet. The increase in depreciation expense in the second quarter of 2021 was not material to our results of operations.

The following table provides a summary of amounts that have been recorded for accelerated and policy depreciation related to our residual value and useful life estimate changes since 2019, as well as used vehicle sales results (rounded to the closest million):
Three months ended June 30,Six months ended June 30,
2021202020212020
(In thousands)
Accelerated depreciation$12,000 $77,000 $42,000 $156,000 
Policy depreciation63,000 68,000 121,000 119,000 
Used vehicle sales, net(52,000)9,000 (80,000)30,000 
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. In addition, we also consider expected declines in market prices when valuing the vehicles held for sale, as well as the forecasted sales channel mix (retail/wholesale).

The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:
Valuation Adjustments
 Three months ended June 30,Six months ended June 30,
June 30, 2021
December 31, 2020 (2)
2021202020212020
 (In thousands)
Revenue earning equipment held for sale (1):
Trucks$2,209 $3,848 $684 $5,389 $1,574 $16,451 
Tractors1,383 2,211 575 3,035 659 11,488 
Trailers and other2,176 4,092 1,828 2,592 3,875 4,585 
Total assets at fair value$5,768 $10,151 $3,087 $11,016 $6,108 $32,524 
 ————————————
(1)Revenue earning equipment held for sale in the table above only includes 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 $72 million and $121 million as of June 30, 2021 and December 31, 2020, respectively.
(2)Adjusted the presentation of the vehicles held for sale that were recorded to fair value to now exclude vehicles that previously recognized accumulated accelerated depreciation.
The components of used vehicle sales, net were as follows:
 Three months ended June 30,Six months ended June 30,
2021202020212020
(In thousands)
Gains on vehicle sales, net$(54,721)$(1,528)$(86,593)$(2,352)
Losses from valuation adjustments3,087 11,016 6,108 32,524 
Used vehicle sales, net$(51,634)$9,488 $(80,485)$30,172