UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-4364
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
11690 N.W. 105th Street
Miami, Florida 33178
(Address of principal executive offices, including zip code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Ryder System, Inc. Common Stock ($0.50 par value)
Securities registered pursuant to Section 12(g) of the Act: None
59-0739250
(I.R.S. Employer Identification No.)
(305) 500-3726
(Telephone number, including area code)
Trading symbol(s)
R
Name of exchange on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at
which the common equity was sold at June 30, 2019 was $3,050,341,216. The number of shares of Ryder System, Inc. Common Stock outstanding at
January 31, 2020 was 53,271,759.
Documents Incorporated by Reference into this Report
Ryder System, Inc. 2020 Proxy Statement
Part of Form 10-K into which Document is Incorporated
Part III
RYDER SYSTEM, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page No.
Business
ITEM 1
ITEM 1A Risk Factors
ITEM 1B Unresolved Staff Comments
ITEM 2
ITEM 3
ITEM 4
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
ITEM 5
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 6
ITEM 7
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
ITEM 8
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9
ITEM 9A Controls and Procedures
ITEM 9B Other Information
PART III
ITEM 10
ITEM 11
ITEM 12
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
ITEM 13
ITEM 14
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
ITEM 15
ITEM 16
Exhibits and Financial Statement Schedules
Form 10-K Summary
Exhibit Index
SIGNATURES
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PART I
ITEM 1. BUSINESS
OVERVIEW
Ryder System, Inc. (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) Fleet Management
Solutions (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) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution, management,
dedicated transportation and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which
provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers and engineering and
administrative support. Dedicated transportation services provided as part of an operationally integrated, multi-service, supply
chain solution to SCS customers are primarily reported in the SCS business segment.
MISSION AND STRATEGY
Ryder's mission is to provide innovative fleet management and supply chain solutions that are reliable, safe and efficient,
enabling our customers to deliver on their promises. We seek to deliver valuable solutions that will compel customers to
outsource their fleet management and supply chain needs to us. Our primary strategy is to grow our fleet management and
supply chain outsourcing services by targeting those companies not currently outsourcing their fleet-related and logistics
services as well as companies who have outsourced to other providers by offering innovative solutions, operational excellence,
best in class talent and information technology. This strategy is supported by:
• offering innovative products, solutions and support services that will create and strengthen customer relationships;
• delivering operational excellence through continuous productivity and process improvements;
• attracting, developing and retaining the best talent; and
• deploying technology that will enable growth while improving operational efficiencies.
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INDUSTRY AND OPERATIONS
Value Proposition
Fleet Management Solutions
Through our FMS business, we provide our customers with a variety of fleet solutions that are designed to improve their
competitive position. By outsourcing these services to us, our customers can focus on their core business, improve their
efficiency and productivity, and lower their costs. Our FMS product offering is comprised of full service leasing as well as
leasing with flexible maintenance options; shorter-term commercial truck rental; contract or transactional maintenance services;
and value-added fleet support services such as vehicle administration and fuel services. In addition, we provide our customers
the ability to purchase a large selection of used trucks, tractors and trailers through our used vehicle sales program. FMS also
provides vehicles and maintenance, fuel and other services for all vehicles used in our SCS and DTS businesses.
Market Trends
The U.S. commercial fleet market is estimated to include 9 million vehicles,
of which 5 million vehicles are privately
owned by companies, 2 million vehicles are with for-hire carriers, 1 million vehicles are leased from banks or other financial
institutions, and 1 million vehicles are in the lease and rental market(1). The companies that privately own their own fleets
generally provide all or a portion of the transportation services for themselves rather than outsourcing those services to third
parties such as Ryder.
The Canadian commercial fleet is estimated at 500,000 vehicles, of which approximately 20,000 vehicles are in the lease
and rental market(2). In the U.K., the commercial rental and lease market is estimated at 235,000 units(3). The total lease and
rental market in Ryder’s major markets totals over 1 million units.
Over the last several years, many key trends have been reshaping the transportation industry. Companies that own,
maintain and manage their own fleet of vehicles have put greater emphasis on the quality of their preventive maintenance and
safety programs because of increased demand for efficiency and reliability. The maintenance and operation of commercial
vehicles has become more complicated and expensive, requiring companies to spend a significant amount of time and money to
keep up with new technology, diagnostics, retooling and training. Companies are also faced with labor issues, including a
shortage of qualified truck drivers and mechanics. Increased regulation and active enforcement efforts by federal and state
governments require more stringent and costly operational processes and oversight. Fluctuating energy prices and alternative
fuel technologies make it difficult for businesses to predict and manage fleet costs. There has also been a tightening of capacity
with respect to the U.S. trucking market. We believe these trends increase the value of our product offering and will
increasingly lead privately held fleets and the for-hire carriers to decide to outsource.
Operations
In 2019, our global FMS business accounted for 56% of our consolidated revenue (excluding eliminations).
United States. Ryder was founded in the U.S. in 1933. Our FMS customers in the U.S. range from small businesses to
large national enterprises operating in a wide variety of industries, the most significant of which are transportation and
warehousing, food and beverage, housing, business and personal services, and industrial. At December 31, 2019, we had 524
operating locations, excluding ancillary storage locations, in 50 states and Puerto Rico. A location consists of a maintenance
facility and serves multiple customers. Our maintenance facilities typically include a shop for preventive maintenance and
repairs, a service island for fueling, safety inspections and preliminary maintenance checks, offices for sales and other
personnel, and in many cases, a commercial rental vehicle counter. We also operate on-site at 160 customer locations, which
primarily provide vehicle maintenance solely for that customer's fleet.
Canada. We have been operating in Canada for over 50 years. At December 31, 2019, we had 32 operating locations
throughout 9 Canadian provinces. We also operate 14 maintenance facilities on-site at customer properties in Canada.
Europe. We began operating in the U.K. in 1971. At December 31, 2019, we had 54 operating locations, primarily
throughout the U.K, including those that we manage on behalf of our customers. We also manage a network of 367 independent
maintenance facilities in the U.K. to serve our customers when it is more effective than providing the service in a Ryder
location. In addition to our typical FMS operations, we supply and manage vehicles, equipment and personnel for military
organizations in the U.K. and Germany.
(1) U.S. Fleet as of September 2019, Class 3-8, IHS Markit Ltd. (formerly RL Polk)
(2) Canada Outsourced Fleet Market as of September 2019, Class 3-8, IHS Markit Ltd. (formerly RL Polk)
(3) U.K. Lease and Rental HGV Market, Projection for December 2019, Source: The Society of Motor Manufacturers & Traders (SMMT) 2010 & Ryder Internal Estimate
2
FMS Product Offerings
ChoiceLease. Our lease offering, ChoiceLease, provides customers with vehicles, maintenance services, supplies, and
related equipment necessary for operation of the vehicles while our customers furnish and supervise their own drivers and
exercise control over the vehicles. The ChoiceLease offering allows customers to select the terms of their lease alongside the
level of maintenance they prefer, from full service or total bumper-to-bumper coverage to on-demand or pay-as-you-go
maintenance.
Our ChoiceLease customers receive the following benefits:
• We are able to leverage our vehicle buying power for the benefit of our customers because we purchase a large
number of vehicles from a limited number of manufacturers. Once we have signed an agreement with the customer,
we acquire vehicles and components that are custom engineered to the customer’s requirements and lease the
vehicles to the customer for periods generally ranging from three to seven years for trucks and tractors and typically
ten years for trailers.
• We offer ChoiceLease customers a complete maintenance program designed to reduce vehicle downtime through a
preventive maintenance plan that is based on vehicle type and time or mileage intervals. Alternatively, we offer
flexible maintenance options to our customers designed to provide them with choices on their preferred level of
maintenance. Given our continued focus on improving the efficiency and effectiveness of our maintenance services,
particularly in light of changing technology and increased regulation, we provide our ChoiceLease customers with a
cost effective alternative to maintaining their own fleet of vehicles and the flexibility to choose the maintenance
program that works for them.
• Our customers have access to our extensive network of maintenance facilities and trained technicians for
maintenance, vehicle repairs, 24-hour emergency roadside service, and replacement vehicles for vehicles that are
temporarily out of service.
• We typically retain vehicle residual risk exposure.
• Customers have an opportunity to enhance their standard lease with additional fleet support services including our
fuel and related services as described below; liability insurance coverage under our existing insurance policies and
related insurance services; safety services including safety training, driver certification and loss prevention
consulting; vehicle use and other tax reporting, permitting and licensing, and regulatory compliance (including hours
of service administration); environmental services; and access to RydeSmart®, a full-featured GPS fleet location,
tracking, and vehicle performance management system; and to RyderGuide®, our mobile fleet tool that provides
customers with 24/7 access to key operational and maintenance management information about their fleets. In
January 2020, we announced our plan to exit the extension of our liability insurance coverage for ChoiceLease
customers. The exit of this program is estimated to be completed in the second quarter of 2021.
For the year ended December 31, 2019, ChoiceLease revenue accounted for 56% of our FMS total revenue.
Commercial Rental. We offer rental customers that have a need to supplement their private fleet of vehicles on a short-
term basis (one day up to one year in length), either because of seasonal increases in their business or discrete projects with
additional transportation needs. ChoiceLease customers also utilize our commercial rental fleet to handle their peak or seasonal
business needs, as substitute vehicles while their lease vehicles are undergoing maintenance, and while they are awaiting
delivery of new lease vehicles. Although a portion of our commercial rental business is purely occasional in nature, we focus on
building long-term relationships with customers so that we become their preferred source for commercial vehicle rentals. Our
rental representatives assist in selecting a vehicle that satisfies a customer’s needs and supervise the rental process, which
includes execution of a rental agreement and a vehicle inspection. In addition to vehicle rental, we may extend liability
insurance coverage under our existing policies to our rental customers as well as the benefits of cost savings and convenience of
our comprehensive fuel services program. For the year ended December 31, 2019, commercial rental revenue accounted for
18% of our FMS total revenue.
SelectCare. Through our SelectCare product line, we provide maintenance services to customers who do not choose to
lease vehicles from us. Our SelectCare customers commit to utilizing our extensive network of maintenance facilities and
trained technicians to maintain the vehicles they own or lease from third parties. There are several bundles of services available
to SelectCare customers including full service contract maintenance, preventive only maintenance and on-demand maintenance.
We can also customize the services to include fleet support services as described above. Vehicles covered under this offering are
typically serviced at our own facilities. However, based on the size and complexity of a customer’s fleet, we may operate an on-
site maintenance facility at the customer’s location.
Additionally, our lease and contract maintenance customers periodically require additional maintenance and repair
services that are not included in their lease or contract maintenance agreements. For example, additional maintenance and repair
3
services may arise when a customer damages a vehicle. In such situations, we generally charge the customer on an hourly basis
for work performed. By servicing all of our customers’ maintenance needs, we create stronger, long-term relationships and have
greater opportunity to provide customers with a wide range of outsourcing solutions. For the year ended December 31, 2019,
SelectCare revenue accounted for 10% of our FMS total revenue.
The following table provides information regarding the number of vehicles and customers by FMS product offering as of
December 31, 2019:
ChoiceLease
Commercial rental (1)
SelectCare (2)
U.S.
Foreign
Total
Vehicles
136,100
36,000
50,400
Customers
12,200
32,200
1,800
Vehicles
23,700
5,900
5,400
Customers
2,400
5,000
300
Vehicles
159,800
41,900
55,800
Customers
14,600
37,200
2,100
______________
(1) Commercial rental customers represent those who rented a vehicle for more than 3 days during the year and includes approximately 7,500 ChoiceLease customers
(2)
SelectCare customers include approximately 1,000 ChoiceLease customers
We also contract with large private fleet operators and for-hire carriers to provide maintenance on demand, particularly in
geographic areas where these customers do not have their own maintenance operations. The contract for on-demand
maintenance services is based on a maintenance program that is designed to meet the customer's specific needs and all
maintenance is performed only when and as requested by the customer. This product allows us to expand our customer base to
include customers that have traditionally chosen to own and maintain their fleet of vehicles.
Fuel Services. We provide our FMS customers with access to diesel fuel at competitive prices at approximately 460 of
our maintenance facilities across the United States and Canada. We also provide fuel services such as fuel planning, fuel tax
reporting, centralized billing, fuel cards and fuel monitoring. Although fuel sales do not have a significant impact on our FMS
earnings, as it is largely a pass-through cost to customers, we believe allowing customers to leverage our fuel buying power is a
significant and valuable benefit to our customers. For the year ended December 31, 2019, fuel services revenue accounted for
15% of our FMS total revenue.
Used Vehicles. We primarily sell our used vehicles out of our 51 retail sales centers throughout North America (14 of
which are co-located at an FMS shop), at our branch locations and through our website at www.Usedtrucks.Ryder.com.
Typically, before we offer used vehicles for sale, our technicians ensure that the vehicles are Ryder CertifiedTM, which means
that they have passed a comprehensive, multi-point performance inspection based on specifications formulated through our
maintenance program, Ryder VerifiedTM, which are fully inspected and DOT compliant vehicles with some wear and tear, or
Ryder ReclassifiedTM. Generally, our retail sales centers throughout North America allow us to leverage our maintenance
expertise and strong brand reputation to realize higher sales proceeds than in the wholesale market. Given our focus on
maximizing sales proceeds, we primarily sell our used vehicles through retail centers. The realized sales proceeds of used
vehicles are dependent upon various other factors, including the general state of the used vehicle market, the supply and
demand for used commercial vehicles in wholesale and retail markets, the age and condition of the vehicle at the time of its
disposal and vehicle depreciation estimates. In recent years, the general state of the used vehicle sales market has been
particularly challenging, which has required us to sell many of our used vehicles below book value and lower residual value
estimates on vehicles still in operation.
FMS Business Strategy
Our FMS business strategy is to be the leading provider of fleet management outsourcing services for light, medium and
heavy duty commercial highway vehicles. This strategy revolves around the following interrelated goals and priorities:
• drive profitable fleet growth that maximizes our return on investment by (1) successfully implementing sales and
marketing initiatives designed to compel private fleet operators and for-hire carriers to outsource all or some portion of
their fleet management needs to us; (2) offering innovative products, solutions and support services that will create and
strengthen new and existing customer relationships; and (3) completing targeted acquisitions;
• deliver a consistent, industry-leading and cost-effective maintenance program to our customers through continued
process improvement and re-design, productivity initiatives and technology improvements allowing us to obtain new
business, including from our competitors; and
• optimize asset utilization and management, particularly with respect to our rental fleet, used vehicle operations and
maintenance facility infrastructure.
4
Competition
As an alternative to using our fleet management services, companies may choose to provide these services for themselves
or to obtain similar or alternative services from other third-party vendors.
Our FMS business segment competes with companies that provide and manage maintenance services themselves and
those providing similar services on a national, regional and local level. Many regional and local competitors provide services on
a national level through their participation in various cooperative programs. We compete with finance lessors, truck and trailer
manufacturers and independent dealers who provide full service lease products, finance leases, extended warranty maintenance,
rental and other transportation services. We compete with other companies based on factors such as price, geographic coverage,
equipment, maintenance, and service. We also face competition from managed maintenance providers who are hired to
coordinate and manage the maintenance of large fleets of vehicles through a network of third-party maintenance providers.
Value-added differentiation of the ChoiceLease, SelectCare and commercial rental services, as well as continued commitment
to offer innovative products and solutions, such as natural gas and electric vehicles, have been and will continue to be our focus.
Value Proposition
Supply Chain Solutions
Through our SCS business, we offer a broad range of innovative logistics management services that are designed to
optimize customers' supply chain and address customers' key business requirements. The business is organized by industry
verticals (Automotive, Technology and Healthcare, Consumer Packaged Goods and Retail, and Industrial and other) to enable
our teams to focus on the specific needs of their customers. Our SCS product offerings are organized into four categories:
dedicated services, distribution management, transportation management and professional services. These offerings are
supported by a variety of information technology and engineering solutions and can be provided independently or as an
integrated solution to optimize supply chain effectiveness. A key aspect of our value proposition is our operational execution,
which is an important differentiator in the marketplace.
Market Trends
Global logistics is an approximately $10 trillion market, of which approximately $995 billion is outsourced(1). Logistics
spending in the markets we are targeting in North America equates to approximately $2 trillion, of which $266 billion is
outsourced(1). Outsourced logistics is a market with significant growth opportunity. More sophisticated supply chain practices
are required as supply chains expand and become more complex and companies look for lower cost supply chain alternatives.
In addition, disruptions from unexpected events such as natural disasters have caused companies to focus on risk management
of their supply chains. The more complicated the supply chain or the product requirements, the greater the need for companies
to utilize the expertise of supply chain solution providers.
Operations
For the year ended December 31, 2019, our global SCS business accounted for 29% of our consolidated revenue.
U.S. At December 31, 2019, we had 188 SCS customer accounts in the U.S., most of which are large enterprises that
maintain large, complex supply chains. Most of our core SCS business operations are geographically located to maximize
efficiencies and reduce costs. At December 31, 2019, managed warehouse space totaled approximately 50 million square feet.
We also concentrate certain logistics expertise in locations not associated with specific customer sites. For example, our
carrier procurement, contract management, freight bill audit and payment services, and transportation optimization and
execution groups operate out of our logistics centers in Novi, Michigan and Fort Worth, Texas.
Mexico. At December 31, 2019, we had 131 SCS customer accounts and managed warehouse space totaling
approximately 4 million square feet. Our Mexico operations offer a full range of SCS services and manage approximately
21,500 border crossings each month between Mexico and the U.S. and Canada, often highly integrated with our distribution and
transportation operations.
Canada. At December 31, 2019, we had 38 SCS customer accounts and managed warehouse space totaling
approximately 2.4 million square feet. Given the proximity of this market to our U.S. and Mexico operations, the Canadian
operations are highly coordinated with their U.S. and Mexico counterparts, managing approximately 9,900 border crossings
each month.
Singapore. In the second quarter of 2019, we ceased our Singapore business operations.
(1) Armstrong & Associates - Third-Party Logistics Market Results and Trends for 2019, June 2019
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SCS Product Offerings
Distribution Management. Our SCS business offers a wide range of services relating to a customer’s distribution
operations, from designing a customer’s distribution network, to managing distribution facilities, to an e-commerce service
designed specifically for high-volume from the receiving function to the shipping function, coordinating warehousing and
transportation for inbound and outbound material flows, handling import and export for international shipments, coordinating
just-in-time replenishment of component parts to manufacturing and final assembly, and providing shipments to customer
distribution centers or end customer delivery points, including support for e-commerce networks. Additional value-added
services such as light assembly of components into defined units (kitting), packaging and refurbishment may also be provided.
For the year ended December 31, 2019, distribution management solutions accounted for 39% of our SCS revenue.
Dedicated Services. Dedicated services are offered as part of an integrated supply chain solution to our customers. We
fulfill transportation needs for our customers with a combination of outside carriers and dedicated services. The dedicated
services offering combines the equipment, maintenance, drivers and additional services to provide a customer with a dedicated
transportation solution that, combined with outside transportation, is designed to increase their competitive position, improve
risk management and integrate their transportation needs with their overall supply chain. Such additional services include
routing and scheduling, fleet sizing, safety, regulatory compliance, risk management, technology and communication systems
support including on-board computer and other technical support. These additional services allow us to mitigate, on behalf of
our customers, labor challenges associated with maintaining a private fleet of vehicles, such as driver recruitment and turnover,
and government regulation, including hours of service regulations, Department of Transportation (DOT) audits and workers'
compensation. Our dedicated services solution offers a high degree of specialization to meet the needs of customers with
sophisticated service requirements such as tight delivery windows, high value or time-sensitive distribution, closed-loop
distribution, multi-stop shipments, specialized equipment and integrated transportation needs. Dedicated services operations are
located at our customer facilities, and our dedicated offering utilizes and benefits from our extensive network of FMS facilities,
which provides maintenance for all Ryder vehicles used in SCS solutions. For the year ended December 31, 2019,
approximately 34% of our SCS revenue was related to dedicated services.
Transportation Management. Our SCS business offers services relating to all aspects of a customer’s transportation
network. Our team of transportation specialists provides shipment planning and execution, which includes shipment
optimization, load scheduling and delivery confirmation through a series of technological and web-based solutions. Our
transportation consultants focus on carrier procurement of all modes of transportation with an emphasis on truck-based
transportation, rate negotiation, and freight bill audit and payment services. In addition, our SCS business provides customers
with capacity management services that are designed to maximize backhaul opportunities and minimize excess miles. For the
year ended December 31, 2019, we purchased or executed approximately $7 billion in freight moves on our customers' behalf.
For the year ended December 31, 2019, transportation management solutions accounted for 14% of our SCS revenue.
Last Mile. Our Ryder Last Mile offering consists of a network of over 120 locations strategically located throughout the
U.S. that receive, assemble, and prepare big and bulky items ranging from furniture to exercise equipment for in home or office
delivery. We offer tiered levels of delivery services to meet consumer’s needs including placing the newly delivered item in the
location of a customer’s choosing, minor installation and disposal of the replaced item. We use proprietary scheduling software
to provide customers with the appointment times they need and optimize routes for maximum efficiency. Finally, as an
extension of our customer’s brand, we track and report the satisfaction of each delivery experience. For the year ended
December 31, 2019, Ryder Last Mile accounted for 8% of our SCS revenue.
Professional Services. In conjunction with providing the SCS services described previously, our SCS business offers a
variety of knowledge-based professional services that support every aspect of a customer’s supply chain. Our SCS professionals
are available to evaluate a customer’s existing supply chain to identify inefficiencies as well as opportunities for integration and
improvement. Once the assessment is complete, we work with the customer to develop a supply chain strategy that will create
the most value for the customer and their target clients. Once a customer has adopted a supply chain strategy, our SCS logistics
team, supported by functional experts and representatives from our information technology, real estate and finance groups,
work together to design a strategically focused supply chain solution. The solution may include both a network design that sets
forth the number, location and function of key components of the network and a transportation solution that optimizes the mode
or modes of transportation and route selection. In addition to providing the distribution and transportation expertise necessary to
implement the supply chain solution, our SCS representatives can coordinate and manage all aspects of the customer’s supply
chain provider network to assure consistency, efficiency and flexibility. For the year ended December 31, 2019, knowledge-
based professional services accounted for 5% of our SCS revenue.
SCS Business Strategy
Our SCS business strategy is to offer our customers differentiated, functional execution and proactive solutions from our
expertise in key industry verticals. The strategy revolves around the following interrelated goals and priorities:
6
• provide customers with best in class execution and quality through reliable and flexible supply chain solutions;
• develop innovative solutions and capabilities that drive value for our customers within our targeted industry verticals;
• create a culture of innovation and collaboration to share capabilities and solutions to meet our clients' needs;
• focus consistently on network optimization and continuous improvement; and
• execute on targeted sales and marketing growth strategies.
Competition
As an alternative to using our services, companies may choose to internally manage their own supply chains and logistics
operations, or obtain similar or alternative services from other third-party vendors.
In the SCS business segment, we compete with a large number of companies providing similar services, each of which
has a different set of core competencies. We compete with a handful of large, multi-service companies across all of our service
offerings and industries. We also compete against other companies on specific service offerings (for example, in transportation
management, distribution management or dedicated services) or with companies specializing in a specific industry. We face
different competitors in each country or region where they may have a greater operational presence. We compete based on
factors such as price, service offerings, market knowledge, expertise in logistics-related technology and overall performance
(e.g. timeliness, accuracy, and flexibility).
Dedicated Transportation Solutions
Value Proposition
Through our DTS business segment, we combine equipment, maintenance, drivers, administrative services and additional
services to provide customers with a dedicated transportation solution that is designed to increase their competitive position,
improve risk management and integrate their transportation needs with their overall supply chain. Such additional services
include routing and scheduling, fleet sizing, safety, regulatory compliance, risk management, technology and communication
systems support, including on-board computers and other technical support. These additional services allow us to mitigate, on
behalf of our customers, labor challenges associated with maintaining a private fleet of vehicles, such as driver recruitment and
retention, and government regulation, including electronic logging devices and hours of service regulations, DOT audits and
workers’ compensation. Our DTS solution offers a high degree of specialization to meet the needs of customers with
sophisticated service requirements such as tight delivery windows, high-value or time-sensitive freight distribution, closed-loop
distribution, multi-stop shipments, specialized equipment and integrated transportation needs.
Market Trends
The U.S. dedicated contract carriage market is estimated to be $18 billion(1) from an addressable market of approximately
$400 billion(2). This market is affected by many of the same trends that impact our FMS business, including the tightening of
capacity in the current U.S. trucking market. The administrative requirements relating to regulations issued by the DOT
regarding driver screening, training and testing, as well as record keeping and other costs associated with the hours of service
requirements, make our DTS product an attractive alternative to private fleet and driver management. With the changes in the
regulatory environment, including the electronic logging device mandate that became effective in late 2017, there continues to
be significant pressure on the availability of qualified truck drivers, whose supply remains tight, and shippers continue to seek
dedicated capacity from quality transportation and logistics providers. In addition, market demand for just-in-time delivery
creates a need for well-defined routing and scheduling plans that are based on comprehensive asset utilization analysis and fleet
rationalization studies offered as part of our DTS services.
Operations/Product Offerings
For the year ended December 31, 2019, our global DTS business accounted for 15% of our consolidated revenue. At
December 31, 2019, we had 186 DTS customer accounts in the U.S. Because it is highly customized, our DTS product is
particularly attractive to companies that operate in industries that have time-sensitive deliveries or special handling
requirements, as well as companies who require specialized equipment. DTS accounts typically operate in a limited geographic
area, and, therefore, most of the drivers assigned to these accounts are short haul drivers, meaning they return home at the end
of each work day, which helps with driver recruiting and retention. Although a significant portion of our DTS operations are
located at customer facilities, our DTS business also utilizes and benefits from our extensive network of FMS facilities,
including the FMS maintenance network that services all vehicles used in DTS solutions.
(1) Armstrong & Associates - Third-Party Logistics Market Results and Trends for 2019, June 2019
(2) Addressable market as of December 2019, Class 3-8, IHS Markit Ltd. (formerly RL Polk) & Ryder Internal Estimates
7
In order to customize an appropriate DTS transportation solution for our customers, our DTS logistics specialists perform
a transportation analysis using advanced logistics planning and operating tools. Based on this analysis, they formulate a
logistics design that includes the routing and scheduling of vehicles, the efficient use of vehicle capacity and overall asset
utilization. The goal of each customized plan is to create a distribution system that optimizes freight flow while meeting a
customer’s service goals. A team of DTS transportation specialists can then implement the plan by leveraging the resources,
expertise and technological capabilities of both our FMS and SCS businesses.
To the extent a distribution plan includes multiple modes of transportation (air, rail, sea and highway), our DTS team, in
conjunction with our SCS transportation specialists, selects appropriate transportation modes and carriers, places the freight,
monitors carrier performance and audits billing. In addition, through our SCS business, we can reduce costs and add value to a
DTS customer’s distribution system by aggregating orders into loads, looking for shipment consolidation opportunities and
organizing loads for vehicles that are returning from their destination point back to their point of origin (backhaul).
DTS Business Strategy
Our DTS business strategy is to offer services to customers who need specialized equipment, specialized handling or
integrated services. This strategy revolves around the following interrelated goals and priorities:
• increase market share with customers in the energy and utility, metals and mining, specialty retail, construction, and
food and beverage industries;
• leverage the support and talent of the FMS sales team to compel private fleet operators to outsource all or some of
their transportation needs to us;
• align the DTS business with other SCS product lines to create revenue opportunities and improve operating
efficiencies in both segments; and
• improve competitiveness in the non-specialized and non-integrated customer segments.
Competition
Our DTS business segment competes with other dedicated providers and truckload carriers servicing on a national,
regional and local level. We compete with these companies based on a number of factors, including price, equipment options
and features, maintenance, service and geographic coverage, driver availability and operations expertise. We are able to
differentiate the DTS product offering by leveraging FMS and integrating the DTS services with those of SCS to create a more
comprehensive transportation solution for our customers. Our strong safety record and focus on customer service also enables
us to uniquely meet the needs of customers with high-value products that require specialized handling in a manner that
differentiates us from truckload carriers.
ACQUISITIONS
In addition to our continued focus on organic growth, acquisitions play an important role in enhancing our growth
strategy. In assessing potential acquisition targets in our FMS business segment, we look for companies that would create value
through operating synergies, leveraging our existing facility infrastructure, improving our geographic coverage and diversifying
our customer base. In our DTS business segment, we are focusing on strategies for growth, including acquisitions that enhance
our technology capabilities, and expand our geographic density and vertical market sector. In our SCS business segment, we
focus on adding capabilities and product offerings, potentially expanding into new industries, diversifying our customer base
within our current industries, and improving our competitive position.
CYCLICALITY
Ryder's business is impacted by economic and market conditions. In a strong economic cycle, there is generally more
demand for our fleet management, dedicated transportation and supply chain services. In a weak or volatile economy, demand
for our services decreases and is considerably more unpredictable. Because of these factors, we have continued to focus on
increasing the diversity of our customer base and strengthening our long-term business partnerships with our customers.
Although we believe these efforts help mitigate the immediate impact of an economic downturn, during a protracted or severe
economic downturn, customers are often unwilling to commit to a full-service lease or long-term supply chain and dedicated
contracts. Because commercial rental and used vehicle sales are transactional, they are more cyclical in nature and are also
heavily dependent on economic and market conditions, and results can vary significantly in both the short- and long-term. In
2019, we began to experience softening in used vehicle and commercial rental market conditions, which we expect to continue
throughout 2020. We mitigate some of the potential impact of an economic downturn through a disciplined and centralized
approach to asset management. This approach allows us to manage the size, mix and location of our operating fleet and used
vehicle inventories to try and maximize asset utilization and used vehicle proceeds in both strong and weak market conditions.
8
ADMINISTRATION
Our financial administrative functions for the U.S. and Canada, including credit, billing and collections, are consolidated
into our Shared Services Center, a centralized processing center located in Alpharetta, Georgia. Our Shared Services Center also
manages contracted third parties providing administrative, finance and support services outside of the U.S. in order to reduce
ongoing operating expenses and maximize our technology capabilities. This centralization results in more efficient and
consistent centralized processing of selected administrative operations. Certain administrative functions are also performed at
the Shared Services Center for our customers. The Shared Services Center’s main objectives are to enhance customer service
through process standardization.
REGULATION
Our business is subject to regulation by various federal, state, local and foreign governmental entities. The DOT and
various federal and state agencies exercise broad powers over certain aspects of our business, generally governing such
activities as authorization to engage in motor carrier operations, safety and operations. The Federal Motor Carrier Safety
Administration (FMCSA), under the DOT, manages a Compliance, Safety, Accountability initiative (known as "CSA"),
partnering with state agencies designed to monitor and improve commercial vehicle motor safety, which uses roadside
inspections and violations to measure motor carriers and drivers. The FMCSA also has regulations mandating electronic
logging devices in commercial motor vehicles that impact various aspects of our dedicated, supply chain and rental businesses.
We are also subject to a variety of laws and regulations promulgated by national, state, provincial and local governments,
including the U.S. Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA),
which regulate safety, the management of hazardous materials, water discharges, air emissions, solid waste disposal and the
release and cleanup of regulated substances. We must comply with licensing and other requirements imposed by the U.S.
Department of Homeland Security and the U.S. Customs Service as a result of increased focus on homeland security and our
Customs-Trade Partnership Against Terrorism certification. We may also become subject to new or more restrictive regulations
imposed by these agencies or other authorities relating to carbon controls and reporting, engine exhaust emissions, drivers’
hours of service, wage and hour requirements, security including data privacy and cyber security and ergonomics.
ENVIRONMENTAL
We have a long-standing commitment to sound environmental practices that reduce risk and build value for us and our
customers. We have a history of adopting “green” designs and processes because they are efficient, cost-effective transportation
solutions that improve our bottom line and bring value to our customers. We have maintained an environmental policy since
1991 and have updated it periodically as regulatory and customer needs have changed. Our environmental policy reflects our
commitment to supporting the goals of sustainable development, environmental protection, and pollution prevention in our
business. We have adopted proactive environmental strategies that have advanced business growth and continued to improve
our performance in ways that reduce emission outputs and environmental impact. Our environmental team works with
operating employees to develop and administer programs in support of our environmental policy and to help ensure that
environmental considerations are integrated into all business processes and decisions.
In establishing appropriate environmental objectives and targets for our wide range of business activities around the
world, we focus on (1) the needs of our customers; (2) the communities in which we provide services; and (3) relevant laws and
regulations. We regularly review and update our environmental management procedures, and information regarding our
environmental activities is routinely disseminated throughout Ryder. We publish a Corporate Sustainability Report, which
includes metrics related to our environmental and safety performance. The report is publicly available on the company website
at www.rydercsr.com. In addition, we have voluntarily submitted an annual report to the Carbon Disclosure Project (CDP),
disclosing direct and indirect emissions resulting from our operations, and earned leadership status for the quality of our
disclosure reporting.
SAFETY
Our safety culture is founded upon a core commitment to the safety, health and well-being of our employees, customers
and the community, a commitment that has made us a long-standing industry leader in safety. Safety is an integral part of our
business strategy because preventing injuries and collisions improves employee quality of life, eliminates service disruptions to
our customers, increases operational efficiency, and improves customer satisfaction. As a core value, our focus on safety is
embedded in our day-to-day operations, reinforced by many safety programs and continuous operational improvement and
supported by a talented and dedicated safety organization.
We deploy relevant vehicle safety systems in the vehicles we operate, including active brake assistance, lane departure
warning systems, stability control, and others, to enhance safety performance. We also install aftermarket safety monitoring
systems that provide effective means for our operations teams to measure and improve driver performance, including in-vehicle
9
video event recorders. Training is also a key component of our safety program. Monthly safety training delivered by location
safety committees cover specific and relevant safety topics and managers receive annual safety leadership training. In driving
operations, we use certified driver trainers to on-board and train our drivers using first hand experienced certified driver
trainers. Quarterly and remedial training is also delivered online to each driver through a highly interactive lesson platform.
Regular safety behavioral observations are conducted by managers throughout the organization everyday and remedial training
and coaching takes place on the spot. Our proprietary, web-based Safety Management System, RyderSafetyNetSM, delivers
monthly proactive safety programs as well as safety compliance tasks tailored to every location and helps measure safety
activity effectiveness across the organization. Our safety policies require that all managers, supervisors and employees
incorporate safe processes in all aspects of our business. Monthly safety scorecards are tracked and reviewed by management
for progress toward key safety objectives.
EMPLOYEES
At December 31, 2019, we had approximately 39,900 full-time employees worldwide, of which 38,600 were employed in
North America and 1,300 in Europe. We currently employ approximately 9,500 drivers and 6,300 technicians. We have
approximately 25,600 hourly employees in the U.S., approximately 4,300 of which are organized by labor unions. Those
employees organized by labor unions are principally represented by the International Brotherhood of Teamsters, the
International Association of Machinists and Aerospace Workers and the United Auto Workers. Their wages and benefits are
governed by 104 separate labor agreements which are renegotiated periodically. Although we have not experienced a material
work stoppage or strike, these events can potentially occur given the types of businesses in which we currently engage. We
consider the relationship with our employees to be good.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Name
Robert E. Sanchez
Scott T. Parker
John J. Diez
J. Steven Sensing
Robert D. Fatovic
John Gleason
Karen M. Jones
Frank Lopez
Tim Fiore
Rajeev Ravindran
Frank Mullen
Age
54
52
49
52
54
63
57
45
64
54
50
Position
Chair and Chief Executive Officer
Executive Vice President and Chief Financial Officer
President, Global Fleet Management
President, Global Supply Chain Solutions and Dedicated Transportation Solutions
Executive Vice President, Chief Legal Officer and Corporate Secretary
Executive Vice President and Chief Sales Officer
Executive Vice President and Chief Marketing Officer
Executive Vice President and Chief Human Resources Officer
Senior Vice President and Chief Procurement Officer
Senior Vice President and Chief Information Officer
Vice President and Controller
Robert E. Sanchez was appointed Chair of Ryder's Board in May 2013 and promoted to Chief Executive Officer and
became a Board member in January 2013. Previously, Mr. Sanchez served as President and Chief Operating Officer from
February 2012 to December 2012. He served as President, Global Fleet Management Solutions from September 2010 to
February 2012 and as Executive Vice President and Chief Financial Officer from October 2007 to September 2010. He also
previously served as Executive Vice President of Operations, U.S. Fleet Management Solutions from October 2005 to October
2007 and as Senior Vice President and Chief Information Officer from January 2003 to October 2005. Mr. Sanchez joined
Ryder in 1993 and has held various other positions of increasing responsibility, including leadership positions in all three of
Ryder's business segments.
Scott T. Parker joined Ryder in April 2019 and was appointed Executive Vice President and Chief Financial Officer. Prior
to joining Ryder, Mr. Parker served as Executive Vice President and Chief Financial Officer at OneMain Financial, a leading
consumer finance company, where he was responsible for overseeing all financial operations since 2015. Prior to OneMain
Financial, Mr. Parker served as Chief Financial Officer for CIT Group Inc., a commercial finance company, from 2010 to 2015.
He also served as Chief Financial Officer from 2006 to 2008 and Chief Operating Officer from 2008 to 2010 of Cerberus
Operations & Advisory Company, and spent more than 15 years in leadership roles within the industrial and financial services
businesses at General Electric Company, including Chief Financial Officer of GE Capital Solutions from 2005 to 2006.
John J. Diez has served as President, Global Fleet Management Solutions since September 2019. Previously, Mr. Diez
served as President of Dedicated Transportation Solutions from March 2015 to August 2019, as Senior Vice President of Ryder
Dedicated from March 2014 to February 2015, and as Senior Vice President of Asset Management from January 2011 to
February 2014. Mr. Diez joined Ryder's Finance department in 2002 and has since held various positions within Finance
10
including Senior Vice President Global Field Finance and Vice President and Chief Financial Officer of Fleet Management
Solutions.
J. Steven Sensing has served as President of Global Supply Chain Solutions since March 2015. In September 2019, the
DTS business was consolidated under the leadership of Mr. Sensing. Previously, Mr. Sensing served as Vice President and
General Manager of the Technology industry group from February 2007 to February 2015. In July 2014, he also added the
Retail industry group under his leadership. Mr. Sensing joined Ryder in 1992 and has since held various positions within
Dedicated Services, Transportation Management and Distribution Management.
Robert D. Fatovic has served as Executive Vice President, Chief Legal Officer and Corporate Secretary since May 2004.
He previously served as Senior Vice President, U.S. Supply Chain Operations, Hi-Tech and Consumer Industries from
December 2002 to May 2004. Mr. Fatovic joined Ryder’s Law department in 1994 as Assistant Division Counsel and has held
various other positions within the Law department including Vice President and Deputy General Counsel.
John Gleason has served as Executive Vice President and Chief Sales Officer since November 2015. Previously, Mr.
Gleason served as Senior Vice President of Global Fleet Management Solutions from October 2009, when he joined Ryder, to
October 2015. Prior to joining Ryder, Mr. Gleason served as Chief Sales Officer for Automatic Data Processing from April
2005 to September 2009 and as Senior Vice President of Sales from July 1998 to April 2005.
Karen M. Jones has served as Executive Vice President and Chief Marketing Officer since October 2014. She joined
Ryder in September 2013 as Senior Vice President and Chief Marketing Officer. Prior to joining Ryder, Ms. Jones was Chief
Marketing Officer for NRG/Reliant Energy, Inc from 2010 to 2013. Previously, Ms. Jones served as Senior Vice President of
Marketing and Corporate Communications for DHL Express U.S. from 2006 to 2009 and as Vice President of Advertising,
Brand Management and Promotion from 2004 to 2006. In addition, Ms. Jones has served in key positions responsible for
worldwide brand advertising, sponsorship, and strategic alliances for Hewlett Packard.
Frank Lopez was appointed as Executive Vice President and Chief Human Resources Officer in February 2018.
Previously, Mr. Lopez served as Chief Human Resources Officer since February 2016 and Senior Vice President, Global
Human Resources Operations since July 2013. Mr. Lopez joined Ryder in 2002 and has since held various positions within the
Human Resources, Labor Relations and Legal functions.
Timothy (Tim) Fiore was appointed Senior Vice President and Chief Procurement Officer in March of 2018. He
previously held the same role from 2002 to 2005. Prior to his current role, Mr. Fiore was the Senior Vice President and Chief
Procurement Officer of ThyssenKrupp NA, a manufacturer and supplier of automotive and industrial components and
equipment, from 2012 until his retirement in 2014. In that role, he was responsible for developing and implementing
ThyssenKrupp’s first consolidated North American supply management program. He also serves as Chair of the Institute for
Supply Management's Manufacturing Business Survey Committee since 2017. Over the course of his career, Mr. Fiore has also
held senior supply management roles at Terex Corporation, Celanese Corporation, and United Technologies Corporation.
Rajeev Ravindran joined Ryder and was appointed Senior Vice President and Chief Information Officer in January 2018.
Mr. Ravindran has over 20 years of IT leadership experience and was previously the CIO and Group Vice President at JM
Enterprises since 2012. Prior to JM, Mr. Ravindran worked in IT leadership roles at various companies including Interactive
Metronome, Asista.com, and AutoNation.
Frank Mullen joined Ryder and was appointed Vice President and Controller in September 2017. Mr. Mullen joined
Ryder from Global Eagle Entertainment, a global provider of media, content, connectivity and data analytics, where he held the
position of Senior Vice President and Chief Accounting Officer since 2016. From 2015 to 2016, he served as Vice President and
Controller of Pinnacle Foods Inc., a manufacturer, marketer and distributor of branded food products. Prior to joining Pinnacle,
Mr. Mullen held roles of increasing responsibility at Aramark, a provider of food service, facilities and uniform services, from
2000 through 2015, including Vice President and Assistant Controller from 2014 to 2015 and Associate Vice President –
Corporate Accounting from 2006 to 2014.
FURTHER INFORMATION
For further discussion concerning our business, see the information included in Items 7 and 8 of this report. Industry and
market data used throughout Item 1 was obtained through a compilation of surveys and studies conducted by industry sources,
consultants and analysts.
We make available our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
all amendments to those reports through the Investor Relations page on our website at www.ryder.com as soon as reasonably
practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC). The
SEC maintains an Internet site that contains our reports, proxy and information statements, and our other SEC filings. The
address of the SEC's website is www.sec.gov.
11
In addition, our Corporate Governance Guidelines, Principles of Business Conduct and Board committee charters are
posted on the Corporate Governance page of our website at www.investors.ryder.com. Upon request to our Investor Relations
page on our website at www.ryder.com, we will provide a copy of these documents to anyone, free of charge.
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ITEM 1A. RISK FACTORS
The following is a cautionary discussion of the material risks and uncertainties that management believes affect us. Any of the
following risks, as well as risks that we do not know or currently deem immaterial, could have a material adverse effect on our
business, financial condition or results of operations. Accordingly, you should carefully consider the following risk factors in
conjunction with all of the other information set forth in or incorporated by reference in this Form 10-K.
Decreased customer demand for transportation services due to adverse economic conditions, competition or other
factors could adversely impact our business and operating results.
The transportation industry is highly cyclical and highly susceptible to trends in economic activity. Weakness or uncertainty in
economic conditions in the United States, and to a lesser extent the other geographic markets in which we operate, could
adversely impact our business and operating results. Our business relies on the strength of our customers’ businesses and the
level of confidence our customers have about current and future economic conditions and trends. Our vehicles are leased or
rented to customers that transport goods commercially, so the demand for our products and services is tied directly to the
production and sale of goods by our customers, and more generally, the health of the North American economy and overall
levels of competition in the transportation and logistics industry. Because of this, our business may begin to slow before market
slowdowns, at the point of customer uncertainty, and may recover later than market recoveries, as our customers may continue
to feel uncertain about future market conditions. If uncertainty and lack of customer confidence around macroeconomic and
transportation industry conditions increase, our future growth prospects, business and results of operations could be materially
adversely affected.
Among our services and product offerings, demand for our longer-term contractual services is particularly susceptible to
changes in economic and market conditions, as customers are often unwilling to commit to long-term lease, maintenance,
dedicated services or supply chain contracts in a weak or volatile economy. Accordingly, any sustained weakness in demand or
a protracted economic downturn can negatively impact performance and operating results in our longer-term contractual
services, which include ChoiceLease and SelectCare contracts in our FMS business segment, supply chain and last mile
delivery contracts in our SCS business segment and dedicated services in our DTS business segment.
We bear the residual risk on the value of our vehicles.
Impact on Used Vehicle Sales. We generally bear the risk that we will not be able to resell our vehicles at a price equal to or
above their expected residual values. If we overestimate a vehicle’s residual value this could contribute to lower gains or losses
on sales of our used vehicles. A decline in market demand for used vehicles would likely result in a reduction in our residual
values. Factors that could contribute to a decline in the market demand for used vehicles include an oversupply of vehicles in
the marketplace; decline in customers due to economic conditions; concerns regarding the real or perceived quality,
maintenance or condition of our vehicles; foreign exchange movements; or changes in technology that render select vehicle
technology obsolete or less attractive to purchasers. We sell our used vehicles through various channels, including retail sales
centers, at our branch locations, through our website at www.UsedTrucks.Ryder.com, as well as through the wholesale market.
