SHARE-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

The following table provides information on share-based compensation expense and related income tax benefits recognized:


	Years ended December 31,
(In millions)	2022		2021		2020
Unvested stock awards	$	44	$	44	$	26
Stock option and employee stock purchase plans	2		3		4
Share-based compensation expense	46		47		30
Income tax benefit	(6)		(7)		(5)
Share-based compensation expense, net of tax	$	40	$	40	$	25

Total unrecognized pre-tax compensation expense related to share-based compensation arrangements as of December 31, 2022 was $47 million and is expected to be recognized over a weighted-average period of approximately 1.8 years. The total fair value of equity awards vested was $31 million during 2022 and $27 million during both 2021 and 2020. The total cash received from employees under all share-based employee compensation arrangements was $14 million in 2022, $30 million in 2021 and $8 million 2020.

Share-Based Incentive Awards

Share-based incentive awards are provided to employees under the terms of various share-based compensation plans (collectively, the Plans). The Plans are administered by the Compensation Committee of the Board of Directors and principally include grants of restricted stock units (RSUs).

Restricted Stock Units

RSUs entitle the holder to receive one share of Ryder common stock for each RSU granted. Under the terms of our Plans, dividends on RSUs are paid only upon vesting of the award, and the amount of dividends paid is equal to the aggregate dividends declared on common shares during the period from the date of grant of the award until the date the shares underlying the award are delivered. The common stock underlying RSUs is not deemed issued or outstanding upon grant, and does not carry any voting rights. As of December 31, 2022, there are 4.9 million shares authorized for issuance under the Plans and 1.6 million shares remaining available for future grants.

RSUs granted to employees typically contain time-based vesting conditions, and in the case of certain senior executives also performance-based vesting conditions. Time-vested restricted stock rights (TVRSRs) typically vest ratably over three years for employees. The fair value of TVRSRs is determined and fixed based on Ryder’s stock price on the date of grant. Performance-based restricted stock rights (PBRSRs) are generally granted to executive management and include company specific performance-based vesting conditions. PBRSRs are awarded based on various revenue, return-based and cash flow performance targets and may include a total shareholder return (TSR) modifier. The fair values of the PBRSRs that include a TSR modifier are estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. The fair value of PBRSRs that do not include a TSR modifier is determined and fixed on the grant date based on our stock price on the date of grant. Share-based compensation expense for PBRSRs is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met.

In 2022 and 2021, PBRSRs were awarded based on adjusted return on equity (ROE), strategic revenue growth (SRG), and free cash flow (FCF). In 2020, PBRSRs were awarded based on ROE, SRG and earnings before interest, taxes, depreciation and amortization (EBITDA) margin percent. Our TSR will be compared against the TSR of each of the companies in a custom peer group to determine our TSR percentile rank versus this custom peer group. The number of PBRSRs will then be adjusted based on this rank.

We also grant stock awards and RSUs to non-executive members of the board of directors. RSUs to new board members do not vest until the director has served a minimum of one year. After one year of service on the board of directors, each director may elect to receive his or her stock award in the form of either (1) shares that are distributed at the time of grant or (2) RSUs that are delivered upon or after separation from the board. The fair value of the awards is determined and fixed based on Ryder’s stock price on the date of grant. Share-based compensation expense is recognized for RSUs in the year the RSUs are granted to board members. Shares of Ryder common stock delivered upon grant have standard voting rights and rights to dividend payments.

The following is a summary of activity for RSUs as of and for the year ended December 31, 2022:


	Time-Vested (1)			Performance-Based (2)
(Shares in millions)	Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value
Unvested stock awards at January 1	1.2	$	53.59	0.5	$	51.79
Granted	0.4	73.95		0.1	76.68
Vested	(0.4)	52.63		(0.1)	60.37
Forfeited (3)	(0.1)	62.03		—	38.45
Unvested stock awards at December 31	1.1	$	61.03	0.5	$	55.94

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(1) Includes RSUs granted to non-executive members of the board of directors.

(2) Performance-based awards are initially granted at target, assuming 100% payout.

(3) Includes awards canceled due to employee terminations or performance conditions not being achieved.

Option Awards

Stock options are awards that allow employees to purchase shares of our stock at a fixed price in the future. Stock option awards are granted at an exercise price equal to the market price of our stock at the time of grant. These awards, which generally vest one-third each year, are fully vested three years from the grant date. Stock options have contractual terms of ten years.

We have not granted stock option awards since 2019. As of December 31, 2022, we had options outstanding and exercisable of 1.2 million with a weighted-average exercise price of $74.18 and a weighted average-remaining contractual term of 3.6 years. As of December 31, 2021, we had options outstanding of 1.5 million with a weighted-average exercise price of $72.82 and a weighted average-remaining contractual term of 4.3 years.

The aggregate intrinsic values (the difference between the close price of our stock on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all options were exercised at year-end was $14 million as of December 31, 2022. This amount fluctuates based on the fair market value of our stock. The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing valuation model. We use historical data to estimate stock option forfeitures.

Employee Stock Purchase Plan

We maintain an Employee Stock Purchase Plan (ESPP) that enables eligible employees in the U.S. and Canada to purchase full or fractional shares of Ryder common stock through payroll deductions of a specific dollar amount or up to 15% of eligible compensation during quarterly offering periods. The price is based on the fair market value of the stock on the last trading day of the quarter. Stock purchased under the ESPP must be held for 90 days or one year for officers. There were 7.5 million shares authorized for issuance under the existing ESPP as of December 31, 2022. There were 1.7 million shares remaining available to be purchased in the future under the ESPP as of December 31, 2022.

The following table presents the shares purchased and the related weighted-average purchase price under the ESPP:


	Years ended December 31,
	2022		2021		2020
Shares purchased	171,000		160,000		320,000
Weighted average purchase price	$	65.50	$	66.75	$	32.39