Pricing and demand for used vehicles varies among selling channels, particularly between the retail and wholesale markets, as
we generally obtain lower proceeds on vehicles sold through wholesale channels. If we are unable to meet our targeted sales
goals and inventory levels through our projected sales mix of retail versus wholesale, we may be required to sell more vehicles
than planned through the wholesale market, which will impact our sales proceeds. Beginning in the latter part of 2015, which
reflected an all-time high for residual values as a percent of net vehicle investment, and continuing through mid-2019, we
experienced a weakening of conditions in the used vehicle sales market. Beginning in the second half of 2019, conditions
significantly deteriorated further requiring us to sell a larger number of used vehicles through wholesale channels and adversely
affected used vehicle sales volume and pricing. As a result, we lowered residual value estimates in the third quarter of 2019 for
the entire fleet of power vehicles. If the market for our used vehicles declines further than those lower residual values, or there
is a concern regarding the quality, maintenance or condition of our vehicles, we may obtain lower sales proceeds upon the sale
of used vehicles, which would negatively impact the residual value estimates of our operating fleet and require us to further
lower our residual value estimates.
Impact on our ChoiceLease Product Line. Changes in residual values also impact the overall competitiveness of our
ChoiceLease product line, as estimated sales proceeds are a significant component of the overall price of the lease. Additionally,
technology changes, sudden changes in supply and demand, competitor pricing, and other market factors beyond our control,
vary from year to year and from vehicle to vehicle, making it difficult to accurately predict residual values used in calculating
and pricing our ChoiceLease arrangements. Although we have developed disciplines related to the management and
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maintenance of our leased vehicles designed to maximize the value of our used vehicles, there is no assurance that these
practices will sufficiently reduce the residual risk.
For a detailed discussion on our accounting policies and assumptions relating to depreciation and residual values, please see
“Critical Accounting Estimates - Depreciation and Residual Value Estimates” in Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Our profitability could be negatively impacted if our key operational assumptions and pricing structure prove to be
invalid.
Substantially all of our SCS and DTS services, as well as our ChoiceLease and SelectCare products, are provided under long-
term contractual arrangements with our customers. These contractual arrangements include pricing terms that are subject to a
number of key operational assumptions including, but not limited to:
•
•
•
with respect to our SCS contracts, the scope of services, production volumes, operational efficiencies, the mix of
fixed versus variable costs, productivity and other factors;
with respect to our DTS contracts, market wages, availability of labor, insurance rates and other operating costs
that experience market fluctuations; and
with respect to our ChoiceLease and SelectCare contracts, residual values (ChoiceLease only) and maintenance
expense.
If we are incorrect in our assumptions, or, as a result of subsequent changes in customer demand or other market forces that are
outside of our control, these assumptions prove to be invalid, we could have lower margins than anticipated in a contract or
segment, lose business, or be unable to offer competitive products and services. For example, our SCS and DTS services are
highly customized and offer a high degree of specialization to meet the needs of our customers. We may not be able to adjust
the pricing terms in some of our SCS and DTS contracts in the event any of our assumptions prove to be incorrect or invalid. As
a result, if we do not accurately predict the costs to us to execute the SCS or DTS contract, it could result in a significant
decrease in revenue or loss on the contract that could adversely affect our operating results and financial condition.
Additionally, although some of our SCS or DTS contracts provide for renegotiation upon a material change, there is no
assurance that we will be successful in obtaining the necessary price adjustments or that pricing will be sufficient to cover the
risk.
Our capital intensive business requires us to make capital decisions based upon projected customer activity levels and
market demand for our commercial rental product line.
We make significant investments in vehicles to support our rental business based on anticipated customer demand. We make
commitments to purchase the vehicles many months in advance of the expected use of the vehicle and seek to optimize the size
and mix of the commercial rental fleet based on demand projections and various other factors. As a result, our business is
dependent on our ability to accurately estimate future levels of rental activity and consumer preferences to effectively capitalize
on market demand in order to drive the highest levels of utilization and revenue per unit. Missing our projections could result in
too much or too little capacity in our rental fleet. Overcapacity could require us to deploy or sell vehicles at lower than
anticipated pricing levels or result in asset write-downs, and undercapacity could negatively impact our ability to reliably
provide rental vehicles to our customers, each of which could result in lower revenues, higher costs and an adverse impact on
profitability. We employ a sales force and operations team on a full-time basis to manage and optimize this product line;
however, their efforts may not be sufficient to overcome unforeseen changes in market demand in the rental business. In
contrast, in our ChoiceLease product line, we typically do not purchase vehicles until we have an executed contract with a
customer.
We operate in a highly regulated industry, and changes in existing regulations or costs of compliance with, or liability
for violation of, existing or future laws or regulations could have a material adverse effect on our business.
Our business is subject to regulation by various federal, state, local and foreign governmental agencies. In the United States, we
are regulated by the DOT as well as local, state and federal agencies that exercise broad powers over our motor carrier
operations, safety and the generation, handling, storage, treatment and disposal of waste materials. The FMCSA, under the
DOT, also manages a compliance and enforcement initiative partnering with state agencies designed to monitor and improve
commercial vehicle motor safety. We are also subject to other regulations relating to our business, employees and customers,
14
including labor and employment laws, international laws and regulations governing our foreign operations, environmental laws
and regulations, among others.
Compliance with existing laws and regulations has involved, and we expect will continue to involve, significant time
commitments and costs, and in recent years, we have seen an increase in proactive regulatory enforcement. In addition, new
laws, rules or regulations may be adopted or interpretative changes to existing regulations could be issued at any time. Any new
initiatives could further increase our costs or operating complexity and our ability to offer certain services in the jurisdictions in
which we operate.
Our failure to comply with any existing or future laws, rules or regulations to which we are, or may become subject, whether
actual or alleged, could have a material adverse effect on our business and on our ability to access the capital required to
operate our business. Among other things, any such failure could expose us to reputational harm, loss of business, fines,
penalties or potential litigation liabilities, including costs, settlements and judgments, as well as the loss of operating authority
and restrictions on our operations. For example, the DOT periodically conducts compliance reviews to ensure compliance with
its safety and other rules and regulations, and evaluates the safety rating assessed to motor carriers (“satisfactory,” “conditional”
or “unsatisfactory”). The receipt of a final “conditional” or “unsatisfactory” safety rating due to deficiencies in our safety and
compliance program could have a material adverse effect on our customer relationships, as some of our existing customer
contracts require a “satisfactory” DOT safety rating. Moreover, if we fail to comply with DOT regulations, including our failure
to maintain a “satisfactory” DOT safety rating, the DOT could levy fines and require us to cease all transportation services
under our operating authority, which could have a material adverse effect on our business.
In addition, the FMCSA’s enforcement and compliance programs, designed to monitor and improve commercial motor vehicle
safety by measuring the safety record of both the motor carrier and the driver, may shrink the industry’s pool of drivers. This
and the shortage of qualified drivers could increase the costs to attract, train and retain qualified drivers as well as increase
driver turnover, decrease asset utilization, limit growth, and adversely impact our results of operations.
Other compliance issues we may face include:
•
•
•
•
•
companies we acquire may not have historically maintained internal controls, policies or procedures to monitor
compliance with the regulatory and legal requirements consistent with our standards;
our operations in Canada, Europe and Mexico may expose us to liability for failure to comply with local laws and
regulatory requirements of foreign jurisdictions, which may vary significantly from country to country, including
local tax laws, and anti-bribery laws;
compliance with environmental laws and regulations, including regulations imposed by the EPA on exhaust
emissions and increasingly stringent regulations related to climate change, which may impose restrictions on our
activities or require us to take certain actions, all of which may, over time, increase our costs and adversely affect
our business and results of operations;
compliance with health and safety laws and regulations imposed by OSHA; and
compliance with new laws or regulations that may change the employee/independent contractor classification of
independent contractors doing business with us, which could cause us to incur additional exposure under federal
and state tax and employment laws.
In addition, we are also subject to reputational risk and other detrimental business consequences associated with noncompliance
by other parties with whom we engage with, such as employees, customers, agents, suppliers or other persons using our supply
chain or assets to commit illegal acts, including the use of company assets for terrorist activities, or a breach of data privacy
laws.
We may fail to respond adequately or in a timely manner to innovative changes in new technology in our industry.
In recent years, our industry has been characterized by rapid changes in technology, leading to innovative transportation and
logistics concepts that have impacted or have the potential to significantly impact our business model, competitive landscape
and the industries of our customers and suppliers. For example, new concepts are currently under development for more
advanced electric vehicles, automatic or semi-automatic self-driving vehicles, connected vehicle platforms, and drones.
Additional innovations impacting the transportation, trucking and supply chain/logistics industries are likely that we cannot yet
foresee. In addition, there is a rapidly growing demand for e-commerce services, last mile home delivery and asset- and freight-
15
sharing services, which continue to disrupt the transportation industry with the goal of bringing efficiencies to the transportation
marketplace.
Our inability to quickly adapt to and adopt new innovations in products and processes desired by our customers may result in a
significant loss of demand for our service offerings. In addition, advances in technology may require us to increase investments
in order to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these
investments. Our lease and rental fleets could become unfavorable with our customers or obsolete within a relatively short
period of time, and we may no longer be able to find buyers for our used vehicles. An increase in customer use of electric
vehicles could reduce the demand for our vehicle maintenance services, diesel vehicles and related offerings. Likewise, self-
driving vehicles may reduce the demand for our dedicated service offerings, where, in addition to a vehicle, Ryder provides a
driver as part of an integrated, full service customer solution. While we are actively engaged in developing strategic
partnerships with new technology providers, developing new products, and evaluating emerging technology, we cannot be
certain that such initiatives will be successful or timely, and our failure to successfully and timely implement any of these
initiatives could have an adverse impact on our financial condition or results of operations.
We face risks related to cybersecurity attacks and other breaches of our systems and information technology.
We depend on the proper functioning and availability of our information systems in operating our business. It is important that
the data processed by these systems remains confidential, as it often includes sensitive customer information, confidential
customer transaction data, employee records, and key financial and operational results and statistics. Failure to prevent or
mitigate data loss or system intrusions from cybersecurity attacks or other security breaches could expose us, our vendors, or
our customers to a risk of loss or misuse of such information, adversely affect our operating results, restrict or prevent
operations or financial reporting, result in litigation or potential liability and otherwise harm our business. Likewise, data
privacy breaches from our systems could expose personally identifiable information of our employees or contractors, sensitive
customer data, or vendor data to unauthorized persons, adversely impacting our customer service, employee relationships and
our reputation. We maintain an information security program, which consists of safeguards and controls to help ensure that our
core fundamentals of confidentiality, integrity and availability are supported, but we cannot ensure that we will be able to
prevent or mitigate all such data breaches or cyberattacks.
In addition, some of our software applications are utilized by third parties who provide outsourced administrative functions.
Such third parties may have access to information we maintain about our company, customers, employees and vendors or
operate systems that are critical to our business operations and services. These third parties are subject to risks imposed by data
breaches, cyberattacks and other events or actions that could damage, disrupt or close down their networks or systems.
Our information systems are protected through physical and software safeguards as well as backup systems considered
appropriate by management. However, threats to network and data security are becoming increasingly diverse and
sophisticated. We have experienced cybersecurity threats and vulnerabilities targeting our information technology systems and
networks and those of our third party providers. Such prior events, to date, have not had a material impact on our financial
condition or results of operations. While we have significant security processes and initiatives in place, we may be unable to
fully detect, mitigate or protect against a material breach or disruption in the future. In addition, efforts to prevent, detect and
mitigate data breaches and cyberattacks subject us to additional costs. We have cyber insurance coverage in place that may
cover certain events described above, subject to deductibles and coverage limitations. It is possible that claims could exceed the
limits of our coverage. Further, such insurance may not address or cover injury to reputation or loss of business that may result
should such an attack be material.
In addition, regulatory authorities have increased their focus on how companies collect, process, use, store, share and transmit
personal data. New privacy security laws and regulations, including the United Kingdom’s Data Protection Act 2018 (“DPA”)
and the European Union General Data Protection Regulation 2016 (“GDPR”), pose increasingly complex and rigorous
compliance challenges, which may increase our compliance costs. Any failure to comply with data privacy laws and regulations
could result in significant penalties, fines, legal challenges and reputational harm.
Failure to maintain, upgrade and consolidate our information technology networks could adversely affect us.
Our success depends on the functionality of information technology systems to support our service offerings. Extended delays
or cost overruns in securing, developing and otherwise implementing technology solutions to support our business and the
business initiatives we will be developing in the future would delay and possibly prevent us from realizing the projected
benefits of these initiatives. In addition, our reputation with our customers may suffer if outages, system failures or delays in
16
timely access to data occur in our information technology systems that support key business processes.
We are continuously upgrading and consolidating our information technology systems by enhancing legacy systems, replacing
legacy systems with successor systems and acquiring new systems with enhanced functionality. These types of activities subject
us to additional costs and inherent risks associated with replacing and modifying our existing systems, including impairment of
our ability to provide our services, disruption of our internal control structure, substantial capital expenditures, additional
administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems,
demands on management time, disruptions in our business operations, and other risks and costs of delays or difficulties in
transitioning to new systems or integrating new systems into our current systems. Our system implementations may not result in
productivity improvements at a level that outweighs the costs of implementation, or at all.
We are in the process of implementing a multi-year Enterprise Resource Planning (ERP) project. This new system is designed
to improve efficiencies and integrate and automate certain internal financial, operating, and other applications that are critical to
our business operations. The implementation, operation, and proper functionality of the ERP system will require a significant
investment of human, technological, and financial resources. While we expect to invest significant resources in planning,
project management, consulting and training to minimize disruptions to our business during the conversion to the new ERP
system, it is possible that significant implementation, operational, and functionality issues may arise. It is further possible that
we may experience significant delays, increased costs, and other difficulties that are not presently contemplated and that may
interfere with our ability to meet our customer service requirements. If we encounter unforeseen problems with regard to our
new ERP system, our business, operations and financial condition could be adversely affected.
We operate in a highly competitive industry and our business may suffer if we are unable to adequately address
potential downward pricing pressures and other competitive factors.
The transportation industry is highly competitive. We face competition in all geographic markets and each industry sector in
which we operate. Increased competition or our inability to compete successfully may lead to a reduction in revenues, reduced
profit margins, increased pricing pressure, or a loss of market share, any one of which could affect our financial results.
Numerous competitive factors could impair our ability to maintain our current profitability, including the following:
•
•
•
•
•
•
•
•
•
our inability to obtain expected customer retention levels or profitability;
we compete with many other transportation and logistics service providers, some of which have greater capital
resources or lower cost structures than we do;
our inability to compete with new entrants in the transportation and logistics market that may offer similar
services at lower cost or have greater technological capabilities;
customers may choose to provide the services we provide for themselves;
our competitors may periodically reduce their prices to gain business, especially during times of declining
economic growth, which may limit our ability to maintain or increase prices or impede our ability to maintain our
profitability or grow our market share or profitability;
many customers periodically accept bids from multiple carriers for their shipping needs, and this process may
depress rates or result in the loss of some of our business to competitors;
the continuing trend toward consolidation in the trucking industry may result in larger carriers with greater
financial resources than we have;
advances in technology require increased investments to remain competitive, and our customers may not be
willing to accept higher prices to cover the cost of these investments; and
because cost of capital is a significant competitive factor, any increase in either the cost of our debt or equity as a
result of reductions in our debt rating or stock price volatility could have a significant impact on our competitive
position.
Failure to execute our growth strategy and develop, market and consistently deliver high-quality services that meet
customer expectations may cause our revenue and earnings to suffer.
Our long-term growth strategy is to target clients new to outsourced transportation and logistics services and thereby expand the
market for our services. We seek to execute our growth strategy by providing operational excellence, superior talent and best-
17
in-class information technology. By providing high-quality leasing services, we aim to attract customers that traditionally have
only been interested in operating their own transportation and logistics networks.
To successfully execute on this strategy, we must continue to focus on developing innovative solutions that meet our existing
and target customers’ evolving needs and keep pace with our competitors. Expanding our service offerings to entice and support
new clients may strain our management, capital resources, information systems and customer service. We may also need to hire
new employees, which may increase costs and may result in temporary inefficiencies until those employees become proficient
in their jobs.
Notwithstanding our efforts, new or enhanced service offerings may not meet customer demands, prove to be profitable or
succeed in the long term. If we do not respond to current customer needs and establish new, and further develop existing,
customer relationships, our ability to maintain a competitive advantage and continue to grow our business profitability could be
negatively affected.
We may be negatively impacted by adverse events in the global credit and financial markets, by an investment rating
downgrade or by the loss of an investment grade rating.
Our business is highly capital intensive and we have significant ongoing capital requirements that could affect our profitability
if we are unable to obtain sufficient capital. In general, we rely in large part upon global credit and financial markets to fund our
operations and contractual commitments as well as refinance existing debt. These markets can experience high levels of
volatility for numerous reasons and our access to capital could be constrained for extended periods of time. Our ability to raise
capital may be materially reduced and/or our borrowing costs may significantly increase if, among other things, access to public
investment grade debt becomes limited or closed, we lose access to our global revolving credit facility, or funding costs
increase due to the loss of an investment grade rating, a severe economic downturn or rising interest rates. Significant
uncertainty, volatility, disruptions or downturns in the global credit and financial markets may also result in:
•
•
•
•
restricted access to capital and an increased cost of capital;
diminished liquidity and credit availability resulting in higher short- or long-term borrowing costs and more
stringent borrowing terms;
unanticipated interest rate and currency exchange rate fluctuations; and
increased risk of default by counterparties under derivative instruments and hedging agreements.
As of December 31, 2019, we had $7.9 billion of outstanding indebtedness. If we are unable to raise additional capital by
accessing the debt and equity markets or our costs of raising additional capital were to materially increase, our ability to operate
or grow our business, including refreshing, replacing and/or growing our vehicle fleets and acquiring new businesses, and
refinance existing debt will be impaired, which could have a material adverse effect on our operating results or materially
impact our ability to implement our long-term strategy.
We and the vehicle and equipment manufacturers in our FMS business rely on a small number of suppliers.
We buy vehicles and related equipment from a relatively small number of original equipment manufacturers (OEMs) in our
FMS business. Some of our vehicle manufacturers rely on a small concentration of suppliers for certain vehicle parts,
components and equipment. A discrete event in a particular OEM’s or supplier’s industry or location, or adverse regional
economic conditions impacting an OEM or supplier’s ability to provide vehicles or a particular component, could adversely
impact our FMS business and profitability. In addition, our business and reputation could also be negatively impacted if any
parts, components or equipment from one of our suppliers suffer from broad-based quality control issues or become the subject
of a product recall and we are unable to obtain replacement parts from another supplier in a timely manner.
We derive a significant portion of our SCS and DTS segment revenue from a relatively small number of customers.
During 2019, sales to our top ten SCS customers accounted for 54% of our SCS total revenue and 47% of our SCS operating
revenue (total revenue less fuel and subcontracted transportation). Additionally, approximately 37% of our global SCS revenue
is from the automotive industry and is directly impacted by automotive vehicle production. Our top ten DTS customers
accounted for 47% of DTS total revenue and 40% of DTS operating revenue. The loss of any of these customers or a significant
reduction in the services provided to any of these customers could materially and adversely impact our operating results. While
we continue to focus our efforts on diversifying our customer base, we may not be successful in doing so.
18
We are also subject to credit risk associated with the concentration of our accounts receivable from our SCS and DTS
customers. If one or more of these customers were to become bankrupt, insolvent or otherwise were unable to pay for the
services provided by us, we may incur significant write-offs of accounts receivable or incur lease or asset impairment charges
that could adversely affect our operating results and financial condition.
In addition, many of our customers operate in cyclical or seasonal industries, or operate in industries, including the food and
beverage industry, that may be impacted by unanticipated weather, growing conditions (such as drought, insects or disease),
natural disasters and other conditions over which we have no control. A downturn in our customers’ businesses or unanticipated
events impacting their businesses could cause a reduction in freight volume shipped by those customers or a reduction in their
need for our services, which could materially and adversely affect our operating results and financial condition.
We may face difficulties in attracting and retaining drivers and technicians.
Drivers. We hire drivers primarily for our SCS and DTS business segments. There is significant competition for qualified
drivers in the transportation industry. Additionally, interventions and enforcement under the CSA program may shrink the
industry’s pool of drivers as those drivers with unfavorable scores may no longer be eligible to drive for us. As a result of driver
shortages, we could be required to increase driver compensation, let trucks sit idle, utilize lower quality drivers or face
difficulty meeting customer demands, all of which could adversely affect our growth and profitability.
Technicians. Similarly, we hire technicians in our FMS business segment to perform vehicle maintenance services on our
ChoiceLease, SelectCare and rental fleets. In recent years, there has been a decrease in the overall supply of skilled
maintenance technicians, particularly new technicians with qualifications from technical programs and schools, which could
make it more difficult to attract and retain skilled technicians. If we are unable to maintain an adequate number of qualified
technicians, whether through the retention of current technicians or the hiring of new qualified technicians, our business could
be adversely affected.
We intend to continue to explore strategic transactions (including acquisitions or divestitures). Our business could be
adversely affected if we are not able to identify or successfully execute these strategic transactions.
In furtherance of our strategy, we routinely evaluate opportunities and may enter into agreements for possible strategic
transactions. We may be unable to identify strategic transactions or we may be unable to negotiate commercially acceptable
terms. Other risks involved in engaging in these strategic transactions include the possible failure to realize the expected
benefits of such transactions within the anticipated time frame, or at all, such as cost savings, synergies, sales and growth
opportunities. In addition, the integration of an acquired business may result in material unanticipated challenges, expenses and
liabilities. Any one of these factors could result in lower than expected revenues or earnings related to combining the companies
or derived from a strategic transaction and could adversely impact our financial condition or results of operations.
Failure to successfully negotiate with our union employees may result in strikes, work stoppages, or substantially higher
labor costs.
We have approximately 4,300 employees that are organized by labor unions whose wages and benefits are governed by 104
labor agreements that are renegotiated periodically. A material work stoppage, slowdown or strike involving our employees
organized by labor unions could result in business disruptions or higher operating costs, which could have an adverse effect on
our financial position, results of operations, or cash flows.
Volatility in assumptions and asset values related to our pension plans may adversely affect the valuation of our
obligations, the current funding levels and our pension expense under our defined benefit pension plans.
We historically sponsored a number of defined benefit plans for employees not covered by union-administered plans, including
certain employees in foreign countries. The aggregate projected benefit obligations and plan assets of our global defined benefit
pension plans as of December 31, 2019, were $2.3 billion and $2.0 billion, respectively. The difference between plan
obligations and assets, or the funded status of the plans, is a significant factor in determining pension expense and the ongoing
funding requirements of those plans. Macroeconomic factors, as well as changes in investment returns and discount rates used
to calculate pension expense and related assets and liabilities, can be volatile and may have an unfavorable impact on our costs
and funding requirements. Although we have actively sought to control increases in these costs and funding requirements
through investment policies and plan contributions, there can be no assurance that we will succeed, and continued cost and
funding requirement pressure could reduce the profitability of our business and negatively impact our cash flows.
19
We are subject to risk of multi-employer pension plan withdrawal.
We participate in certain U.S. multi-employer pension (MEP) plans that provide defined benefits to employees covered by
collective bargaining agreements. In the event that we withdraw from participation in any of these plans, then applicable law
could require us to make an additional lump-sum contribution to the plan. Our withdrawal liability for any MEP plan would
depend on the extent of the plan’s funding of vested benefits. Economic conditions have caused MEP plans to be significantly
underfunded. As a result, although we have taken steps in recent years to withdraw from significantly underfunded MEP plans,
we may still have liability for at least a period of time following our withdrawal. If the financial condition of the MEP plans
were to continue to deteriorate, we could be subject to additional assessments.
We may fail to establish sufficient insurance reserves and adequately estimate for future workers’ compensation and
vehicle liabilities.
We are partially self-insured for vehicle liability and workers’ compensation claims. Our self-insurance accruals are based on
actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported. While we believe that our
estimation processes are well designed and comply with generally accepted accounting principles (GAAP) and other accounting
and finance best practices, any projection of losses concerning workers’ compensation and vehicle insurance is subject to a
considerable degree of variability. The causes of this variability include litigation trends, claim settlement patterns and
fluctuations in the frequency or severity of accidents. If actual losses incurred are greater than those anticipated, our self-
insurance reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. If we
suffer a substantial loss in excess of our self-insured limits, the loss and attendant expenses may be covered by traditional
insurance and excess insurance the Company has in place, but if not covered or above such coverages, losses could harm our
business, financial condition or results of operations. For a detailed discussion on our accounting policies and assumptions
relating to our self-insurance reserves, please see the “Critical Accounting Estimates - Self-Insurance Accruals” section in
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Impairment in the carrying value of goodwill could negatively affect our operating results.
We assess our goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable. In evaluating goodwill for impairment, we have the option to first
assess qualitative factors to determine whether further impairment testing is necessary, such as macroeconomic conditions,
changes in our industry and the markets in which we operate, and our market capitalization, as well as our reporting units'
historical and expected future financial performance. If events occur that negatively affect key assumptions used in our
analysis, then we may be required to record charges for goodwill impairments in the future, which could have a material
adverse non-cash effect on our results of operations. Subsequent to December 31, 2019, we experienced a decline in our market
capitalization and if this decline continues for a sustained period of time, we may be required to perform additional impairment
analyses and could be required to recognize a non-cash goodwill impairment charge. For a detailed discussion on our
accounting policies and assumptions relating to goodwill, please see “Critical Accounting Estimates - Goodwill” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Severe weather or other natural occurrences could result in significant business interruptions and expenditures in excess
of available insurance coverage.
Our operations may be affected by external factors such as severe weather and other natural occurrences, including floods, fires,
hurricanes and earthquakes at operating locations where we have vehicles, warehouses and other facilities. As a result, our
vehicles and facilities may be damaged, our workforce may be unavailable, fuel costs may rise and significant business
interruptions could occur. In addition, the performance of our vehicles could be adversely affected by extreme weather
conditions. Insurance to protect against loss of business and other related consequences resulting from these natural occurrences
is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all
of our damages or damages to others and this insurance may not continue to be available at commercially reasonable rates.
Even with insurance, if any natural occurrence leads to a catastrophic interruption of service, we may not be able to mitigate a
significant interruption in operations.
20
We face litigation risks that could have a material adverse effect on the operation of our business.
We face litigation risks regarding a variety of issues, including without limitation, accidents involving our trucks and injuries to
employees, alleged violations of federal and state labor and employment law including class-action lawsuits alleging wage and
hour violations, independent contractor misclassification and improper pay, securities laws, environmental liability, commercial
claims and other matters. These proceedings may be time-consuming, expensive and disruptive to normal business operations.
The defense of such lawsuits could result in significant expense and the diversion of our management’s time and attention from
the operation of our business. In recent years, several insurance companies have stopped offering coverage to trucking
companies as a result of increases in the severity of automobile liability claims and higher costs of settlements and verdicts,
causing the cost of such insurance to increase. This trend could adversely affect our ability to obtain suitable insurance coverage
or further increase the cost for such coverage significantly, each of which may adversely affect our financial condition, results
of operations, liquidity or cash flows. Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be
covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material
adverse effect on our financial condition, results of operations, liquidity and cash flows.
Damage to our reputation through unfavorable publicity or the actions of our employees could adversely affect our
financial condition.
Our success depends on our ability to consistently deliver operational excellence and strong customer service. Our inability to
deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise
becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand
and reputation, which could, in turn, adversely affect revenue and earnings growth. Adverse publicity (whether or not justified)
relating to activities by our employees, contractors, agents or others with whom we do business, such as customer service
mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increase in the
use of social media outlets such as Facebook, YouTube, Instagram and Twitter, adverse publicity can be disseminated quickly
and broadly, making it increasingly difficult for us to effectively respond. This unfavorable publicity could also require us to
allocate significant resources to rebuild our reputation.
Future acts of terrorism, war or regulatory changes to combat the risk of terrorism may cause significant disruptions in
our operations.
Terrorist attacks, along with any government response to those attacks, may adversely affect our financial condition, results of
operations or liquidity. Our fleet, other key infrastructure and information technology systems may be targets or indirect
casualties of acts of terror, other harmful acts, or war. Further, because transportation assets continue to be a target of terrorist
activities, federal, state and local governmental bodies are proposing and, in some cases, have adopted legislation and
regulations relating to security issues that impact the transportation industry, including checkpoints and travel restrictions on
large trucks. If additional security measures disrupt or impede the timing of our operations, we may fail to meet the
requirements of our customers or incur increased expenses to do so. In addition, complying with these or future regulations
could continue to increase our operating costs and reduce operating efficiencies. We maintain insurance coverages addressing
these risks and we have received U.S. Patriot Act protections for our security practices related to the rental of our assets.
However, such insurance may be inadequate or become unavailable, premiums charged for some or all of the insurance could
increase dramatically, regulations may change or U.S. Patriot Act protections could be reduced. These changes could exacerbate
the effects of an act of terrorism on our business, resulting in a significant business interruption, increased costs and liabilities
and decreased revenues or an adverse impact on results of operations.
Our business may be affected by uncertainty or changes in U.S. or global social, political or regulatory conditions.
Adverse developments in laws, policies or practices in the U.S. and internationally can negatively impact our business and the
business of our customers. Negative domestic and international global trade conditions as a result of social, political or
regulatory changes or perceptions could materially affect our business, financial conditions and results of operations.
We provide services domestically and to a lesser extent outside of the U.S., which subjects our business to various additional
risks, including:
•
•
changes in tariffs, trade restrictions, trade agreements and taxes;
varying tax regimes, including consequences from changes in applicable tax laws;
21
•
•
•
•
•
•
difficulties in managing or overseeing foreign operations and agents;
foreign currency fluctuations and limitations on the repatriation of funds due to foreign currency controls;
different liability standards;
the price and availability of fuel;
national and international conflict; and
intellectual property laws of countries that do not protect our rights in intellectual property to the same extent as
the laws of the U.S.
If we do not correctly anticipate changes in social, political or regulatory conditions or their impact on the transportation
industry, we may not alter our business practices in time to avoid adverse effects. Additionally, the occurrence or consequences
of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our
operations in that region.
Our suppliers may also be affected by changes in the political and regulatory environment, both in the U.S. and internationally.
Negative impacts on our suppliers could result in disruptions in the supply and availability of equipment or services needed for
our business that could in turn affect our ability to operate and serve our customers as planned.
In addition, there may be changes to existing trade agreements, like the North American Free Trade Agreement (“NAFTA”) and
its anticipated successor agreement, the U.S.-Mexico-Canada Agreement (“USMCA”), which is still subject to approval by
Canada, greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the United States,
particularly tariffs on products manufactured in Mexico, among other possible changes. These changes may lead to fewer goods
transported and we may need to restructure certain terms of business with suppliers or customers. It remains unclear what the
U.S. administration or foreign governments will or will not do with respect to tariffs, NAFTA, USMCA or other international
trade agreements or policies. It is therefore difficult to anticipate the full impact of this agreement on our business, financial
condition, cash flows and results of operations.
The market value of our common stock may fluctuate and could be substantially affected by various factors.
We expect that the market price of our common stock will continue to fluctuate due to a variety of factors, some of which are
beyond our control. These factors include, among others:
•
•
•
•
•
•
•
•
actual or anticipated variations in earnings, financial or operating performance or liquidity;
changes in analysts’ recommendations or projections;
failure to meet analysts’ and our Company's projections;
general political, social, economic and capital market conditions;
announcements of developments or initiatives related to our business;
operating and stock performance of other companies deemed to be peers;
actions by government regulators; and
news reports of trends, concerns and other issues related to us or our industry, including changes in regulations.
Our common stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance.
General market price declines or market volatility in the future could adversely affect the price of our common stock, and the
current market price of our common stock may not be indicative of future market prices.
Our failure to comply with U.S. or foreign tax laws or a government challenging our tax position could adversely affect
our business and future operating results.
We are affected by various U.S. federal, state and foreign tax laws, including income taxes and taxes imposed on the purchase,
sale and lease of goods and services such as sales, excise, property, value-added tax (“VAT”), fuel, environmental and other
taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination
is uncertain. For example, significant judgment is required in determining our worldwide provision for income taxes. Our tax
22
expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and
assumptions, including assessments that could affect the valuation of our net deferred tax assets. Our operating results could be
adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing
statutory tax rates, changes in our overall profitability, changes in tax legislation, the results of audits and examinations of
previously filed tax returns and continuing assessments of our income and indirect tax exposures.
In addition, from time to time we are under audit by tax authorities in different jurisdictions with regards to income tax and
indirect tax matters. Economic and political pressures to increase tax revenue in various jurisdictions may make resolving tax
disputes favorably more difficult. Although we believe our tax estimates are reasonable, the final determination of tax audits
and any other related tax proceedings in the jurisdictions where we are subject to taxation could be materially different from our
historical income and indirect tax provisions and accruals.
Finally, changes in U.S. federal, state or international tax laws applicable to corporate multinationals, other tax reform currently
being considered by many countries, including the U.S., and changes and clarifications in taxing jurisdictions’ administrative
interpretations, decisions, policies and positions may materially adversely impact our tax expense and cash flows. The U.S.
Congress, the Organization for Economic Co-operation and Development, the European Union, and other government agencies
in jurisdictions in which we and our affiliates invest or do business have maintained a focus on the taxation of multinational
companies and have a number of on-going tax initiatives. If we are unable to successfully take actions to manage the adverse
impacts of new tax legislation, or if additional interpretations, regulations, amendments or technical corrections exacerbate the
adverse impacts of such legislation, the legislation could have a material adverse effect on our financial condition, results of
operations and cash flows.
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None.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
Our properties consist primarily of vehicle maintenance and repair facilities, warehouses and other real estate and
improvements.
We maintain 593 FMS properties in the U.S., Puerto Rico and Canada; we own 413 of these and lease the remaining
properties. Our FMS properties are primarily comprised of maintenance facilities generally including a repair shop, rental
counter, fuel service island, administrative offices, and used vehicle retail sales centers.
Additionally, we manage 174 on-site maintenance facilities, located at customer locations.
We also maintain 263 locations in the U.S. and Canada in connection with our domestic SCS business. Almost all of our
SCS locations are leased and generally include a warehouse and administrative offices.
We maintain 119 international locations (locations outside of the U.S. and Canada) for our international businesses. There
are 54 locations in the U.K. and Germany, and 65 locations in Mexico. The majority of these locations are leased and may be a
repair shop, warehouse or administrative office.
Additionally, we maintain 11 U.S. locations primarily used for Central Support Services. These facilities are generally
administrative offices, of which we own three and lease the remaining locations.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various claims, lawsuits and administrative actions arising in the normal course of our businesses.
Some involve claims for substantial amounts of money and/or claims for punitive damages. While any proceeding or litigation
has an element of uncertainty, management believes that the disposition of such matters, in the aggregate, will not have a
material impact on our consolidated financial condition or liquidity.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Ryder Common Stock
Our common shares are listed on the New York Stock Exchange under the trading symbol “R.” At January 31, 2020, there
were 6,307 common stockholders of record.
Performance Graph
The following graph compares the performance of our common stock with the performance of the Standard & Poor’s
MidCap 400 Index and the Dow Jones Transportation 20 Index for a five year period by measuring the changes in common
stock prices from December 31, 2014 to December 31, 2019.
The stock performance graph assumes for comparison that the value of our common stock and of each index was $100 on
December 31, 2014 and that all dividends were reinvested. Past performance is not necessarily an indicator of future results.
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Purchases of Equity Securities
The following table provides information with respect to purchases we made of our common stock during the quarter
ended December 31, 2019:
October 1 through October 31, 2019
November 1 through November 30, 2019
December 1 through December 31, 2019
Total
Total Number
of Shares
Purchased (1)
Average Price
Paid per
Share
73
63,621
548
64,242
$
$
51.50
51.22
53.23
51.24
Total Number of
Shares Purchased as
Part of Publicly
Announced Programs (2)
—
63,621
—
63,621
Maximum Number
of Shares That May
Yet Be Purchased
Under the Anti-Dilutive
Programs (2)
667,372
603,751
1,500,000
______________
(1) During the three months ended December 31, 2019, we purchased an aggregate of 621 shares of our common stock in employee-related transactions.
Employee-related transactions may include: (i) shares of common stock delivered as payment for the exercise price of options exercised or to satisfy the
option holders’ tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of
Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.
(2)
In December 2017, our Board of Directors authorized a share repurchase program intended to mitigate the dilutive impact of shares issued under our
employee stock plans (the program). Under the program, management was authorized to repurchase up to 1.5 million shares of common stock. The 2-
year program expired in December 2019.
In December 2019, our Board of Directors authorized a new share repurchase program intended to mitigate the dilutive impact of shares issued under
our employee stock plans. Under the December 2019 program, management is authorized to repurchase up to 1.5 million shares of common stock issued
to employees under our employee stock plans from December 1, 2019 to December 11, 2021. Share repurchases are made periodically in open-market
transactions using the Company's working capital, and are subject to market conditions, legal requirements, and other factors. In addition, management
has been granted the authority to establish prearranged written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 as part of the
repurchase program.
26
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial information should be read in conjunction with Items 7 and 8 of this Annual
Report. Amounts in 2019, 2018 and 2017 reflect the impact of the retrospective adoption in 2019 of the new accounting
standard related to leasing. See Note 2 to our Consolidated Financial Statements for additional information on the new leasing
standard. Amounts in 2015 do not reflect the impact of the retrospective adoption of the new accounting standard in 2018
related to revenue recognition. See Note 1 to our Consolidated Financial Statements for additional information on our revenue
recognition accounting policy.
2019
Years ended December 31
2017
(In thousands, except per share amounts and other data)
2016
2018
2015
Operating Data:
Total revenue
Operating revenue (1)
Earnings (loss) from continuing operations (2)
Comparable earnings from continuing operations (3)
Net earnings (loss) (2), (4)
Per Share Data:
Earnings (loss) from continuing operations — Diluted (2)
Comparable earnings from continuing operations — Diluted (3)
Net earnings (loss) — Diluted (2), (4)
Cash dividends
Book value (5)
Financial Data:
Total debt
Shareholders’ equity (5)
Debt to equity (5)
Adjusted return on equity (5), (6), (7)
Adjusted return on capital (5), (6), (8)
Cash Flow Data:
Net cash provided by (used in):
$ 8,925,801
$
8,413,946
$
7,280,074
$
6,758,138
$
6,571,893
7,224,332
6,698,116
6,022,505
5,790,897
5,561,077
(23,272)
53,554
(24,410)
$
(0.45)
$
1.01
(0.47)
2.20
46.48
286,922
314,781
284,613
5.43
5.95
5.38
2.12
47.75
720,101
225,187
719,644
$
13.54
$
4.23
13.53
1.80
46.33
265,232
291,080
263,069
4.95
5.43
4.91
1.70
38.49
$
305,989
326,485
304,768
5.73
6.10
5.71
1.56
37.15
$ 7,924,788
$
6,649,277
$
5,440,006
$
5,391,274
$
5,502,627
2,476,310
2,536,568
2,453,577
2,057,620
1,987,111
320%
0.3%
1.9%
262%
12.7%
5.2%
222%
11.1%
4.2%
262%
13.2%
4.8%
277%
16.5%
5.8%
Operating activities from continuing operations
$ 2,140,539
$
1,717,993
$
1,628,098
$
1,601,022
$
1,441,788
Investing activities from continuing operations
Financing activities from continuing operations
Free cash flow (9)
Capital expenditures paid
Other Data:
(3,217,193)
1,084,139
(1,076,654)
3,735,174
(2,821,459)
(1,438,676)
(1,407,347)
(2,161,355)
1,085,515
(936,094)
3,050,409
(162,055)
196,662
(185,922)
193,675
731,485
(727,714)
1,860,436
1,905,157
2,667,978
Number of vehicles — Owned and leased
213,800
201,600
186,200
185,100
185,200
____________________
(1) Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section in Item 7 of this Annual Report for a reconciliation of total revenue to operating revenue,
as well as the reasons management believes these measures are important to investors.
(2) Amounts in 2017 reflect a tax benefit as a result of the 2017 Tax Cuts and Jobs Act. Refer to Note 12 , "Income Taxes", for additional information.
(3) Non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section in Item 7 of this Annual Report for a reconciliation of net earnings from continuing
operations to comparable earnings from continuing operations and net earnings from continuing operations per diluted common share to comparable earnings per diluted
common share, as well as the reasons management believes these measures are important to investors.
(4) Net earnings in 2019, 2018, 2017, 2016 and 2015 included losses from discontinued operations of $1 million, or $0.03 per diluted common share, $2 million, or $0.04 per
(5)
diluted common share, $0.5 million, or $0.01 per diluted common share, $2 million, or $0.04 per diluted common share, and $1 million, or $0.02 per diluted common share,
respectively.
Shareholders’ equity as of December 31, 2019, 2018, 2017, 2016 and 2015 reflected cumulative after-tax equity charges of $667 million, $712 million, $567 million, $627
million, and $577 million, respectively, related to our pension and postretirement plans.
(6) Amounts were computed primarily using an 5-point average based on quarterly information.
(7) Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section in Item 7 of this Annual Report for a reconciliation of the non-GAAP elements of this
calculation and a numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity used to calculate adjusted
return on equity, as well as the reasons management believes these measures are important to investors.
(8) Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section in Item 7 of this Annual Report for a reconciliation of the non-GAAP elements of this
calculation and a numerical reconciliation of net earnings to adjusted net earnings and average total debt and average shareholders' equity to adjusted average total capital
used to calculate adjusted return on capital, as well as the reasons management believes these measures are important to investors.
(9) Non-GAAP financial measure. Refer to the “Non-GAAP financial measures” section in Item 7 of this Annual Report for a reconciliation of net cash provided by operating
activities to free cash flow, as well as the reasons why management believes this measure is important to investors.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should
be read in conjunction with our consolidated financial statements and related notes contained in Item 8 of this Annual Report on
Form 10-K. The following MD&A describes the principal factors affecting results of operations, financial resources, liquidity,
contractual cash obligations and critical accounting estimates. The information presented in the MD&A is for the years ended
December 31, 2019, 2018 and 2017 unless otherwise noted. Amounts in 2019, 2018 and 2017 reflect the impact of the
retrospective adoption in 2019 of the new accounting standard related to leasing. See Note 2 to our Consolidated Financial
Statements for additional information on the new leasing standard.
OVERVIEW
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) SCS, which provides integrated
logistics solutions, including distribution, management, dedicated transportation and professional services in North America;
and (3) DTS, which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers and
engineering, and administrative support. Dedicated transportation services provided as part of an operationally integrated,
multi-service, supply chain solution to SCS customers are primarily reported in the SCS business segment.
The FMS business, our largest segment, had total revenue and assets in 2019 of $5.6 billion and $13.0 billion,
respectively, representing 56% of our consolidated revenue (excluding eliminations) and 90% of consolidated assets. SCS total
revenue and assets in 2019 were $2.6 billion and $1.2 billion, respectively, representing 29% of our consolidated revenue and
9% of consolidated assets. DTS total revenue and assets in 2019 were $1.4 billion and $327 million, respectively, representing
15% of our consolidated revenue and 2% of consolidated assets.
We operate in highly competitive markets. Our customers select us based on numerous factors including service quality,
price, technology and service offerings. As an alternative to using our services, customers may choose to provide these services
for themselves, or may choose to obtain similar services from other third-party vendors. Our customer base includes enterprises
operating in a variety of industries including food and beverage service (22%), transportation and logistics (21%), automotive
(11%), retail and consumer goods (11%), industrial (8%), housing (8%), technology (6%), business and personal services (5%)
and other (8%). In April 2018, we acquired MXD, an e-commerce fulfillment provider with a national network of facilities,
including last mile delivery capabilities, which is included in our SCS business segment. Refer to Note 3, "Acquisitions," in the
Notes to Consolidated Financial Statements for additional information.
Our results of operations and financial condition are influenced by a number of factors including, but not limited to: used
vehicle sales; market conditions including pricing and demand; customer contracting activity and retention; rental demand;
maintenance costs; residual value estimates and other depreciation changes; currency exchange rate fluctuations; customer
preferences; inflation; fuel and energy prices; general economic conditions; insurance costs; interest rates; labor costs;
unemployment; tax rates; changes in accounting or regulatory requirements; and cybersecurity attacks.
This MD&A includes certain non-GAAP financial measures. Please refer to the “Non-GAAP Financial Measures” section
of this MD&A for information on these non-GAAP measures, including reconciliations to the most comparable GAAP financial
measure and the reasons why we believe each measure is useful to investors. In addition, this MD&A includes certain forward-
looking statements regarding our 2020 outlook. These statements are based on our current plans and expectations and are
subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and
events to differ significantly from those expressed. For a detailed description of certain of these risk factors, please see “Item
1A-Risk Factors” and "Special Note Regarding Forward-Looking Statements" sections of this Annual Report.
28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following discussion provides a summary of financial highlights that are discussed in more detail throughout our
MD&A and within the Notes to Consolidated Financial Statements:
2019
2018
2017
2019/2018
2018/2017
Change
Total revenue
Operating revenue (1)
(In thousands, except per share amounts)
$ 8,413,946
6,698,116
$ 7,280,074
6,022,505
$ 8,925,801
7,224,332
Earnings (loss) from continuing operations
before income taxes (EBT)
Comparable EBT (2)
Earnings (loss) from continuing operations (3)
Comparable earnings from continuing
operations (2)
Net earnings (loss) (3)
Earnings (loss) per common share (EPS) —
Diluted
Continuing operations (3)
Comparable (2)
Net earnings (loss) (3)
$
$
(42,271) $
56,089
(23,272)
53,554
(24,410)
389,469
418,862
286,922
314,781
284,613
(0.45) $
1.01
(0.47)
5.43
5.95
5.38
$
$
296,436
348,257
720,101
225,187
719,644
13.54
4.23
13.53
6%
8
NM
(87)
NM
(83)
NM
NM
(83)
NM
16%
11
31%
20
(60)
40
(60)
(60)%
41
(60)
_________________
(1) Non-GAAP financial measure. Refer to the“Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating revenue and the
reasons why management believes this measure is important to investors.
(2) Non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section for a reconciliation of EBT, earnings (loss) from continuing operations and
earnings (loss) from continuing operations per diluted common share to the comparable measures and the reasons why management believes these measures are
important to investors.
(3) 2017 amounts reflect a total tax provision benefit of $424 million, which includes the impact from the 2017 Tax Cuts and Jobs Act. Refer to Note 12 , "Income Taxes ,"
in the Notes to Consolidated Financial Statements for additional information.
In 2019, total revenue increased 6% to $8.9 billion and operating revenue (a non-GAAP measure excluding fuel and
subcontracted transportation) increased 8% to $7.2 billion. Total revenue and operating revenue increased due to new business
and higher volumes in all segments. Total and operating revenue growth also reflects the acquisition of MXD in the second
quarter of 2018. The following table summarizes the components of the change in revenue on a percentage basis versus the
prior year:
Organic, including price and volume
Acquisitions
Fuel
Total increase
2019/2018
2018/2017
Total
5%
1
—
6%
Operating
8%
—
—
8%
Total
12%
2
2
16%
Operating
10%
1
—
11%
EBT decreased to a loss of $(42) million in 2019, reflecting higher depreciation expense related to changes in vehicle
residual value estimates in our FMS segment in the third quarter of 2019 partially offset by improved operating results in DTS
and SCS segments.
Cash provided by operating activities from continuing operations increased 25% to $2.1 billion in 2019 compared with
$1.7 billion in 2018, reflecting higher cash earnings as well as lower working capital needs in 2019. Free cash flow from
continuing operations (a non-GAAP financial measure) decreased to a use of $(1.1) billion in 2019 from a use of $(0.9) billion
in 2018, primarily due to higher capital expenditures in 2019.
Capital expenditures increased 14% to $3.6 billion in 2019, reflecting higher planned investments in our ChoiceLease and
commercial rental fleets. Our debt balance of $7.9 billion as of December 31, 2019 increased 19% from the prior year reflecting
financing for the higher planned vehicle capital spending. Our debt to equity ratio increased to 320% from 262% in 2018
reflecting higher debt and a decrease in our equity balance due to the net loss in 2019.
We increased our annualized dividend rate by 4% to $2.24 per share of common stock during 2019.
29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
FULL YEAR CONSOLIDATED RESULTS
Lease & Related Maintenance and Rental
2019
2018
2017
2019/2018
2018/2017
(In thousands)
Change
Lease & related maintenance and rental
revenues
Cost of lease & related maintenance and
rental
Gross margin
Gross margin %
$ 3,784,744
$ 3,512,867
$ 3,220,705
8%
$
3,103,703
681,041
18%
$
2,555,358
957,509
27%
$
2,353,209
867,496
27%
21
(29)%
9%
9
10%
Lease & related maintenance and rental revenues represent ChoiceLease and commercial rental product offerings within
our FMS business segment. Revenues increased 8% and 9% in 2019 and 2018, respectively, from higher ChoiceLease revenue,
driven by growth in the average ChoiceLease fleet (up 9% in 2019 and 4% in 2018), and higher prices on replacement vehicles.
Lease & related maintenance and rental revenue growth in 2019 and 2018 also reflects higher commercial rental revenue driven
by higher pricing and demand.
Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and
rental revenues and are comprised of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and
labor), and other costs such as licenses, insurance and operating taxes. Cost of lease & related maintenance and rental excludes
interest costs from vehicle financing, which are reported within "Interest expense" in our Consolidated Statements of Earnings.
Cost of lease & related maintenance and rental increased 21% in 2019 due to higher depreciation expense of approximately
$297 million related to the change in estimate for residual values of our lease and commercial rental fleet in our FMS business
segment in the third quarter of 2019 (of the total increase in depreciation expense of $317 million), as well as higher insurance
costs of $27 million related to higher claim activity and adverse development on prior year claims. These costs also increased
from a larger average lease and rental fleet, partially offset by a significant maintenance cost recovery item.
Cost of lease & related maintenance and rental increased 9% in 2018 due to higher depreciation and maintenance costs on
a larger average lease and rental fleet, policy depreciation changes of $40 million and accelerated depreciation of $39 million in
2018 and $30 million in 2017.
Lease & related maintenance and rental gross margin decreased 29% and gross margin as a percentage of revenue
decreased to 18% in 2019. The decrease in gross margin dollars in 2019 was primarily due to higher depreciation as a result of
changes in our vehicle residual value estimates in the third quarter of 2019. Lease & related maintenance and rental gross
margin increased 10% and gross margin as a percentage of remained flat at 27% in 2018. The 2018 increase in gross margin
dollars was due to increased commercial rental utilization, reflecting strong demand, and lease fleet growth, partially offset by
higher depreciation from residual value changes as well as accelerated depreciation and higher maintenance costs on certain
older model vehicles.
Refer to "Critical Accounting Estimates" below and Note 7, "Revenue Earning Equipment, net" in the Notes to
Consolidated Financial Statements for additional information on policy and accelerated depreciation and the changes in our
vehicle residual value estimates in the third quarter of 2019 which primarily impacted our FMS business segment.
Services
Services revenue
Cost of services
Gross margin
Gross margin %
2019
2018
2017
2019/2018
2018/2017
Change
$ 4,555,692
3,879,863
675,829
15%
$
(In thousands)
$ 4,280,834
3,663,348
617,486
14%
$
$ 3,538,869
2,977,426
561,443
16%
$
6%
6
9%
21%
23
10%
Services revenue represents all the revenues associated with our SCS and DTS business segments, as well as SelectCare
and fleet support services associated with our FMS business segment. Services revenue increased 6% and 21% in 2019 and
2018, respectively, due to new business, increased volumes and higher pricing in SCS and DTS. Services revenue also reflects
30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
the MXD acquisition since the second quarter of 2018 and benefits from higher fuel costs passed through to our SCS and DTS
customers in 2018.
Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and
employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs
and maintenance costs. Cost of services increased 6% in 2019 due to the growth of SCS and DTS. Cost of services increased
23% in 2018 due to higher volumes and higher fuel costs.
Services gross margin increased 9% and 10% in 2019 and 2018, respectively, reflecting benefits from revenue growth in
our SCS and DTS segments. In 2019, there was also a benefit from favorable insurance claim developments of $5 million. In
2018, benefits from revenue growth were partially offset by higher costs incurred during the start-up phase of a new DTS
customer account. Services gross margin as a percentage of revenue increased to 15% in 2019, reflecting improved operating
performance in SCS and DTS. Services gross margin as a percentage of revenue decreased to 14% in 2018, reflecting a change
in the mix of business.
Fuel
Fuel services revenue
Cost of fuel services
Gross margin
Gross margin %
2019
2018
2017
2019/2018
2018/2017
Change
$
$
585,365
571,658
13,707
2%
(In thousands)
620,245
$
605,613
14,632
2%
$
$
$
520,500
507,440
13,060
3%
(6)%
(6)
(6)%
19%
19
12%
Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 6% in
2019 primarily reflecting lower fuel costs passed through to customers. Fuel services revenue increased 19% in 2018 due to
higher fuel costs passed through to customers.
Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel,
salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of
fuel services decreased 6% in 2019 as a result of lower price and volume. Cost of fuel services increased 19% in 2018 due to
higher fuel costs.
Fuel services gross margin decreased 6% in 2019 and increased 12% in 2018. Fuel services gross margin as a percentage
of revenue remained flat at 2% in 2019 and decreased to 2% in 2018. Fuel is largely a pass-through to customers for which we
realize minimal changes in margin during periods of steady market fuel prices. However, fuel services margin is impacted by
sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established
based on trailing market fuel costs. Fuel services gross margin was impacted by these price change dynamics as fuel prices
fluctuated during the periods.
Other operating expenses
Other operating expenses
2019
2018
2017
2019/2018
2018/2017
$
121,980
(In thousands)
123,964
$
$
115,019
(2)%
8%
Change
Other operating expenses include costs related to our owned and leased facilities within the FMS business segment, such
as facility depreciation, rent, purchased insurance, utilities and taxes. These facilities are utilized to provide maintenance to our
FMS customers. Other operating expenses decreased slightly in 2019. Other operating expenses increased in 2018 due to higher
facility maintenance and weather-related utility costs.
31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Selling, general and administrative expenses
2019
2018
2017
2019/2018
2018/2017
Change
(In thousands)
Selling, general and administrative expenses
(SG&A)
$
907,449
$
849,410
$
870,918
7%
(2)%
Percentage of total revenue
10%
10%
12%
SG&A expenses increased 7% in 2019 and decreased 2% in 2018. The increase in 2019 primarily reflects higher
compensation-related expenses, as well as growth-related investments in sales, marketing and technology. The decrease in 2018
was primarily due to cost savings initiatives implemented during 2018 and lower compensation-related costs.
Non-operating pension costs
Non-operating pension costs
$
60,406
(In thousands)
7,541
$
$
27,741
NM
NM
2019
2018
2017
2019/2018
2018/2017
Change
Non-operating pension costs includes the components of our net periodic benefit cost other than service cost. These
components include interest cost, expected return on plan assets and amortization of actuarial loss and prior service cost, as well
as settlement or curtailment charges. Non-operating pension costs increased by $53 million in 2019 due to a pension settlement
charge of $32 million related to employee benefit settlements from the U.S. pension plan in 2019 and unfavorable asset returns
in 2018, partially offset by higher interest rates. Non-operating pension costs decreased by $20 million in 2018 due to the
benefit of favorable asset returns in 2017 and lower interest rates, partially offset by a pension settlement charge of $3 million
related to employee benefit settlements from our U.K. pension plan.
Losses on used vehicle sales, net
Losses on used vehicle sales, net
$
58,706
(In thousands)
22,325
$
$
16,989
NM
31%
2019
2018
2017
2019/2018
2018/2017
Change
Losses on used vehicle sales, net includes gains and losses from sales of used vehicles, selling costs associated with used
vehicles and write-downs of vehicles held for sale to fair market value (referred to as "valuation adjustments"). Losses on used
vehicle sales, net was $59 million in 2019 as compared to $22 million in 2018 primarily due to higher valuation adjustments on
a larger inventory, as well as lower sales prices. Losses on used vehicle sales, net was $22 million in 2018 as compared to $17
million in 2017 primarily due to lower gains from sales of used vehicles driven by the mix and volume of units sold in 2018,
partially offset by lower valuation adjustments.
Global average proceeds per unit in 2019 decreased for both tractors and trucks due to higher sales volumes in the
wholesale markets which generally have lower proceeds per unit. In the fourth quarter, we also experienced a decrease in
proceeds per unit in the retail markets and we expect these trends to continue in 2020. Global average proceeds per unit in 2018
increased for both tractors and trucks primarily due to a higher mix of retail sales, as well as lower average age of vehicles sold
and improved market pricing. The following table presents the used vehicle pricing changes for 2019 and 2018 compared with
the respective prior years:
Tractors
Trucks
Proceeds per unit change
2019/2018
2018/2017
(3)%
(6)%
12%
9%
32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Interest expense
Interest expense
Effective interest rate
2019
2018
2017
2019/2018
2018/2017
$
241,381
(In thousands)
180,488
$
$
141,876
34%
27%
3.3%
3.0%
2.6%
Change
Interest expense increased 34% to $241 million in 2019 reflecting higher average outstanding debt and a higher effective
interest rate. The increase in average outstanding debt reflects higher planned vehicle capital spending. The higher effective
interest rate in 2019 reflects the replacement of lower fixed interest rate debt with debt issuances at higher fixed rates. Interest
expense increased 27% to $180 million in 2018 reflecting a higher effective interest rate and higher average outstanding debt.
The higher effective interest rate in 2018 reflects the replacement of lower fixed interest rate debt with debt issuances at higher
fixed rates as well as the impact on variable rate debt of an increasing interest rate environment. The increase in average
outstanding debt reflects higher planned vehicle capital spending as well as acquisitions.
Miscellaneous income, net
2019
2018
2017
2019/2018
2018/2017
Change
(In thousands)
Miscellaneous (income) loss, net
$
(33,642) $
(5,422) $
(44,245)
NM
NM
Refer to Note 25, "Miscellaneous Income, Net" in the Notes to Consolidated Financial Statements for further discussion.
Restructuring and other items, net
Restructuring and other items, net
$
56,568
(In thousands)
21,852
$
$
17,265
NM
27%
2019
2018
2017
2019/2018
2018/2017
Change
Refer to Note 5, “Restructuring and Other Items, Net” in the Notes to Consolidated Financial Statements for further
discussion.
Provision for income taxes
Provision for (benefit from) income taxes
Effective tax rate from continuing
operations
2019
2018
2017
2019/2018
2018/2017
$
(18,999)
(In thousands)
102,547
$
$
(423,665)
NM
NM
Change
44.9%
26.3%
(142.9)%
Our provision for income taxes and effective income tax rates from continuing operations are impacted by changes in the
mix of earnings in countries with different statutory rates, changes in our overall profitability, changes in tax legislation
(including the 2017 Tax Cuts and Jobs Act), settlement of tax audits, and the expiration of statutes of limitations. In 2019, the
effective tax rate was impacted by losses due to the residual value estimate change in the third quarter of 2019, as well as an
increase in the expiration of state net operating losses and the release of uncertain tax position reserves due to the expiration of
statutes of limitations. In 2019 and 2018, the effective tax rate was also impacted by the lower federal rate associated with the
2017 Tax Cuts and Jobs Act. The 2017 tax rate reflects the net impact of the remeasurement of our deferred taxes and the
transition tax as a result of the 2017 Tax Cuts and Jobs Act. Refer to Note 12, “Income Taxes” in the Notes to Consolidated
Financial Statements for further discussion.
33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
FULL YEAR OPERATING RESULTS BY BUSINESS SEGMENT
2019
2018
2017
2019/2018
2018/2017
(In thousands)
Change
Revenue:
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Total
Operating Revenue: (1)
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Total
Earnings (Loss) Before Taxes:
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Unallocated Central Support Services
Non-operating pension costs
Other items impacting comparability, net (2)
Earnings (loss) from continuing operations
before income taxes
$ 5,571,403
2,551,271
1,417,483
(614,356)
$ 8,925,801
$ 5,258,693
2,398,144
1,333,313
(576,204)
$ 8,413,946
$ 4,716,541
1,937,352
1,095,645
(469,464)
$ 7,280,074
$ 4,755,041
1,879,965
972,694
(383,368)
$ 7,224,332
$ 4,411,038
1,765,336
870,537
(348,795)
$ 6,698,116
$ 4,026,732
1,507,548
789,294
(301,069)
$ 6,022,505
$
(70,274) $
145,060
81,149
(50,732)
105,203
(49,114)
(60,406)
(37,954)
$
340,038
130,262
61,236
(63,593)
467,943
(49,081)
(7,541)
(21,852)
295,618
98,825
55,346
(53,273)
396,516
(48,259)
(27,741)
(24,080)
$
(42,271) $
389,469
$
296,436
6%
6
6
(7)
6%
8%
6
12
(10)
8%
NM
11
33
20
(78)
—
NM
(74)
NM
11%
24
22
(23)
16%
10%
17
10
(16)
11%
15%
32
11
(19)
18
(2)
73
9
31%
————————————
NM - Not Meaningful
(1) Non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation of total revenue to operating
revenue and segment total revenue to segment operating revenue for FMS, SCS and DTS, as well as the reasons why management believes these measures
are important to investors.
(2) Refer to Note 22, "Other Items Impacting Comparability," and below for a discussion of items excluded from our primary measure of segment
performance.
As part of management’s evaluation of segment operating performance, we define the primary measurement of our
segment financial performance as "Earnings from continuing operations before taxes" (EBT), which includes an allocation of
Central Support Services (CSS), and excludes non-operating pension costs and restructuring and other items, net, as described
in Note 22, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements. 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 business segment accountable for their allocated share of CSS costs. 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. Certain costs are not attributable to any segment and remain unallocated in CSS, including
costs for investor relations, public affairs and certain executive compensation. See Note 26, “Segment Reporting,” in the Notes
to Consolidated Financial Statements for a description of the methodology for allocating the remainder of CSS costs to the
business segments.
34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the
SCS and DTS 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 SCS and DTS customers (equipment contribution) are included
in both FMS and the segment that served the customer and then eliminated (presented as “Eliminations” in the table above).
Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in providing services to SCS and
DTS customers. Refer to Note 26, "Segment Reporting" in the Notes to Consolidated Financial Statements for additional
information. Prior year amounts have been revised to conform to the current period presentation, which excludes EBT from our
Singapore operations that were shut down during the second quarter of 2019.
The following table sets forth equipment contribution included in EBT for our SCS and DTS business segments:
2019
2018
2017
2019/2018
2018/2017
(In thousands)
Change
$
$
22,267
28,465
50,732
$
$
27,067
36,526
63,593
$
$
22,244
31,029
53,273
(18)%
(22)
(20)%
22%
18
19%
Equipment Contribution:
Supply Chain Solutions
Dedicated Transportation Solutions
Total (1)
————————————
(1) Total amount is included in FMS EBT.
SCS and DTS equipment contribution decreased 18% and 22%, respectively, in 2019, primarily related to the impact of
higher depreciation expense due to the change in estimate for residual values on vehicles used to provide services to SCS and
DTS customers. Refer to "Critical Accounting Estimates" below and Note 8, "Revenue Earning Equipment, net" in the Notes to
Consolidated Financial Statements for additional information on the changes in our vehicle residual value estimates. SCS and
DTS equipment contribution increased 22% and 18%, respectively, in 2018, primarily driven by new business.
The following table provides items excluded from our segment EBT measure and their classification within our
Consolidated Statements of Earnings:
Description
Classification
2019
2018
2017
Restructuring and other, net (1)
Goodwill impairment (2)
ERP implementation costs (1)
Costs related to cost savings initiatives (1)
Tax reform related bonus (3)
Pension related adjustment (4)
Operating tax adjustment (3)
Gain on sale of property (5)
Other items impacting comparability, net
Non-operating pension costs (4)
Restructuring and other items, net
Restructuring and other items, net
Restructuring and other items, net
Restructuring and other items, net
SG&A
SG&A
SG&A
Miscellaneous income
Non-operating pension costs
(In thousands)
(20,532) $
—
(21,260)
(14,776)
(5,597) $
(15,513)
(742)
—
—
—
—
—
—
—
18,614
(37,954)
(60,406)
(98,360) $
—
(21,852)
(7,541)
(29,393) $
$
$
(6,360)
—
—
(10,905)
(23,278)
(5,454)
(2,205)
24,122
(24,080)
(27,741)
(51,821)
________________
(1) See Note 5, "Restructuring and Other Items, Net," in the Notes to Consolidated Financial Statements for additional information.
(2) See Note 10, "Goodwill," in the Notes to Consolidated Financial Statements for additional information.
(3) See Note 22, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additional information.
(4) See Note 20, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
(5) See Note 25, "Miscellaneous Income, Net" in the Notes to Consolidated Financial Statements for additional information.
35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Fleet Management Solutions
ChoiceLease
SelectCare
Commercial rental
Other
Fuel services revenue
FMS total revenue (1)
2019
2018
2017
2019/2018
2018/2017
Change
(In thousands)
$ 3,112,311
$ 2,860,266
$ 2,671,687
9%
541,358
1,009,086
92,286
816,362
502,835
960,606
87,331
847,655
464,056
813,539
77,450
689,809
$ 5,571,403
$ 5,258,693
$ 4,716,541
8
5
6
(4)
6%
8%
7%
8
18
13
23
11%
10%
15%
FMS operating revenue (2)
$ 4,755,041
$ 4,411,038
$ 4,026,732
FMS EBT
$
(70,274)
$
340,038
$
295,618
NM
FMS EBT as a % of FMS total revenue
FMS EBT as a % of FMS operating revenue (2)
(1.3)%
(1.5)%
6.5%
7.7%
6.3%
7.3%
(780) bps
(920) bps
20 bps
40 bps
Includes intercompany fuel sales from FMS to SCS and DTS.
____________________
(1)
(2) Non-GAAP financial measures. Reconciliations of FMS total revenue to FMS operating revenue and FMS EBT as a % of FMS total revenue to FMS EBT
as a % of FMS operating revenue, as well as the reasons why management believes these measures are important to investors, are included in the “Non-
GAAP Financial Measures” section of this MD&A.
FMS total revenue increased 6% to $5.6 billion in 2019 and 11% to $5.3 billion in 2018. FMS operating revenue (a non-
GAAP measure excluding fuel) increased 8% to $4.8 billion in 2019 and 10% to $4.4 billion in 2018. The following table
summarizes the components of the change in revenue on a percentage basis versus the prior year:
Organic, including price and volume
Fuel
Total increase
2019/2018
2018/2017
Total
7%
(1)
6%
Operating (1)
8%
—
8%
Total
8%
3
11%
Operating (1)
10%
—
10%
————————————
(1) Non-GAAP financial measure. A reconciliation of FMS total revenue to FMS operating revenue, as well as the reasons why management believes this
measure is important to investors, is included in the "Non-GAAP Financial Measures" section of this MD&A.
2019 versus 2018
ChoiceLease revenue increased 9% in 2019 reflecting a larger average fleet size as well as higher prices on replacement
vehicles. The average number of ChoiceLease vehicles increased 9% from the prior year reflecting continuing sales activity. We
expect ChoiceLease revenue growth to slow next year due to a lower OEM production environment, the non-renewal of lease
business with lower returns and anticipated lost business related to the discontinuation of our liability insurance program to
ChoiceLease customers. SelectCare revenue increased 8% in 2019 due to increased volumes. Commercial rental revenue
increased 5% in 2019 due to higher pricing and demand. We expect unfavorable commercial rental comparisons next year based
on a weakening demand environment and a smaller fleet. Fuel services revenue decreased 4% in 2019 due to lower fuel costs
passed through to customers.
FMS EBT decreased in 2019 primarily driven by higher depreciation expense of approximately $297 million related to
the change in estimate for residual values of our lease and commercial rental fleet in the third quarter of 2019 (of the total
increase in depreciation expense of $317 million). FMS EBT also decreased by approximately $37 million in 2019 as used
vehicle sales results reflected higher losses as a result of higher valuation adjustments on a larger inventory and lower expected
sales prices. At the end of the second quarter of 2019, we began to experience softening in used vehicle market conditions,
which intensified during the third quarter of 2019 and we now expect to continue throughout 2020. In addition, our inventory of
used vehicles to be made available for sale was higher than expected, which has, and is expected to continue to, impact the
36
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
volume of used vehicle sales expected to be transacted through our wholesale channels. Due to these dynamics and our updated
outlook, management concluded in the third quarter of 2019 that our residual value estimates likely exceeded the expected
future values that would be realized upon the sale of power vehicles in our existing fleet and accordingly changed the vehicle
residual value estimates. As a result of the change in vehicle residual value estimates, we expect higher depreciation expense on
our current fleet in the future, which negatively impacted FMS EBT in 2019 as discussed above and will negatively impact
FMS EBT in 2020 by approximately $275 million. We expect the negative impact of the higher depreciation expense on FMS
EBT to decline each quarter going forward starting in 2020 through 2025. Refer to "Critical Accounting Estimates" below and
Note 7, "Revenue Earning Equipment, net" in the Consolidated Financial Statements for additional information. In addition,
FMS EBT decreased due to higher insurance costs of $23 million from higher claim activity and adverse development of prior
year claims. The impact of these items was partially offset as lease results benefited from a larger average fleet size, as well as
higher prices on replacement vehicles. Commercial rental performance was lower reflecting lower utilization in 2019. Rental
power fleet utilization was 75.0% in 2019, down from 79.2% in 2018, on a 10% larger average rental power fleet.
2018 versus 2017
ChoiceLease revenue increased 7% in 2018 reflecting a larger average fleet size and higher prices on replacement
vehicles. The average number of ChoiceLease vehicles increased 4% from the prior year reflecting continued solid sales
activity. Commercial rental revenue increased 18% in 2018 due to stronger demand and higher pricing. SelectCare revenue
increased 8% in 2018 due to sales activity and increased volumes. Fuel services revenue increased 23% in 2018 due to higher
fuel costs passed through to customers.
FMS EBT increased 15% in 2018 primarily driven by growth in commercial rental and ChoiceLease, as well as cost
savings initiatives implemented during 2018. These benefits were partially offset by higher depreciation of $40 million due to
residual value estimate changes and accelerated depreciation of $9 million to vehicles expected to be made available for sale
through June 2020; higher compensation-related expenses; and unfavorable self-insurance developments. Commercial rental
performance improved in 2018 due to increased utilization reflecting stronger demand and higher pricing. Rental power fleet
utilization was 79.2% in 2018, up from 75.6% in 2017, on a 10% larger average rental power fleet. ChoiceLease comparisons
benefited from fleet growth. Used vehicle sales results declined $5 million reflecting lower gains from sales of used vehicles
due to the mix and volume of units sold, partially offset by lower valuation adjustments.
The following table provides commercial rental statistics on our global fleet:
Rental revenue from non-lease customers (1)
Rental revenue from lease customers (2)
Average commercial rental power fleet size –
in service (3), (4)
Commercial rental utilization – power fleet (3)
2019
2018
2017
2019/2018
2018/2017
(In thousands, except vehicle counts)
$
$
609,840
399,246
$
$
566,612
393,994
$
$
517,874
295,665
8%
1%
9%
33%
Change
36,000
75.0%
32,800
79.2%
29,700
75.6%
10%
(420) bps
10%
360 bps
______________
(1) Also includes additional vehicles rented to lease customers, incremental to the lease fleet.
(2) Represents revenue from rental vehicles provided to our existing ChoiceLease customers, generally in place of a lease vehicle.
(3) Number of units rounded to nearest hundred and calculated using quarterly average unit counts.
(4) Excluding trailers.
37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Our global fleet of owned and leased revenue earning equipment and SelectCare vehicles, including vehicles under on-
demand maintenance, is summarized as follows (rounded to the nearest hundred):
2019
2018
2017
2019/2018
2018/2017
Change
End of period vehicle count
By type:
Trucks (1)
Tractors (2)
Trailers (3)
Other
Total
By product line:
ChoiceLease
Commercial rental
Service vehicles and other
Held for sale
Total
Active ChoiceLease vehicles
Customer vehicles under SelectCare contracts
Average vehicle count
By product line:
ChoiceLease
Commercial rental
Service vehicles and other
Held for sale
Total
Active ChoiceLease vehicles (4)
Revenue per active ChoiceLease vehicle
Customer vehicles under SelectCare contracts
Customer vehicles under SelectCare on-demand (5)
85,200
82,400
45,400
800
213,800
159,800
41,900
2,700
204,400
9,400
213,800
147,400
55,800
156,600
44,100
2,700
203,400
7,800
211,200
144,300
$21,600
56,300
23,200
81,700
74,000
44,700
1,200
201,600
149,300
42,600
2,800
194,700
6,900
201,600
139,200
56,300
143,100
41,000
3,100
187,200
6,100
193,300
134,400
$21,300
55,600
23,200
76,400
66,000
42,600
1,200
186,200
139,100
37,800
3,300
180,200
6,000
186,200
131,000
54,400
137,600
37,500
3,400
178,500
6,700
185,200
129,300
$20,700
52,100
24,500
Total vehicles serviced
290,700
272,100
261,800
4%
11
2
(33)
6%
7%
(2)
(4)
5
36
6%
6%
(1)%
9%
8
(13)
9
28
9%
7%
1%
1%
—%
7%
7%
12
5
—
8%
7%
13
(15)
8
15
8%
6%
3%
4%
9
(9)
5
(9)
4%
4%
3%
7%
(5)%
4%
__________________
(1) Generally comprised of Class 1 through Class 7 type vehicles with a Gross Vehicle Weight (GVW) up to 33,000 pounds.
(2) Generally comprised of over the road on highway tractors and are primarily comprised of Class 8 type vehicles with a GVW of over 33,000 pounds.
(3) Generally comprised of dry, flatbed and refrigerated type trailers.
(4) Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units.
(5) Comprised of the number of unique vehicles serviced under on-demand maintenance agreements. This does not represent averages for the periods.
Vehicles included in the end of period count may have been serviced more than one time during the respective annual period.
Note: Average vehicle counts were computed using a 24-point average based on monthly information.
38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The totals in the previous table include the following non-revenue earning equipment for the global fleet (rounded to the
nearest hundred):
Number of Units
Not yet earning revenue (NYE)
No longer earning revenue (NLE):
Units held for sale
Other NLE units
Total NLE
Total
2019
3,500
9,400
8,400
17,800
21,300
December 31,
2018
4,500
6,900
4,300
11,200
15,700
2017
2,900
6,000
3,400
9,400
12,300
Change
2019/2018
(22)%
2018/2017
55%
36
95
59%
36%
15
26
19%
28%
NYE units represent new vehicles on hand that are being prepared for deployment to a lease customer or into the rental
fleet. Preparations include activities such as adding lift gates, paint, decals, cargo area and refrigeration equipment. The number
of NYE units decreased 22% in 2019 reflecting quicker customer fulfillment activities. The number of NYE units increased in
2018 reflecting lease fleet growth and a significant amount of deliveries close to the end of the year.
NLE units represent all vehicles held for sale and vehicles for which no revenue has been earned in the previous 30 days.
Accordingly, these vehicles may be temporarily out of service, being prepared for sale or awaiting redeployment. For 2019, the
number of NLE units increased 59% reflecting a higher number of vehicles being prepared for sale or redeployment and a
higher number of contract terminations, as well as higher used vehicle inventories as a result of lower demand. For 2018, the
number of NLE units increased 19% reflecting higher used vehicle inventories and a higher number of vehicles being prepared
for sale at the end of the year. We expect NLE units to decrease in 2020 as a result of higher redeployments of used vehicles.
Supply Chain Solutions
Automotive
Technology and healthcare
Consumer product goods and retail
Industrial and other
Subcontracted transportation
Fuel
SCS total revenue
2019
2018
2017
2019/2018
2018/2017
Change
(In thousands, except vehicle counts)
$
693,211
268,305
736,083
182,366
554,678
116,628
$ 2,551,271
$
628,766
329,843
637,244
169,483
521,028
111,780
$ 2,398,144
$
566,302
271,551
511,793
157,902
354,644
75,160
$ 1,937,352
10%
(19)
16
8
6
4
6%
11%
21
25
7
47
49
24%
17%
SCS operating revenue (1)
$ 1,879,965
$ 1,765,336
$ 1,507,548
6%
SCS EBT
$
145,060
$
130,262
$
98,825
SCS EBT as a % of SCS total revenue
SCS EBT as a % of SCS operating revenue(1)
5.7%
7.7%
5.4%
7.4%
5.1%
6.6%
11%
30 bps
30 bps
32%
30 bps
80 bps
Memo:
Average fleet
9,700
8,800
7,900
10%
11%
————————————
(1) Non-GAAP financial measures. Reconciliations of SCS total revenue to SCS operating revenue and SCS EBT as a % of SCS total revenue to SCS EBT as a
% of SCS operating revenue, as well as the reasons why management believes these measures are important to investors, are included in the “Non-GAAP
Financial Measures” section of this MD&A.
SCS total revenue increased 6% to $2.6 billion in 2019 and 24% to $2.4 billion in 2018. SCS operating revenue (a non-
GAAP measure excluding fuel and subcontracted transportation) increased 6% to $1.9 billion in 2019 and 17% to $1.8 billion
in 2018. We expect favorable operating revenue comparisons to continue next year at a slower growth rate.
39
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table summarizes the components of the change in revenue on a percentage basis versus the prior year:
Organic, including price and volume
Acquisition
Fuel
Total increase
2019/2018
2018/2017
Total
4%
2
—
6%
Operating (1)
5%
1
—
6%
Total
14%
8
2
24%
Operating (1)
12%
5
—
17%
————————————
(1) Non-GAAP financial measure. A reconciliation of SCS total revenue to SCS operating revenue, as well as the reasons why management believes this
measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.
2019 versus 2018
SCS total revenue increased 6% and SCS operating revenue increased 6% in 2019 largely reflecting new business and
higher pricing, as well as the full year results of Ryder Last Mile (formerly MXD), which was acquired in the second quarter of
2018. SCS EBT increased 11% in 2019 driven by revenue growth and improved operating performance, partially offset by a
decrease in equipment contribution of $4.8 million (see further discussions on equipment contribution above). We expect
equipment contribution to be negatively impacted in the future due to the change in the vehicle residual value estimates in the
third quarter of 2019 for the FMS revenue earning equipment that is utilized in the SCS business. However, we do not expect
this impact to SCS EBT to be material.
2018 versus 2017
SCS total revenue increased 24% in 2018 due to increased volumes and new business, the MXD acquisition, as well as
higher fuel costs passed through to our customers. SCS operating revenue increased 17% primarily reflecting increased
volumes, the MXD acquisition and new business. SCS EBT increased 32% in 2018 driven by revenue growth and better
operating results.
Dedicated Transportation Solutions
DTS total revenue
DTS operating revenue (1)
DTS EBT
DTS EBT as a % of DTS total revenue
DTS EBT as a % of DTS operating revenue(1)
Memo:
Average fleet
2019
2018
2017
2019/2018
2018/2017
Change
$ 1,417,483
(In thousands)
$ 1,333,313
$ 1,095,645
6%
$
$
$
$
972,694
81,149
5.7%
8.3%
$
$
870,537
61,236
4.6%
7.0%
789,294
12%
55,346
5.1%
7.0%
33%
110 bps
130 bps
11%
(50) bps
— bps
22%
10%
9,600
8,900
8,200
8%
9%
__________________
(1) Non-GAAP financial measures. Reconciliations of DTS total revenue to DTS operating revenue and DTS EBT as a % of DTS total revenue to DTS EBT as
a % of DTS operating revenue, as well as the reasons why management believes these measures are important to investors are included in the “Non-
GAAP Financial Measures” section of this MD&A.
DTS total revenue increased 6% to $1.4 billion in 2019 and increased 22% to $1.3 billion in 2018. DTS operating
revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 12% to $973 million in 2019 and
increased 10% to $871 million in 2018. We expect operating revenue to slightly decline next year, reflecting lower sales activity
and fewer large deals signed in the second half of 2019.
40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table summarizes the components of the change in revenue on a percentage basis versus the prior year:
Organic, including price and volume
Subcontracted transportation
Fuel
Total increase
2019/2018
2018/2017
Total
8%
(1)
(1)
6%
Operating (1)
12%
—
—
12%
Total
19%
—
3
22%
Operating (1)
10%
—
—
10%
————————————
(1) Non-GAAP financial measure. A reconciliation of DTS total revenue to DTS operating revenue, as well as the reasons why management believes this
measure is important to investors is included in the "Non-GAAP Financial Measures" section of this MD&A.
2019 versus 2018
DTS total revenue increased 6% and operating revenue increased 12% in 2019 primarily reflecting new business. DTS
EBT increased 33% due to revenue growth, increased rates, improved operating performance and favorable insurance claim
developments, partially offset by a decrease in equipment contribution of $8.1 million (see further discussions on equipment
contribution above). We expect equipment contribution to be negatively impacted in the future due to the change in the vehicle
residual value estimates in the third quarter of 2019 for the FMS revenue earning equipment that is utilized in the DTS
business. However, we do not expect this impact to DTS EBT to be material.
2018 versus 2017
DTS total revenue increased 22% in 2018 reflecting higher operating revenue, as well as higher fuel costs passed through
to our customers. DTS operating revenue increased 10% due to new business and increased volumes. DTS EBT increased 11%
due to revenue growth, partially offset by higher costs incurred during the start-up phase of a new customer account.
Central Support Services
Human resources
Finance and procurement
Corporate services and public affairs
Information technology
Legal and safety
Marketing
Other
Total CSS
Allocation of CSS to business segments
Unallocated CSS
2019 versus 2018
2019
2018
2017
2019/2018
2018/2017
Change
21,447
74,382
11,103
98,756
28,626
(In thousands)
20,082
$
70,921
11,583
90,083
25,969
22,356
34,798
291,468
(242,354)
49,114
$
18,287
37,725
274,650
(225,569)
49,081
$
$
$
$
18,947
68,929
12,561
89,453
25,388
16,927
35,788
267,993
(219,734)
48,259
7%
5
(4)
10
10
22
(8)
6
7
—%
6%
3
(8)
1
2
8
5
2
3
2%
Total CSS costs increased 6% to $291 million in 2019 primarily reflecting investments in technology, increased
marketing efforts and higher compensation-related costs. Unallocated CSS costs remained flat in 2019.
2018 versus 2017
Total CSS costs increased 2% to $275 million in 2018 primarily reflecting higher compensation-related costs.
Unallocated CSS costs increased 2% to $49 million in 2018 reflecting higher compensation-related costs, partially offset by
lower professional services costs.
41
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
FINANCIAL RESOURCES AND LIQUIDITY
Cash Flows
The following is a summary of our cash flows from continuing operations:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash
Net change in cash and cash equivalents
Net cash provided by operating activities
Earnings (loss) from continuing operations
Non-cash and other, net
Collections on sales-type leases
Changes in operating assets and liabilities:
Receivables
Accounts payable
Changes in other assets and liabilities
Cash flows from operating activities from continuing
operations
2019 versus 2018
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
$
2,140,539
(3,217,193)
1,084,139
(4,272)
3,213
$
$
$
1,717,993
(2,821,459)
1,085,515
4,694
(13,257) $
1,628,098
(1,438,676)
(162,055)
(5,539)
21,828
Years ended December 31,
2019
2018
2017
(In thousands)
(23,272) $
2,178,662
121,201
$
286,922
1,716,802
82,803
27,149
(26,596)
(136,605)
(193,144)
16,869
(192,259)
720,101
983,981
81,015
(178,861)
66,149
(44,287)
$
2,140,539
$
1,717,993
$
1,628,098
Cash provided by operating activities from continuing operations increased to $2.1 billion in 2019 compared with $1.7
billion in 2018 reflecting higher cash earnings as well as lower working capital needs. Our working capital needs are primarily
driven by the timing of collections of our receivables and payments of our trade payables, as well as other changes in operating
assets and liabilities. The favorable impact in receivables was primarily due to improved collection efforts in our SCS and DTS
segments. The unfavorable impact from trade payables was due to timing of payments. In addition, the favorable impact from
changes in other assets and liabilities was driven by lower insurance and income tax payments, partially offset by higher
payments related to our pension plans in 2019 and higher bonus payments in 2019. Cash used in investing activities increased
to $3.2 billion in 2019 compared with $2.8 billion in 2018 primarily due to increased capital expenditures for planned vehicle
purchases, partially offset by higher proceeds from the sale of revenue-earning equipment and operating property and
equipment. Cash provided by financing activities was $1.1 billion in both 2019 and 2018.
2018 versus 2017
Cash provided by operating activities from continuing operations increased to $1.7 billion in 2018 compared with $1.6
billion in 2017 reflecting higher cash earnings offset by higher working capital needs. The unfavorable impact from trade
payables was due to timing of payments. In addition, the unfavorable impact from changes in other assets and liabilities was
driven by higher tax payments and lower accruals for salaries and wages, partially offset by lower pension payments. Cash used
in investing activities increased to $2.8 billion in 2018 compared with $1.4 billion in 2017 primarily due to increased capital
expenditures. Cash provided by financing activities was $1.1 billion in 2018 compared with cash used in financing activities of
$162 million in 2017 due to higher borrowing needs.
42
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table shows the components of our free cash flow:
Net cash provided by operating activities
Sales of revenue earning equipment (1)
Sales of operating property and equipment (1)
Total cash generated (2)
Purchases of property and revenue earning equipment (1)
Free cash flow (2)
2019
2018
(In thousands)
$
$
$
2,140,539
465,705
52,276
2,658,520
(3,735,174)
(1,076,654) $
$
1,717,993
379,716
16,606
2,114,315
(3,050,409)
(936,094) $
2017
1,628,098
376,743
52,257
2,057,098
(1,860,436)
196,662
Included in cash flows from investing activities.
———————————
(1)
(2) Non-GAAP financial measures. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in
this table. Refer to the “Non-GAAP Financial Measures” section of this MD&A for the reasons why management believes these measures are important
to investors.
Free cash flow decreased to $(1.1) billion in 2019 from $(936) million in 2018 primarily due to higher capital
expenditures, partially offset by higher cash flows from operations in 2019. Free cash flow decreased to $(936) million in 2018
from $197 million in 2017 primarily due to higher capital expenditures in 2018.
We expect cash provided by operating activities from continuing operations to decrease to approximately $2.1 billion in
2020 due to earnings growth adjusted for non-cash items, primarily depreciation. We expect 2020 free cash flow to increase to
approximately $350 million reflecting lower capital spending for the lease and rental vehicle fleets.
Capital expenditures generally represent the purchase of revenue earning equipment (trucks, tractors and trailers) within
our FMS segment. These expenditures primarily support the ChoiceLease and commercial rental product lines. The level of
capital required to support the ChoiceLease product line varies based on customer contract signings for replacement vehicles
and growth. These contracts are long-term agreements that result in predictable cash flows typically over three to seven years
for trucks and tractors and ten years for trailers. We utilize capital for the purchase of vehicles in our commercial rental product
line to replenish and expand the fleet available for shorter-term use by contractual or occasional customers. Operating property
and equipment expenditures primarily relate to spending on items such as vehicle maintenance facilities and equipment,
computer and telecommunications equipment, investments in technologies, and warehouse facilities and equipment.
The following is a summary of capital expenditures:
Revenue earning equipment:
ChoiceLease
Commercial rental
Operating property and equipment
Total capital expenditures (1)
2019
2018
(In thousands)
2017
$
$
2,871,043
556,560
3,427,603
192,820
3,620,423
$
2,206,500
796,617
3,003,117
162,154
3,165,271
1,456,758
351,707
1,808,465
132,752
1,941,217
Changes in accounts payable related to purchases of revenue earning
equipment
Cash paid for purchases of property and revenue earning equipment
$
114,751
(3,735,174) $
(114,862)
(3,050,409) $
(80,781)
(1,860,436)
_____________
(1) Non-cash additions exclude approximately $22 million, $15 million and $23 million in 2019, 2018 and 2017, respectively, in assets held under finance
leases resulting from new or the extension of existing finance leases and other additions.
Capital expenditures increased to $3.6 billion in 2019 reflecting planned higher investments in the ChoiceLease fleet.
Capital expenditures increased to $3.2 billion in 2018 reflecting planned higher investments in the ChoiceLease and
commercial rental fleets. We expect capital expenditures to decrease to approximately $2.1 billion in 2020 primarily due to
lower growth in our lease and rental vehicle fleets. We expect to fund 2020 capital expenditures primarily with additional debt
financing.
43
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Financing and Other Funding Transactions
We utilize external capital primarily to support working capital needs and growth in our asset-based product lines. The
variety of financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-
term public and private debt, asset-backed securities, bank term loans, leasing arrangements, and bank credit facilities. Our
principal sources of financing are issuances of unsecured commercial paper and medium-term notes.
Cash and equivalents totaled $74 million as of December 31, 2019. As of December 31, 2019, approximately $21 million
was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. If we decide to
repatriate cash and equivalents held outside the U.S., we may be subject to additional income and withholding taxes. However,
our intent is to permanently reinvest these foreign amounts outside the U.S. and our current plans do not demonstrate a need to
repatriate these foreign amounts to fund our U.S. operations.
We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial
paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the
foreseeable future. However, there can be no assurance that unanticipated volatility and disruption in the public unsecured bond
market or the commercial paper market would not impair our ability to access these markets on terms commercially acceptable
to us or at all. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we
would meet our liquidity needs by drawing upon contractually committed lending agreements and/or by seeking other funding
sources.
Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings.
These ratings are intended to provide guidance to fixed income investors in determining the credit risk associated with
particular Ryder securities based on current information obtained by the rating agencies from us or from other sources. Lower
ratings generally result in higher borrowing costs, as well as reduced access to unsecured capital markets. A significant
downgrade of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on
alternative funding sources. A significant downgrade would not affect our ability to borrow amounts under our revolving credit
facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.
Our debt ratings and rating outlooks at December 31, 2019 were as follows:
Fitch Ratings
Standard & Poor’s Ratings Services
Moody’s Investors Service
DBRS
Rating Summary
Short-term
F2
A2
P2
R-1 (Low)
Long-term
A-
BBB
Baa1
A (Low)
Outlook
Stable
Stable
Stable
Stable
At December 31, 2019, we had the following amounts available to fund operations:
Global revolving credit facility
Trade receivables program
(In millions)
$744
$225
In accordance with our funding philosophy, we attempt to align the aggregate average remaining re-pricing life of our
debt with the aggregate average remaining re-pricing life of our vehicle assets. We utilize both fixed-rate and variable-rate debt
to achieve this alignment and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding.
The variable-rate portion of our total debt (including notional value of swap agreements) was 17% and 28% at December 31,
2019 and 2018, respectively.
Refer to Note 14 , "Debt" in the Notes to the Consolidated Financial Statements for further discussion around the global
revolving credit facility, the trade receivables program, the issuance of medium-term notes under our shelf registration
statement, asset-backed financing obligations and debt maturities.
Our debt to equity ratios were 320% and 262% at December 31, 2019 and 2018, respectively. The debt to equity ratio
represents total debt divided by total equity. The increase in our debt to equity ratio reflects higher debt and a decrease in our
equity balance due to the net loss in 2019.
Off-Balance Sheet Arrangements
Guarantees. Refer to Note 15, “Guarantees,” in the Notes to Consolidated Financial Statements for a discussion of our
agreements involving guarantees.
44
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Contractual Obligations and Commitments
As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts
such as debt agreements, lease agreements and unconditional purchase obligations. The following table summarizes our
expected future contractual cash obligations and commitments at December 31, 2019:
Debt (1)
Finance lease obligations
Total debt, including finance leases
Interest on debt (2)
Operating leases (3)
Purchase obligations (4)
Total contractual cash obligations
Insurance obligations (primarily self-
insurance)
Other long-term liabilities (5), (6), (7)
Total
Total
2020
2021-2022
2023-2024
Thereafter
(In thousands)
$
7,898,484
61,155
7,959,639
707,704
243,516
533,621
1,484,841
$
1,322,055
14,663
1,336,718
208,165
79,345
486,979
774,489
$
2,378,765
22,390
2,401,155
320,308
100,496
34,822
455,626
$
3,441,759
11,541
3,453,300
141,846
45,220
10,865
197,931
438,371
72,106
9,954,957
$
152,533
3,162
2,266,902
$
141,501
5,035
3,003,317
$
61,101
5,842
3,718,174
$
$
$
755,905
12,561
768,466
37,385
18,455
955
56,795
83,236
58,067
966,564
____________
(1) Net of unamortized discount and excludes the fair market value adjustment on notes subject to hedging.
(2) Total debt matures at various dates through fiscal year 2026 and bears interest principally at fixed rates. Interest on variable-rate debt is calculated
based on the applicable rate as of December 31, 2019. Amounts are based on existing debt obligations and do not consider potential refinancing of
expiring debt obligations.
(3) Represents future lease payments associated with vehicles, equipment and properties under operating leases. Amounts are based upon the general
assumption that the leased asset will remain on lease for the length of time specified by the respective lease agreements. No effect has been given to
renewals, cancellations, contingent rentals or future rate changes.
(4) The majority of our purchase obligations are pay-as-you-go transactions made in the ordinary course of business. Purchase obligations include
agreements to purchase goods or services that are legally binding and that specify all significant terms, including: fixed or minimum quantities to be
purchased; fixed minimum or variable price provisions; and the approximate timing of the transaction. The most significant item included in the above
table are purchase obligations related to vehicles. Purchase orders made in the ordinary course of business that are cancelable are excluded from the
above table. Any amounts for which we are liable under purchase orders for goods received are reflected in the Consolidated Balance Sheets as
“Accounts payable” and “Accrued expenses and other current liabilities” and are excluded from the above table.
(5) Represents other long-term liabilities reflected in our Consolidated Balance Sheets that have known payment streams. The most significant items
included were asset retirement obligations and deferred compensation obligations.
(6) The amounts exclude our estimated pension contributions. For 2020, our pension contributions, including our minimum funding requirements as set forth
by U.S. and international regulations and legislation (including ERISA), are expected to be $37 million. Our minimum funding requirements after 2020
are dependent on several factors. However, we estimate that the undiscounted required global contributions over the next five years are approximately
$276 million (pre-tax) (assuming expected long-term rate of return realized and other assumptions remain unchanged). We also have payments due under
our other postretirement benefit (OPEB) plans. These plans are not required to be funded in advance, but are pay-as-you-go. See Note 20,“Employee
Benefit Plans,” in the Notes to Consolidated Financial Statements for further discussion.
(7) The amounts exclude $54 million of liabilities associated with uncertain tax positions as we are unable to reasonably estimate the ultimate amount or
timing of settlement. See Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for further discussion.
45
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Pension Information
We have defined benefit retirement plans which are frozen for non-grandfathered and certain non-union employees in the
U.S., Canada and the United Kingdom. The funded status of our pension plans is dependent upon many factors, including
returns on invested assets and the level of certain market interest rates. We review pension assumptions regularly and we may
from time to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. During
2019, total global pension contributions were $72 million compared with $28 million in 2018 and $41 million in 2017. We
estimate 2020 required pension contributions will be $37 million. The present value of estimated global pension contributions
that would be required over the next 5 years totals approximately $254 million (pre-tax). Changes in interest rates and the
market value of the securities held by the plans could materially change, positively or negatively, the funded status of the plans
and affect the level of pension expense and required contributions in future years. The ultimate amount of contributions is also
dependent upon the requirements of applicable laws and regulations. See Note 20, “Employee Benefit Plans,” in the Notes to
Consolidated Financial Statements for additional information.
Due to the underfunded status of our defined benefit plans, we had an accumulated net pension equity charge (after-tax) of
$667 million and $712 million as of December 31, 2019 and 2018, respectively. The improvement in funded status reflects the
benefit of asset returns of 19% in 2019, partially offset by a decrease in discount rates.
Pension expense was $82 million, $30 million, and $57 million in 2019, 2018 and 2017, respectively. The increase in
pension expense was due to a pension settlement charge of $32 million related to employee benefit settlements from the U.S.
pension plan in 2019 and unfavorable asset returns in 2018, partially offset by higher interest rates. We expect 2020 pension
expense to decrease approximately $54 million as a result of the non-recurring settlement charges in 2019, as well as favorable
asset returns in 2019 and a decrease in interest rates. Our 2020 pension expense estimates are subject to change based upon the
completion of the actuarial analysis for all pension plans. See the “Critical Accounting Estimates — Pension Plans” section for
further discussion on pension accounting estimates.
We participate in certain U.S. multi-employer pension (MEP) plans that provide defined benefits to employees covered
by collective bargaining agreements. At December 31, 2019, approximately 1,100 employees (approximately 3% of total
employees) participated in these MEP plans. The annual net pension cost of the MEP plans is equal to the annual contribution
determined in accordance with the provisions of negotiated labor contracts. Our MEP plan contributions in 2019 was $11
million. Pursuant to current U.S. pension laws, if any MEP plans fail to meet certain minimum funding thresholds, we could be
required to make additional MEP plan contributions, until the respective labor agreement expires, of up to 10% of current
contractual requirements. Several factors could cause MEP plans not to meet these minimum funding thresholds, including
unfavorable investment performance, changes in participant demographics, and increased benefits to participants. The plan
administrators and trustees of the MEP plans provide us with the annual funding notice as required by law. This notice sets forth
the funded status of the plan as of the beginning of the prior year but does not provide any company-specific information.
Employers participating in MEP plans can elect to withdraw from the plans, contingent upon certain requirements, and be
subject to a withdrawal obligation based on, among other factors, the MEP plan’s unfunded vested benefits. U.S. pension
regulations provide that an employer can fund its withdrawal obligation in a lump sum or over a time period of up to 20 years
based on previous contribution rates. During 2017, we recorded estimated pension settlement charges of $5 million related to
our exit from a U.S. multi-employer pension plan. These charges were recorded within "Selling, general and administrative
expenses" in our Consolidated Statement of Earnings and included in the Union-administered plans expense. See Note 20,
“Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
Share Repurchase Programs and Cash Dividends
Refer to Note 16, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on
our share repurchase programs.
Cash dividend payments to shareholders of common stock were $116 million in 2019, $112 million in 2018, and $96
million in 2017. During 2019, we increased our annualized dividend rate 4% to $2.24 per share of common stock.
46
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Market Risk
In the normal course of business, we are exposed to fluctuations in interest rates, foreign currency exchange rates and fuel
prices. We manage these exposures in several ways, including, in certain circumstances, the use of a variety of derivative
financial instruments when deemed prudent. We do not enter into leveraged derivative financial transactions or use derivative
financial instruments for trading purposes.
Exposure to market risk for changes in interest rates exists for our debt obligations. Our interest rate risk management
program objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing
costs. A hypothetical 10% change in short-term market interest rates would change annual pre-tax earnings by approximately
$12 million. We manage our exposure to interest rate risk primarily through the proportion of fixed-rate and variable-rate debt
we hold in the total debt portfolio. From time to time, we also use interest rate swap agreements to manage our fixed-rate and
variable-rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. The fair value of
derivatives was not material as of December 31, 2019.
At December 31, 2019, we had $5.7 billion of fixed-rate debt outstanding (excluding finance leases and U.S. asset-
backed securities) with a weighted-average interest rate of 3.18% and a fair value of $5.6 billion. A hypothetical 10% decrease
or increase in the December 31, 2019 market interest rates would impact the fair value of our fixed-rate debt by approximately
$47 million at December 31, 2019. Changes in the relative sensitivity of the fair value of our financial instrument portfolio for
these theoretical changes in the level of interest rates are primarily driven by changes in our debt maturities, interest rate profile
and amount.
At December 31, 2019, we had $1.4 billion of variable-rate debt, including $525 million of fixed-rate debt instruments
swapped to LIBOR-based floating-rate debt. Changes in the fair value of the interest rate swaps were offset by changes in the
fair value of the debt instruments and no net gain or loss was recognized in earnings. The fair value of our variable-rate debt at
December 31, 2019 was $1.4 billion. A hypothetical 10% increase in market interest rates would have impacted 2019 pre-tax
earnings from continuing operations by approximately $3 million.
We are also subject to interest rate risk with respect to our pension and postretirement benefit obligations, as changes in
interest rates will effectively increase or decrease our liabilities associated with these benefit plans, which also results in
changes to the amount of pension and postretirement benefit expense recognized each period.
Exposure to market risk for changes in foreign currency exchange rates relates primarily to our foreign operations’
buying, selling and financing in currencies other than local currencies and to the carrying value of net investments in foreign
subsidiaries. The majority of our transactions are denominated in U.S. dollars. The principal foreign currency exchange rate
risks to which we are exposed include the Canadian dollar, British pound sterling and Mexican peso. We manage our exposure
to foreign currency exchange rate risk related to our foreign operations’ buying, selling and financing in currencies other than
local currencies by naturally offsetting assets and liabilities not denominated in local currencies to the extent possible. A
hypothetical uniform 10% strengthening in the value of the dollar relative to all the currencies in which our transactions are
denominated would not materially impact results of operations. We also use foreign currency option contracts and forward
agreements from time to time to hedge foreign currency transactional exposure. We generally do not hedge the foreign currency
exposure related to our net investment in foreign subsidiaries, since we have no near-term intent to repatriate funds from such
subsidiaries.
Exposure to market risk for fluctuations in fuel prices relates to a small portion of our service contracts for which the cost
of fuel is integral to service delivery and the service contract does not have a mechanism to adjust for increases in fuel prices.
At December 31, 2019, we also had various fuel purchase arrangements in place to ensure delivery of fuel at market rates in the
event of fuel shortages. We are exposed to fluctuations in fuel prices in these arrangements since none of the arrangements fix
the price of fuel to be purchased. Changes in the price of fuel are generally passed on to our customers for which we realize
minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or
negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer pricing for
fuel services is established based on trailing market fuel costs. We believe the exposure to fuel price fluctuations would not
materially impact our results of operations, cash flows or financial position.
ENVIRONMENTAL MATTERS
Refer to Note 21, “Environmental Matters,” in the Notes to Consolidated Financial Statements for a discussion
surrounding environmental matters.
47
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions.
Our significant accounting policies are described in the Notes to Consolidated Financial Statements. Certain of these policies
require the application of subjective or complex judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. These estimates and assumptions are based on historical experience, changes in the
business environment and other factors that we believe to be reasonable under the circumstances. Different estimates that could
have been applied in the current period or changes in the accounting estimates that are reasonably likely can result in a material
impact on our financial condition and operating results in the current and future periods. We review the development, selection
and disclosure of these critical accounting estimates with Ryder’s Audit Committee on an annual basis.
The following discussion, which should be read in conjunction with the descriptions in the Notes to Consolidated
Financial Statements, is furnished for additional insight into certain accounting estimates that we consider to be critical.
Depreciation and Residual Value Estimates. We periodically review and adjust, as appropriate, the estimated residual
values and useful lives of revenue earning equipment for the purposes of recording depreciation expense as described in Note 7,
“Revenue Earning Equipment, Net" in the Notes to Consolidated Financial Statements.
Our review of the estimated residual values (i.e., the price at which we ultimately expect to dispose of revenue earning
equipment) and useful lives of revenue earning equipment is established with a long-term view based on vehicle class,
generally subcategories of trucks, tractors and trailers by weight and usage, as well as other factors. We refer to this long-term
view as "policy depreciation." These other factors include, but are not limited to, historical market prices, current and expected
future market prices, expected lives of vehicles, and expected sales of used vehicles in the wholesale and retail markets.
Reductions in estimated residual values or useful lives will result in an increase in depreciation expense over the remaining life
of the equipment. Factors that could cause actual results to materially differ from estimates include, but are not limited to,
changes in technology; changes in supply and demand; competitor pricing; regulatory requirements; driver shortages,
requirements and preferences; and changes in underlying assumption factors. As a result, future depreciation expense rates are
subject to change based upon changes in these factors. While we believe that the carrying values and estimated sales proceeds
for revenue earning equipment are appropriate, there can be no assurance that deterioration in economic conditions or adverse
changes to expectations of future sales proceeds will not occur, resulting in lower gains or losses on sales. 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.
At the end of the second quarter of 2019, we began to experience softening in used vehicle market conditions, which
intensified during the third quarter of 2019 and we now expect to continue throughout 2020. In addition, our inventory of used
vehicles that is expected to be made available for sale was higher than expected, which has and will impact the volume of used
vehicle sales expected to be sold through our wholesale channels. Due to these dynamics and our updated outlook, we
concluded that our residual value estimates likely exceeded the expected future values that would be realized upon the sale of
power vehicles in our fleet. As a result, we changed the estimates of our residual values for our revenue earning equipment in
the third quarter of 2019 to reflect more recent multi-year trends and our outlook for the expected used vehicle market. In 2019,
the impact to policy depreciation and accelerated depreciation related to the change in the residual value estimates that occurred
in the third quarter of 2019 was $104 million and $193 million, respectively.
Each year, we complete a review of the estimated residual values and useful lives of revenue earning equipment. Based
on the results of our analysis, we adjust the estimated residual values and useful lives of certain classes of our revenue earning
equipment each year. The approximate unfavorable incremental impact on the annual depreciation expense resulting from the
residual value and useful life reviews was as follows:
Policy depreciation
2020
$205 million
2019
$134 million
2018
$40 million
The impact of policy depreciation in 2019 included the vehicle residual values estimate change that occurred in the third
quarter of 2019, as well as $30 million of depreciation expense related to the policy depreciation estimate change effective
January 1, 2019.
48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
In addition, we also monitor market trends throughout the year and assess estimates of residual values of vehicles
expected to be made available for sale in the near-term (generally 12 to 24 months) and may adjust residual values for these
vehicles to reflect current market rates, which we refer to as “accelerated depreciation.” Following the completion of our review
in the third quarter of 2019, the near-term forecast for realized residual values on used vehicle sales was below our estimates of
residual value as discussed above. As a result, we adjusted the estimated residual values for these vehicles and increased
accelerated depreciation expense for these vehicles beginning in the third quarter of 2019. The approximate unfavorable
incremental impact on annual depreciation expense resulting from accelerated depreciation was as follows:
Accelerated depreciation
2020
$70 million
2019
$223 million
2018
$39 million
Depreciation expense was $1.9 billion, $1.4 billion and $1.3 billion in 2019, 2018 and 2017, respectively. Depreciation
expense relates primarily to FMS revenue earning equipment. Depreciation expense increased in 2019 driven by the change in
estimated residual values in the third quarter of 2019 as discussed above. Depreciation expense increased in 2018 driven by
larger average lease and commercial rental fleets and accelerated depreciation on vehicles expected to be made available for
sale through June 2020 of $9 million.
The impact of the estimate change in 2019 as a percentage of our original vehicle investment (cost) of our revenue
earning equipment was approximately 5% at December 31, 2019.
Based on our fleet of revenue earning equipment as of December 31, 2019, a hypothetical additional 10% reduction in
estimated residual values used for policy depreciation would increase depreciation expense in 2020 by approximately $111
million and would increase depreciation expense over the remaining life of these vehicles beyond 2020 by approximately $222
million.
Revenue Recognition. We generate revenue primarily through contracts with customers to lease, rent and maintain
revenue earning equipment and to provide logistics management and dedicated transportation services. We enter into contracts
that can include various combinations of products and services, which are generally capable of being distinct and accounted for
as separate performance obligations. We account for a contract when it has approval and commitment from both parties, the
rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectibility of
consideration is probable. We recognize revenue upon the transfer of control of promised products and services to customers in
an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally
recognize revenue over time as we perform because of continuous transfer of control to our customers.
We offer a full service lease as well as a lease with more flexible maintenance options under our ChoiceLease product
line in our FMS business segment, which are marketed, priced and managed as bundled products, that include the equipment
lease, maintenance and other related services. We do not offer a stand-alone lease of new vehicles. Our ChoiceLease
product line includes the lease of a vehicle (lease component) and maintenance and other services (non-lease component).
Contract consideration is allocated between the lease and non-lease components based on management's best estimate of the
relative stand-alone selling price of each component. Allocating consideration between the lease and maintenance components
in our ChoiceLease product requires significant judgment. We do not sell the components of our ChoiceLease product offering
on a stand-alone basis, therefore significant judgment is required to determine the stand-alone selling prices of the lease
and maintenance components in order to allocate the consideration on a relative stand-alone selling price basis.
For the lease component, we estimate the stand-alone selling price using the projected cash outflows related to the
underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return considering the weighted average
cost of capital. For the non-lease component of the contract, we estimate the stand-alone selling price of the maintenance
component using an expected cost-plus margin approach. The expected costs are based on our historical costs of providing
maintenance services in our ChoiceLease arrangements. The margin is based on the historical margin percentages for our full
service maintenance contracts in the SelectCare product line, as the maintenance performance obligation in those contracts is
similar to maintenance in our ChoiceLease arrangements. Full service maintenance arrangements in SelectCare are priced based
on targeted margin percentages for new and used vehicles by type of vehicle (trucks, tractors, and trailers), considering the
fixed and variable costs of providing maintenance services.
We recognize maintenance revenue using an input method, consistent with the estimated pattern of the costs to maintain
the underlying vehicles. This generally results in the recognition of a contract liability for the portion of the customer's bill
allocated to the maintenance service component of the agreement. The non-lease revenue component for maintenance included
in lease & related maintenance and rental revenues was $950 million, $909 million and $832 million in 2019, 2018 and 2017,
respectively.
49
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The stand-alone price for both the lease and non-lease components could vary in the future based on both external market
conditions and our pricing strategies as a result of the market conditions.
Pension Plans. We apply actuarial methods to determine the annual net periodic pension expense and pension plan
liabilities on an annual basis, or on an interim basis if there is an event requiring remeasurement. Each December, we review
actual experience compared with the assumptions used and make adjustments to our assumptions, if warranted. In determining
our annual estimate of periodic pension cost, we are required to make an evaluation of critical factors such as discount rate,
expected long-term rate of return on assets, expected increase in compensation levels, retirement rate and mortality. Discount
rates are based upon a duration analysis of expected benefit payments and the equivalent average yield for high quality
corporate fixed income investments as of our December 31 annual measurement date. In order to estimate the discount rate
relevant to our plan, we use models that match projected benefits payments of our primary U.S. plan to coupons and maturities
from a hypothetical portfolio of high quality corporate bonds. Long-term rate of return assumptions are based on a review of
our asset allocation strategy and long-term expected asset returns. Investment management and other fees paid using plan assets
are factored into the determination of asset return assumptions.
Assumptions as to mortality of the participants in our pension plan is a key estimate in measuring the expected payments
participants may receive over their lifetime, and therefore the amount of expense we will recognize. We update our mortality
assumptions as deemed necessary by taking into consideration relevant actuarial studies as they become available as well as
reassessing our own historical experience.
As part of our strategy to manage future pension costs and net funded status volatility, we regularly assess our pension
investment strategy. Our U.S. pension investment policy and strategy seek to reduce the effects of future volatility on the fair
value of our pension assets relative to our pension liabilities by increasing our allocation of high quality, longer-term fixed
income securities and reducing our allocation of equity investments as the funded status of the plan improves. The composition
of our pension assets was 45% equity securities and alternative assets and 55% debt securities and other investments as of
December 31, 2019. We continually evaluate our mix of investments between equity and fixed income securities and adjust the
composition of our pension assets when appropriate. In 2020, we adjusted our long-term expected rate of return assumption for
our primary U.S. plan to 5.10% from 5.40% based on our expected asset mix.
Accounting guidance applicable to pension plans does not require immediate recognition of the effects of a deviation
between these assumptions and actual experience or the revision of an estimate. This approach allows the favorable and
unfavorable effects that fall within an acceptable range to be netted and included in “Accumulated other comprehensive loss.”
We had a pre-tax accumulated actuarial loss of $870 million and $930 million as of December 31, 2019 and 2018, respectively.
To the extent the amount of cumulative actuarial gains and losses exceed 10% of the greater of the benefit obligation or plan
assets, the excess amount is amortized over the average remaining life expectancy of active participants or the remaining life
expectancy of inactive participants if all or almost all of a plan’s participants are inactive. As of December 31, 2019, the amount
of the actuarial loss subject to amortization in 2020 and future years is $637 million. We expect to recognize approximately $32
million of the net actuarial loss as a component of pension expense in 2020. The effect on years beyond 2020 will depend
substantially upon the actual experience of our plans in future years.
Disclosure of the significant assumptions used in arriving at the 2019 net pension expense is presented in Note 20,
“Employee Benefit Plans,” in the Notes to Consolidated Financial Statements. A sensitivity analysis of net pension expense to
changes in key underlying assumptions for our primary plan, the U.S. pension plan, is presented below:
Expected long-term rate of return on assets
Discount rate
Assumed Rate
5.10%
3.30%
Change
+/- 0.25
+/- 0.25
Impact on 2020 Net
Pension Expense
+/- $3.5 million
N/M
Effect on
December 31, 2019
Projected Benefit
Obligation
N/A
+/- $54 million
50
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Self-Insurance Accruals. Self-insurance accruals were $411 million and $358 million as of December 31, 2019 and 2018,
respectively. The majority of our self-insurance relates to vehicle liability and workers’ compensation. We use a variety of
statistical and actuarial methods that are widely used and accepted in the insurance industry to estimate amounts for claims that
have been reported but not paid and claims incurred but not reported. In applying these methods and assessing their results, we
consider such factors as frequency and severity of claims, claim development and payment patterns, and changes in the nature
of our business, among other factors. Such factors are analyzed for each of our business segments. Our estimates may be
impacted by such factors as increases in the market price for medical services, unpredictability of the size of jury awards and
limitations inherent in the estimation process. During 2019, 2018, and 2017, we recognized a charge of $18 million, a charge of
$1 million, and a benefit of $9 million, respectively, from the development of estimated prior years’ self-insured loss reserves.
Based on self-insurance accruals at December 31, 2019, a 5% adverse change in actuarial claim loss estimates would increase
operating expense in 2020 by approximately $19 million.
Goodwill Impairment. We assess goodwill for impairment, as described in Note 1, “Summary of Significant Accounting
Policies — Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements, on an annual basis or
more often if deemed necessary. As of December 31, 2019, total goodwill was $475 million. To determine whether goodwill is
impaired, we are required to assess the fair value of each reporting unit and compare it to its carrying value. A reporting unit is a
component of an operating segment for which discrete financial information is available and management regularly reviews its
operating performance.
We assess goodwill for impairment on October 1st of each year or more often if deemed necessary. In evaluating goodwill
for impairment, we have the option to first assess qualitative factors to determine whether further impairment testing is
necessary, such as macroeconomic conditions, changes in our industry and the markets in which we operate, and our market
capitalization as well as our reporting units' historical and expected future financial performance. If we conclude that it is more
likely than not that a reporting unit's fair value is less than its carrying value or we bypass the optional qualitative assessment,
recoverability is assessed by comparing the fair value of the reporting unit with its carrying amount. If a reporting unit's
carrying value exceeds its fair value, we will measure any goodwill impairment losses as the amount by which the carrying
amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
For quantitative tests, we estimated the fair value of the reporting units using a combination of both an income and
market approach. We perform our quantitative impairment test with the assistance of a third-party specialist. Under the market
approach, we use a selection of comparable publicly-traded companies that correspond to the reporting unit to derive a market-
based multiple. Under the income approach, the fair value of the reporting unit is estimated based on the discounted present
value of the projected future cash flows. Rates used to discount cash flows are dependent upon interest rates and the cost of
capital based on our industry and capital structure, adjusted for equity and size risk premiums based on market capitalization.
Estimates of future cash flows are dependent on our knowledge and experience about past and current events and significant
judgments and assumptions about conditions we expect to exist, including revenue growth rates, margins, long-term growth
rates, capital requirements, proceeds from the sale of used vehicles, the ability to utilize our tax net operating losses, and the
discount rate. Our estimates of cash flows are also based on historical and future operating performance, economic conditions
and actions we expect to take. In addition to these factors, our SCS and DTS reporting units are dependent on several key
customers or industry sectors. The loss of a key customer may have a significant impact to our SCS or DTS reporting units,
causing us to assess whether or not the event resulted in a goodwill impairment loss.
In making our assessments of fair value, we rely on our knowledge and experience about past and current events and
assumptions about conditions we expect to exist in the future. These assumptions are based on a number of factors, including
future operating performance, economic conditions, actions we expect to take and present value techniques. There are inherent
uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is
possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur
in the future. We conduct additional sensitivity analyses to assess the risk for potential impairment based upon changes in the
key assumptions in our goodwill valuation test, including long-term growth rates and discount rates.
In the third quarter of 2019, we performed an interim impairment test of our FMS North America reporting unit (“FMS
NA”) as a result of the decline in market conditions and our updated outlook primarily in the used vehicle market, which
negatively affects our forecasted cash flows from the sale of used vehicles. Based on our analysis, we determined that FMS NA
goodwill was not impaired as of September 30, 2019. However, the fair value of FMS NA was not substantially in excess of its
carrying amount. The estimated fair value of the FMS NA reporting unit exceeded its carrying value by approximately 5%.
As a result of a revised forecast and outlook for the FMS NA reporting unit as of December 31, 2019, we performed an
additional impairment test. Based on our analysis, we determined that FMS NA goodwill was not impaired as of December 31,
2019. However, the fair value of FMS NA was not substantially in excess of its carrying amount. The estimated fair value of the
FMS NA reporting unit exceeded its carrying value by approximately 15% as of December 31, 2019.
51
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The increase in the estimated fair value of FMS NA in excess of its carrying value as compared to September 30, 2019 is
due to improved estimated future cash flows from management actions which moderate future ChoiceLease growth
assumptions, lower expected future capital expenditures and improve future profit margins. As of December 31, 2019, there
was $244 million of goodwill recorded related to FMS NA.
As the fair value is not substantially in excess of its carrying amount, in the event the financial performance of FMS NA
does not meet our expectations in the future; we experience future prolonged market downturns, including in the used vehicle
market or a sustained decline in our stock price; or other negative revisions to key assumptions, we may be required to perform
additional impairment analyses and could be required to recognize a non-cash goodwill impairment charge. Subsequent to
December 31, 2019, we experienced a decline in our market capitalization and if this decline continues for a sustained period of
time, we may also be required to perform additional impairment analyses and could be required to recognize a non-cash
goodwill impairment charge.
On October 1, 2019, we completed our annual goodwill impairment test for our SCS and DTS related reporting units and
determined there was no impairments.
Income Taxes. Our overall tax position is complex and requires careful analysis by management to estimate the expected
realization of income tax assets and liabilities.
Tax regulations can require items to be included in the tax return at different times than the items are reflected in the
financial statements. As a result, the effective tax rate reflected in the financial statements can be different than that reported in
the tax return. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can
be used as a tax deduction or credit in the tax return in future years, for which we have already recognized the tax benefit in the
financial statements. Deferred tax assets were $1.0 billion and $799 million as of December 31, 2019 and 2018, respectively.
We recognize a valuation allowance for deferred tax assets to reduce such assets to amounts expected to be realized. As of
December 31, 2019 and 2018, the deferred tax valuation allowance, principally attributed to tax loss carryforwards, was $18
million and $16 million, respectively. In determining the required level of valuation allowance, we consider whether it is more
likely than not that all or some portion of deferred tax assets will not be realized. This assessment is based on management’s
expectations as to whether sufficient taxable income of an appropriate character will be realized within tax carryback and
carryforward periods. Our assessment involves estimates and assumptions about matters that are inherently uncertain, and
unanticipated events or circumstances could cause actual results to differ from these estimates. Should we change our estimate
of the amount of deferred tax assets that we would be able to realize, an adjustment to the valuation allowance would result in
an increase or decrease to the provision for income taxes in the period such a change in estimate was made.
As part of our calculation of the provision for income taxes, we determine whether the benefits of our tax positions are at
least more likely than not of being sustained upon audit based on the technical merits of the tax position. We accrue the largest
amount of the benefit that has a cumulative probability of greater than 50% of being sustained. These accruals require
management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary
materially from these estimates.
A number of years may elapse before a particular matter for which we have established a reserve is audited and finally
resolved. The number of years with open tax audits varies depending on the tax jurisdiction. The tax benefit that has been
previously reserved because of a failure to meet the “more likely than not” recognition threshold would be recognized in our
income tax expense in the first interim period when the uncertainty is resolved under any one of the following conditions:
(1) the tax position has been determined to be “more likely than not” of being sustained, (2) the tax position, amount and/or
timing is ultimately settled through negotiation or litigation, or (3) the statutes of limitations for the tax position has expired.
See Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for further discussion.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2, “Recent Accounting Pronouncements,” in the Notes to Consolidated Financial Statements for a discussion of
recent accounting pronouncements.
52
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
NON-GAAP AND SEGMENT FINANCIAL MEASURES
Non-GAAP Financial Measures. This Annual Report on Form 10-K includes information extracted from consolidated
financial information that is not required by generally accepted accounting principles in the United States of America (GAAP)
to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures”
as defined by SEC rules. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or
superior to, other measures of financial performance or liquidity prepared in accordance with GAAP. Also, our non-GAAP
financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each
of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section.
We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.
Specifically, we refer to the following non-GAAP financial measures in this Form 10-K:
Non-GAAP Financial Measure
Comparable GAAP Measure
Operating Revenue Measures:
Operating Revenue
FMS Operating Revenue
SCS Operating Revenue
DTS Operating Revenue
Total Revenue
FMS Total Revenue
SCS Total Revenue
DTS Total Revenue
FMS EBT as a % of FMS Operating Revenue
FMS EBT as a % of FMS Total Revenue
SCS EBT as a % of SCS Operating Revenue
SCS EBT as a % of SCS Total Revenue
DTS EBT as a % of DTS Operating Revenue
DTS EBT as a % of DTS Total Revenue
Comparable Earnings Measures:
Comparable Earnings (Loss) Before Income Tax
Earnings (Loss) Before Income Tax
Comparable Earnings (Loss)
Earnings (Loss) from Continuing Operations
Comparable EPS
Comparable Tax Rate
Adjusted Return on Equity (ROE)
Adjusted Return on Capital (ROC)
Cash Flow Measures:
EPS from Continuing Operations
Effective Tax Rate from Continuing Operations
Not Applicable. However, non-GAAP elements of the
calculation have been reconciled to the corresponding
GAAP measures. A numerical reconciliation of net
earnings to adjusted net earnings and average
shareholders' equity to adjusted average equity is
provided in the following reconciliations.
Not Applicable. However, non-GAAP elements of the
calculation have been reconciled to the corresponding
GAAP measures. A numerical reconciliation of net
earnings to adjusted net earnings and average total debt
and average shareholders' equity to adjusted average total
capital is provided in the following reconciliations.
Total Cash Generated and Free Cash Flow
Cash Provided by Operating Activities
53
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that
presentation of each non-GAAP financial measure provides useful information to investors. See reconciliations for each of
these measures following this table.
Operating Revenue Measures:
Operating Revenue
FMS Operating Revenue
SCS Operating Revenue
DTS Operating Revenue
FMS EBT as a % of FMS
Operating Revenue
SCS EBT as a % of SCS Operating
Revenue
DTS EBT as a % of DTS Operating
Revenue
Comparable Earnings Measures:
Comparable Earnings (Loss) before
Income Taxes (EBT)
Comparable Earnings (Loss)
Comparable earnings (loss) per
diluted common share (EPS)
Comparable Tax Rate
Adjusted Return on Equity (ROE)
Adjusted Return on Capital (ROC)
Operating revenue is defined as total revenue for Ryder System, Inc. or each business
segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted
transportation. We believe operating revenue provides useful information to investors as
we use it to evaluate the operating performance of our core businesses and as a measure
of sales activity at the consolidated level for Ryder System, Inc., as well as for each of
our business segments. We also use segment EBT as a percentage of segment operating
revenue for each business segment for the same reason. Note: FMS EBT, SCS EBT and
DTS EBT, our primary measures of segment performance, are not non-GAAP measures.
Fuel: We exclude FMS, SCS and DTS fuel from the calculation of our operating
revenue measures, as fuel is an ancillary service that we provide our customers, which is
impacted by fluctuations in market fuel prices and the costs are largely a pass-through to
our customers, resulting in minimal changes in our profitability during periods of steady
market fuel prices. However, profitability may be positively or negatively impacted by
rapid changes in market fuel prices during a short period of time, as customer pricing for
fuel services is established based on trailing market fuel costs.
Subcontracted transportation: We also exclude subcontracted transportation from the
calculation of our operating revenue measures, as these services are also typically a
pass-through to our customers and, therefore, fluctuations result in minimal changes to
our profitability. While our SCS and DTS business segments subcontract certain
transportation services to third party providers, our FMS business segment does not
engage in subcontracted transportation and, therefore, this item is not applicable to FMS.
Comparable EBT, comparable earnings and comparable EPS are defined, respectively,
as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-
operating pension costs and (2) any other significant items that are not representative of
our business operations. We believe these comparable earnings measures provide useful
information to investors and allow for better year-over-year comparison of operating
performance.
Non-operating pension costs: Our comparable earnings measures exclude non-operating
pension costs, which include the amortization of net actuarial loss and prior service cost,
interest cost and expected return on plan assets components of pension and
postretirement benefit costs, as well as a settlement or curtailment of a plan. We exclude
non-operating pension costs because we consider these to be impacted by financial
market performance and outside the operational performance of our business.
Other Items Impacting Comparability: Our comparable and adjusted earnings measures
also exclude other significant items that are not representative of our business operations
as detailed in the reconciliation table below. These other significant items vary from
period to period and, in some periods, there may be no such significant items.
Calculation of comparable tax rate: The comparable provision for income taxes is
computed using the same methodology as the GAAP provision for income taxes. Income
tax effects of non-GAAP adjustments are calculated based on the statutory tax rates of
the jurisdictions to which the non-GAAP adjustments relate.
Adjusted ROE: Adjusted ROE is defined as adjusted net earnings divided by adjusted
average shareholders' equity and represents the rate of return on shareholders'
investment. Other items impacting comparability described above are excluded, as
applicable, from the calculation of net earnings and average shareholders' equity. We use
adjusted ROE as an internal measure of how effectively we use the owned capital
invested in our operations.
Adjusted ROC: Adjusted ROC is defined as adjusted net earnings divided by average
total capital and represents the rate of return generated by the capital deployed in our
business. Other items impacting comparability described above are excluded, as
applicable, from the calculation of net earnings and average shareholders' equity (a
component of average total capital).We use adjusted ROC as an internal measure of how
effectively we use the capital invested (borrowed or owned) in our operations.
54
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Cash Flow Measures:
Total Cash Generated
Free Cash Flow
We consider total cash generated and free cash flow to be important measures of
comparative operating performance, as our principal sources of operating liquidity are
cash from operations and proceeds from the sale of revenue earning equipment.
Total Cash Generated: Total cash generated is defined as the sum of (1) net cash
provided by operating activities, (2) net cash provided by the sale of revenue earning
equipment, (3) net cash provided by the sale of operating property and equipment, and
(4) other cash inflows from investing activities. We believe total cash generated is an
important measure of total cash flows generated from our ongoing business activities.
Free Cash Flow: We refer to the net amount of cash generated from operating activities
and investing activities (excluding acquisitions) from continuing operations as “free
cash flow”. We calculate free cash flow as the sum of (1) net cash provided by operating
activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash
provided by the sale of operating property and equipment, and (4) other cash inflows
from investing activities, less (5) purchases of property and revenue earning equipment.
We believe free cash flow provides investors with an important perspective on the cash
available for debt service and for shareholders, after making capital investments required
to support ongoing business operations. Our calculation of free cash flow may be
different from the calculation used by other companies and, therefore, comparability
may be limited.
55
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table provides a reconciliation of GAAP earnings (loss) before taxes (EBT), earnings (loss), and earnings
(loss) per diluted share (Diluted EPS) from continuing operations to comparable EBT, comparable earnings and comparable
EPS from continuing operations. Certain items included in EBT, earnings and diluted EPS from continuing operations have
been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures. The following table lists
a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated
Financial Statements:
EBT
Non-operating pension costs (1)
Restructuring and other, net (2)
ERP implementation costs (2)
Goodwill impairment (3)
Tax reform-related and other tax adjustments,
net (4), (5)
Pension-related adjustments (1)
Operating tax adjustment (4)
Gain on sale of property (6)
Comparable EBT
Earnings (loss)
Non-operating pension costs (1)
Restructuring and other, net (2)
ERP implementation costs (2)
Goodwill impairment (3)
Tax reform-related and other tax adjustments,
net (4), (5)
Uncertain tax position (5)
Pension-related adjustments (1)
Operating tax adjustment (4)
Gain on sale of property (6)
Tax law changes (5)
Comparable Earnings (7)
Diluted EPS
Non-operating pension costs (1)
Restructuring and other, net (2)
ERP implementation costs (2)
Goodwill impairment (3)
Tax reform-related and other tax adjustments,
net (4), (5)
Uncertain tax position (5)
Pension-related adjustments (1)
Operating tax adjustment (4)
Gain on sale of property (6)
Tax law changes (5)
Comparable EPS (7)
$
$
$
$
$
$
2019
(42,271) $
60,406
35,308
21,260
—
—
—
—
(18,614)
56,089
$
(23,272) $
44,852
26,532
15,779
—
3,508
—
—
—
(13,845)
—
53,554
$
(0.45) $
0.85
0.51
0.30
—
0.06
—
—
—
(0.26)
—
1.01
$
2016
2018
Continuing Operations
Years ended December 31,
2017
(In thousands, except per share amounts)
389,469
7,541
5,597
742
15,513
296,436
27,741
17,265
—
—
$
$
407,256
29,943
5,074
—
—
—
—
—
—
418,862
286,922
4,685
4,475
550
15,513
10,038
(4,382)
—
—
—
(3,020)
314,781
5.43
0.09
0.08
0.01
0.29
0.19
(0.08)
—
—
—
(0.06)
5.95
$
$
$
$
$
23,278
5,454
2,205
(24,122)
348,257
720,101
16,034
9,231
—
—
(512,234)
—
3,303
1,677
(14,769)
1,844
225,187
13.54
0.31
0.15
—
—
(9.62)
—
0.06
0.03
(0.27)
0.03
4.23
$
$
$
$
$
—
7,650
—
—
449,923
265,232
17,518
3,513
—
—
—
—
4,817
—
—
—
291,080
4.95
0.33
0.06
—
—
—
—
0.09
—
—
—
5.43
2015
469,215
17,797
18,068
—
—
—
(509)
—
—
504,571
305,989
10,136
12,782
—
—
—
—
(309)
—
—
(2,113)
326,485
5.73
0.19
0.23
—
—
—
—
(0.01)
—
—
(0.04)
6.10
$
$
$
$
$
$
____________________
(1) Refer to Note 20, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
(2) Refer to Note 5, “Restructuring and Other Items, Net,” in the Notes to Consolidated Financial Statements for additional information.
(3) Refer to Note 9, "Goodwill,” in the Notes to Consolidated Financial Statements for additional information.
(4) Refer to Note 22, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additional information.
(5) Refer to Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements for additional information.
(6) Refer to Note 25, "Miscellaneous Income, Net," in the Notes to Consolidated Financial Statements for additional information.
(7) Refer to the reconciliation of the comparable provision for income taxes table below for information on the tax impact on our comparable earnings
measures.
56
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table provides a reconciliation of the provision for income taxes to the comparable provision for income
taxes:
Benefit from (provision for)
income taxes (1), (2)
Income tax effects of non-GAAP
adjustments (1)
Tax reform-related and other tax
adjustments, net (1), (2)
Comparable provision for income taxes (1)
$
Years ended December 31,
2019
2018
2017
2016
2015
(In thousands)
$
18,999
$
(102,547) $
423,665
$
(142,024) $
(163,226)
(25,042)
(11,572)
(11,223)
(16,819)
(14,860)
3,508
(2,535) $
10,038
(104,081) $
(535,512)
(123,070) $
—
(158,843) $
—
(178,086)
_________________
(1) The comparable provision for income taxes is computed using the same methodology as the GAAP provision of income taxes. Income tax effects of non-
GAAP adjustments are calculated based on statutory tax rates of the jurisdictions to which the non-GAAP adjustments related.
(2) 2017 amounts reflect a tax benefit as a result of the 2017 Tax Cuts and Jobs Act. Refer to Note 12 , "Income Taxes ," in the Notes to Consolidated
Financial Statements for additional information.
The following table provides a numerical reconciliation of net cash provided by operating activities to total cash
generated and to free cash flow:
2019
2018
2017
2016
2015
Years ended December 31,
Net cash provided by operating activities
Sales of revenue earning equipment (1)
Sales of operating property and equipment (1)
Collections on direct finance leases (2)
Total cash generated
Purchases of property and revenue earning
$ 2,140,539
465,705
52,276
—
2,658,520
$ 1,717,993
379,716
16,606
—
2,114,315
(In thousands)
$ 1,628,098
376,743
52,257
—
2,057,098
$ 1,601,022
414,249
7,051
76,510
2,098,832
$ 1,441,788
423,605
3,891
70,980
1,940,264
equipment
Free cash flow
Memo:
(3,735,174)
$ (1,076,654) $
(3,050,409)
(936,094) $
(1,860,436)
196,662
(1,905,157)
193,675
$
(2,667,978)
(727,714)
$
Net cash used in investing activities
$ (3,217,193) $ (2,821,459) $ (1,438,676) $ (1,407,347) $ (2,161,355)
Net cash provided by (used in) financing
activities
$ 1,084,139
$ 1,085,515
$
(162,055) $
(185,922) $
731,485
_________________
(1)
(2)
Included in cash flows from investing activities.
Included in cash flows from investing activities for periods prior to January 1, 2017 as a result of the adoption of the new leasing standard in 2019.
The following table provides a numerical reconciliation of total revenue to operating revenue:
Total revenue
Subcontracted transportation
Fuel
Operating revenue
Years ended December 31,
2019
2018
2017
2016
2015
$ 8,925,801
(854,149)
(847,320)
$ 7,224,332
$ 8,413,946
(836,991)
(878,839)
$ 6,698,116
(In thousands)
$ 7,280,074
(546,369)
(711,200)
6,022,505
$ 6,758,138
(338,716)
(628,525)
$ 5,790,897
$ 6,571,893
(288,082)
(722,734)
$ 5,561,077
57
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table provides a reconciliation of FMS total revenue to FMS operating revenue:
FMS total revenue
Fuel (1)
FMS operating revenue
FMS EBT
FMS EBT as a % of FMS total revenue
FMS EBT as a % of FMS operating revenue
————————————
(1)
Includes intercompany fuel sales from FMS to DTS and SCS.
Years ended December 31,
2019
2018
2017
(In thousands)
$ 5,571,403
(816,362)
$ 4,755,041
$ 5,258,693
(847,655)
$ 4,411,038
$ 4,716,541
(689,809)
$ 4,026,732
$
(70,274) $
340,038
$
295,618
(1.3)%
(1.5)%
6.5%
7.7%
6.3%
7.3%
The following table provides a reconciliation of SCS total revenue to SCS operating revenue:
SCS total revenue
Subcontracted transportation
Fuel
SCS operating revenue
SCS EBT
SCS EBT as a % of SCS total revenue
SCS EBT as a % of SCS operating revenue
Years ended December 31,
2019
2018
2017
$ 2,551,271
(554,678)
(116,628)
$ 1,879,965
(In thousands)
$ 2,398,144
(521,028)
(111,780)
$ 1,765,336
$ 1,937,352
(354,644)
(75,160)
$ 1,507,548
$
145,060
$
130,262
$
98,825
5.7%
7.7%
5.4%
7.4%
5.1%
6.6%
The following table provides a reconciliation of DTS total revenue to DTS operating revenue:
DTS total revenue
Subcontracted transportation
Fuel
DTS operating revenue
DTS EBT
DTS EBT as a % of DTS total revenue
DTS EBT as a % of DTS operating revenue
Years ended December 31,
2019
2018
2017
$ 1,417,483
(299,471)
(145,318)
972,694
$
(In thousands)
$ 1,333,313
(315,963)
(146,813)
870,537
$
$ 1,095,645
(191,725)
(114,626)
789,294
$
$
81,149
$
61,236
$
55,346
5.7%
8.3%
4.6%
7.0%
5.1%
7.0%
58
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following tables provide numerical reconciliations of net earnings to adjusted net earnings and average shareholders'
equity to adjusted average shareholders' equity (Adjusted ROE), and of net earnings to adjusted net earnings and average total
debt and average shareholders' equity to adjusted average total capital (Adjusted ROC), and of the non-GAAP elements used to
calculate the adjusted return on equity and adjusted return on capital to the corresponding GAAP measures:
Adjusted Return on Equity
Net earnings (loss) (1)
Other items impacting comparability, net (2)
Income taxes
Adjusted earnings (loss) before income taxes
Adjusted income taxes (3)
Adjusted net earnings (loss) for adjusted return
on equity [A]
Average shareholders’ equity
Average adjustments to shareholders’ equity (4)
Adjusted average shareholders’ equity [B]
Adjusted return on equity [A/B]
Adjusted Return on Capital
2019
2018
2017
2016
2015
Years ended December 31,
$
(24,410) $
37,954
(18,951)
(5,407)
12,972
284,613
21,852
102,695
409,160
(101,373)
$
(In thousands)
719,644
24,080
(423,145)
320,579
(111,884)
$
7,565
$
307,787
$
208,695
$ 2,532,875
14,988
$ 2,547,863
$ 2,492,956
(78,431)
$ 2,414,525
$ 1,983,736
(98,794)
$ 1,884,942
$
$
$
$
$
263,069
12,585
141,906
417,560
(146,567)
304,768
17,559
163,649
485,976
(171,021)
270,993
$
314,955
2,053,039
1,728
2,054,767
$ 1,894,917
10,843
$ 1,905,760
0.3%
12.7%
11.1%
13.2%
16.5%
Net earnings (loss) (1)
$
Other items impacting comparability, net (2)
Income taxes
Adjusted earnings (loss) before income taxes
Adjusted interest expense (5)
Adjusted income taxes (6)
Adjusted net earnings (loss) for adjusted return
on capital [A]
Years ended December 31,
2019
2018
2017
2016
2015
(24,410) $
37,954
(18,951)
(5,407)
241,478
(43,164)
284,613
21,852
102,695
409,160
180,648
(146,335)
$
(In thousands)
719,644
$
24,080
(423,145)
320,579
142,051
(161,891)
$
263,069
12,585
141,906
417,560
148,043
(198,531)
304,768
17,559
163,649
485,976
150,640
(224,033)
$
192,907
$
443,473
$
300,739
$
367,072
$
412,583
Average total debt
Average off-balance sheet debt
Average shareholders’ equity
Average adjustments to shareholders’ equity (4)
Adjusted average total capital [B]
Adjusted return on capital [A]/[B]
$ 7,427,218
—
2,532,875
14,988
$ 9,975,081
1.9%
$ 6,025,260
—
2,492,956
(78,431)
$ 8,439,785
5.2%
$ 5,394,752
—
1,983,736
(98,794)
$ 7,279,694
4.2%
$ 5,549,458
1,472
2,053,039
1,728
$ 7,605,697
4.8%
$ 5,177,012
1,467
1,894,917
10,843
$ 7,084,239
5.8%
________________
(1) 2017 amounts reflect a tax benefit as a result of the 2017 Tax Cuts and Jobs Act. Refer to Note 12 , "Income Taxes ," in the Notes to Consolidated
Financial Statements for additional information.
(2) Refer to the table above which discusses items excluded from our segment EBT measure and their classification within our Consolidated Statements of
Earnings.
(3) Represents the tax provision on adjusted net earnings before income taxes.
(4) Represents the impact of other items impacting comparability, net of tax, to equity for the respective period.
(5) Represents reported interest expense plus imputed interest on off-balance sheet obligations.
(6) Represents provision for income taxes plus income taxes on other items impacting comparability and adjusted interest expense.
59
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The following table provides a numerical reconciliation of forecasted net cash provided by operating activities to
forecasted total cash generated and forecasted free cash flow for 2020:
Net cash provided by operating activities
Sales of revenue earning equipment (1)
Total cash generated
Purchases of property and revenue earning equipment (1)
Forecasted free cash flow
————————————
(1)
Included in cash flows from investing activities.
2020
(In thousands)
2,130,000
430,000
2,560,000
(2,210,000)
350,000
$
$
60
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are
statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning
matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,”
“estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Annual Report contains forward-looking
statements including, but not limited to, statements regarding:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our expectations in our FMS business segment regarding anticipated ChoiceLease revenue and fleet growth and
commercial rental revenue and demand;
our expectations in our SCS and DTS business segments regarding anticipated operating revenue trends, sales activity
and growth rates;
our expectations of the long-term residual values of revenue earning equipment;
the anticipated increase in NLE vehicles in inventory through the end of the year;
the expected pricing and inventory levels for used vehicles;
our expectations of operating cash flow, free cash flow, and capital expenditures through the end of 2020;
the adequacy of our accounting estimates and reserves for pension expense, compensation expense and employee
benefit plan obligations, depreciation and residual value guarantees, goodwill impairment, accounting changes, and
income taxes;
our expected future contractual cash obligations and commitments;
the adequacy of our fair value estimates of employee incentive awards under our share-based compensation plans,
publicly traded debt and other debt;
our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally
generated funds and outside funding sources;
our expected level of use and availability of outside funding sources, anticipated future payments under debt and lease
agreements, and risk of losses resulting from counterparty default under hedging and derivative agreements;
the anticipated impact of fuel price and exchange rate fluctuations;
our expectations as to return on pension plan assets, future pension expense and estimated contributions;
our expectations regarding the scope and anticipated outcomes with respect to certain claims, proceedings and lawsuits;
the ultimate disposition of estimated environmental liabilities;
our expectations about the need to repatriate foreign cash to the U.S.;
our ability to access commercial paper and other available debt financing in the capital markets;
our expected cost savings from workforce reductions and restructuring actions;
the size and impact of our strategic investments;
our expectations regarding restructuring charges;
the status of our unrecognized tax benefits related to the U.S. federal, state and foreign tax positions;
our estimates for self-insurance loss reserves;
our expectations regarding the completion and ultimate outcome of certain tax audits; and
the anticipated impact of recent accounting pronouncements.
61
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
These statements, as well as other forward-looking statements contained in this Annual Report, are based on our current
plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors
could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk
factors include, but are not limited to, the following:
• Market Conditions:
Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand
for our services, lower profit margins, increased levels of bad debt and reduced access to credit and financial
markets.
Decreases in freight demand which would impact both our transactional and variable-based contractual business.
Changes in our customers’ operations, financial condition or business environment that may limit their demand
for, or ability to purchase, our services.
Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global
economic conditions.
Volatility in customer volumes and shifting customer demand in the industries serviced by our SCS business.
Changes in current financial, tax or regulatory requirements that could negatively impact our financial results.
•
Competition:
Advances in technology may impact demand for our services or may require increased investments to remain
competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.
Competition from other service providers, some of which have greater capital resources or lower capital costs,
or from our customers, who may choose to provide services themselves.
Continued consolidation in the markets in which we operate which may create large competitors with greater
financial resources.
Our inability to maintain current pricing levels due to economic conditions, demand for services, customer
acceptance or competition.
•
Profitability:
Our inability to obtain adequate profit margins for our services.
Lower than expected sales volumes or customer retention levels.
Decreases in commercial rental fleet utilization and pricing.
Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail
versus wholesale sales.
Loss of key customers in our DTS and SCS business segments.
Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis.
The inability of our legacy information technology systems to provide timely access to data.
Sudden changes in fuel prices and fuel shortages.
Higher prices for vehicles, diesel engines and fuel as a result of new environmental standards.
Higher than expected maintenance costs and lower than expected benefits associated with our maintenance
initiatives.
Our inability to successfully execute our asset management initiatives, maintain our fleet at normalized levels
and right-size our fleet in line with demand.
62
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Our key assumptions and pricing structure of our DTS and SCS contracts prove to be inaccurate.
Increased unionizing, labor strikes and work stoppages.
Difficulties in attracting and retaining drivers and technicians due to driver and technician shortages, which may
result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers.
Our inability to manage our cost structure.
Our inability to limit our exposure for customer claims.
Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions.
Business interruptions or expenditures due to severe weather or natural occurrences.
•
Financing Concerns:
Higher borrowing costs.
Unanticipated interest rate and currency exchange rate fluctuations.
Negative funding status of our pension plans caused by lower than expected returns on invested assets and
unanticipated changes in interest rates.
Withdrawal liability as a result of our participation in multi-employer plans.
Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to
credit.
•
Accounting Matters:
Reductions in residual values or useful lives of revenue earning equipment.
Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory
changes affecting pension estimates, accruals and expenses.
Changes in accounting rules, assumptions and accruals.
Difficulties and delays in implementing our Enterprise Resource Planning system and related processes.
•
Other risks detailed from time to time in our SEC filings, including in “Item 1A.-Risk Factors” of this Annual Report.
New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess
the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements.
You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this
Annual Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this
Annual Report, whether as a result of new information, future events or otherwise.
63
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by ITEM 7A is included in ITEM 7 of PART II of this report.
64
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements:
Note 1. Summary of Significant Accounting Policies
Note 2. Recent Accounting Pronouncements
Note 3. Acquisitions
Note 4. Revenue
Note 5. Restructuring and Other Items, Net
Note 6. Receivables, Net
Note 7. Revenue Earning Equipment, Net
Note 8. Operating Property and Equipment, Net
Note 9. Goodwill
Note 10. Intangible Assets, Net
Note 11. Accrued Expenses and Other Liabilities
Note 12. Income Taxes
Note 13. Leases
Note 14. Debt
Note 15. Guarantees
Note 16. Share Repurchase Programs
Note 17. Accumulated Other Comprehensive Loss
Note 18. Earnings Per Share
Note 19. Share-Based Compensation Plans
Note 20. Employee Benefit Plans
Note 21. Environmental Matters
Note 22. Other Items Impacting Comparability
Note 23. Other Matters
Note 24. Supplemental Cash Flow Information
Note 25. Miscellaneous Income, Net
Note 26. Segment Reporting
Note 27. Quarterly Information (unaudited)
Consolidated Financial Statement Schedule for the Years Ended December 31, 2019, 2018 and 2017:
Schedule II — Valuation and Qualifying Accounts
Page No.
66
67
71
72
73
74
75
76
86
90
91
93
94
94
96
96
97
97
98
101
104
106
106
107
108
108
112
118
119
119
120
120
121
124
125
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated
financial statements or notes thereto.
65
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
TO THE SHAREHOLDERS OF RYDER SYSTEM, INC.:
Management of Ryder System, Inc., together with its consolidated subsidiaries (Ryder), is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. Ryder’s internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America.
Ryder’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Ryder;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of Ryder’s management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of Ryder’s assets that could have a material effect
on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Ryder’s internal control over financial reporting as of December 31, 2019. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in “Internal Control — Integrated Framework (2013).” Based on our assessment and those criteria, management
determined that Ryder maintained effective internal control over financial reporting as of December 31, 2019.
Ryder’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of
Ryder’s internal control over financial reporting as of December 31, 2019. Their report appears on the subsequent page.
66
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Ryder System, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ryder System, Inc. and its subsidiaries (the “Company”) as
of December 31, 2019 and 2018, and the related consolidated statements of earnings, of comprehensive income, of
shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related
notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
67
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Earning Equipment - Residual Values
As described in Notes 1 and 7 to the consolidated financial statements, the net carrying amount of revenue earning equipment
was $10.4 billion as of December 31, 2019. Depreciation expense was $1.9 billion primarily related to Fleet Management
Solutions (FMS) revenue earning equipment. Revenue earning equipment, comprised of vehicles, is initially recorded at cost
inclusive of vendor rebates. The provision for depreciation is computed using the straight-line method. Management
periodically reviews and adjusts, as appropriate, the estimated residual values and useful lives of revenue earning equipment.
Management’s review of the estimated residual values and useful lives is established with a long-term view based on vehicle
class, generally subcategories of trucks, tractors and trailers by weight and usage, as well as other factors, including but not
limited to historical market price trends, current and expected future market prices, expected lives of vehicles, and expected
sales of used vehicles in the wholesale and retail markets.
The principal considerations for our determination that performing procedures relating to revenue earning equipment - residual
values is a critical audit matter are there was significant judgment by management when estimating residual values. This in turn
led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating the significant
judgment by management in estimating residual values, including the Company’s historical market price trends, current and
expected future market prices, and expected sales of used vehicles in the wholesale and retail markets.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s assessment of, and related adjustments to, the estimated residual values of revenue earning equipment. These
procedures also included, among others (i) testing management’s process for developing the estimated residual values of
revenue earning equipment, (ii) testing the accuracy of the Company’s historical used vehicle sales data, (iii) assessing
management’s estimates of current and expected future market prices of used vehicles and management’s assumptions about the
expected sales of used vehicles in the wholesale and retail markets, and (iv) testing the calculation of the adjustment to
depreciation expense based on updated estimated residual values. Evaluating management’s assumptions related to expected
future market prices of used vehicles and the expected sales of used vehicles in the wholesale and retail markets involved
evaluating whether the assumptions used were reasonable considering (i) past trends in the used vehicle sales market, (ii) the
consistency with external market and industry data, and (iii) whether they were consistent with evidence obtained in other areas
of the audit.
Goodwill Impairment Assessment - FMS North America Reporting Unit
As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $475
million as of December 31, 2019, and the goodwill associated with the FMS North America (FMS NA) reporting unit was $244
million. Goodwill is tested for impairment at least annually as of October 1 of each year, or more frequently if events or
circumstances indicate the carrying value of goodwill may be impaired. If management concludes that it is more likely than not
that a reporting unit's fair value is less than its carrying value or if management bypasses the optional qualitative assessment,
recoverability of goodwill is assessed by comparing the fair value of the reporting unit with its carrying amount. If a reporting
unit’s carrying value exceeds its fair value, management will measure any goodwill impairment loss as the amount by which the
carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting
unit. In both the third and fourth quarter of 2019, management performed impairment tests of the FMS NA reporting unit. Fair
68
value for the FMS NA reporting unit was determined based on a discounted future cash flow model (income approach) and the
application of current market multiples for comparable publicly-traded companies (market approach). Under the income
approach, the fair value of the FMS NA reporting unit is estimated based on the discounted present value of the projected future
cash flows. Management’s cash flow projections for the FMS NA reporting unit included significant judgments and
assumptions, including revenue growth rates, margins, long-term growth rates, capital requirements, proceeds from the sale of
used vehicles, the ability to utilize tax net operating losses, and the discount rate. Under the market approach, management uses
a selection of comparable publicly-traded companies that correspond to the FMS NA reporting unit to derive a market-based
multiple.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment
of the FMS NA reporting unit is a critical audit matter are there was significant judgment by management when developing the
fair value measurement of the reporting unit. This in turn led to a high degree of auditor judgment, subjectivity, and effort in
performing procedures and evaluating the audit evidence obtained relating to management’s valuation models and significant
assumptions, including revenue growth rates, margins, and the discount rate. In addition, the audit effort involved the use of
professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence
obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s goodwill impairment assessment, including controls over the valuation of the Company’s FMS NA reporting
unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate, (ii)
evaluating the appropriateness of the valuation models, (iii) testing the completeness and accuracy of underlying data used in
the models, and (iv) evaluating the significant assumptions used by management, including the revenue growth rates, margins,
and discount rate. Evaluating management’s assumptions related to revenue growth rates and margins involved evaluating
whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting
unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with
evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the
evaluation of the Company’s valuation models and certain significant assumptions, including the discount rate.
Revenue Recognition - Stand-alone Selling Price of the Lease Component of the ChoiceLease Product Line
Revenue from the ChoiceLease product line makes up a significant portion of the lease & related maintenance and rental
revenues of $3.8 billion. As described in Note 1 to the consolidated financial statements, contract consideration for the
ChoiceLease product line arrangements is allocated between the lease component and non-lease component based on
management’s best estimate of the relative stand-alone selling price of each component. The ChoiceLease product line includes
the lease of a vehicle (lease component) and the maintenance and other services (non-lease component). The Company does not
sell the components of their ChoiceLease product offering on a stand-alone basis; therefore, significant judgment is required to
determine the stand-alone selling prices of the lease and maintenance components in order to allocate the consideration on a
relative stand-alone selling price basis. The stand-alone selling price of the lease component is estimated using the projected
cash outflows related to the underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return
considering the weighted average cost of capital.
The principal considerations for our determination that performing procedures relating to revenue recognition - stand-alone
selling price of the lease component of the ChoiceLease product line is a critical audit matter are there was significant judgment
by management when developing the estimated stand-alone selling price of the lease component. This in turn led to a high
degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the audit evidence obtained relating
to management’s estimated projected cash outflows related to the underlying leased vehicle, specifically the estimated disposal
proceeds and the weighted average cost of capital. In addition, the audit effort involved the use of professionals with specialized
skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process for the ChoiceLease product line, including controls over the estimation of the stand-alone selling
price of the lease component. These procedures also included, among others, testing management’s process for estimating the
stand-alone selling price of the lease component, which included evaluating the reasonableness of significant assumptions used
in the estimated projected cash outflows at contract initiation, specifically the estimated disposal proceeds of the underlying
leased vehicle and the weighted average cost of capital. Evaluating management’s assumptions related to estimated disposal
proceeds of the underlying leased vehicle involved evaluating whether the assumptions used by management were reasonable
considering (i) past trends in the used vehicle sales market, (ii) the consistency with external market and industry data, and (iii)
69
whether they were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and
knowledge were used to assist in the evaluation of the weighted average of cost of capital assumption.
/s/ PricewaterhouseCoopers LLP
Miami, Florida
February 27, 2020
We have served as the Company’s auditor since 2006.
70
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Lease & related maintenance and rental revenues
$
3,784,744
$
3,512,867
$
3,220,705
Years ended December 31,
2019
2018
2017
(In thousands, except per share amounts)
Services revenue
Fuel services revenue
Total revenues
Cost of lease & related maintenance and rental
Cost of services
Cost of fuel services
Other operating expenses
Selling, general and administrative expenses
Non-operating pension costs
Used vehicle sales, net
Interest expense
Miscellaneous (income) loss, net
Restructuring and other items, net
Earnings (loss) from continuing operations before income taxes
Provision for (benefit from) income taxes
Earnings (loss) from continuing operations
Loss from discontinued operations, net of tax
Net earnings (loss)
Earnings (loss) per common share — Basic
Continuing operations
Discontinued operations
Net earnings (loss)
Earnings (loss) per common share — Diluted
Continuing operations
Discontinued operations
Net earnings (loss)
See accompanying notes to consolidated financial statements.
Note: EPS amounts may not be additive due to rounding.
4,555,692
585,365
8,925,801
3,103,703
3,879,863
571,658
121,980
907,449
60,406
58,706
241,381
(33,642)
56,568
4,280,834
620,245
8,413,946
2,555,358
3,663,348
605,613
123,964
849,410
7,541
22,325
180,488
(5,422)
21,852
3,538,869
520,500
7,280,074
2,353,209
2,977,426
507,440
115,019
870,918
27,741
16,989
141,876
(44,245)
17,265
8,968,072
8,024,477
6,983,638
(42,271)
(18,999)
(23,272)
(1,138)
389,469
102,547
286,922
(2,309)
296,436
(423,665)
720,101
(457)
(24,410) $
284,613
$
719,644
(0.45) $
(0.03)
(0.47) $
(0.45) $
(0.03)
(0.47) $
5.46
$
(0.04)
5.41
$
5.43
$
(0.04)
5.38
$
13.64
(0.01)
13.63
13.54
(0.01)
13.53
$
$
$
$
$
71
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net earnings (loss)
Other comprehensive income (loss):
Years ended December 31,
2019
2018
2017
(In thousands)
$
(24,410) $
284,613
$
719,644
Changes in cumulative translation adjustment and other
30,681
(55,940)
62,837
Amortization of pension and postretirement items
Income tax expense related to amortization of pension and
postretirement items
Amortization of pension and postretirement items, net of tax
Reclassification of net actuarial loss due to pension settlement
Change in net actuarial loss and prior service cost
Income tax benefit (expense) related to pension settlement and change
in net actuarial loss and prior service cost
Change in net actuarial loss and prior service cost, net of taxes
30,305
27,499
31,520
(7,059)
23,246
34,974
(7,609)
(6,149)
21,216
(6,422)
21,077
—
(83,695)
18,327
(65,368)
(11,034)
20,486
—
49,680
(9,807)
39,873
Other comprehensive income (loss), net of taxes
75,143
(100,231)
123,196
Comprehensive income
$
50,733
$
184,382
$
842,840
See accompanying notes to consolidated financial statements.
72
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Assets:
Current assets:
Cash and cash equivalents
Receivables, net
Inventories
Prepaid expenses and other current assets
Total current assets
Revenue earning equipment, net
Operating property and equipment, net
Goodwill
Intangible assets, net
Sales-type leases and other assets
Total assets
Liabilities and shareholders’ equity:
Current liabilities:
Short-term debt and current portion of long-term debt
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Deferred income taxes
Total liabilities
Commitments and contingencies (Note 23)
Shareholders’ equity:
Preferred stock, no par value per share — authorized, 3,800,917; none
outstanding, December 31, 2019 and 2018
Common stock, $0.50 par value per share — authorized, 400,000,000;
outstanding, December 31, 2019 — 53,278,316 and December 31, 2018 —
53,116,485
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes to consolidated financial statements.
$
$
$
December 31,
2019
2018
(In thousands, except
share amounts)
$
$
$
73,584
1,228,490
80,822
179,155
1,562,051
10,427,664
917,799
475,025
50,905
1,041,890
14,475,334
1,154,564
594,712
876,077
2,625,353
6,770,224
1,442,003
1,161,444
11,999,024
68,111
1,242,058
79,228
178,313
1,567,710
9,415,961
862,054
475,206
59,075
967,802
13,347,808
937,131
731,876
847,739
2,516,746
5,712,146
1,402,625
1,179,723
10,811,240
—
—
26,639
1,108,649
2,177,513
(836,491)
2,476,310
14,475,334
$
$
26,559
1,084,391
2,337,252
(911,634)
2,536,568
13,347,808
73
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
2019
2018
(In thousands)
2017
$
(24,410) $
284,613
$
Cash flows from operating activities from continuing operations:
Net earnings (loss)
Less: Loss from discontinued operations, net of tax
Earnings (loss) from continuing operations
Depreciation expense
Goodwill impairment charge
Used vehicle sales, net
Amortization expense and other non-cash charges, net
Non-cash lease expense
Non-operating pension costs and share-based compensation expense
Deferred income tax expense (benefit)
Collections on sales-type leases
Changes in operating assets and liabilities, net of acquisitions:
Receivables
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other non-current liabilities
(1,138)
(23,272)
1,878,929
—
58,706
101,289
85,835
86,234
(32,331)
121,201
27,149
(1,334)
(65,185)
(26,596)
(70,086)
(2,309)
286,922
1,388,570
15,513
22,325
67,936
81,070
32,493
108,895
82,803
(193,144)
(5,782)
(84,727)
16,869
(101,750)
1,717,993
719,644
(457)
720,101
1,257,681
—
16,989
41,039
67,783
46,708
(446,219)
81,015
(178,861)
(3,296)
(95,809)
66,149
54,818
1,628,098
Net cash provided by operating activities from continuing operations
2,140,539
Cash flows from investing activities from continuing operations:
Purchases of property and revenue earning equipment
(3,735,174)
(3,050,409)
(1,860,436)
Sales of revenue earning equipment
Sales of operating property and equipment
Acquisitions, net of cash acquired
Net cash used in investing activities from continuing operations
Cash flows from financing activities from continuing operations:
Net borrowings (repayments) of commercial paper and revolving credit
facilities
Debt proceeds
Debt repaid
Dividends on common stock
Common stock issued
Common stock repurchased
Debt issuance costs and other items
465,705
52,276
—
(3,217,193)
(18,033)
2,636,095
(1,392,891)
(116,469)
8,216
(27,686)
(5,093)
379,716
16,606
(167,372)
(2,821,459)
51,888
1,970,620
(805,739)
(111,864)
17,020
(30,810)
(5,600)
376,743
52,257
(7,240)
(1,438,676)
89,519
873,302
(969,517)
(95,813)
20,508
(78,316)
(1,738)
Net cash provided by (used in) financing activities from continuing
operations
1,084,139
1,085,515
(162,055)
Effect of exchange rates on cash, cash equivalents, and restricted cash
(4,272)
4,694
Increase (decrease) increase in cash, cash equivalents, and restricted cash from
continuing operations
Increase (decrease) in cash, cash equivalents, and restricted cash from
discontinued operations
Increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at January 1
3,213
2,260
5,473
68,111
(13,257)
(1,654)
(14,911)
83,022
Cash, cash equivalents, and restricted cash at December 31
$
73,584
$
68,111
$
(5,539)
21,828
(1,445)
20,383
62,639
83,022
See accompanying notes to consolidated financial statements.
74
RYDER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Preferred
Stock
Amount
Common Stock
Shares
Par
Additional
Paid-In
Capital
Retained
Earnings
(In thousands, except share amounts)
Accumulated
Other
Comprehensive
Loss
Total
Balance at January 1, 2017
$
— 53,463,118
$
26,732
$ 1,032,549
$ 1,832,407
$
(834,032) $ 2,057,656
Adoption of new lease accounting standard (see
Note 2)
Comprehensive income
Common stock dividends declared —$1.80 per
share
Common stock issued under employee stock
option and stock purchase plans (1)
Benefit plan stock (purchases) sales (2)
Common stock repurchases
Share-based compensation
—
—
—
—
—
—
—
—
578,847
250
—
—
—
289
—
—
—
—
20,200
19
(95,507)
—
—
— (1,086,901)
(543)
(20,718)
(57,055)
—
—
—
18,967
—
(312,571)
—
(312,571)
719,644
123,196
842,840
Balance at December 31, 2017
— 52,955,314
26,478
1,051,017
2,086,918
(710,836)
2,453,577
284,613
(100,231)
184,382
Comprehensive income
Common stock dividends declared —$2.12 per
share
Common stock issued under employee stock
option and stock purchase plans (1)
Benefit plan stock (purchases) sales (2)
Common stock repurchases
Share-based compensation
Adoption of new accounting standard
—
—
—
—
—
—
—
—
—
585,290
700
—
—
293
—
—
—
16,659
68
(112,553)
—
—
(424,819)
(212)
(8,305)
(22,293)
—
—
—
—
24,952
—
—
100,567
(100,567)
—
Balance at December 31, 2018
— 53,116,485
26,559
1,084,391
2,337,252
(911,634)
2,536,568
(24,410)
75,143
50,733
Comprehensive income
Common stock dividends declared —$2.20 per
share
Common stock issued under employee stock
option and stock purchase plans (1)
Benefit plan stock (purchases) sales (2)
Common stock repurchases
Share-based compensation
—
—
—
—
—
—
—
—
632,711
550
—
—
316
—
—
—
7,877
23
(117,349)
—
—
(471,430)
(236)
(9,470)
(17,980)
—
—
25,828
—
Balance at December 31, 2019
$
— 53,278,316
$
26,639
$ 1,108,649
$ 2,177,513
$
(836,491) $ 2,476,310
__________________
(1) Net of common shares delivered as payment for the exercise price or to satisfy the holders’ withholding tax liability upon exercise of options.
(2) Represents open-market transactions of common shares by the trustee of Ryder’s deferred compensation plans.
See accompanying notes to consolidated financial statements.
75
—
—
—
—
—
(95,507)
20,489
19
(78,316)
18,967
—
—
—
—
—
(112,553)
16,952
68
(30,810)
24,952
—
—
—
—
—
(117,349)
8,193
23
(27,686)
25,828
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Presentation
The consolidated financial statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder
has a controlling voting interest (subsidiaries) and variable interest entities (VIEs) where Ryder is determined to be the primary
beneficiary. Ryder is deemed to be the primary beneficiary if we have the power to direct the activities that most significantly
impact the entity’s economic performance and we share in the significant risks and rewards of the entity. All significant
intercompany accounts and transactions have been eliminated in consolidation. We report our financial performance based on
three business segments: (1) Fleet Management Solutions (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) Supply Chain Solutions (SCS), which provides integrated logistics
solutions, including distribution, management, dedicated transportation and professional services in North America; and (3)
Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S. that includes dedicated
vehicles, drivers and engineering and administrative support.
Use of Estimates
The preparation of our consolidated financial statements requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on
management’s best knowledge of historical trends, actions that we may take in the future, and other information available when
the consolidated financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules
for the estimate, which is typically in the period when new information becomes available. Areas where the nature of the
estimate make it reasonably possible that actual results could materially differ from the amounts estimated include: depreciation
and residual values, employee benefit plan obligations, self-insurance accruals, impairment assessments on long-lived assets
(including goodwill and indefinite-lived intangible assets), allowance for accounts receivable, income tax liabilities and
contingent liabilities.
Cash Equivalents
Cash equivalents represent investments in short-term, interest-bearing instruments with maturities of three months or less
at the date of purchase and are stated at cost.
Revenue Recognition
We generate revenue primarily through contracts with customers to lease, rent and maintain revenue earning equipment
and to provide logistics management and dedicated transportation services. We enter into contracts that can include various
combinations of products and services, which are generally capable of being distinct and accounted for as separate performance
obligations. We account for a contract when it has approval and commitment from both parties, the rights of the parties are
identified, payment terms are identified, the contract has commercial substance and collectibility of consideration is probable.
We recognize revenue upon the transfer of control of promised products or services to customers in an amount that reflects the
consideration we expect to receive in exchange for those products or services. We generally recognize revenue over time as we
perform because of continuous transfer of control to our customers. Revenue is recognized net of amounts collected from
customers for taxes, such as sales tax, that are remitted to the applicable taxing authorities.
Our lease and rental revenues are recognized in accordance with the new lease guidance retrospectively adopted in 2019
(refer to Note 2 for further information) and our services and fuel revenues are recognized in accordance with the new revenue
recognition guidance adopted in 2018.
Lease & related maintenance and rental
Lease & related maintenance and rental revenues include ChoiceLease and commercial rental revenues from our FMS
business segment. We offer a full service lease as well as a lease with more flexible maintenance options under our
ChoiceLease product line, which are marketed, priced and managed as bundled services, that include the equipment lease,
maintenance and other related services. We do not offer a stand-alone lease of a vehicle. We offer rental of vehicles under our
commercial rental product line, which allows customers to supplement their fleet of vehicles on a short-term basis.
76
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Our ChoiceLease product line includes the lease of a vehicle (lease component) and maintenance and other services (non-
lease component). We generally lease new vehicles to our customers. Contract consideration is allocated between the lease
component and non-lease component based on management's best estimate of the relative stand-alone selling price of each
component. Allocating consideration between the lease and maintenance components in our ChoiceLease product requires
significant judgment. We do not sell the components of our ChoiceLease product offering on a stand-alone basis, therefore
significant judgment is required to determine the stand-alone selling prices of the lease and maintenance components in order to
allocate the consideration on a relative stand-alone selling price basis. For further information regarding our stand-alone selling
price estimation process, refer to the "Significant Judgments and Estimates" section below.
Our ChoiceLease product provides for a fixed charge billing and a variable charge billing based on mileage or time usage.
Fixed charges are typically billed at the beginning of the month and variable charges are typically billed a month in arrears.
Revenue from the lease component of ChoiceLease agreements is recognized based on the classification of the arrangement,
typically as either an operating or a sales-type lease. Our commercial rental product includes the short-term rental of a vehicle
(one day up to one year in length). All of our rental arrangements are classified as operating leases and revenue is recognized on
a straight-line basis.
The majority of our leases are classified as operating leases and we recognize revenue for the lease component of these
agreements on a straight-line basis. The non-lease component for maintenance services are not typically performed evenly over
the life of a ChoiceLease contract as the level of maintenance provided generally increases as vehicles age. Therefore, we
recognize maintenance revenue consistent with the estimated pattern of the costs to maintain the underlying vehicles. This
generally results in the recognition of a contract liability for the portion of the customer's bill allocated to the maintenance
service component of the agreement. The non-lease component for maintenance included in lease & related maintenance and
rental revenues was $950 million, $909 million and $832 million in 2019, 2018 and 2017, respectively.
Lease and rental agreements do not usually provide for scheduled rent increases or escalations. However, most lease
agreements allow for rate changes based upon changes in the Consumer Price Index (CPI). Lease and rental agreements also
provide for vehicle usage charges based on a time charge and/or a fixed per-mile charge. The time charge, the per-mile charge
and the changes in rates attributed to changes in the CPI are considered contingent rentals and are not considered fixed or
determinable until the equipment usage or CPI change occurs. This consideration is allocated to the lease and non-lease
components of the contract as it is billed to the customer based on the allocation determined at contract inception. Variable
consideration allocated to the lease component is recognized in revenue on a straight-line basis for the remainder of the contract
term and variable consideration allocated to the non-lease component is recognized in revenue using an input method,
consistent with the estimated pattern of maintenance costs for the remainder of the contract term.
Variable consideration, such as billings for mileage and from changes in CPI, is excluded from the allocation of
consideration at the inception of the contract. Revenues associated with licensing and operating taxes that are billed as incurred
based on the contract arrangement are also excluded from the allocation of consideration at contract inception and allocated as
earned. The variable consideration and licensing and operating tax revenues are allocated to the lease and maintenance
components based on the same allocation percentages at contract inception (or the most recent contract modification) when
earned.
Leases not classified as operating leases are generally considered sales-type leases. We recognize revenue for sales-type
leases using the effective interest method, which provides a constant periodic rate of return on the outstanding investment in the
lease. We generally lease new vehicles under our sales-type lease arrangements. Therefore, there is generally not a difference
between the net investment in the lease and the carrying value of the vehicles. As a result, there is no selling profit or loss at
lease commencement.
Services
Services include SelectCare and other revenues from our FMS business segment and all SCS and DTS revenues.
Under our SelectCare arrangements, we provide maintenance and repairs required to keep a vehicle in good operating
condition, perform preventive maintenance inspections, provide access to emergency road service, and substitute vehicles. The
vast majority of our services are routine services performed on a recurring basis throughout the term of the arrangement. From
time to time, we provide non-routine major repair services in order to place a vehicle back in service.
Through our SelectCare product line, we provide maintenance services to customers who do not choose to lease vehicles
from us. Our maintenance service arrangement provides for a monthly fixed charge and a monthly variable charge based on
77
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
mileage or time usage. Fixed charges are typically billed at the beginning of the month for the services to be provided that
month. Variable charges are typically billed a month in arrears. Most maintenance agreements allow for rate changes based
upon changes in the CPI. The fixed per-mile charge and the changes in rates attributed to changes in the CPI are recognized as
earned.
The maintenance service is the only performance obligation in SelectCare contracts. This single performance obligation is
satisfied at a point in time for transactional maintenance services or over time for contract maintenance agreements. For
contract maintenance agreements, the maintenance performance obligation is satisfied as services are performed during the
contract period. Revenue from SelectCare contracts is recognized as maintenance services are rendered over the terms of the
related arrangements. We generally account for long-term maintenance contracts as one-year contracts since our maintenance
arrangements are generally cancelable, without penalty, after one year. We do not disclose information about remaining
performance obligations for these contracts as the contract terms are generally deemed to be less than a year.
Costs associated with the activities performed under our maintenance arrangements are primarily comprised of labor,
parts and outside repair work. These costs are expensed as incurred. Non-chargeable maintenance costs have been allocated and
reflected within “Cost of services” based on the proportionate maintenance-related labor costs relative to all product lines.
In our SCS business segment, we offer a broad range of logistics management services designed to optimize the supply
chain and address the key business requirements of our customers supported by a variety of technology and engineering
solutions. SCS operates by industry verticals (Automotive, Technology and Healthcare, Consumer Packaged Goods and Retail,
and Industrial) to enable our teams to focus on the specific needs of their customers. In our DTS business segment, we combine
equipment, maintenance, drivers, administrative services and additional services to provide customers with a single integrated
dedicated transportation solution. DTS transportation solutions are customized for our customers based on a transportation
analysis to create a logistics design that includes the routing and scheduling of vehicles, the efficient use of vehicle capacity and
overall asset utilization.
Revenues from SCS and DTS service contracts are recognized as services are rendered in accordance with contract terms,
which typically include (1) fixed and variable billing rates, (2) cost-plus billing rates (input method based on actual costs
incurred to perform services and a contracted mark-up), or (3) variable only or fixed only billing rates for the services. Our
billing structure aligns with the value transferred to our customers. As a practical expedient, we do not disclose information
about remaining performance obligations for these contracts since the revenue recognized corresponds to the amount we have
the right to invoice for services performed.
Our customers contract us to provide an integrated service of transportation or supply chain logistical services into a
single transportation or supply chain solution. Therefore, we typically recognize SCS and DTS service contracts as one
performance obligation satisfied over time. Less commonly, however, we may promise to provide distinct services within a
contract, in which case we separate the contract into more than one performance obligation. If a contract is separated into more
than one performance obligation, we allocate the total transaction price to each performance obligation in relation to the
estimated stand-alone selling prices of each performance obligation. We infrequently sell standard products with observable
stand-alone selling prices. More frequently, we sell a customized customer-specific solution, and in these cases we use the
expected cost plus a margin approach to estimate the stand-alone selling price of each performance obligation.
Fuel Services
Fuel services revenue is reported in our FMS business segment. We provide our FMS customers with access to fuel at our
maintenance facilities across the United States and Canada. Fuel services revenue is invoiced to customers at contracted rates
separate from other services being provided in other contracts, or at retail prices. Revenue from fuel services is recognized
when fuel is delivered to customers. Fuel is largely a pass-through to our customers, for which we realize minimal changes in
profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by
sudden increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is
established based on trailing market fuel costs.
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Significant Judgments and Estimates
We allocate the contract consideration from our ChoiceLease arrangements between the lease and maintenance
components based on the relative stand-alone selling prices of each of those services. We do not sell the components of our
ChoiceLease product offering on a stand-alone basis, therefore significant judgment is required to determine the stand-alone
selling price of the lease component to allocate the consideration on a relative stand-alone selling price basis. We sell
maintenance services separately through our SelectCare arrangements.
For the lease component, we estimate the stand-alone selling price using the projected cash outflows related to the
underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return considering the weighted average
cost of capital. For the non-lease component of the contract, we estimate the stand-alone selling price of the maintenance
component using an expected cost-plus margin approach. The expected costs are based on our historical costs of providing
maintenance services in our ChoiceLease arrangements. The margin is based on the historical margin percentages for our full
service maintenance contracts in the SelectCare product line, as the maintenance performance obligation in those contracts is
similar to maintenance in our ChoiceLease arrangements.
Our SCS and DTS contracts with customers often include promises to transfer multiple services to a customer.
Determining whether these services are considered distinct performance obligations that should be accounted for separately
versus together may require significant judgment. Our SCS and DTS services depend on a significant level of integration and
interdependency between the services provided within a contract. Judgment is required to determine whether each service is
considered distinct and accounted for as a separate performance obligation, or accounted for together as a significant integrated
service and recognized over time. In making this judgment, we consider whether the services provided, within the context of
the contract, represent the transfer of individual services or a combined bundle of services to the customer. This involves
evaluating the promises to a customer within a contract to identify the services that need to be performed in order for the
promise to be satisfied. Since multiple services that occur at different points in time during a contract may be accounted for as
an integrated service, judgment is required to assess the pattern of delivery to our customers.
Contract Balances
We do not have material contract assets as we generally invoice customers as we perform services. Contract receivables
are recorded in “Receivables, net” in the Consolidated Balance Sheets. Payment terms vary by contract type, although terms
generally include a requirement of payment within 15 to 90 days. As a practical expedient, we do not assess whether a contract
has a significant financing component as the period between the receipt of customer payment and the transfer of service to the
customer is less than a year.
Our contract liabilities consist primarily of the portion of our ChoiceLease billings allocated to maintenance services that
have not yet been performed. We record deferred revenues when cash payments are received or due in advance of our
performance, including amounts that are refundable. We classify deferred revenue for performance obligations we expect to
perform within 12 months as current liabilities and for performance obligations to be performed later than 12 months as other
non-current liabilities. Refer to Note 4, "Revenue," for further information.
Costs to Obtain and Fulfill a Contract
Our incremental direct costs of obtaining and fulfilling a contract, which primarily consist of sales commissions and start-
up costs, are capitalized and amortized over the period of contract performance or a longer period, generally the estimated life
of the customer relationship if renewals are expected and the renewal commission is not commensurate with the initial
commission. We capitalize incremental direct costs of obtaining a contract that i) relate directly to the contract and ii) are
expected to be recovered through revenue generated under the contract. This requires an evaluation of whether the costs are
incremental and would not have occurred absent the customer contract.
The current and non-current portions of incremental costs to obtain and fulfill a contract are included in “Prepaid expenses
and other current assets” and “Sales-type leases and other assets,” respectively, in the Consolidated Balance Sheets. Costs are
amortized in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings on a straight-line basis
over the expected period of benefit. Refer to Note 4, "Revenue," for further information.
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Leases
Leases as Lessor
We lease revenue earning equipment to customers for periods generally ranging from three to seven years for trucks and
tractors and up to ten years for trailers. We determine if an arrangement is or contains a lease at inception. The standard lease
agreement for revenue earning equipment provides both parties the right to terminate; therefore, we evaluate whether the lessee
is reasonably certain to exercise the termination option in order to determine the appropriate lease term. If we terminate, the
customer has the right (but not obligation) to purchase the vehicle. If the customer terminates, we have the option to require the
customer to purchase the vehicle or pay a termination penalty. Our leases generally do not provide either party an option to
renew the lease. We also rent revenue earning equipment to customers on a short-term basis, from one day up to one year in
length. From time to time, we may also lease facilities to third parties. The majority of our leases are classified as operating
leases. However, some of our revenue earning equipment leases are classified as sales-type leases. Refer to Note 7, "Revenue
Earning Equipment, Net" for further information on our estimates of residual values and useful lives of revenue earning
equipment which impact our sales-type leases.
Leases as Lessee
We lease facilities, revenue earning equipment, material handling equipment, automated washing machines, vehicles and
office equipment. We determine if an arrangement is or contains a lease at inception. Effective with the adoption of the new
lease accounting standard, we have established right-of-use (ROU) assets, which represent our right to use an underlying asset
for the lease term, and lease liabilities, which represent our obligation to make lease payments arising from the lease. Operating
lease ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term
at commencement date. As most of our leases do not provide an implicit rate of return, we use our incremental borrowing rate
based on the information available at commencement date in determining the present value of lease payments. We use the
implicit rate when readily determinable. Operating lease ROU assets also exclude lease incentives received. We pay variable
lease charges related to property taxes, insurance and maintenance as well as changes in CPI for leased facilities; usage-based
fees for revenue earning equipment, automated washing machines, vehicles and office equipment; and hours of operation for
material handling equipment. For leases with a term of 12 months or less, with the exception of our real estate leases, we do not
recognize a ROU asset or liability and recognize lease payments in our income statement on a straight-line basis over the lease
term and variable lease payments in the period in which the obligation for those payments is incurred.
Lease terms for facilities are generally three to five years with one or more five-year renewal options and the lease terms
for revenue earning equipment, material handling equipment, automated washing machines and vehicles typically range from
three to seven years with no extension options. For purposes of calculating operating lease ROU assets and operating lease
liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we
will exercise that option. Macroeconomic conditions is the primary factor used to estimate whether an option to extend a lease
term will be exercised or not. None of our leasing arrangements contain restrictive financial covenants. Certain of our material
handling equipment leases have residual value guarantees. Refer to Note 13, "Leases," for additional information.
Accounts Receivable Allowance
We maintain an allowance for uncollectible customer receivables and an allowance for billing adjustments related to
certain discounts and other customer concessions. Estimates are updated regularly based on historical experience of bad debts
and billing adjustments processed, current collection trends, and aging analysis. Accounts are charged against the allowance
when determined to be uncollectible.
Inventories
Inventories, which consist primarily of fuel, tires and vehicle parts, are valued at the lower of cost using the weighted-
average cost basis, or net realizable value.
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Revenue Earning Equipment, Operating Property and Equipment, and Depreciation
Revenue earning equipment, comprised of vehicles, and operating property and equipment are initially recorded at cost
inclusive of vendor rebates. Revenue earning equipment and operating property and equipment recognized as finance leases are
initially generally recorded at the lower of the present value of the lease payments to be made over the lease term or fair value.
Vehicle repairs and maintenance that extend the life or increase the value of a vehicle are capitalized, whereas ordinary repairs
and maintenance (including tire replacement or repair) are expensed as incurred. Direct costs incurred in connection with
developing or obtaining internal-use software are capitalized. Costs incurred during the preliminary stage of a software
development project, as well as maintenance and training costs, are expensed as incurred.
Provision for depreciation is computed using the straight-line method on all depreciable assets. Depreciation expense has
been recognized throughout the Consolidated Statement of Earnings depending on the nature of the related asset. We
periodically review and adjust, as appropriate, the estimated residual values and useful lives of revenue earning equipment for
purposes of recording depreciation expense as described in Note 7, “Revenue Earning Equipment, Net”.
Leasehold improvements are depreciated over the shorter of their estimated useful lives or the term of the related lease. If
a substantial additional investment is made in a leased property during the term of the lease, we re-evaluate the lease term to
determine whether the investment, together with any penalties related to non-renewal, would constitute an economic penalty in
such amount that renewal appears to be reasonably assured.
We routinely dispose of used revenue earning equipment as part of our FMS business. Refer to Note 7, “Revenue Earning
Equipment, Net” for more information. Gains and losses on sales of operating property and equipment are reflected in
“Miscellaneous income, net” in the Consolidated Statement of Earnings.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the underlying acquired net tangible and
intangible assets. Goodwill and other intangible assets with indefinite useful lives are not amortized, but rather, are tested for
impairment at least annually as of October 1 of each year, or more frequently if events or circumstances indicate the carrying
value of goodwill may be impaired. In evaluating goodwill for impairment, we have the option to first assess qualitative factors
to determine whether further impairment testing is necessary, such as macroeconomic conditions, changes in our industry and
the markets in which we operate, and our market capitalization as well as our reporting units' historical and expected future
financial performance.
If we conclude that it is more likely than not that a reporting unit's fair value is less than its carrying value or we bypass
the optional qualitative assessment, recoverability is assessed by comparing the fair value of the reporting unit with its carrying
amount. If a reporting unit's carrying value exceeds its fair value, we will measure any goodwill impairment losses as the
amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill
allocated to that reporting unit.
Our estimate of fair value for reporting units is determined based on a combination of both an income and market
approach. Under the market approach, we use a selection of comparable publicly-traded companies that correspond to the
reporting unit to derive a market-based multiple. Under the income approach, the fair value of the reporting unit is estimated
based on the discounted present value of the projected future cash flows. Rates used to discount cash flows are dependent upon
interest rates and the cost of capital based on our industry and capital structure, adjusted for equity and size risk premiums
based on market capitalization. Estimates of future cash flows are dependent on our knowledge and experience about past and
current events and significant judgments and assumptions about conditions we expect to exist, including revenue growth rates,
margins, long-term growth rates, capital requirements, proceeds from the sale of used vehicles, the ability to utilize our tax net
operating losses, and the discount rate. Our estimates of cash flows are also based on historical and future operating
performance, economic conditions and actions we expect to take. In addition to these factors, our SCS and DTS reporting units
are dependent on several key customers or industry sectors. The loss of a key customer may have a significant impact to our
SCS or DTS reporting units, causing us to assess whether or not the event resulted in a goodwill impairment loss.
In making our assessments of fair value, we rely on our knowledge and experience about past and current events and
assumptions about conditions we expect to exist in the future. These assumptions are based on a number of factors, including
future operating performance, economic conditions, actions we expect to take and present value techniques. There are inherent
uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is
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possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur
in the future.
Identifiable intangible assets not subject to amortization are assessed for impairment using a similar process used to
evaluate goodwill as described above. Intangible assets with finite lives are amortized over their respective estimated useful
lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a similar process used to
evaluate long-lived assets described below.
Impairment of Long-Lived Assets Other than Goodwill and Indefinite-Lived Intangible Assets
Long-lived assets held and used, including revenue earning equipment, operating property and equipment, and intangible
assets with finite lives, are tested for recoverability when circumstances indicate that the carrying amount of assets may not be
recoverable. Recoverability of long-lived assets is evaluated by comparing the carrying value of an asset or asset group to
management’s best estimate of the undiscounted future operating cash flows (excluding interest charges) expected to be
generated by the asset or asset group. If these comparisons indicate that the carrying value of the asset or asset group is not
recoverable, an impairment loss is recognized for the amount by which the carrying value of the asset or asset group exceeds
fair value. Fair value is determined by a quoted market price, if available, or an estimate of projected future operating cash
flows, discounted using a rate that reflects the related operating segment’s average cost of funds. Long-lived assets to be
disposed of, including revenue earning equipment and operating property and equipment, are reported at the lower of carrying
amount or fair value less costs to sell.
Self-Insurance Accruals
We retain a portion of the accident risk under auto liability, workers’ compensation and other insurance programs. Under
our insurance programs, we retain the risk of loss in various amounts, generally up to $3 million on a per occurrence basis. Self-
insurance accruals are based primarily on an actuarially estimated, undiscounted cost of claims, which includes claims incurred
but not reported. Historical loss development factors are utilized to project the future development of incurred losses, and these
amounts are adjusted based upon actual claim experience and settlements. While we believe that the amounts are adequate,
there can be no assurance that changes to our actuarial estimates may not occur due to limitations inherent in the estimation
process. Changes in the actuarial estimates of these liabilities are charged or credited to earnings in the period determined.
Amounts estimated to be paid within the next year have been classified as “Accrued expenses and other current liabilities” with
the remainder included in “Other non-current liabilities” in our Consolidated Balance Sheets.
We also maintain additional insurance at certain amounts in excess of our respective underlying retention. Amounts
recoverable from insurance companies are not offset against the related liability as our insurance policies do not extinguish or
provide legal release from the obligation to make payments related to such risk-related losses. Amounts expected to be received
within the next year from insurance companies have been included within “Receivables, net” with the remainder included in
“Sales-type leases and other assets” and are recognized only when realization of the claim for recovery is considered probable.
Income Taxes
Our provision for income taxes is based on reported earnings before income taxes. Deferred taxes are recognized for the
future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases, using tax rates in effect for the years in which the differences are expected to reverse.
Valuation allowances are recognized to reduce deferred tax assets to the amount that is more likely than not to be realized.
In assessing the likelihood of realization, management considers estimates of future sources of taxable income. We calculate
our current and deferred tax position based on estimates and assumptions that could differ from the actual results reflected in
income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified.
We are subject to tax audits in numerous jurisdictions in the U.S. and around the world. Tax audits by their very nature are
often complex and can require several years to complete. In the normal course of business, we are subject to challenges from
the Internal Revenue Service (IRS) and other tax authorities regarding amounts of taxes due. These challenges may alter the
timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. As part of our
calculation of the provision for income taxes on earnings, we determine whether the benefits of our tax positions are at least
more likely than not of being sustained upon audit based on the technical merits of the tax position. The tax benefit to be
recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate
settlement. Such accruals require management to make estimates and judgments with respect to the ultimate outcome of a tax
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audit. Actual results could vary materially from these estimates. We adjust these reserves as well as the impact of any related
interest and penalties in light of changing facts and circumstances, such as the progress of a tax audit.
Interest and penalties related to income tax exposures are recognized as incurred and included in "Provision for (benefit
from) income taxes” in our Consolidated Statements of Earnings. Accruals for income tax exposures, including penalties and
interest, expected to be settled within the next year are included in “Accrued expenses and other current liabilities” with the
remainder included in “Other non-current liabilities” in our Consolidated Balance Sheets. The federal benefit from state income
tax exposures is included in “Deferred income taxes” in our Consolidated Balance Sheets.
Severance and Contract Termination Costs
We recognize liabilities for severance and contract termination costs based upon the nature of the cost to be incurred. For
involuntary separation plans that are completed within the guidelines of our written involuntary separation plan, we recognize
the liability when it is probable and reasonably estimable. For one-time termination benefits, such as additional severance pay
or benefit payouts, and other exit costs, such as contract termination costs, the liability is measured and recognized initially at
fair value in the period in which the liability is incurred, with subsequent changes to the liability recognized as adjustments in
the period of change. Severance related to position eliminations that are part of a restructuring plan is included in
"Restructuring and other items, net” in the Consolidated Statements of Earnings. Severance costs that are not part of a
restructuring plan are recognized in the period incurred as a direct cost of revenue or within “Selling, general and administrative
expenses” in the Consolidated Statements of Earnings depending upon the nature of the eliminated position.
Environmental Expenditures
We recognize liabilities for environmental matters when it is probable a loss has been incurred and the costs can be
reasonably estimated. Environmental liability estimates may include costs such as anticipated site testing, consulting,
remediation, disposal, post-remediation monitoring and legal fees, as appropriate. The liability does not reflect possible
recoveries from insurance companies or reimbursement of remediation costs by state agencies, but does include estimates of
cost sharing with other potentially responsible parties. Estimates are not discounted, as the timing of the anticipated cash
payments is not fixed or readily determinable. Subsequent adjustments to initial estimates are recognized as necessary based
upon additional information developed in subsequent periods. In future periods, new laws or regulations, advances in
remediation technology, or additional information about the ultimate remediation methodology to be used could significantly
change our estimates. Claims for reimbursement of remediation costs are recognized when recovery is deemed probable.
Derivative Instruments and Hedging Activities
We use financial instruments, including forward exchange contracts and swaps, to manage our exposures to movements in
interest rates and foreign currency exchange rates. The use of these financial instruments modifies the exposure of these risks
with the intent to reduce the risk or cost to us. We do not enter into derivative financial instruments for trading purposes. We
limit our risk that counterparties to the derivative contracts will default and not make payments by entering into derivative
contracts only with counterparties comprised of large banks and financial institutions that meet established credit criteria. We
do not expect to incur any losses as a result of counterparty default.
On the date a derivative contract is executed, we formally document, among other items, the intended hedging designation
and relationship, along with the risk management objectives and strategies for entering into the derivative contract. We also
formally assess, both at inception and on an ongoing basis, whether the derivatives we used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items. Cash flows from derivatives that are accounted for
as hedges are classified in the Consolidated Statements of Cash Flows in the same category as the items being hedged. When it
is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, we
discontinue hedge accounting prospectively. The fair value of our derivatives was not material as of December 31, 2019 and
2018.
The hedging designation may be classified as one of the following:
No Hedging Designation. The unrealized gain or loss on a derivative instrument not designated as an accounting hedging
instrument is recognized immediately in earnings.
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Fair Value Hedge. A hedge of a recognized asset or liability or an unrecognized firm commitment is considered a fair
value hedge. For fair value hedges, both the effective and ineffective portions of the changes in the fair value of the derivative,
along with the gain or loss on the hedged item that is attributable to the hedged risk, are both recognized in earnings.
Cash Flow Hedge. A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to
a recognized asset or liability is considered a cash flow hedge. The effective portion of the change in the fair value of a
derivative that is declared as a cash flow hedge is recognized net of tax in “Accumulated other comprehensive loss” in the
Consolidated Balance Sheets until earnings are affected by the variability in cash flows of the designated hedged item.
Foreign Currency Translation
Our foreign operations generally use local currency as their functional currency. Assets and liabilities of these operations
are translated at the exchange rates in effect on the balance sheet date. Items in the Consolidated Statements of Earnings are
translated at the average exchange rates for the year. The impact of currency fluctuations on our balance sheet is presented in
“Changes in cumulative translation adjustment and other” in the Consolidated Statements of Comprehensive Income. Upon
sale, or upon complete or substantially complete liquidation of an investment in a foreign operation, the currency translation
adjustment attributable to that operation is removed from accumulated other comprehensive loss and is reported as part of the
gain or loss on sale or liquidation of the investment for the period during which the sale or liquidation occurs. Gains and losses
resulting from foreign currency transactions are recognized in “Miscellaneous income, net” in the Consolidated Statements of
Earnings.
Share-Based Compensation
The fair value of stock option awards and nonvested stock awards other than restricted stock units (RSUs) is expensed on
a straight-line basis over the vesting period of the awards. RSUs are expensed in the year they are granted. Windfall tax benefits
and tax shortfalls are charged directly to income tax expense.
Earnings Per Share
Earnings per share is computed using the two-class method. The two-class method of computing earnings per share is an
earnings allocation formula that determines earnings per share for common stock and any participating securities according to
dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. RSUs are considered
participating securities since the share-based awards contain a non-forfeitable right to dividend equivalents irrespective of
whether the awards ultimately vest. Under the two-class method, earnings per common share are computed by dividing the sum
of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted
average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are
allocated to both common shares and participating securities based on the weighted average shares outstanding during the
period.
Diluted earnings per common share reflect the dilutive effect of potential common shares from stock options and other
nonparticipating nonvested stock. The dilutive effect of stock options is computed using the treasury stock method, which
assumes any proceeds that could be obtained upon the exercise of stock options or vesting of stock awards would be used to
purchase common shares at the average market price for the period. The assumed proceeds include the purchase price the
grantee pays and the unrecognized compensation expense at the end of each period.
Share Repurchases
Repurchases of shares of common stock are made periodically in open-market transactions and are subject to market
conditions, legal requirements and other factors. The cost of share repurchases is allocated between additional paid-in capital
and retained earnings based on the amount of additional paid-in capital at the time of the share repurchase.
Defined Benefit Pension and Postretirement Benefit Plans
The funded status of our defined benefit pension plans and postretirement benefit plans are recognized in the Consolidated
Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation
at December 31, the measurement date. The fair value of plan assets represents the current market value of contributions made
to irrevocable trusts, held for the sole benefit of participants, which are invested by the trusts. For defined benefit pension plans,
the benefit obligation represents the actuarial present value of benefits expected to be paid upon retirement based on estimated
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future compensation levels. For postretirement benefit plans, the benefit obligation represents the actuarial present value of
postretirement benefits attributed to employee services already rendered. Overfunded plans, with the fair value of plan assets
exceeding the benefit obligation, are aggregated and reported as a pension asset. Underfunded plans, with the benefit obligation
exceeding the fair value of plan assets, are aggregated and reported as a pension and postretirement benefit liability.
The current portion of pension and postretirement benefit liabilities represents the actuarial present value of benefits
payable within the next year exceeding the fair value of plan assets (if funded), measured on a plan-by-plan basis. These
liabilities are recognized in “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets.
Pension and postretirement benefit expense includes service cost, interest cost, and expected return on plan assets (if
funded). Pension costs include amortization of net prior service costs loss and net actuarial loss. Postretirement costs include
amortization of net prior service credit and net actuarial gain. Service cost represents the actuarial present value of participant
benefits earned in the current year. The expected return on plan assets represents the average rate of earnings expected on the
funds invested or to be invested to provide for the benefits included in the obligation. Prior service cost represents the impact of
plan amendments. Net actuarial losses arise as a result of differences between actual experience and assumptions or as a result
of changes in actuarial assumptions. Net actuarial gain/loss and prior service cost/credit not recognized as a component of
pension and postretirement benefit expense as they arise are recognized as "Change in net actuarial loss and prior service cost,
net of tax" in the Consolidated Statements of Comprehensive Income. These pension and postretirement items are subsequently
amortized as a component of pension and postretirement benefit expense over the remaining service period if the majority of
the employees are active, otherwise over the remaining life expectancy, provided such amounts exceed thresholds based upon
the benefit obligation or the value of plan assets.
The measurement of benefit obligations and pension and postretirement benefit expense is based on estimates and
assumptions approved by management. These valuations reflect the terms of the plans and use participant-specific information
such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected
return on plan assets, rate of compensation increases, interest rates and mortality rates.
Fair Value Measurements
We carry various assets and liabilities at fair value in the Consolidated Balance Sheets, including vehicles held for sale,
investments held in Rabbi Trusts and pension assets.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. Fair value measurements are classified based on the following fair value hierarchy:
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access
at the measurement date. An active market for the asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or model-derived valuations or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs for the asset or liability. These inputs reflect our own assumptions about the assumptions a
market participant would use in pricing the asset or liability.
When available, we use unadjusted quoted market prices to measure fair value and classify such measurements within
Level 1. If quoted prices are not available, fair value is based upon model-driven valuations that use current market-based or
independently sourced market parameters such as interest rates and currency rates. Items valued using these models are
classified according to the lowest level input or value driver that is significant to the valuation.
The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to the immediate or short-term maturities of these financial instruments. Revenue
earning equipment held for sale is measured at fair value on a nonrecurring basis and is stated at the lower of carrying amount
or fair value less costs to sell. Investments held in Rabbi Trusts and derivatives are carried at fair value on a recurring basis.
85
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Investments held in Rabbi Trusts include exchange-traded equity securities and mutual funds. Fair values for these investments
are based on quoted prices in active markets. Refer to Note 20, "Employee Benefit Plans," for further information regarding
pension assets.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Income Taxes
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This pronouncement enhances and simplifies various
aspects of income tax accounting guidance. Among other things, the amendment removes the year-to-date loss limitation in
interim-period tax accounting and requires entities to reflect the effect of an enacted change in tax laws in the interim period
that includes the enactment date of the new legislation. The standard is effective for fiscal years beginning after December 15,
2020, and interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of the
adoption of this update on our consolidated financial position, results of operations, and cash flows.
Cloud Computing Arrangements
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Topic
350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service
Contract, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA)
that is a service contract. ASU 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service
arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The standard
is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Entities are permitted to apply
either a retrospective or prospective approach to adopt the guidance. We are currently evaluating the impact of the adoption of
this update on our consolidated financial position, results of operations, and cash flows.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). This
pronouncement, along with subsequent ASUs issued to clarify certain provisions of ASU 2016-13, modifies the measurement of
expected credit losses of certain financial instruments, including accounts receivable (excluding those related to operating
leases) and net investments in sales-type leases. Among other things, these amendments require the measurement of all
expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and
reasonable and supportable forecasts. The standard is effective for fiscal years beginning after December 15, 2019, with early
adoption permitted. The standard requires a cumulative-effect adjustment to the statement of financial position as of the
beginning of the first reporting period in which the guidance is effective. Periods prior to the adoption date that are presented
for comparative purposes are not adjusted. We are currently evaluating the impact of the adoption of this update on our
consolidated financial position, results of operations, and cash flows.
Derivatives and Hedging
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815). This pronouncement, along
with ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815,
Derivatives and Hedging, and Topic 825, Financial Instruments, were issued to clarify certain provisions of these ASUs,
simplifies and clarifies the accounting and disclosure for hedging activities by more closely aligning the results of cash flow
and fair value hedge accounting with the risk management activities of an entity. The amendments in this update are effective
for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption
permitted. We adopted this standard during the first quarter of 2019 and it did not impact our consolidated financial position,
results of operations, or cash flows.
Leases
In February 2016, the FASB issued Topic 842, which sets out the principles for the identification, measurement,
recognition, presentation and disclosure of leases and its related updates. Topic 842 impacts the accounting for both lessors and
lessees. We have adopted the standard effective January 1, 2019, using the modified retrospective transition method and initial
86
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
application date of January 1, 2017. For all facilities and equipment that we lease, we have elected the practical expedient to
combine lease and non-lease components. For our existing operating and finance leases that commenced before the date of
initial application where we are the lessee, we have made an accounting policy election to use the incremental borrowing rate
considering the remaining lease term and remaining minimum rental payments. In calculating the change in ROU assets from a
lease modification that decreases our rights as lessee to use one or more underlying assets, we have made an accounting policy
election of remeasuring the ROU asset based on how much of the original right of use remains after modification.
The new standard requires lessors to identify and evaluate the lease and non-lease components in arrangements containing
a lease, provides clarification on the scope of non-lease components and provides more guidance on how to identify and
separate the components. From a lessor perspective, the adoption of the new lease standard primarily impacts our ChoiceLease
product line, which includes a vehicle lease as well as maintenance and other services.
The standard requires lessees to classify leases as either finance or operating leases. This classification determines
whether the related expense is recognized based on asset amortization and interest on the obligation (finance leases) or on a
straight-line basis over the term of the lease (operating lease). We recorded a ROU asset and a lease liability for all leases with a
term of greater than 12 months regardless of their classification. We have elected the practical expedient to not apply these
recognition requirements to leases with a term of 12 months or less with the exception of our real estate leases. Instead we
recognize the lease payments on a straight-line basis over the lease term and variable lease payments in the period in which the
obligation for those payments is incurred.
Effective with the adoption of the new leasing accounting standard in 2019, we recorded an after-tax cumulative effect
adjustment to decrease retained earnings as of January 1, 2017 primarily to recognize a contract liability (deferred revenue)
related to maintenance services, which was partially offset by costs capitalized related to sales commissions and is reflected in
the Consolidated Statements of Shareholders' Equity.
87
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Adoption of the new lease standard impacted our previously reported Consolidated Statements of Earnings and
Comprehensive Income results as follows (in millions, except per share amounts):
Year ended December 31, 2018
Year ended December 31, 2017
As
Previously
Reported
Lessor
Adjustments (1)
Lessee and
Other
Adjustments (1)
As
Revised
As
Previously
Reported
Lessor
Adjustments (1)
Lessee and
Other
Adjustments (1)
As
Revised
Lease & related maintenance
and rental revenues (1)
$ 3,508.1 $
Total revenues
8,409.2
3.5 $
3.5
1.3 $ 3,512.9
$ 3,237.7 $
(17.0) $
— $ 3,220.7
1.3
8,413.9
7,297.1
(17.0)
— 7,280.1
Cost of lease & related
maintenance and rental (1)
Cost of services (2)
Other operating expenses
Selling, general and
administrative expenses (2)
Used vehicle sales, net
Interest expense
Restructuring and other
items, net (2)
Earnings (loss) from
continuing operations
before income taxes
Provision for (benefit from)
income taxes
Earnings (loss) from
continuing operations
Net earnings (loss)
Comprehensive income
Earnings (loss) per common
share - Basic
Continuing operations
Net earnings (loss)
Earnings (loss) per common
share - Diluted
Continuing operations
Net earnings (loss)
$
$
$
$
$
$
2,566.3
3,655.8
125.3
854.8
21.7
178.6
25.1
373.9
98.3
275.6
(10.9)
—
—
(2.5)
0.6
—
—
16.3
4.3
12.0
— 2,555.4
2,355.0
(1.8)
— 2,353.2
7.6
(1.4)
(2.9)
—
1.9
3,663.3
124.0
2,970.8
115.5
849.4
22.3
180.5
871.2
17.2
140.4
21.4
(3.3)
21.9
—
—
2.1
(0.3)
—
—
6.6
(0.5)
(2.4)
—
1.5
2,977.4
115.0
870.9
17.0
141.9
(4.1)
17.3
(0.7)
389.5
314.5
(17.0)
(1.1)
296.4
—
102.5
(477.7)
54.1
— (423.7)
(0.7)
286.9
792.3
(71.1)
(1.1)
720.1
273.3 $
12.0 $
(0.7) $
284.6
170.0 $
14.3 $
— $
184.4
5.24 $
5.20 $
0.22 $
0.22 $
— $
— $
5.46
5.41
5.21 $
5.17 $
0.22 $
0.22 $
— $
— $
5.43
5.38
$
$
$
$
$
$
791.8 $
(71.1) $
(1.1) $
719.6
918.4 $
(75.5)
— $
842.8
15.00 $
15.00 $
(1.36) $
(1.36) $
— $
— $
13.64
13.63
14.90 $
14.89 $
(1.36) $
(1.36) $
— $
— $
13.54
13.53
————————————
(1) We determined that certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted
for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real
estate leases, historically accounted for as operating leases should have been accounted for as capital leases. The prior period error was corrected by
reducing "Lease & related maintenance and rental revenues" by approximately $19 million and $15 million during the years ended December 31, 2018
and 2017, respectively. We also reduced depreciation expense (included in "Cost of lease & related maintenance and rental") by approximately $17
million and $14 million during the years ended December 31, 2018 and 2017, respectively. We concluded these errors were not material to any of our
previously issued consolidated financial statements.
(2) Adjustments primarily reflect the reclassification of our Singapore operations that were shut down during 2019 into "Restructuring and other items, net,".
Note: Amounts may not be additive due to rounding.
88
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Adoption of the new lease standard impacted our previously reported Consolidated Balance Sheet as follows (in millions):
Receivables, net
Prepaid expenses and other current assets
Total current assets
Revenue earning equipment, net
Operating property and equipment, net
Sales-type leases and other assets
Total assets
Short-term debt and current portion of long term-debt
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Deferred income taxes
Total liabilities
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
December 31, 2018
As Previously
Reported
Lessor
Adjustment (1)
Lessee
Adjustment (1)
As Revised
$
1,219.4
$
201.6
1,568.4
9,498.0
843.8
606.6
13,051.1
930.0
630.5
2,292.3
5,693.6
849.9
1,304.8
10,140.8
2,710.7
(911.3)
2,910.3
13,051.1
22.6
(23.3)
(0.7)
(84.2)
—
156.8
72.0
—
145.1
145.1
—
421.2
(124.6)
441.7
(369.6)
(0.1)
(369.7)
72.0
$
— $
—
—
2.2
18.2
204.3
224.7
7.2
72.2
79.3
18.5
131.5
(0.5)
228.8
(3.8)
(0.2)
(4.1)
224.7
1,242.1
178.3
1,567.7
9,416.0
862.1
967.8
13,347.8
937.1
847.7
2,516.7
5,712.1
1,402.6
1,179.7
10,811.2
2,337.3
(911.6)
2,536.6
13,347.8
————————————
(1) We determined that in a prior period certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should
have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee
arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. The prior
period error was corrected by increasing "Receivables, net" by approximately $24 million and also increasing "sales-type leases and other assets" by
approximately $65 million and reducing "Revenue earning equipment, net" by $83 million. We concluded these errors were not material to any of our
previously issued consolidated financial statements.
Note: Amounts may not be additive due to rounding.
89
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Adoption of the new lease standard impacted our previously reported Consolidated Statements of Cash Flows as follows
(in millions):
Year ended December 31, 2018
Year ended December 31, 2017
As Revised
As Previously
Reported
New Lease
Standard
Adjustments
As Previously
Reported
New Lease
Standard
Adjustments
$
273.3 $
11.3 $
275.6
1,395.0
21.7
31.2
—
104.6
—
11.3
(6.4)
0.6
36.8
81.1
4.3
82.8
284.6
286.9
1,388.6
22.3
67.9
81.1
108.9
82.8
(189.3)
(65.8)
3.1
(3.8)
(18.9)
(104.8)
(193.1)
(84.7)
(101.8)
$
791.8 $
792.3
1,255.2
17.2
8.3
—
(500.3)
—
(173.8)
(38.9)
78.4
(72.2) $
(72.2)
2.5
(0.3)
32.7
67.8
54.1
81.0
(5.0)
(56.9)
(23.6)
As Revised
719.6
720.1
1,257.7
17.0
41.0
67.8
(446.2)
81.0
(178.9)
(95.8)
54.8
1,635.1
82.9
1,718.0
1,548.0
80.1
1,628.1
75.0
(2,746.5)
(797.8)
(75.0)
(75.0)
(7.9)
—
73.2
(2,821.5)
(805.7)
(1,365.5)
(962.6)
(73.2)
(73.2)
(6.9)
—
(1,438.7)
(969.5)
1,093.4
(7.9)
1,085.5
(155.1)
(6.9)
(162.1)
Net earnings (loss)
Earnings (loss) from continuing operations
Depreciation expense
Used vehicle sales, net
Amortization expense and other non-cash charges,
net
Non-cash lease expense
Deferred income tax expense
Collections on sales-type leases and other items
Changes in operating assets and liabilities:
Receivables
Prepaid expenses and other assets
Accrued expenses and other non-current liabilities
Net cash provided by operating activities from
continuing operations
Collections on direct finance leases and other
items
Net cash used in investing activities from
continuing operations
Debt repaid
Net cash provided by (used in) financing activities
from continuing operations
Note: Amounts may not be additive due to rounding.
3. ACQUISITIONS
On April 2, 2018, we acquired all of the outstanding equity of MXD Group, Inc. (MXD), an e-commerce fulfillment
provider with a national network of facilities, including last mile delivery capabilities, for a purchase price of $118 million. The
acquisition is included in our SCS business segment. The assets, liabilities and results of operations of MXD were not material
to our consolidated financial position or results of operations and therefore financial information for the acquisition is not
presented.
On June 15, 2018, we acquired all of the outstanding equity of Metro Truck & Tractor Leasing (Metro), a full service
leasing, rental and maintenance company for a purchase price of $52 million. The acquisition is included in our FMS business
segment. The assets, liabilities and results of operations of Metro were not material to our consolidated financial position or
results of operations and therefore financial information for the acquisition is not presented.
90
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. REVENUE
Disaggregation of Revenue
The following tables disaggregate our revenue by primary geographical market and industry:
Primary Geographical Markets
Year ended December 31, 2019
FMS
SCS
DTS
Eliminations
Total
United States
Canada
Europe
Mexico
Singapore
$ 4,965,461
$ 2,110,240
(In thousands)
$ 1,417,483
$
302,956
302,986
—
—
215,380
—
222,358
3,293
—
—
—
—
Total revenue
$ 5,571,403
$ 2,551,271
$ 1,417,483
$
(593,170) $ 7,900,014
(21,186)
497,150
—
302,986
—
222,358
—
3,293
(614,356) $ 8,925,801
Year ended December 31, 2018
FMS
SCS
DTS
Eliminations
Total
United States
Canada
Europe
Mexico
Singapore
$ 4,639,494
$ 1,990,486
(In thousands)
$ 1,333,313
$
302,106
317,093
—
—
185,655
—
198,147
23,856
—
—
—
—
Total revenue
$ 5,258,693
$ 2,398,144
$ 1,333,313
$
(554,764) $ 7,408,529
(21,440)
466,321
—
317,093
—
198,147
—
23,856
(576,204) $ 8,413,946
Year ended December 31, 2017
FMS
SCS
DTS
Eliminations
Total
United States
Canada
Europe
Mexico
Singapore
$ 4,128,814
$ 1,566,945
(In thousands)
$ 1,095,645
$
282,438
305,289
—
—
169,090
—
170,525
30,792
—
—
—
—
Total revenue
$ 4,716,541
$ 1,937,352
$ 1,095,645
$
Industry
(449,896) $ 6,341,508
(19,568)
431,960
—
305,289
—
170,525
—
30,792
(469,464) $ 7,280,074
We have a diversified portfolio of customers across a full array of transportation and logistics solutions and across many
industries. We believe this will help to mitigate the impact of adverse downturns in specific sectors of the economy. Our
portfolio of ChoiceLease and commercial rental customers is not concentrated in any one particular industry or geographic
region. We derive a significant portion of our SCS revenue from the automotive industry, mostly from manufacturers and
suppliers of original equipment parts.
91
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Our SCS business segment includes revenue from the following industries:
Automotive
Technology and healthcare
CPG and retail
Industrial and other
Total revenue
Contract Balances
Years ended December 31,
2019
2018
(In thousands)
2017
$
1,003,508
$
947,408
$
432,107
901,344
214,312
480,026
766,765
203,945
783,642
387,253
535,687
230,770
$
2,551,271
$
2,398,144
$
1,937,352
We record a receivable related to revenue recognized when we have an unconditional right to invoice. There were no
material contract assets as of December 31, 2019 or 2018. Refer to Note 6, "Receivables, Net," for the amount of our trade
receivables.
Contract liabilities relate to payments received in advance of performance under the contract. Changes in contract
liabilities are due to additional billings and our performance under the contract. The amount of deferred revenue as of January
1, 2019 recognized as revenue during the year ended December 31, 2019 was $181 million. In addition, we deferred
consideration of $203 million received in advance of performance during the year ended December 31, 2019 resulting in an
increase in deferred revenue. Deferred revenue was $587 million and $566 million as of December 31, 2019 and 2018,
respectively, related to the maintenance services component of our ChoiceLease product line.
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized
(“contracted not recognized revenue”). Contracted not recognized revenue includes deferred revenue and amounts for full
service ChoiceLease maintenance revenue that will be recognized as revenue in future periods as we provide maintenance
services to our customers. Contracted not recognized revenue excludes variable consideration as it is not included in the
transaction price consideration allocated at contract inception, as well as amounts from contracts with an original duration of
one year or less. Further, contracted not recognized revenue does not include amounts from remaining performance obligations
when we have the right to invoice the customer for the value to the customer of our performance completed to date. Contracted
not recognized revenue was $2.9 billion as of December 31, 2019.
Costs to Obtain and Fulfill a Contract
We capitalize incremental sales commissions paid as a result of obtaining ChoiceLease, SCS and DTS contracts as
contract costs. Capitalized sales commissions was $105 million and $107 million as of December 31, 2019 and 2018,
respectively. Capitalized sales commissions include initial direct costs of our leases of $55 million and $53 million as of
December 31, 2019 and 2018, respectively. Capitalized sales commissions are presented in “Sales-type leases and other assets”
in the Consolidated Balance Sheets.
Capitalized sales commissions related to our ChoiceLease product are amortized based on the same pattern as the revenue
is recognized for the underlying lease or non-lease components of the contract; generally on a straight-line basis for the lease
component and consistent with the estimated pattern of maintenance costs for the non-lease component. We allocate the
ChoiceLease commissions to the lease and non-lease components based on the same allocation of the contract consideration.
The amortization period aligns with the term of our contract, which typically ranges from three to seven years, and the expense
is included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.
Capitalized sales commissions related to our SCS and DTS service contracts are amortized based on the same pattern as
the revenue is recognized for the underlying contracts. This generally results in a straight-line amortization. The amortization
period aligns with the expected term of the contract, which typically ranges from three to five years, and the expense is included
in “Selling, general and administrative expenses” in the Consolidated Statement of Earnings.
For the years ended December 31, 2019, 2018, and 2017, sales commission expense was $43 million, $37 million and $33
million, respectively.
92
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. RESTRUCTURING AND OTHER ITEMS, NET
The following table presents the amounts within "Restructuring and other items, net" in the Consolidated Statements of
Earnings that related to each segment in 2019, 2018 and 2017.
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Central Support Services
Restructuring and other items, net
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
33,275
(45)
—
23,338
56,568
$
$
16,785
4,413
—
654
21,852
$
$
2,995
(1,862)
771
15,361
17,265
In 2019, 2018 and 2017, we executed restructuring plans to reduce our workforce in multiple locations as a result of cost
containment actions. During 2019, we recognized employee termination costs related to the closure of several FMS
maintenance locations in the U.S. and Canada and expect to incur additional restructuring charges in 2020, but we do not expect
these charges to be material to our financial statements. In addition to these restructuring charges, we also incurred charges
related to cost savings initiatives, the pursuit of a commercial claim and the implementation of an enterprise resource planning
system. In addition, we recognized income from our Singapore operations that were shut down during the second quarter of
2019.
During 2018, we recognized restructuring charges offset by restructuring credits related to gains on the sale of certain
U.K. facilities that were closed as part of our December 2017 restructuring activities and income from our Singapore operations
that were shut down during the second quarter of 2019. We also incurred charges related to cost savings initiatives, transaction
costs related to the acquisitions of MXD and Metro and an impairment charge of goodwill associated with our FMS Europe
reporting unit. We recognized a net benefit for an adjustment to the one-time 2017 Tax Cuts and Jobs Act-related employee
bonus accrued as of December 31, 2017.
During 2017, we recognized restructuring charges offset by restructuring credits related to gains on the sale of certain
U.K. facilities that were closed as part of prior year restructuring activities and income from our Singapore operations that were
shut down during the second quarter of 2019. We also incurred charges related to consulting fees associated with cost savings
initiatives.
The following table summarizes the activities within, and components of, restructuring liabilities as of December 31,
2019, 2018 and 2017:
Balance at December 31, 2016
Workforce reduction charges
Utilization (1)
Balance at December 31, 2017
Workforce reduction charges
Utilization (1)
Balance at December 31, 2018
Workforce reduction charges
Utilization (1)
Balance at December 31, 2019 (2)
Employee Termination Costs
(In thousands)
$
$
7,278
13,320
(7,524)
13,074
8,366
(13,845)
7,595
5,655
(6,485)
6,765
_________________
(1) Principally represents cash payments.
(2) The majority of the balance remaining for employee termination costs is expected to be paid by the end of 2020.
Note: The restructuring liabilities shown above are included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets.
93
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. RECEIVABLES, NET
Trade
Sales-type leases
Other, primarily warranty and insurance
Allowance
Total
December 31,
2019
2018
(In thousands)
$
$
1,060,298
135,353
55,600
1,251,251
(22,761)
1,228,490
$
$
1,087,219
106,594
65,427
1,259,240
(17,182)
1,242,058
7. REVENUE EARNING EQUIPMENT, NET
Estimated
Useful
Lives
(In years)
December 31, 2019
December 31, 2018
Cost
Accumulated
Depreciation
Net (1)
Cost
(In thousands)
Accumulated
Depreciation
Net (1)
Held for use:
ChoiceLease
3 — 12
$ 12,223,179
Commercial rental
4.5 — 12
3,200,403
Held for sale
Total
748,435
$ 16,172,017
$ (4,125,342) $ 8,097,837
2,150,553
(1,049,850)
(569,161)
179,274
$ (5,744,353) $ 10,427,664
$ 10,824,819
3,152,908
467,093
$ 14,444,820
$ (3,645,485) $ 7,179,334
2,105,562
(1,047,346)
(336,028)
131,065
$ (5,028,859) $ 9,415,961
_______________
(1) Revenue earning equipment, net includes vehicles under finance leases of $12 million, less accumulated depreciation of $8 million, at December 31,
2019 and $23 million, less accumulated depreciation of $13 million, at December 31, 2018.
We periodically review and adjust, as appropriate, the estimated residual values and useful lives of revenue earning
equipment for the purposes of recording depreciation expense. Our review of the estimated residual values and useful lives of
revenue earning equipment is established with a long-term view based on vehicle class, generally subcategories of trucks,
tractors and trailers by weight and usage, as well as other factors. We refer to this long-term view as "policy depreciation."
These other factors include, but are not limited to, historical market prices, current and 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, but are not limited to, 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. In addition, we also monitor market trends
throughout the year and assess estimates of residual values of vehicles expected to be made available for sale in the near-term
(generally 12 to 24 months) and may adjust estimates of residual values for these vehicles to reflect current market rates, which
we refer to as "accelerated depreciation."
At the end of the second quarter of 2019, we began to experience softening in used vehicle market conditions, which
intensified through the third quarter of 2019 and we now expect to continue throughout 2020. In addition, our inventory of used
vehicles that is expected to be made available for sale was higher than expected, which has and will impact the volume of used
vehicle sales expected to be sold through our wholesale channels. Due to these dynamics and our updated outlook, management
concluded that our residual value estimates likely exceeded the expected future values that would be realized upon the sale of
power vehicles in our fleet. As a result, we changed the estimates of residual values for our revenue earning equipment in the
third quarter of 2019 to reflect more recent multi-year trends and our outlook for the expected used vehicle market. The
increase in depreciation expense, resulting from the change in estimate, reduced earnings from continuing operations before
income taxes and net earnings by approximately $297 million and $219 million, respectively, in 2019. This amount included
accelerated depreciation of approximately $193 million related to lower residual value estimates of vehicles expected to be sold
in the near-term and additional policy depreciation of $104 million. The effect of this change in estimate decreased our diluted
earnings per share by $4.19 in 2019.
94
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The impact of the vehicle residual value estimates change that occurred in the third quarter of 2019 is in addition to the
depreciation expense of $30 million related to the policy depreciation estimate change effective January 1, 2019 and additional
accelerated depreciation of $30 million that was incurred throughout 2019. We recorded accelerated depreciation expense of
$39 million and $30 million in 2018 and 2017, respectively. Total depreciation expense related to revenue earning equipment
was $1.8 billion, $1.3 billion and $1.2 billion in 2019, 2018 and 2017, respectively.
Revenue earning equipment held for sale is stated at the lower of net book value 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 arrive at our used truck centers and are presented within "Used vehicle sales, net" in the
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 a certain population of revenue earning equipment held for sale, fair value was determined based upon recent
market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. Expected
declines in market prices were also considered when valuing the vehicles held for sale.
The following table presents the revenue earning equipment held for sale that are measured at fair value on a nonrecurring
basis and considered a Level 3 fair value measurement:
Assets held for sale:
Revenue earning equipment: (1)
Trucks
Tractors
Trailers
Total assets at fair value
Total Losses (2)
December 31,
Years ended December 31,
2019
2018
2019
2018
2017
(In thousands)
(In thousands)
$
$
39,009
73,359
2,206
114,574
$
$
44,325
35,397
1,507
81,229
$
$
38,701
40,213
4,224
83,138
$
$
40,220
9,030
4,478
53,728
$
$
30,812
21,261
5,992
58,065
______________
(1) Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where net book values exceeded fair values and
fair value adjustments were recorded. Assets held for sale where fair value was higher than net book value were $65 million and $50 million as of December 31,
2019 and 2018, respectively.
(2) Total losses represent fair value adjustments for all vehicles held for sale throughout the period for which fair value was less than net book value.
The components of used vehicle sales, net were as follows:
Losses (gains) on vehicle sales, net
Losses from fair value adjustments
Used vehicle sales, net
Years ended December 31,
2019
2018
2017
(In thousands)
$
$
(24,432) $
83,138
58,706
$
(31,403) $
53,728
22,325
$
(41,076)
58,065
16,989
95
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. OPERATING PROPERTY AND EQUIPMENT, NET
Land
Buildings and improvements
Machinery and equipment
Other
Accumulated depreciation
Total
Estimated
Useful Lives
(In years)
December 31,
2019
2018
(In thousands)
—
$
245,034
$
10 — 40
3 — 10
3 — 10
904,567
866,654
125,760
2,142,015
(1,224,216)
$
917,799
$
235,720
896,385
860,609
125,377
2,118,091
(1,256,037)
862,054
Depreciation expense related to operating property and equipment was $118 million, $103 million and $97 million in
2019, 2018 and 2017, respectively.
9. GOODWILL
The carrying amount of goodwill attributable to each reportable business segment with changes therein was as follows:
Fleet
Management
Solutions
Supply Chain
Solutions
Dedicated
Transportation
Solutions
Total
Balance at January 1, 2018
Acquisitions (1)
Impairment
Foreign currency translation adjustment
Balance at December 31, 2018
Foreign currency translation adjustment
$
Balance at December 31, 2019 (2)
———————————
(1) See Note 3, "Acquisitions," for additional information.
(2) Accumulated impairment losses were $45 million as of both December 31, 2019 and 2018.
$
226,854
32,266
(15,513)
(1)
243,606
96
243,702
(In thousands)
127,842
63,424
—
(474)
190,792
(277)
190,515
$
$
40,808
—
—
—
40,808
—
40,808
$
$
$
$
395,504
95,690
(15,513)
(475)
475,206
(181)
475,025
We assess goodwill for impairment on October 1st of each year or more often if deemed necessary. In the third quarter of
2019, we performed an interim impairment test of our FMS North America reporting unit (“FMS NA”) as a result of the decline
in market conditions and our updated outlook primarily in the used vehicle market, which negatively affects our forecasted cash
flows from the sale of used vehicles. Our valuation of fair value for FMS NA was determined based on a discounted future cash
flow model (income approach) and the application of current market multiples for comparable publicly-traded companies
(market approach). Based on our analysis, we determined that FMS NA goodwill was not impaired as of September 30, 2019.
The estimated fair value of the FMS NA reporting unit exceeded its carrying value by approximately 5% as of September 30,
2019.
As a result of a revised forecast and outlook for the FMS NA reporting unit as of December 31, 2019, we performed an
additional impairment test. Based on our analysis, we determined that FMS NA goodwill was not impaired as of December 31,
2019. However, the fair value of FMS NA was not substantially in excess of its carrying value. The estimated fair value of the
FMS NA reporting unit exceeded its carrying value by approximately 15% as of December 31, 2019.
The increase in the estimated fair value of FMS NA in excess of its carrying value as compared to September 30, 2019 is
due to improved estimated future cash flows from management actions which moderate future ChoiceLease growth
assumptions, lower expected future capital expenditures and improve future profit margins.
Given this level of fair value, in the event the financial performance of FMS NA does not meet our expectations in the
future; we experience future prolonged market downturns, including in the used vehicle market or a sustained decline in our
stock price; or other negative revisions to key assumptions, we may be required to perform additional impairment analyses and
could be required to recognize a non-cash goodwill impairment charge. Subsequent to December 31, 2019, we experienced a
96
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
decline in our market capitalization and if this decline continues for a sustained period of time, we may also be required to
perform additional impairment analyses and could be required to recognize a non-cash goodwill impairment charge. As of
December 31, 2019, there was $244 million of goodwill recorded related to FMS NA.
On October 1, 2019, we completed our annual goodwill impairment test for our SCS and DTS related reporting units and
determined there were no impairments.
During the first quarter of 2018, we recorded an impairment charge of $16 million for all goodwill in the FMS Europe
reporting unit. This item was reflected within "Restructuring and other items, net" in our Consolidated Statements of Earnings.
10. INTANGIBLE ASSETS, NET
Indefinite lived intangible assets — Trade name
Finite lived intangible assets:
Customer relationship intangibles
Other intangibles, primarily trade name
Accumulated amortization
Total
December 31,
2019
2018
(In thousands)
8,731
$
113,150
2,367
(73,343)
50,905
$
8,731
113,025
2,367
(65,048)
59,075
$
$
The Ryder trade name has been identified as having an indefinite useful life. Customer relationship intangibles are being
amortized on a straight-line basis over their estimated useful lives, generally 7-19 years. We recognized amortization expense
associated with finite lived intangible assets in 2019, 2018 and 2017 of $8 million, $8 million and $6 million, respectively. The
future amortization expense for each of the five succeeding years related to all intangible assets that are currently reported in
the Consolidated Balance Sheets is estimated to range from $6 - $8 million per year for 2020 - 2024.
11. ACCRUED EXPENSES AND OTHER LIABILITIES
December 31, 2019
December 31, 2018
Accrued
Expenses
Non-Current
Liabilities
Total
Accrued
Expenses
Non-Current
Liabilities
Total
Salaries and wages
Deferred compensation
Pension benefits
Other postretirement benefits
Other employee benefits
Insurance obligations (1)
Operating taxes
Income taxes
Interest
Deposits, mainly from customers
Operating lease liabilities
Deferred revenue (2)
Restructuring liabilities (3)
Other
Total
(In thousands)
$ 126,119
6,436
3,863
1,478
21,577
163,763
116,003
2,873
46,032
82,573
72,285
165,205
6,765
61,105
$ 876,077
$
— $ 126,119
71,442
417,692
65,006
413,829
20,187
—
285,838
—
17,484
—
3,065
151,361
438,482
—
46,751
$ 1,442,003
21,665
21,577
449,601
116,003
20,357
46,032
85,638
223,646
603,687
6,765
107,856
$ 2,318,080
$ 149,629
4,524
3,754
1,387
28,370
139,314
100,399
3,491
39,522
80,401
73,422
160,902
7,595
55,029
$ 847,739
_________________
(1) Insurance obligations are primarily comprised of self-insured claim liabilities.
(2) Deferred revenue is primarily related to the non-lease maintenance services component of our ChoiceLease product line.
(3) Refer to Note 5 "Restructuring and Other Items, Net" for further information.
97
$
— $ 149,629
59,803
460,733
19,484
28,370
386,866
100,399
21,968
39,522
83,791
210,806
582,078
7,595
99,320
$ 2,250,364
55,279
456,979
18,097
—
247,552
—
18,477
—
3,390
137,384
421,176
—
44,291
$ 1,402,625
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
During 2019 and 2018, we recognized charges of $18 million and $1 million, respectively, within earnings from
continuing operations from the unfavorable development of estimated prior years claims where costs exceeded self-insured loss
reserves. During 2017, we recognized a benefit of $9 million within earnings from continuing operations from the favorable
development of estimated prior years' self-insured loss reserves for the reasons noted above.
12. INCOME TAXES
The components of earnings (loss) from continuing operations before income taxes and the provision for (benefit from)
income taxes from continuing operations were as follows:
Earnings (loss) from continuing operations before income taxes:
United States
Foreign
Total
Provision for (benefit from) income taxes from continuing
operations:
Current tax expense (benefit) from continuing operations:
Federal (1)
State
Foreign
Deferred tax expense (benefit) from continuing operations:
Federal
State
Foreign
Total
Years ended December 31,
2019
2018
(In thousands)
2017
(44,668) $
2,397
(42,271) $
371,925
17,544
389,469
$
$
273,033
23,403
296,436
(1,065) $
9,187
5,210
13,332
(8,228)
(18,790)
(5,313)
(32,331)
(18,999) $
(23,333) $
6,862
10,123
(6,348)
113,764
1,250
(6,119)
108,895
102,547
$
6,752
9,360
6,442
22,554
(455,021)
7,008
1,794
(446,219)
(423,665)
$
$
$
$
_______________
(1) The current federal tax benefit in 2018 includes the anticipated $22 million alternative minimum tax refunds generated by the 2017 Tax Cuts and Jobs Act.
A reconciliation of the federal statutory tax rate with the effective tax rate from continuing operations follows:
Federal statutory tax rate
Impact of one-time deemed repatriation
Impact on deferred taxes for changes in tax rates
Additional deferred tax adjustments
State income taxes, net of federal income tax benefit
Foreign rates varying from federal statutory tax rate
Tax contingencies
Tax credits
Other permanent book-tax differences
Other, net
Effective tax rate
98
Years ended December 31,
2019
2018
2017
(Percentage of pre-tax earnings)
21.0 %
— %
20.5 %
— %
(19.2)%
3.1 %
15.7 %
11.3 %
(8.6)%
1.1 %
44.9 %
21.0 %
6.2 %
(3.3)%
(1.5)%
3.7 %
0.1 %
(0.9)%
0.2 %
0.8 %
— %
26.3 %
35.0 %
11.3 %
(188.5)%
— %
3.3 %
(4.2)%
0.1 %
(0.1)%
0.2 %
— %
(142.9)%
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Tax Reform Impact
On December 22, 2017, the 2017 Tax Cuts and Jobs Act of 2017 (2017 Tax Reform) was signed into law. The 2017 Tax
Reform made broad and complex changes to the U.S. tax code which have had a significant impact on our earnings. During
2017, we recorded a $619 million benefit for the re-measurement of our net deferred tax liability and a $33 million expense for
the one-time transition tax as provisional estimates. During 2018, we completed our analyses and recorded an additional $10
million benefit for the re-measurement of our net deferred tax liability and an additional $24 million expense for the transition
tax.
Deferred Income Taxes
The components of the net deferred income tax liability were as follows:
Deferred income tax assets:
Self-insurance accruals
Net operating loss carryforwards
Accrued compensation and benefits
Federal benefit on state tax positions
Pension benefits
Deferred revenue
Other accruals
Valuation allowance
Deferred income tax liabilities:
Property and equipment basis differences
Other
Net deferred income tax liability (1)
______________
December 31,
2019
2018
(In thousands)
$
94,690
619,314
31,402
9,115
78,004
146,383
21,635
1,000,543
(17,577)
982,966
82,118
414,144
31,627
11,027
94,433
146,831
19,068
799,248
(16,186)
783,062
(2,121,842)
(5,386)
(2,127,228)
(1,144,262) $
(1,937,009)
(7,907)
(1,944,916)
(1,161,854)
$
$
(1) Deferred tax assets of $17 million and $18 million have been included in "Sales-type leases and other assets" as of December 31, 2019 and 2018,
respectively.
As of December 31, 2019, we have undistributed earnings of foreign subsidiaries of $826 million. We have historically
reinvested such earnings overseas indefinitely and will continue to reinvest future foreign earnings overseas indefinitely. With
respect to the undistributed earnings as of December 31, 2019, $635 million was included in the transition tax. The
determination of the amount of any additional unrecognized deferred tax liability is not practicable because of the complexities
associated with the hypothetical calculations used in evaluating whether we will maintain the indefinite reinvestment assertion.
As of December 31, 2019, we had U.S. federal tax effected net operating loss carryforwards, before unrecognized tax
benefits, of $547 million, of which $137 million is expected to expire beginning 2033; the remaining $410 million has an
indefinite carryforward period. Various U.S. subsidiaries had state tax effected net operating loss carryforwards, before
unrecognized tax benefits and valuation allowances, of $89 million that will begin to expire as follows: $7 million in 2020, $4
million in 2021, and $73 million in 2022 and thereafter; the remaining $5 million has an indefinite carryforward period. To the
extent that we do not generate sufficient state taxable income within the statutory carryforward periods to utilize the loss
carryforwards in these states, the loss carryforwards will expire unused. We also had foreign tax effected net operating loss
carryforwards of $19 million that are available to reduce future income tax payments in several countries, subject to varying
expiration rules. We assess the realizability of our deferred tax assets and record a valuation allowance to the extent it is
determined that they are not more-likely-than-not to be realized. Due to our assessment of future sources of taxable income in
various states and foreign jurisdictions as of December 31, 2019 and the near-term expiration of certain net operating
carryforwards, we recorded a valuation allowance of $18 million against our deferred tax assets. The valuation allowance is
subject to change in future years based on the availability of future sources of taxable income to offset the net operating loss
carryforwards.
99
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
During 2018, we determined that certain deferred tax assets had been undervalued in prior periods. As the amounts were
not material to our consolidated financial statements in any individual period, and the cumulative amount is not material to
2018 results, we recognized a one-time $6 million benefit in our provision for income taxes related to the correction of this
error.
Uncertain Tax Positions
In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant
taxing authorities. The following table summarizes these open tax years by jurisdiction:
Jurisdiction
United States (Federal)
Canada
Mexico
United Kingdom
Brazil (in discontinued operations)
Open Tax Year
2009 - 2011, 2013 - 2019
2012 - 2019
2014 - 2019
2018 - 2019
2014 - 2019
The following table summarizes the activity related to unrecognized tax benefits (excluding the federal benefit received
from state positions):
Balance at January 1
Additions based on tax positions related to the current year
Reductions due to lapse of applicable statutes of limitation
Gross balance at December 31
Interest and penalties
Balance at December 31
2019
December 31,
2018
(In thousands)
2017
$
$
58,819
1,422
(11,323)
48,918
4,772
53,690
$
$
62,288
3,885
(7,354)
58,819
4,594
63,413
$
$
61,649
3,971
(3,332)
62,288
5,860
68,148
Of the total unrecognized tax benefits as of December 31, 2019, $45 million (net of the federal benefit on state issues)
represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future
periods. The total includes $4 million of interest and penalties, as of both December 31, 2019 and 2018, net of the federal
benefit on state interest. Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $8 million
by December 31, 2020, if audits are completed or tax years close during 2020.
During 2018, we determined that reserves for certain uncertain tax positions should have been reversed in prior periods
when the statutes of limitations expired. As the amounts were not material to our consolidated financial statements in any
individual period, and the cumulative amount is not material to 2018 results, we recognized a one-time $4 million benefit in our
provision for income taxes related to the correction of this error.
100
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
13. LEASES
Leases as Lessor
The components of revenue from leases were as follows:
Operating leases
Lease income related to ChoiceLease
Lease income related to commercial rental (1)
Sales-type leases
Interest income related to net investment in leases
Variable lease income excluding commercial rental (1)
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
$
1,505,913
952,560
46,801
272,065
$
$
$
1,369,025
905,305
38,385
244,911
$
$
$
1,303,263
777,270
30,169
238,905
_________________
(1) Lease income related to commercial rental includes both fixed and variable lease income. Variable lease income is approximately 15% to 25% of total
commercial rental income.
The components of the net investment in sales-type leases included in "Receivables, net" and "Sales-type lease and other
assets" in the Consolidated Balance Sheet were as follows:
Net investment in the lease - lease payment receivable
Net investment in the lease - unguaranteed residual value in assets
December 31,
2019
2018
(In thousands)
553,076
44,952
598,028
$
$
505,057
46,209
551,266
$
$
Maturities of sales-type lease receivables as of December 31, 2019 were as follows:
Years ending December 31
2020
2021
2022
2023
2024
Thereafter
Total undiscounted cash flows
Present value of lease payments (recognized as lease receivables)
Difference between undiscounted cash flows and discounted cash flows
(In thousands)
166,300
144,745
117,645
84,803
62,292
86,417
662,202
(553,076)
109,126
$
$
101
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Payments due for operating leases as of December 31, 2019 were as follows:
Years ending December 31
2020
2021
2022
2023
2024
Thereafter
Total undiscounted cash flows
Leases as Lessee
(In thousands)
1,316,590
1,052,096
765,195
526,845
347,258
291,703
4,299,687
$
$
The components of lease expense were as follows:
Finance lease cost
Amortization of right-of-use-assets
Interest on lease liabilities
Operating lease cost
Short-term lease and other
Variable lease cost
Sublease income
Total lease cost
Classification
2019
2018
2017
Years ended December 31,
(In thousands)
Other operating expenses, SG&A
Interest expense
Other operating expenses, SG&A
Other operating expenses, SG&A
Other operating expenses, SG&A
Lease & related maintenance and
rental revenues, Other operating
expenses
$
$
13,671
2,565
94,039
10,963
12,459
$
13,805
2,546
87,741
10,017
9,888
13,870
2,288
72,992
9,877
8,892
(22,385)
111,312
$
(23,261)
100,736
$
(21,169)
86,750
$
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from finance leases
Operating cash flows from operating leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
Finance leases
Operating leases
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
2,565
93,383
17,922
21,749
96,810
$
2,546
85,980
17,601
15,324
114,990
2,288
69,379
17,206
23,095
99,476
102
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Supplemental balance sheet information relates to leases was as follows:
Classification
Assets
Operating lease right-of-use assets
Finance lease assets
Total leased assets
Sales-type leases and other assets
Operating property and equipment, net and
revenue earning equipment, net
December 31,
2019
2018
(In thousands)
214,809
$
203,834
44,190
258,999
$
41,647
245,481
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Total lease liabilities
Accrued expenses and other current liabilities
Short-term debt and current portion of long-
term debt
72,285
$
12,381
Other non-current liabilities
Long-term debt
151,361
39,336
$
275,363
$
73,422
14,543
137,384
32,909
258,258
$
$
$
Weighted-average remaining lease term
Operating
Finance
Weighted-average discount rate
Operating
Finance
Maturities of operating and finance lease liabilities were as follows:
December 31,
2019
2018
4 years
7 years
4.0%
6.6%
4 years
7 years
3.7%
8.0%
Years ending December 31
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: Imputed Interest
Present value of lease liabilities
Operating
Leases
Finance
Leases
(In thousands)
Total
$
$
79,345
57,323
43,173
31,768
13,452
18,455
243,516
(19,870)
223,646
$
$
14,663
13,377
9,013
6,716
4,825
12,561
61,155
(9,438)
51,717
$
$
94,008
70,700
52,186
38,484
18,277
31,016
304,671
(29,308)
275,363
As of December 31, 2019, we have entered into additional facility operating leases that have not yet commenced of $14
million. The operating leases will commence in 2020 through 2023 with lease terms of generally 3 to 5 years.
103
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
14. DEBT
Short-term debt and current portion of long-
term debt:
Short-term debt
Current portion of long-term debt,
including finance leases
Total short-term debt and current portion of
long-term debt
Total long-term debt:
U.S. commercial paper (1)
Canadian commercial paper (1)
Trade receivables program
Global revolving credit facility
Unsecured U.S. notes – Medium-term
notes (1) (2)
Unsecured U.S. obligations
Unsecured foreign obligations
Asset-backed U.S. obligations (3)
Finance lease obligations (4)
Total long-term debt
Debt issuance costs
Current portion of long-term debt, including
finance leases
Long-term debt
Weighted-Average Interest Rate
December 31,
December 31,
2019
2018
Maturities
2019
2018
(In thousands)
1.98%
2.69%
$
425,676
$
81,522
1.99%
2.04%
—%
2.10%
3.17%
2.79%
2.18%
2.50%
8.18%
2.78%
2.28%
3.15%
3.25%
3.22%
3.50%
1.61%
2.37%
7.97%
728,888
855,609
1,154,564
937,131
119,690
107,128
—
8,104
454,397
123,491
200,000
12,581
2023
2023
2020
2023
2020-2026
5,965,064
4,853,496
2024
2020-2024
2020-2026
2020-2073
200,000
265,910
807,374
51,717
50,000
216,719
627,707
47,452
7,524,987
(25,875)
7,499,112
6,585,843
(18,088)
6,567,755
(728,888)
6,770,224
(855,609)
5,712,146
Total debt
_________________
(1) Amounts are net of unamortized original issue discounts of $6 million and $7 million as of December 31, 2019 and 2018, respectively.
(2) Amounts are inclusive of the fair market values of our hedging instruments on our notes of $10 million as of December 31, 2018. The fair market values
of our hedging instruments were not material as of December 31, 2019. The notional amount of the interest rate swaps designated as fair value hedges
was $525 million and $725 million as of December 31, 2019 and 2018, respectively.
$ 6,649,277
$ 7,924,788
(3) Asset-backed U.S. obligations are related to financing transactions backed by a portion of our revenue earning equipment.
(4) Refer to Note 13, "Leases," for additional information.
Contractual maturities of total debt, excluding finance lease obligations, are as follows:
Years ending December 31
2020
2021
2022
2023
2024
Thereafter
Total (1)
Finance lease obligations (Refer to Note 13)
Debt issuance costs
Impact of fair market value adjustments on notes subject to hedging
Total long-term debt
_________________
(1) Net of unamortized discount.
104
(In thousands)
1,322,055
1,082,983
1,295,782
1,930,497
1,511,262
755,905
7,898,484
51,717
(25,875)
462
7,924,788
$
$
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Debt Facilities
We maintain a $1.4 billion global revolving credit facility, which includes U.S. and Canadian commercial paper
programs, with a syndicate of twelve lending institutions, which matures in September 2023. The agreement provides for
annual facility fees which range from 7.5 basis points to 20 basis points based on our long-term credit ratings. The annual
facility fee is currently 10 basis points. The credit facility is used primarily to finance working capital and vehicle purchases,
but can also be used to issue up to $75 million in letters of credit (there were no letters of credit outstanding against the facility
as of December 31, 2019). At our option, the interest rate on borrowings under the credit facility is based on LIBOR, prime,
federal funds or local equivalent rates. The credit facility contains no provisions limiting its availability in the event of a
material adverse change to our business operations; however, the credit facility does contain standard representations and
warranties, events of default, cross-default provisions, and certain affirmative and negative covenants.
In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or
equal to 300%. Net worth, as defined in the credit facility, represents shareholders' equity excluding any accumulated other
comprehensive income or loss associated with our pension and other postretirement plans. As of December 31, 2019, the ratio
was 226%. As of December 31, 2019, there was $744 million available under the credit facility.
Our global revolving credit facility enables us to refinance short-term obligations on a long-term basis. Short-term
commercial paper obligations not required for working capital needs are classified as long-term as we have both the intent and
ability to refinance on a long-term basis. In addition, we have the intent and ability to refinance the current portion of long-term
debt on a long-term basis. As of December 31, 2019, we classified $227 million of short-term commercial paper, $400 million
of the current portion of long-term debt and $201 million of short-term debt as long-term debt. As of December 31, 2018, we
classified $578 million of short-term commercial paper, $200 million of trade receivables borrowings, $250 million of the
current portion of long-term debt and $50 million of short-term debt as long-term debt.
In 2019, we issued $2.1 billion of unsecured medium-term notes maturing in years 2022 through 2026. The proceeds
from these notes were used to pay off maturing debt and for general corporate purposes. If these notes are downgraded below
investment grade following, or as a result of, a change in control, the note holders can require us to repurchase all or a portion
of the notes at a purchase price equal to 101% of principal value plus accrued and unpaid interest. We also executed a $50
million bank term loan at one of our Canadian subsidiaries and two $100 million bank term loans, all of which mature in 2024.
In 2019, we received $298 million from financing transactions backed by a portion of our revenue earning equipment.
The proceeds from these transactions were used for general corporate purposes. We have provided end of term guarantees for
the residual value of the revenue earning equipment in these transactions. The transaction proceeds, along with the end of term
residual value guarantees, have been included within "asset-backed U.S. obligations" in the preceding table.
We have a trade receivables purchase and sale program, pursuant to which we sell certain of our domestic trade accounts
receivable to a bankruptcy remote, consolidated subsidiary of Ryder, that in turn sells, on a revolving basis, an ownership
interest in certain of these accounts receivable to a committed purchaser. The subsidiary is considered a VIE and is consolidated
based on our control of the entity’s activities. We use this program to provide additional liquidity to fund our operations,
particularly when it is cost effective to do so. The costs under the program may vary based on changes in interest rates. The
available proceeds that may be received under the program are limited to $225 million. In June 2019, we renewed the trade
receivables purchase and sale program. In February 2020, we increased the amount of available proceeds to $300 million. If no
event occurs which causes early termination, the 365-day program will expire on June 11, 2020. The program contains
provisions restricting its availability in the event of a material adverse change to our business operations or the collectibility of
the collateralized receivables. Sales of receivables under this program are accounted for as secured borrowings based on our
continuing involvement in the transferred assets.
In 2020, one of our Canadian subsidiaries executed bank term loans of approximately $80 million with maturity dates that
range from one- to three-years, which included the refinancing of approximately $20 million of a term loan that matured in
February 2020. The remaining proceeds were primarily used to repay intercompany debt.
The fair value of total debt (excluding finance lease and asset-backed U.S. obligations) was approximately $7.0 billion
and $6.0 billion as of December 31, 2019 and 2018, respectively. For publicly-traded debt, estimates of fair value were based
on market prices. For other debt, fair value is estimated based on a model-driven approach using rates currently available to us
for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and our other
debt were classified within Level 2 of the fair value hierarchy.
105
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
15. GUARANTEES
We have executed various agreements with third parties that contain standard indemnifications that may require us to
indemnify a third party against losses arising from a variety of matters, such as lease obligations, financing agreements,
environmental matters, and agreements to sell business assets. In each of these instances, payment by Ryder is contingent on the
other party bringing about a claim under the procedures outlined in the specific agreement. Normally, these procedures allow us
to dispute the other party’s claim. Additionally, our obligations under these agreements may be limited in terms of the amount
and/or timing of any claim. We have entered into individual indemnification agreements with each of our independent directors,
through which we will indemnify such director acting in good faith against any and all losses, expenses and liabilities arising
out of such director’s service as a director of Ryder. The maximum amount of potential future payments under these agreements
is generally unlimited.
We cannot predict the maximum potential amount of future payments under certain of these agreements, including the
indemnification agreements, due to the contingent nature of the potential obligations and the distinctive provisions that are
involved in each individual agreement. Historically, no such payments made by us have had a material adverse effect on our
business. We believe that if a loss were incurred in any of these matters, the loss would not have a material adverse impact on
our consolidated results of operations or financial position.
As of December 31, 2019 and 2018, we had letters of credit and surety bonds outstanding, which primarily guarantee
various insurance activities as noted in the following table:
Letters of credit
Surety bonds
16. SHARE REPURCHASE PROGRAMS
December 31,
2019
2018
$
(In thousands)
337,476
115,848
$
253,259
121,757
In December 2019, our Board of Directors authorized a new share repurchase program intended to mitigate the dilutive
impact of shares issued under our employee stock plans (the 2019 program). Under the 2019 program, management is
authorized to repurchase up to 1.5 million shares of common stock, the sum of which will not exceed the number of shares
issued to employees under our employee stock plans from December 1, 2019 to December 11, 2021. Share repurchases of
common stock are made periodically in open-market transactions and are subject to market conditions, legal requirements, and
other factors. Management may establish prearranged written plans under Rule 10b5-1 of the Securities Exchange Act of 1934
as part of the 2019 program, which allow for share repurchases during our quarterly blackout periods as set forth in the trading
plan. As of December 31, 2019, we have not repurchased any shares under the 2019 program.
During 2019, 2018 and 2017, we repurchased 0.5 million, 0.4 million and 1.1 million shares under previous share
repurchase programs for $28 million, $31 million and $78 million, respectively.
106
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
17. ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive income presents a measure of all changes in shareholders’ equity except for changes resulting from
transactions with shareholders in their capacity as shareholders. The following summary sets forth the components of
accumulated other comprehensive loss, net of tax:
January 1, 2017
Amortization
Other current period change
December 31, 2017
Amortization
Other current period change
Adoption of new accounting standard
December 31, 2018
Amortization
Pension lump sum settlement
Other current period change
December 31, 2019
Currency
Translation
Adjustments and
Other
Net Actuarial
Loss (1)
Prior Service
(Cost)/Credit (1)
(In thousands)
Accumulated
Other
Comprehensive
Loss
$
(206,610) $
(620,292) $
(7,130) $
(834,032)
—
62,837
20,267
39,872
(143,773)
(560,153)
—
(55,940)
—
20,773
(62,017)
(98,987)
219
1
(6,910)
304
(3,351)
(1,580)
(199,713)
(700,384)
(11,537)
—
—
30,681
22,692
27,391
(6,012)
554
—
(163)
20,486
102,710
(710,836)
21,077
(121,308)
(100,567)
(911,634)
23,246
27,391
24,506
$
(169,032) $
(656,313) $
(11,146) $
(836,491)
_______________________
(1) These amounts are included in the computation of net periodic pension cost and pension settlement charge. See Note 20, "Employee Benefit Plans," for
further information.
The gain from currency translation adjustments and other in 2019 primarily consists of currency translation adjustments
of $38 million due to the strengthening of the British Pound and Canadian Dollar against the U.S. Dollar. The loss from
currency translation adjustments of $56 million in 2018 was primarily due to the weakening of the British Pound and Canadian
Dollar against the U.S. Dollar. The gain from currency translations in 2017 of $63 million was primarily due to the
strengthening of the British Pound and Canadian Dollar against the U.S. Dollar. Refer to Note 20, "Employee Benefit Plans,"
for further information related to net actual loss and prior services cost.
107
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
18. EARNINGS PER SHARE
The following table presents the calculation of basic and diluted earnings per common share from continuing operations:
Earnings (loss) per share — Basic:
Earnings (loss) from continuing operations
Less: Distributed and undistributed earnings allocated to unvested stock
Earnings (loss) from continuing operations available to common
shareholders — Basic
Weighted average common shares outstanding — Basic
Earnings (loss) from continuing operations per common share — Basic
Earnings (loss) per share — Diluted:
Earnings (loss) from continuing operations
Less: Distributed and undistributed earnings allocated to unvested stock
Earnings (loss) from continuing operations available to common
shareholders — Diluted
Weighted average common shares outstanding — Basic
Effect of dilutive equity awards
Weighted average common shares outstanding — Diluted
Earnings (loss) from continuing operations per common share — Diluted
Anti-dilutive equity awards and market-based restrictive stock rights not
included above
$
$
$
$
$
$
Years ended December 31,
2019
2018
2017
(In thousands, except per share amounts)
(23,272) $
(453)
$
286,922
(1,038)
720,101
(2,594)
(23,725) $
285,884
$
717,507
52,348
52,390
52,613
(0.45) $
5.46
$
13.64
(23,272) $
(453)
$
286,922
(1,038)
720,101
(2,594)
(23,725) $
285,884
$
717,507
52,348
—
52,348
52,390
307
52,697
(0.45) $
5.43
$
2,458
1,330
52,613
373
52,986
13.54
881
19. SHARE-BASED COMPENSATION PLANS
The following table provides information on share-based compensation expense and related income tax benefits
recognized in 2019, 2018 and 2017:
Stock option and stock purchase plans
Unvested stock awards
Share-based compensation expense
Income tax benefit
Share-based compensation expense, net of tax
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
6,575
19,253
25,828
(4,667)
21,161
$
$
7,703
17,249
24,952
(4,615)
20,337
$
$
7,869
11,098
18,967
(6,628)
12,339
Total unrecognized pre-tax compensation expense related to share-based compensation arrangements as of December 31,
2019 was $31 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 during 2019, 2018 and 2017 was $20 million, $18 million and $22 million, respectively.
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. Awards under
108
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
the Plans principally include at-the-money stock options and unvested stock. Unvested stock awards include grants of market-
based, performance-based, and time-vested restricted stock rights. Under the terms of our Plans, dividends on unvested stock
are not paid unless the award vests. Upon vesting, the amount of the 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. As of December 31, 2019, there are 4.3 million shares authorized for issuance under the Plans and 4.2 million shares
remaining available for future issuance.
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 granted since 2013 have
contractual terms of ten years.
Restricted stock awards are unvested stock rights that are granted to employees and entitle the holder to shares of
common stock as the award vests. Time-vested restricted stock rights typically vest ratably over three years regardless of
company performance. The fair value of the time-vested awards is determined and fixed based on Ryder’s stock price on the
date of grant.
Performance-based restricted stock awards (PBRSRs) include a performance-based vesting condition. PBRSRs are
awarded based on our one-year adjusted return on capital (ROC). Beginning in 2018, PBRSRs are also awarded based on the
spread between ROC and the cost of capital (COC) and strategic revenue growth (SRG).
Awards with a ROC performance-based vesting condition are segmented into three one-year performance periods. For
these awards, up to 150% of the awards may be earned based on ROC measured against an annual ROC target. If earned,
employees will receive the grant of stock three years after the grant date, provided they continue to be employed with Ryder,
subject to Compensation Committee approval. For accounting purposes, the awards are not considered granted until the
Compensation Committee approves the annual ROC target. During 2019, 2018 and 2017, 79,000, 98,000 and 79,000 PBRSRs,
respectively, were considered granted for accounting purposes. The fair value of the PBRSRs is determined and fixed on the
grant date based on our stock price on the date of grant. Share-based compensation expense is recognized on a straight-line
basis over the vesting period, based upon the probability that the performance target will be met.
Awards with a performance-based vesting condition measured by the spread between ROC and COC (ROC/COC) have a
three-year performance period. For these awards, up to 200% of the awards may be earned based on ROC/COC measured
against a three-year ROC/COC target. The majority of these awards include a total shareholder return (TSR) modifier. 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 ROC/COC PBRSRs will then be adjusted based on this rank. During 2019 and 2018,
approximately 74,000 and 51,000 PBRSRs, respectively, with the ROC/COC condition were awarded under the Plans. The fair
value of these PBRSRs is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo
simulation. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the
probability that the performance target will be met.
Awards with a SRG performance-based condition have a three-year performance period. For these awards, up to 200% of
the awards may be earned based on SRG measured against a three-year SRG target. The majority of these awards include a
TSR modifier consistent with the discussion above. During 2019 and 2018, approximately 74,000 and 51,000 PBRSRs,
respectively, with the SRG condition were awarded under the Plans. The fair value of these PBRSRs is estimated using a
lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Share-based compensation expense is
recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met.
Market-based restricted stock awards include a market-based vesting provision. The awards, which are no longer granted
since 2017, are segmented into three performance periods of one, two and three years. At the end of each performance period,
up to 150% of the award may be earned based on our TSR compared to the target TSR of a peer group over the applicable
performance period. If earned, employees will receive the grant of stock at the end of the relevant three-year performance
period provided they continue to be employed with Ryder, subject to Compensation Committee approval. The fair value of the
market-based awards was determined on the date of grant using a Monte-Carlo valuation model. Share-based compensation
expense is recognized on a straight-line basis over the vesting period and is recognized regardless of whether the awards vest.
We also grant stock awards to non-management members of the Board of Directors. Equity awards to new board
members do not vest until the director has served a minimum of one year. Prior to 2018, board members received the awards
upon separation from the Board. Beginning in 2018, each director may elect to receive his or her equity award in the form of
109
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
either (i) shares that are distributed at the time of grant or (ii) restricted stock units (RSUs) which will entitle the director to
receive one share of Ryder stock for each RSU granted and are distributed upon or after separation from service on 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. Ryder shares delivered upon grant have
standard voting rights and rights to dividend payments. RSUs that are distributed upon or after separation from service on the
board are eligible for non-forfeitable dividend equivalents until distribution but such RSUs have no voting rights.
Option Awards
The following is a summary of option activity under our stock option plans as of and for the year ended December 31,
2019:
Options outstanding at January 1
Granted
Exercised
Forfeited or expired
Options outstanding at December 31
Vested and expected to vest at December 31
Exercisable at December 31
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(In years)
(In thousands)
Shares
(In thousands)
1,862
$
220
(7)
(85)
1,990
1,896
1,480
$
$
$
72.28
59.09
55.32
71.45
70.92
70.71
71.53
6.1
5.2
5.3
$
$
$
—
—
—
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (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. This amount fluctuates
based on the fair market value of our stock. All options were "out-of-the-money" as of December 31, 2019.
Restricted Stock Awards
The following is a summary of activity for unvested restricted stock awards as of and for the year ended December 31,
2019:
Time-Vested
Market-Based
Performance-Based
Weighted-
Average
Grant Date
Fair Value
Shares
(In thousands)
488
$
416
(145)
(29)
66.11
59.48
61.97
64.68
Shares
(In thousands)
68
—
(21)
(29)
Weighted-
Average
Grant Date
Fair Value
Shares
Weighted-
Average
Grant Date
Fair Value
$
64.26
(In thousands)
229
$
—
54.10
67.80
227
(36)
(46)
73.41
59.51
55.32
67.78
730
$
63.21
18
$
76.49
374
$
67.14
Unvested stock outstanding at January 1
Granted
Vested (1)
Forfeited (2)
Unvested stock outstanding at December
31
_________________
(1) Includes awards attained above target.
(2) Includes awards canceled due to employee terminations or performance and market conditions not being achieved.
Stock Purchase Plan
We maintain an Employee Stock Purchase Plan (ESPP) that enables eligible participants in the U.S. and Canada to
purchase full or fractional shares of Ryder common stock through payroll deductions of up to 15% of eligible compensation.
The ESPP provides for quarterly offering periods during which shares may be purchased at 85% of the fair market value of our
stock. The exercise price is based on the fair market value of the stock on the last trading day of the quarter. Stock purchased
110
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
under the ESPP must be held for 90 days or one year for officers. There were 5.5 million shares authorized for issuance under
the existing ESPP as of December 31, 2019. There were 0.4 million shares remaining available to be purchased in the future
under the ESPP as of December 31, 2019.
The following table presents the weighted-average exercise price for shares granted and exercised under the ESPP:
Years ended December 31,
2019
2018
2017
Shares granted and exercised
Weighted average exercise price
228,000
47.97
$
199,000
54.89
$
160,000
66.72
$
Share-Based Compensation Fair Value Assumptions
The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing
valuation model that uses the weighted-average assumptions noted in the table below. Expected volatility is based on historical
volatility of our stock and implied volatility from traded options on our stock. The risk-free rate for periods within the
contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock
option award is granted with a maturity equal to the expected term of the stock option award. We use historical data to estimate
stock option exercises and forfeitures within the valuation model. The expected term of stock option awards granted is derived
from historical exercise experience under the share-based employee compensation arrangements and represents the period of
time that stock option awards granted are expected to be outstanding. The fair value of market-based restricted stock awards is
estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation.
The following table presents the weighted-average assumptions used for options granted:
Expected dividends
Expected volatility
Risk-free rate
Expected term in years
Grant-date fair value
Years ended December 31,
2019
2018
2017
3.7%
31.4%
2.4%
4.4 years
11.74
$
2.8%
29.4%
2.7%
4.4 years
15.89
$
2.3%
28.5%
1.9%
4.4 years
15.71
$
Exercise of Employee Stock Options and Purchase Plans
The total intrinsic value of options exercised during 2019 was not material. The total intrinsic value of options exercised
during 2018 and 2017 was $3 million and $5 million, respectively. The total cash received from employees under all share-
based employee compensation arrangements for 2019, 2018 and 2017 was $8 million, $17 million and $21 million,
respectively. In connection with these exercises, the tax benefits generated from share-based employee compensation
arrangements were not material for 2019, 2018 and 2017.
111
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
20. EMPLOYEE BENEFIT PLANS
Pension Plans
We historically sponsored several defined benefit pension plans covering most employees not covered by union-
administered plans, including certain employees in foreign countries. These plans generally provided participants with benefits
based on years of service and career-average compensation levels.
In past years, we made amendments to defined benefit retirement plans that froze the retirement benefits for non-
grandfathered and certain non-union employees in the U.S., Canada and the United Kingdom (U.K.). As a result of these
amendments, non-grandfathered plan participants ceased accruing benefits under the plans as of the respective amendment
effective date and began receiving an enhanced benefit under a defined contribution plan. All retirement benefits earned as of
the amendment effective date were fully preserved and will be paid in accordance with the plan and legal requirements. The
funding policy for these plans is to make contributions based on annual service costs plus amortization of unfunded past service
liability, but not greater than the maximum allowable contribution deductible for federal income tax purposes. We may, from
time to time, make voluntary contributions to our pension plans, which exceed the amount required by statute. The majority of
the plans’ assets are invested in a master trust that, in turn, is invested primarily in commingled funds whose investments are
listed stocks and bonds.
We also have a non-qualified supplemental pension plan covering certain U.S. employees, which provides for incremental
pension payments from our funds so that total pension payments equal the amounts that would have been payable from our
principal pension plans if it were not for limitations imposed by income tax regulations. The accrued pension liability related to
this plan was $58 million and $53 million as of December 31, 2019 and 2018, respectively.
Pension Expense
Pension expense from continuing operations was as follows:
Company-administered plans:
Service cost
Interest cost
Expected return on plan assets
Pension settlement expense
Amortization of:
Net actuarial loss
Prior service cost
Union-administered plans
Net pension expense
Company-administered plans:
U.S.
Foreign
Union-administered plans
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
$
$
$
11,007
84,960
(91,034)
34,974
30,708
711
71,326
10,582
81,908
$
75,936
(4,610)
71,326
10,582
81,908
$
$
$
12,108
78,234
(101,980)
3,061
28,593
550
20,566
9,326
29,892
28,043
(7,477)
20,566
9,326
29,892
$
$
$
12,345
86,431
(91,062)
—
32,987
579
41,280
15,553
56,833
43,717
(2,437)
41,280
15,553
56,833
Non-operating pension costs include the amortization of net actuarial loss and prior service cost, interest cost and
expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for
settlements or curtailments. During 2019, we offered approximately 4,500 vested former employees in our U.S. defined benefit
plan a one-time option to receive a lump sum distribution of their benefits. Approximately 1,700 former employees, or 38% of
112
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
those that were offered the distribution, accepted the offer. In December 2019, we made payments of approximately $80 million
from the U.S. defined benefit plan assets, which resulted in a settlement of $90 million, representing approximately 4% of our
U.S. pension plan obligations. We recognized a settlement loss of $32 million of the pro-rata share of the unrecognized actuarial
losses existing at the time of the settlement.
The following table sets forth the weighted-average actuarial assumptions used in determining our annual pension
expense:
Discount rate
Rate of increase in compensation levels
Expected long-term rate of return on
plan assets
Gain and loss amortization period
(years)
U.S. Plans
Years ended December 31,
Foreign Plans
Years ended December 31,
2019
4.35%
3.00%
2018
3.70%
3.00%
2017
4.20%
3.00%
2019
3.04%
3.08%
2018
2.70%
3.08%
2017
3.90%
3.10%
5.40%
5.40%
5.40%
5.36%
5.50%
5.48%
22
21
21
24
26
26
The return on plan assets assumption reflects the weighted-average of the expected long-term rates of return for the broad
categories of investments held in the plans. The expected long-term rate of return is adjusted when there are fundamental
changes in expected returns or in asset allocation strategies of the plan assets.
Obligations and Funded Status
The following table sets forth the benefit obligations, assets and funded status associated with our pension plans:
2019
2018
(In thousands)
$
$
2,135,143
11,007
84,960
274,456
(102,905)
(96,290)
17,709
2,324,080
1,725,543
348,354
72,202
(96,290)
(93,049)
21,948
1,978,708
(345,372)
85%
$
$
2,298,902
12,108
78,234
(120,934)
—
(104,560)
(28,607)
2,135,143
1,941,330
(108,386)
27,741
(104,560)
—
(30,582)
1,725,543
(409,600)
81%
Change in benefit obligations:
Benefit obligations at January 1
Service cost
Interest cost
Actuarial (gain) loss
Pension settlement
Benefits paid
Foreign currency exchange rate changes
Benefit obligations at December 31
Change in plan assets:
Fair value of plan assets at January 1
Actual return on plan assets
Employer contribution
Benefits paid
Pension settlement
Foreign currency exchange rate changes
Fair value of plan assets at December 31
Funded status
Funded percent
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The funded status of our pension plans was presented in the Consolidated Balance Sheets as follows:
Noncurrent asset
Current liability
Noncurrent liability
Net amount recognized
December 31,
2019
2018
(In thousands)
$
$
$
72,320
(3,863)
(413,829)
(345,372) $
51,133
(3,754)
(456,979)
(409,600)
Amounts recognized in accumulated other comprehensive loss (pre-tax) consisted of:
Prior service cost
Net actuarial loss
Net amount recognized
December 31,
2019
2018
(In thousands)
13,798
869,907
883,705
$
$
14,519
929,995
944,514
$
$
In 2020, we expect to amortize $32 million of net actuarial loss as a component of pension expense.
The following table sets forth the weighted-average actuarial assumptions used in determining funded status:
Discount rate
Rate of increase in compensation levels
U.S. Plans
December 31,
Foreign Plans
December 31,
2019
3.30%
3.00%
2018
4.35%
3.00%
2019
2.30%
3.11%
2018
3.04%
3.08%
As of December 31, 2019 and 2018, our total accumulated benefit obligations, as well as our pension plan obligations
(projected benefit obligations (PBO) and accumulated benefit obligations (ABO)) in excess of the fair value of the related plan
assets, for our U.S. and foreign plans were as follows:
U.S. Plans
December 31,
Foreign Plans
December 31,
Total
December 31,
2019
2018
2019
2018
2019
2018
(In thousands)
$ 1,812,813
$ 1,685,270
$ 489,135
$ 429,640
$ 2,301,948
$ 2,114,910
1,832,786
1,812,813
1,423,787
1,703,847
1,685,270
1,250,032
8,693
7,025
—
6,912
5,788
1,841,479
1,819,838
— 1,423,787
1,710,759
1,691,058
1,250,032
Total accumulated benefit obligations
Plans with pension obligations in excess
of plan assets:
PBO
ABO
Fair value of plan assets
Plan Assets
Our pension investment strategy is to reduce the effects of future volatility on the fair value of our pension assets relative
to our pension obligations. We increase our allocation of high quality, longer-term fixed income securities and reduce our
allocation of equity investments as the funded status of the plans improve. The plans utilize several investment strategies,
including actively and passively managed equity and fixed income strategies. The investment policy establishes targeted
allocations for each asset class that incorporate measures of asset and liability risks. Deviations between actual pension plan
asset allocations and targeted asset allocations may occur as a result of investment performance and changes in the funded
status from time to time. Rebalancing of our pension plan asset portfolios is evaluated periodically and rebalanced if actual
allocations exceed an acceptable range. U.S. plans account for approximately 72% of our total pension plan assets. Equity
securities primarily include investments in both domestic and international common collective trusts and publicly traded
equities. Fixed income securities primarily include domestic collective trusts and corporate bonds. Other types of investments
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RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
include private equity fund-of-funds and hedge fund-of-funds. Equity and fixed income securities in our international plans
include actively and passively managed mutual fund.
The following table presents the fair value of each major category of pension plan assets and the level of inputs used to
measure fair value as of December 31, 2019 and 2018:
Asset Category
Equity securities:
U.S. common collective trusts
Foreign common collective trusts
Fixed income securities:
Corporate bonds
Common collective trusts
Private equity and hedge funds
Total
Asset Category
Equity securities:
U.S. common collective trusts
Foreign common collective trusts
Fixed income securities:
Corporate bonds
Common collective trusts
Private equity and hedge funds
Total
Fair Value Measurements at December 31, 2019
Total
Level 1
Level 2
Level 3
(In thousands)
384,739
379,717
$
84,519
1,011,515
118,218
1,978,708
$
— $
—
—
—
—
— $
384,739
379,717
$
—
—
84,519
1,011,515
—
1,860,490
$
—
—
118,218
118,218
Fair Value Measurements at December 31, 2018
Total
Level 1
Level 2
Level 3
(In thousands)
315,741
352,040
$
79,155
856,771
121,836
1,725,543
$
— $
—
—
—
—
— $
315,741
352,040
$
—
—
79,155
856,771
—
1,603,707
$
—
—
121,836
121,836
$
$
$
$
The following is a description of the valuation methodologies used for our pension assets as well as the level of input
used to measure fair value:
Equity securities — These investments include common and preferred stocks and index common collective trusts that
track U.S. and foreign indices. The common collective trusts were valued at the unit prices established by the funds’ sponsors
based on the fair value of the assets underlying the funds. Since the units of the funds are not actively traded, the fair value
measurements have been classified within Level 2 of the fair value hierarchy.
Fixed income securities — These investments include investment grade bonds of U.S. issuers from diverse industries,
government issuers, index common collective trusts that track the Barclays Aggregate Index and other fixed income
investments (primarily mortgage-backed securities). Fair values for the corporate bonds were valued using third-party pricing
services. These sources determine prices utilizing market income models which factor in, where applicable, transactions of
similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap
spreads and volatility. Since the corporate bonds are not actively traded, the fair value measurements have been classified
within Level 2 of the fair value hierarchy. The common collective trusts were valued at the unit prices established by the funds’
sponsors based on the fair value of the assets underlying the funds. Since the units of the funds are not actively traded, the fair
value measurements have been classified within Level 2 of the fair value hierarchy. The other investments are not actively
traded and fair values are estimated using bids provided by brokers, dealers or quoted prices of similar securities with similar
characteristics or pricing models. Therefore, the other investments have been classified within Level 2 of the fair value
hierarchy.
Private equity and hedge funds — These investments represent limited partnership interests in private equity and hedge
funds. The partnership interests are valued by the general partners based on the underlying assets in each fund. The limited
115
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
partnership interests are valued using unobservable inputs and have been classified within Level 3 of the fair value hierarchy.
The following table presents a summary of changes in the fair value of the pension plans’ Level 3 assets for 2019 and
2018:
Beginning balance at January 1
Return on plan assets:
Relating to assets still held at the reporting date
Relating to assets sold during the period
Purchases, sales, settlements and expenses
Ending balance at December 31
2019
2018
(In thousands)
121,836
$
114,593
5,752
(44)
(9,326)
118,218
$
6,762
(38)
519
121,836
$
$
The following table details pension benefits expected to be paid in each of the next five fiscal years and in aggregate for
the five fiscal years thereafter:
2020
2021
2022
2023
2024
2025-2029
(In thousands)
$
107,940
110,416
114,180
117,439
120,585
628,854
For 2020, required pension contributions to our pension plans are estimated to be $37 million.
Multi-employer Plans
We participate in multi-employer plans that provide defined benefits to certain employees covered by collective-
bargaining agreements. Such plans are usually administered by a board of trustees comprised of the management of the
participating companies and labor representatives. The net pension cost of these plans is equal to the annual contribution
determined in accordance with the provisions of negotiated labor contracts. Assets contributed to such plans are not segregated
or otherwise restricted to provide benefits only to our employees. The risks of participating in these multi-employer plans are
different from single-employer plans in the following respects: 1) assets contributed to the multi-employer plan by one
employer may be used to provide benefits to employees and former employees of other participating employers; 2) if a
participating employer is no longer able to contribute to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers at annual contribution rates under the collective bargaining agreements; 3) if there is a mass
withdrawal of substantially all employers from the plan, we may be required to pay the plan an annual contribution based on
historical contribution levels as prescribed by federal statute; and 4) if we choose to stop participating in some of our multi-
employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, which is
referred to as a withdrawal liability.
Our participation in these plans is outlined in the table below. Unless otherwise noted, the most recent Pension Protection
Act zone status available in 2019 and 2018 is for the plan years ended December 31, 2018 and December 31, 2017,
respectively. The zone status is based on information that we received from the plan. Among other factors, plans in the red zone
are generally less than sixty-five percent funded, plans in the yellow zone are less than eighty percent funded, and plans in the
green zone are at least eighty percent funded.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Pension Protection
Act Zone Status
Ryder Contributions
Employer
Identification
Number
2019
2018
FIP/RP Status
Pending/
Implemented (1)
2019
2018
2017
(In thousands)
Expiration Date(s) of
Collective-
Bargaining
Agreement(s)
Surcharge
Imposed
91-6145047
Green
51-6031295
Red
Green
Green
No
$ 3,971
$ 3,488
$ 3,245
RP Adopted
4,148
3,953
3,891
No
Yes
01/12/18 to 03/31/21
10/01/19 to 09/14/23
36-6042061 Yellow
Yellow
FIP Adopted
1,494
969
1,435
931
2,048
Yes
06/01/19 to 05/31/22
915
10,582
9,807
10,099
—
(481)
5,454
$ 10,582
$ 9,326
$ 15,553
Pension Fund
Western Conference
Teamsters (2)
IAM National (3)
Automobile Mechanics
Local No. 701
Other funds
Total contributions
Pension settlement (benefit)
charges
Union-administered plans
_____________
(1) The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either
pending or has been implemented.
(2) The Pension Protection Act zone status is for the plan year ended December 31, 2019.
(3) The Trustees voluntarily elected to put the fund in red status, even though the plan is at least eighty percent funded, and implemented a rehabilitation plan.
Our contributions are impacted by changes in contractual contributions rates as well as changes in the number of
employees covered by each plan.
Savings Plans
Employees who do not actively participate in pension plans and are not covered by union-administered plans are
generally eligible to participate in enhanced savings plans. These plans provide for (i) a company contribution even if
employees do not make contributions for employees hired before January 1, 2016, (ii) a company match of employee
contributions of eligible pay, subject to tax limits and (iii) a discretionary company match. Savings plan costs totaled $39
million, $40 million and $39 million in 2019, 2018 and 2017, respectively.
Deferred Compensation and Long-Term Compensation Plans
We have deferred compensation plans that permit eligible U.S. employees, officers and directors to defer a portion of
their compensation. The deferred compensation liability, including Ryder matching amounts and accumulated earnings, totaled
$71 million and $60 million as of December 31, 2019 and 2018, respectively.
We have established grantor trusts (Rabbi Trusts) to provide funding for benefits payable under the supplemental pension
plan, deferred compensation plans and long-term incentive compensation plans. The assets held in the trusts were $72 million
and $60 million as of December 31, 2019 and 2018, respectively. The Rabbi Trusts’ assets consist of short-term cash
investments and a managed portfolio of equity securities, including our common stock. These assets, except for the investment
in our common stock, are included in “Sales-type leases and other assets” because they are available to our general creditors in
the event of insolvency. The equity securities are classified as trading securities and stated at fair value. Both realized and
unrealized gains and losses are included in “Miscellaneous income, net.” The Rabbi Trusts’ investments of $1 million in our
common stock as of both December 31, 2019 and 2018, are reflected at historical cost and included in shareholders’ equity.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Investments held in Rabbi Trusts are assets measured at fair value on a recurring basis, all of which are considered Level 1
of the fair value hierarchy. The following table presents the asset classes as of December 31, 2019 and 2018:
Cash and cash equivalents
U.S. equity mutual funds
Foreign equity mutual funds
Fixed income mutual funds
Total Investments held in Rabbi Trusts
Other Postretirement Benefits
December 31,
2019
2018
(In thousands)
18,460
$
34,035
8,658
9,800
70,953
$
15,578
29,298
6,678
7,849
59,403
$
$
We sponsor plans that provide retired U.S. and Canadian employees with certain healthcare and life insurance benefits.
Substantially all U.S. and Canadian employees not covered by union-administered health and welfare plans are eligible for the
healthcare benefits. The postretirement medical plan was closed to non-grandfathered participants in 2013. Healthcare benefits
for our principal plan are generally provided to qualified retirees under age 65 and eligible dependents. This plan requires
employee contributions that vary based on years of service and include provisions that limit our contributions. The benefit
obligation was $22 million and $19 million as of December 31, 2019 and 2018, respectively. The amount of postretirement
benefit expense was not material for 2019, 2018 and 2017.
21. ENVIRONMENTAL MATTERS
Our operations involve storing and dispensing petroleum products, primarily diesel fuel, regulated under environmental
protection laws. These laws require us to eliminate or mitigate the effect of such substances on the environment. In response to
these requirements, we continually upgrade our operating facilities and implement various programs to detect and minimize
contamination. In addition, we have received notices from the Environmental Protection Agency (EPA) and others that we have
been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and
Liability Act; the Superfund Amendments and Reauthorization Act; and similar state statutes. We may be required to share in
the cost of cleanup of 21 identified disposal sites.
Our environmental expenses, which are presented within “Cost of fuel services” in our Consolidated Statements of
Earnings, consist of remediation costs as well as normal recurring expenses such as licensing, testing and waste disposal fees.
These expenses totaled $16 million, $12 million and $12 million in 2019, 2018 and 2017, respectively. The carrying amount of
our environmental liabilities was $12 million and $10 million as of December 31, 2019 and 2018, respectively. Our asset
retirement obligations related to fuel tanks to be removed are not included above. Asset retirement obligations totaled $28
million and $27 million as of December 31, 2019 and 2018, respectively. The carrying amount of our environmental liabilities
and our asset retirement obligations are included in “Accrued expenses and other current liabilities” and “Other non-current
liabilities” in our Consolidated Balance Sheets.
The ultimate cost of our environmental liabilities cannot presently be projected with certainty due to the presence of
several unknown factors, primarily the level of contamination, the effectiveness of selected remediation methods, the stage of
investigation at individual sites, the determination of our liability in proportion to other responsible parties and the
recoverability of such costs from third parties. Based on information presently available, we believe that the ultimate
disposition of these matters, although potentially material to the results of operations in any one year, will not have a material
adverse effect on our financial condition or liquidity.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
22. OTHER ITEMS IMPACTING COMPARABILITY
Our primary measure of segment performance as shown in Note 26, "Segment Reporting," excludes certain items we do
not believe are representative of the ongoing operations of the segment. Excluding these items from our segment measure of
performance allows for better year over year comparison:
Restructuring and other, net (1)
ERP implementation costs (1)
Goodwill impairment (2)
Restructuring and other items, net
Tax reform related bonus
Operating tax adjustment
Pension related adjustment (3)
Gain on sale of property (4)
Total
_______________
(1) Refer to Note 5, "Restructuring and Other Items, Net," for additional information.
(2) Refer to Note 9, "Goodwill," for additional information.
(3) Refer to Note 20, "Employee Benefit Plans," for additional information.
(4) Refer to Note 25,"Miscellaneous Income, Net," for additional information.
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
35,308
21,260
—
56,568
—
—
—
(18,614)
37,954
$
$
5,597
742
15,513
21,852
—
—
—
—
21,852
$
$
17,265
—
—
17,265
23,278
2,205
5,454
(24,122)
24,080
In connection with the 2017 Tax Reform, we awarded a one-time bonus, totaling $23 million in the aggregate, to our U.S.-
based non-incentive eligible employees in 2017. The bonus is reflected within “Selling, general and administrative expenses” in
the Consolidated Statements of Earnings.
During 2017, we determined that certain operating tax expenses related to prior periods had not been recognized in prior
period earnings. We recorded a one-time charge of $2 million within “Selling, general and administrative expenses” in the
Consolidated Statements of Earnings as the impact of the adjustment was not material to our consolidated financial statements.
23. OTHER MATTERS
We are a party to various claims, complaints and proceedings arising in the ordinary course of our continuing business
operations including, but not limited to, those relating to commercial and employment claims, environmental matters, risk
management matters (e.g., vehicle liability, workers’ compensation, etc.), and administrative assessments primarily associated
with operating taxes. We have established loss provisions for matters in which losses are probable and can be reasonably
estimated. For matters from continuing operations, we believe that the resolution of these claims, complaints and legal
proceedings will not have a material effect on our consolidated financial statements.
Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing
currently available information. Although we will continue to reassess our reserves and estimates based on future
developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and
actual results may vary from our current estimates.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
24. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information was as follows:
Interest paid
Income taxes paid
Changes in accounts payable related to purchases of revenue
earning equipment
25. MISCELLANEOUS INCOME, NET
Years ended December 31,
2019
2018
(In thousands)
2017
$
225,842
6,325
$
161,826
22,965
$
129,559
13,692
(114,751)
114,862
80,781
Years ended December 31,
2019
2018
(In thousands)
2017
Gains on sales of operating property and equipment
$
17,577
$
2,478
$
26,093
Insurance recoveries
Contract settlement
Foreign currency transaction gains (losses)
Rabbi trust investment income (loss)
Other, net
Total
1,033
—
273
11,221
3,538
1,155
817
(459)
(3,247)
4,678
$
33,642
$
5,422
$
1,734
1,600
657
10,522
3,639
44,245
In 2019, we recorded a gain on the sale of certain SCS properties. In 2017, gains on sales of properties were $26 million
which included the gain on the sale of a SCS property of $25 million. Refer to Note 20 "Employee Benefit Plans" for additional
information on Rabbi trust investment income (loss).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
26. SEGMENT REPORTING
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) SCS, which provides integrated logistics
solutions, including distribution, management, dedicated transportation and professional services in North America; and (3)
DTS, which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers and engineering and
administrative support. Dedicated transportation services provided as part of an operationally integrated, multi-service, supply
chain solution to SCS customers are primarily reported in the SCS business segment.
Our primary measurement of segment financial performance, defined as “Earnings from continuing operations before
taxes” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes non-operating
pension costs and certain other items as discussed in Note 5, "Restructuring and Other Items, Net" and Note 22, "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 business 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, SCS and DTS 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
SCS and DTS segments. EBT related to inter-segment equipment and services billed to SCS and DTS customers (equipment
contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation
(presented as “Eliminations”). Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in
providing services to SCS and DTS customers.
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. Each business segment follows the same accounting
policies as described in Note 1, “Summary of Significant Accounting Policies.” However, we do not record right-of-use assets
or liabilities for our intercompany operating leases between FMS and SCS and DTS business segments. 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. Prior period segment amounts have been revised to reflect the adoption of the new
leasing standard (refer to Note 2 for further information).
121
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Revenue:
Fleet Management Solutions:
ChoiceLease
Commercial rental
SelectCare
Other
Fuel services revenue
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Total revenue
Earnings (Loss) Before Taxes:
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Unallocated Central Support Services
Non-operating pension costs (1)
Other items impacting comparability, net (2)
Earnings (loss) from continuing operations before income taxes
Years ended December 31,
2019
2018
(In thousands)
2017
$
$
$
$
3,112,311
1,009,086
541,358
92,286
816,362
5,571,403
2,551,271
1,417,483
(614,356)
8,925,801
$
$
(70,274) $
145,060
81,149
(50,732)
105,203
(49,114)
(60,406)
(37,954)
(42,271) $
2,860,266
960,606
502,835
87,331
847,655
5,258,693
2,398,144
1,333,313
(576,204)
8,413,946
340,038
130,262
61,236
(63,593)
467,943
(49,081)
(7,541)
(21,852)
389,469
$
$
$
$
2,671,687
813,539
464,056
77,450
689,809
4,716,541
1,937,352
1,095,645
(469,464)
7,280,074
295,618
98,825
55,346
(53,273)
396,516
(48,259)
(27,741)
(24,080)
296,436
______________
(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 and pension settlement charges. Refer to Note 20, "Employee Benefit Plans," for a discussion on
these items.
(2) Refer to Note 22, “Other Items Impacting Comparability,” for a discussion of items excluded from our primary measure of segment performance.
122
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table sets forth depreciation expense, amortization expense and other non-cash charges, net, interest
expense (income), capital expenditures paid and total assets for the years ended December 31, 2019, 2018 and 2017, as
provided to the chief operating decision-maker for each of our reportable business segments:
2019
Depreciation expense (1)
Amortization expense and other non-
cash charges, net
Interest expense (income) (2)
Capital expenditures paid
Total assets
2018
Depreciation expense (1)
Amortization expense and other non-cash
charges, net
Interest expense (income) (2)
Capital expenditures paid
Total assets
2017
Depreciation expense (1)
Amortization expense and other non-cash
charges, net
Interest expense (income) (2)
Capital expenditures paid
Total assets
FMS
SCS
DTS
CSS
Eliminations
Total
(In thousands)
$ 1,825,816
42,428
3,795
6,890
— $ 1,878,929
126,224
$
243,406
$
$ 3,643,573
$ 12,991,716
55,658
1,038
49,421
1,236,589
1,427
(3,224)
2,182
327,384
$ 1,346,484
34,631
4,773
$
$
81,041
181,335
$ 2,979,482
65,443
1,171
45,348
1,469
(2,262)
1,444
$ 11,854,454
1,123,864
324,906
3,815
161
39,998
305,631
2,682
1,053
244
24,135
404,999
187,124
— $
241,381
— $
— $ 3,735,174
(385,986) $ 14,475,334
— $ 1,388,570
— $
— $
149,006
180,488
— $ 3,050,409
(360,415) $ 13,347,808
$ 1,218,897
32,245
3,513
3,026
— $ 1,257,681
$
$
79,252
145,400
$ 1,783,917
$ 10,528,482
28,032
(2,398)
50,117
1,801
(1,659)
3,375
907,627
278,863
(263)
533
23,027
280,371
— $
— $
108,822
141,876
— $ 1,860,436
(269,614) $ 11,725,729
____________
(1) Depreciation expense totaling $27 million, $25 million and $24 million during 2019, 2018 and 2017, respectively, associated with CSS assets was
(2)
allocated to business segments based upon estimated and planned asset utilization.
Interest expense was primarily allocated to the FMS segment since such borrowings were used principally to fund the purchase of revenue earning
equipment used in FMS; however, interest income was also reflected in SCS and DTS based on targeted segment leverage ratios.
Geographic Information
Long-lived assets:
United States
Foreign:
Canada
Europe
Mexico
Singapore
Total
Years ended December 31,
2019
2018
(In thousands)
$
10,106,520
$
9,125,278
737,037
439,772
62,134
—
1,238,943
11,345,463
$
651,424
444,468
56,608
237
1,152,737
10,278,015
$
123
RYDER SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
27. QUARTERLY INFORMATION (UNAUDITED)
Earnings
(Loss) from
Continuing
Operations
Before Income
Taxes
Revenue
Earnings
(Loss) from
Continuing
Operations
Net Earnings
(Loss)
Earnings (Loss) from
Continuing
Operations per
Common Share
Net Earnings (Loss) per
Common Share
Basic
Diluted
Basic
Diluted
(In thousands, except per share amounts)
2019
First quarter
Second quarter
Third quarter
Fourth quarter
Full year
2018
First quarter
Second quarter
Third quarter
Fourth quarter
Full year
$ 2,180,327
2,244,993
2,223,932
2,276,549
$
$
68,151
103,069
(91,260)
(122,231)
$ 8,925,801
$
(42,271) $
$
45,890
75,452
(91,538)
(53,076)
(23,272) $
$
$
$
0.86
0.87
45,316
1.43
1.43
75,215
(1.75)
(1.75)
(91,455)
(53,486)
(1.02)
(1.02)
(24,410) $ (0.45) $ (0.45) $ (0.47) $ (0.47)
0.87
1.44
(1.75)
(1.02)
0.86
1.43
(1.75)
(1.02)
$
$
$ 1,904,205
2,089,904
2,159,682
2,260,155
$
52,699
101,894
118,863
116,013
$
$
37,313
46,169
91,602
111,838
36,886
44,908
90,842
111,977
$ 8,413,946
$
389,469
$
286,922
$
284,613
$
0.71
0.88
1.74
2.13
5.46
$
$
0.70
0.87
1.73
2.12
5.43
$
$
0.70
0.85
1.73
2.13
5.41
$
$
0.70
0.85
1.72
2.12
5.38
Quarterly and year-to-date computations of per share amounts are made independently; therefore, the sum of per-share
amounts for the quarters may not equal per-share amounts for the year.
Refer to Note 5, “Restructuring and Other Items, Net,” and Note 22, “Other Items Impacting Comparability,” for items
included in earnings during 2019 and 2018.
Refer to Note 7, "Revenue Earning Equipment, Net" for further discussion on adjustments to the estimated residual values
on revenue earning equipment that impacted earnings in the third and fourth quarter of 2019.
124
RYDER SYSTEM, INC. AND SUBSIDIARES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Description
2019
Accounts receivable allowance
Self-insurance accruals (3)
Valuation allowance on deferred tax assets
2018
Accounts receivable allowance
Self-insurance accruals (3)
Valuation allowance on deferred tax assets
2017
Accounts receivable allowance
Self-insurance accruals (3)
Valuation allowance on deferred tax assets
Additions
Balance at
Beginning
of Period
Charged to
Earnings
Transferred
from Other
Accounts (1)
(In thousands)
Deductions
(2)
Balance
at End
of Period
$
$
$
$
$
$
$
$
$
17,182
357,526
16,186
13,847
348,612
18,667
14,915
336,901
16,387
23,003
436,148
1,906
10,890
359,528
(534)
12,335
327,306
2,213
—
86,832
—
—
82,904
—
—
74,153
—
17,424
469,521
515
7,555
433,518
1,947
$
$
$
$
$
$
13,403
389,748
$
$
(67) $
22,761
410,985
17,577
17,182
357,526
16,186
13,847
348,612
18,667
______________
(1) Transferred from other accounts includes employee contributions made to the medical and dental self-insurance plans.
(2) Deductions represent write-offs, lease termination payments, insurance claim payments during the period and net foreign currency translation
adjustments.
(3) Self-insurance accruals include vehicle liability, workers’ compensation, property damage, cargo and medical and dental, which comprise our self-
insurance programs. Amounts charged to earnings include developments in prior years' selected loss development factors, which charged earnings by $18
million in 2019 and $1 million in 2018 and benefited earnings by $9 million in 2017.
125
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Evaluation of Disclosure Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the
participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange
Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that at
December 31, 2019, Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange
Act of 1934) were effective.
Management’s Report on Internal Control over Financial Reporting
Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Certified
Public Accounting Firm thereon are set out in Item 8 of Part II of this Form 10-K Annual Report.
Changes in Internal Controls over Financial Reporting
Beginning January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842)” and related amendments (collectively,
the “new lease standard”). As a result of our adoption of the new lease standard, we implemented significant new lease
accounting systems, processes and internal controls over lease accounting to assist us in the application of the new lease
standard. During the three months ended December 31, 2019, there were no changes in Ryder’s internal control over financial
reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.
None.
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 with respect to executive officers is included within Item 1 in Part I under the
caption “Information about our Executive Officers” of this Form 10-K Annual Report.
The information required by Item 10 with respect to directors, audit committee, audit committee financial experts and
Section 16(a) beneficial ownership reporting compliance (to the extent applicable) is included under the captions “Election of
Directors,” “Audit Committee,” and “Delinquent Section 16(a) Reports,” respectively, in our definitive proxy statement, which
will be filed with the Commission within 120 days after the close of the fiscal year, and is incorporated herein by reference.
Ryder has adopted a code of conduct applicable to all employees, including its Chief Executive Officer, Chief Financial
Officer, Controller and Senior Financial Management. We will provide a copy of our code of conduct to anyone, free of charge,
upon request through our Investor Relations Page, on our website at www.ryder.com.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is included under the captions “Compensation Discussion and Analysis,” “Executive
Compensation,” “Compensation Committee,” “Compensation Committee Report on Executive Compensation” and “Director
Compensation” in our definitive proxy statement, which will be filed with the Commission within 120 days after the close of
the fiscal year, and is incorporated herein by reference.
126
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 with respect to security ownership of certain beneficial owners and management is
included under the captions “Security Ownership of Officers and Directors” and “Security Ownership of Certain Beneficial
Owners” in our definitive proxy statement, which will be filed with the Commission within 120 days after the close of the fiscal
year, and is incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plans
The following table includes information as of December 31, 2019 about certain plans that provide for the issuance of
common stock in connection with the exercise of stock options and other share-based awards.
Plans
Equity compensation plans approved by security holders:
Broad based employee stock plans
Employee stock purchase plan
Non-employee directors' stock plans
Total
Number of Securities to
be issued upon Exercise
of Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of
Securities
Remaining
Available for Future
Issuance Under
Equity
Compensation Plans
Excluding
Securities Reflected
in Column (a)
(a)
(b)
(c)
2,935,754 (1)
—
209,917 (2)
3,145,671
$69.69 (3)
—
—
$69.69
656,593
356,649
37,484
1,050,726
_______________
(1)
Includes 1,989,773 stock options, 526,420 time-vested restricted stock awards, 17,880 market-based restricted stock awards and 401,681 performance-
based restricted stock awards, which includes 27,392 performance-based restricted stock rights not considered granted under accounting guidance for
stock compensation. Refer to Note 19, "Share-Based Compensation Plans", for additional information.
Includes 204,079 time-vested restricted stock awards, as well as 5,838 time-vested restricted stock awards awarded to non-executive directors and vested
but not exercisable until six months after the director's retirement.
(2)
(3) Weighted-average exercise price of outstanding options excludes restricted stock awards and restricted stock units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
The information required by Item 13 is included under the captions “Board of Directors” and “Related Person
Transactions” in our definitive proxy statement, which will be filed with the Commission within 120 days after the close of the
fiscal year, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is included under the caption “Ratification of Independent Auditor” in our definitive
proxy statement, which will be filed with the Commission within 120 days after the close of the fiscal year, and is incorporated
herein by reference.
127
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Items A through H and Schedule II are presented on the following pages of this Form 10-K Annual Report:
1. Financial Statements for Ryder System, Inc. and Consolidated Subsidiaries:
A) Management’s Report on Internal Control over Financial Reporting
B) Report of Independent Registered Certified Public Accounting Firm
C) Consolidated Statements of Earnings
D) Consolidated Statements of Comprehensive Income
E) Consolidated Balance Sheets
F) Consolidated Statements of Cash Flows
G) Consolidated Statements of Shareholders’ Equity
H) Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedule for the Years Ended December 31, 2019, 2018
and 2017
Schedule II — Valuation and Qualifying Accounts
Page No.
66
67
71
72
73
74
75
76
125
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated
financial statements or notes thereto.
Supplementary Financial Information consisting of selected quarterly financial data is included in Item 8 of this report.
3. Exhibits:
The following exhibits are filed with this report or, where indicated, incorporated by reference (Forms 10-K, 10-Q and 8-
K referenced herein have been filed under the Commission’s file No. 1-4364). Ryder will provide a copy of the exhibits filed
with this report at a nominal charge to those parties requesting them.
None.
ITEM 16. FORM 10-K SUMMARY
128
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
EXHIBIT INDEX
Description
The Ryder System, Inc. Restated Articles of Incorporation (conformed copy incorporating all amendments
through May 3, 2019), previously filed with the Commission on May 9, 2019 as an exhibit to Ryder's
Quarterly Report on Form 10-Q, is incorporated by reference in this report.
The Ryder System, Inc. By-Laws, as amended through May 3, 2019, previously filed with the Commission on
May 9, 2019 as an exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this
report.
Ryder hereby agrees, pursuant to paragraph (b)(4)(iii) of Item 601 of Regulation S-K, to furnish the
Commission with a copy of any instrument defining the rights of holders of long-term debt of Ryder, where
such instrument has not been filed as an exhibit hereto and the total amount of securities authorized there
under does not exceed 10% of the total assets of Ryder and its subsidiaries on a consolidated basis.
The First Supplemental Indenture between Ryder System, Inc. and The Chase Manhattan Bank (National
Association) dated October 1, 1987, previously filed with the Commission as an exhibit to Ryder's Annual
Report on Form 10-K for the year ended December 31, 1994, is incorporated by reference into this report.
The Form of Indenture between Ryder System, Inc. and The Chase Manhattan Bank (National Association)
dated as of May 1, 1987, and supplemented as of November 15, 1990 and June 24, 1992, filed with the
Commission on July 30, 1992 as an exhibit to Ryder's Registration Statement on Form S-3 (No. 33-50232), is
incorporated by reference into this report.
The Form of Indenture between Ryder System, Inc. and J.P. Morgan Trust Company (National Association)
dated as of October 3, 2003 filed with the Commission on August 29, 2003 as an exhibit to Ryder's
Registration Statement on Form S-3 (No. 333-108391), is incorporated by reference into this report.
Form of Medium-Term Note - Master Note, previously filed with the Commission on July 30, 2019, as an
exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated by reference in this report.
Description of Ryder System Inc.'s Securities Registered Under Section 12 of the Securities Exchange Act of
1934.
The Ryder System, Inc. 2005 Equity Compensation Plan, previously filed with the Commission on March 21,
2008, as Appendix A to Ryder's Definitive Proxy Statement on Schedule 14A, is incorporated by reference
into this report.
The Ryder System, Inc. Stock Purchase Plan for Employees, previously filed with the Commission on March
29, 2010, as Appendix B to Ryder System, Inc.'s Definitive Proxy Statement on Schedule 14A, is incorporated
by reference into this report.
Terms and Conditions applicable to restricted stock units granted under the Ryder System, Inc. 2005 Equity
Compensation Plan, previously filed with the Commission as an exhibit to Ryder's Quarterly Report on Form
8-K filed with the Commission on May 11, 2005, are incorporated by reference into this report.
Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed with the Commission as
an exhibit to Ryder's Current Report on Form 8-K filed with the Commission on May 10, 2012, is
incorporated by reference into this report.
Terms and Conditions applicable to non-qualified stock options granted under the Ryder System, Inc. 2012
Equity and Incentive Compensation Plan, previously filed with the Commission as an exhibit to Ryder's
Current Report on Form 8-K filed with the Commission on May 10, 2012, are incorporated by reference into
this report.
Terms and Conditions applicable to restricted stock units granted under the Ryder System, Inc. 2012 Equity
and Incentive Compensation Plan, previously filed with the Commission as an exhibit to Ryder's Current
Report on Form 8-K filed with the Commission on May 10, 2012, are incorporated by reference into this
report.
129
Exhibit
Number
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
Description
Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed
with the Commission on May 10, 2016 as an exhibit to Ryder’s Quarterly Report on Form 8-K, is incorporated
by reference to this report.
Form of Terms and Conditions applicable to non-qualified stock options granted under the Amended and
Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed with the
Commission on July 27, 2016 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated by
reference to this report.
Form of Terms and Conditions applicable to restricted stock units for non-employee directors granted under the
Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed
with the Commission on July 27, 2016 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated
by reference to this report.
The Form of Amended and Restated Severance Agreement for Chief Executive Officer, previously filed with
the Commission on February 14, 2017 as an exhibit to Ryder's Annual Report on Form 10-K for the year ended
December 31, 2016, is incorporated by reference into this report.
The Ryder System, Inc. Executive Severance Plan, effective as of January 1, 2017, previously filed with the
Commission on February 14, 2017 as an exhibit to Ryder's Annual Report on Form 10-K for the year ended
December 31, 2016, is incorporated by reference into this report.
Form of Terms and Conditions applicable to non-qualified stock options granted under the Amended and
Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed with the
Commission on April 25, 2017 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated by
reference to this report.
Form of Terms and Conditions applicable to performance-based restricted stock rights granted under the
Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed
with the Commission on April 25, 2017 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is
incorporated by reference to this report.
Form of Terms and Conditions applicable to restricted stock rights granted under the Amended and Restated
Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed with the Commission on
April 25, 2017 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated by reference to this
report.
Form of Terms and Conditions applicable to restricted stock units granted under the Amended and Restated
Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed with the Commission on
April 25, 2017 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated by reference to this
report.
Form of Terms and Conditions applicable to performance-based restricted stock rights granted under the
Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed
with the Commission on February 20, 2018 as an exhibit to Ryder’s Annual Report on Form 10-K, is
incorporated by reference to this report.
The Form of Amended and Restated Severance Agreement for named executive officers (other than the Chief
Executive Officer), previously filed with the Commission on February 20, 2018 as an exhibit to Ryder’s
Annual Report on Form 10-K, is incorporated by reference to this report.
Form of Terms and Conditions applicable to stock-awards for non-employee directors issued under the
Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed
with the Commission on July 25, 2018 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is incorporated
by reference to this report.
Form of Terms and Conditions applicable to deferred stock awards for non-employee directors issued under the
Amended and Restated Ryder System, Inc. 2012 Equity and Incentive Compensation Plan, previously filed
with the Commission on October 26, 2018 as an exhibit to Ryder’s Quarterly Report on Form 10-Q, is
incorporated by reference to this report.
The Ryder System, Inc. Directors Stock Award Plan, as amended and restated at February 10, 2005, previously
filed with the Commission on February 24, 2005 as an exhibit to Ryder's Annual Report on Form 10-K for the
year ended December 31, 2004, is incorporated by reference into this report.
The Ryder System, Inc. Directors Stock Plan, as amended and restated at May 7, 2004, previously filed with
the Commission on February 24, 2005 as an exhibit to Ryder's Annual Report on Form 10-K for the year ended
December 31, 2004, is incorporated by reference into this report.
The Ryder System Benefit Restoration Plan, as amended and restated, previously filed with the Commission as
an exhibit to Ryder's Current Report on Form 8-K filed with the Commission on February 11, 2009, is
incorporated by reference into this report.
Form of Indemnification Agreement for independent directors, effective as of February 24, 2016, previously
filed with the Commission as an exhibit to Ryder's Current Report on Form 8-K filed with the Commission on
February 29, 2016, is incorporated by reference into this report.
130
Exhibit
Number
10.24*
10.25*
10.26
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
21.1
23.1
Description
The Ryder System, Inc. Deferred Compensation Plan, effective as of January 1, 2009, previously filed with the
Commission as an exhibit to Ryder's Current Report on Form 8-K filed with the Commission on February 11,
2009, is incorporated by reference to this report.
Employment Offer Letter for Frank Mullen dated as of August 25, 2017, between Ryder System, Inc. and
Frank Mullen, previously filed with the Commission as an exhibit to Ryder’s Current Report on Form 8-K filed
with the Commission on September 18, 2017, is incorporated by reference in this report.
Second Amended and Restated Global Revolving Credit Agreement, dated as of September 28, 2018, by and
among Ryder System, Inc., certain Ryder subsidiaries, and the lenders and agents named therein, previously
filed with the Commission as an exhibit to Ryder’s Current Report on Form 8-K filed with the Commission on
October 3, 2018, is incorporated by reference to this report.
Ryder System, Inc. 2019 Equity and Incentive Compensation Plan, previously filed with the Commission on
March 18, 2019, as Appendix A to Ryder System, Inc.'s Definitive Proxy Statement on Schedule 14A, is
incorporated by reference into this report.
Employment Offer Letter for Scott T. Parker, previously filed with the Commission on March 27, 2019, as an
exhibit to Ryder's Current Report on Form 8-K filed with the Commission on March 27, 2019, is incorporated
by reference in this report.
Form of Terms and Conditions Applicable to Deferred Stock Awards for Non-Employee Directors issued under
the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan, previously filed with the Commission
on May 9, 2019 as an exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this
report.
Form of Terms and Conditions Applicable to Non-Qualified Stock Options issued under the Ryder System, Inc.
2019 Equity and Incentive Compensation Plan, previously filed with the Commission on May 9, 2019 as an
exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this report.
Form of Terms and Conditions Applicable to Performance-Based Restricted Stock Rights issued under the
Ryder System, Inc. 2019 Equity and Incentive Compensation Plan, previously filed with the Commission on
May 9, 2019 as an exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this
report.
Form of Terms and Conditions Applicable to Restricted Stock Rights issued under the Ryder System, Inc. 2019
Equity and Incentive Compensation Plan, previously filed with the Commission on May 9, 2019 as an exhibit
to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this report.
Form of Terms and Conditions Applicable to Stock Awards for Non-Employee Directors issued under the
Ryder System, Inc. 2019 Equity and Incentive Compensation Plan, previously filed with the Commission on
May 9, 2019 as an exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this
report.
Form of Ryder System, Inc. Annual Cash Incentive Award Plan, previously filed with the Commission on May
9, 2019 as an exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this report.
Ryder System, Inc. Non-Qualified Stock Option Award Granted as an “Employment Inducement Grant” under
New York Stock Exchange Listing Rule 303A.08, previously filed with the Commission on May 9, 2019 as an
exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this report.
Ryder System, Inc. Restricted Stock Rights Award Granted as an “Employment Inducement Grant” under New
York Stock Exchange Listing Rule 303A.08, previously filed with the Commission on May 9, 2019 as an
exhibit to Ryder's Quarterly Report on Form 10-Q, is incorporated by reference in this report.
Forms of Terms and Conditions Applicable to Non-Qualified Stock Options issued under the Ryder System,
Inc. 2019 Equity and Incentive Compensation Plan.
Form of Terms and Conditions Applicable to Performance-Based Restricted Stock Rights issued under the
Ryder System, inc. 2019 Equity and Incentive Compensation Plan.
Form of Terms and Conditions Applicable to Restricted Stock Rights issued under the Ryder System, inc. 2019
Equity and Incentive Compensation Plan.
List of subsidiaries of the registrant, with the state or other jurisdiction of incorporation or organization of each,
and the name under which each subsidiary does business.
PricewaterhouseCoopers LLP consent to incorporation by reference in certain Registration Statements on Form
S-8 and on Form S-3 of their report on Consolidated Financial Statements financial statement schedule and
effectiveness of internal controls over financial reporting of Ryder System, Inc.
131
Exhibit
Number
24
31.1
31.2
32
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Description
Manually executed powers of attorney for each of:
Robert J. Eck
Robert A. Hagemann
Michael F. Hilton
Tamara L. Lundgren
Luis P. Nieto
David G. Nord
Abbie J. Smith
E. Follin Smith
Dmitri L. Stockton
Hansel E. Tookes
Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Certification of Scott Parker pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Certification of Robert E. Sanchez and Scott Parker pursuant to Rule 13a-14(b) or Rule 15d-14(b) and
18 U.S.C. Section 1350.
Inline XBRL Instance Document.
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document.
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Management contract or compensation plan arrangement pursuant to Item 601(b)(10) of Regulation S-K.
132
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date:
February 27, 2020
RYDER SYSTEM, INC.
By: /s/ ROBERT E. SANCHEZ
Robert E. Sanchez
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Date:
February 27, 2020
Date:
February 27, 2020
Date:
February 27, 2020
Date:
February 27, 2020
Date:
February 27, 2020
Date:
February 27, 2020
By: /s/ ROBERT E. SANCHEZ
Robert E. Sanchez
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ SCOTT T. PARKER
Scott T. Parker
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By: /s/ FRANK MULLEN
Frank Mullen
Vice President and Controller
(Principal Accounting Officer)
By: ROBERT J. ECK *
Robert J. Eck
Director
By: ROBERT A. HAGEMANN *
Robert A. Hagemann
Director
By: MICHAEL F. HILTON*
Michael F. Hilton
Director
133
Date:
February 27, 2020
By: TAMARA L. LUNDGREN*
Date:
February 27, 2020
Date:
February 27, 2020
Date:
February 27, 2020
Tamara L. Lundgren
Director
By: LUIS P. NIETO, JR. *
Luis P. Nieto, Jr.
Director
By: DAVID G. NORD *
David G. Nord
Director
By: ABBIE J. SMITH *
Abbie J. Smith
Director
Date:
February 27, 2020
By: E. FOLLIN SMITH *
Date:
February 27, 2020
Date:
February 27, 2020
E. Follin Smith
Director
By: DMITRI L. STOCKTON *
Dmitri L. Stockton
Director
By: HANSEL E. TOOKES, II *
Hansel E. Tookes, II
Director
Date:
February 27, 2020
*By: /s/ ALENA BRENNER
Alena Brenner
Attorney-in-Fact, pursuant to a power of attorney
134
EXHIBIT 4.6
Description of Ryder System, Inc.’s Securities Registered Under Section 12 of the Exchange Act
The following summary of our capital stock is based on and qualified in its entirety by reference to our
restated articles of incorporation and bylaws. For a complete description of the terms and provisions of our capital
stock, refer to our restated articles of incorporation and the bylaws, both of which are filed as exhibits to this Annual
Report on Form 10-K. Reference is also made to the Florida Business Corporation Act, or FBCA.
General
As of the date of this Annual Report on Form 10-K, we were authorized to issue up to 400,000,000 shares
of common stock, $0.50 par value per share and 3,800,917 shares of preferred stock, no par value per share. As of
December 31, 2019, 53,278,316 shares of our common stock were issued and outstanding, and no shares of our
preferred stock were issued and outstanding.
The outstanding shares of our common stock are duly authorized, validly issued, fully-paid and non-
assessable. Our common stock is listed on the New York Stock Exchange, under the symbol “R.”
Common Stock
Our common stock has the following rights and privileges:
Dividend Rights
Each share of our common stock is entitled to participate equally with respect to dividends declared on our
common stock out of funds legally available for the payment thereof. Our restated articles of incorporation do not
limit the dividends that can be paid on our common stock.
Liquidation Rights
After satisfaction of creditors and payments due to the holders of preferred stock, the holders of our
common stock are entitled to share ratably in the distribution of all remaining assets.
Voting Rights
In general, the holders of our common stock are entitled to one vote per share for the election of directors
and for other corporate purposes. Our restated articles of incorporation and/or bylaws also:
•
•
•
permit shareholders to remove a director with or without cause by the affirmative vote of the majority
of the votes cast of the outstanding shares of voting stock, voting as a class;
provide that a vacancy on our board of directors may be filled by a majority of the directors then in
office? and
permit shareholders to take action only at an annual meeting, or a special meeting duly called by our
board of directors or the holders of not less than 10% of the voting power of the outstanding shares of
voting stock entitled to vote on the matter.
1
Under our bylaws, a quorum is present where a majority of the total number of shares issued and outstanding and
entitled to vote at a meeting are present in person or represented by proxy. At a meeting where a quorum is present,
in connection with an uncontested election of directors, the affirmative vote of the holders of at least a majority of
the total number of shares cast is required for the election of each director. Where the number of nominees
considered by the shareholders for election as a director exceeds the number of directors to be elected, directors are
elected by the vote of a plurality of the votes cast. Unless otherwise provided in our restated articles of incorporation
or bylaws or in accordance with applicable law, the affirmative vote of a majority of the votes cast is required for
shareholder action on matters other than the election of directors. Voting rights for the election of directors or
otherwise, if any, for any series of preferred stock, will be established by the board of directors when such series is
designated. The holders of our common stock do not have cumulative voting rights.
Board of Directors
Our bylaws provide that, at each annual meeting of stockholders, all directors shall be elected to hold office
for a term expiring at the next annual meeting of stockholders following the year of their election.
No Other Rights
Holders of our common stock are not entitled to preemptive, redemption, subscription or conversion rights.
The rights, preferences and privileges of holders of common stock could be subject to, and may be adversely
affected by, the rights of the holders of shares of any preferred stock, if any, which may be issued in the future.
Anti-Takeover Effects of our Restated Articles of Incorporation and Bylaws and Florida Law
Certain provisions of our restated articles of incorporation, our bylaws and Florida law contain provisions
that could have the effect of delaying, deferring or discouraging another party from acquiring control of us.
Our restated articles of incorporation provide that the consent of the holders of a majority of each series of
outstanding preferred stock, if any, shall be required in order to effect a merger or consolidation of the company with
or into any other corporation or the sale of all or substantially all of the assets of the company in exchange for stock
or securities of another corporation unless: (i) the surviving corporation will not have, after such transaction, any
stock either authorized or outstanding that ranks prior to the preferred stock, or to the stock of the surviving
corporation issued in exchange therefor, in respect of payment of dividends or distribution of assets (except such
stock of the company as may have been authorized or outstanding immediately prior to the transaction), and (ii) the
merger or consolidation results in no change in the rights, privileges or preferences of such series of preferred stock
or the stock of the surviving corporation issued in exchange therefor. While we currently do not have any shares of
preferred stock outstanding, the issuance of any shares of preferred stock in the future may delay, defer or prevent a
merger or sale of all or substantially all of the company’s assets.
Our bylaws contain advance notice procedures for shareholders to make nominations of candidates for
election as directors or to bring other business before the annual meeting of shareholders. As specified in our
bylaws, director nominations and the proposal of business to be considered by shareholders may be made only
pursuant to a notice of meeting, at the direction of the board of directors (or a committee thereof) or by a shareholder
who is a shareholder of record at the time of giving the notice, who is entitled to vote at the meeting and who has
complied with the advance notice procedures that are provided in our bylaws.
To be timely, a nomination of a director by a shareholder or notice for business to be brought before an
annual meeting by a shareholder must be delivered to the Secretary of the company not less than 90 days nor more
2
than 120 days prior to the first anniversary of the preceding year’s annual meeting? provided, however, that in the
event that the date of an annual meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, for notice by the shareholder to be timely, it must be delivered not earlier than the opening of
business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the
90th day prior to such annual meeting and (ii) the 10th day following the day on which public announcement of the
date of such meeting is first made, whichever first occurs.
In the event a special meeting of shareholders is called for the purpose of electing one or more directors,
any shareholder who is a shareholder of record at the time of giving the notice, who is entitled to vote at the meeting
and who has complied with the advance notice procedures that are provided in our bylaws may nominate a person or
persons as specified in our bylaws, but only if the shareholder notice is delivered to the Secretary of the company
not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of (x)
the 90th day prior to such special meeting and (y) the 10th day following the day on which public disclosure of the
date of such special meeting and the nominees proposed by the Board of Directors to be elected at such meeting was
made, whichever first occurs.
We are also subject to statutory “anti-takeover” provisions under Florida law. Section 607.0901 of the
FBCA imposes restrictions upon acquirers of 10% or more of our outstanding voting shares and requires approval by
the corporation’s disinterested directors or a supermajority of disinterested shareholders for certain business
combinations and corporate transactions with the interested shareholder or any entity or individual controlled by the
interested shareholder, unless certain statutory exemptions apply. Section 607.0902 of the FBCA eliminates the
voting rights of common stock acquired by a party who, by such acquisition, controls at least 20% of all voting
rights of the corporation’s issued and outstanding stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EQ Shareowner Services.
3
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EXHIBIT 10.37
NON-QUALIFIED STOCK OPTIONS
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
20XX TERMS AND CONDITIONS
The following terms and conditions apply to the non-qualified stock option (“Option”) granted by Ryder
System, Inc. (the “Company”) under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the
“Plan”) during the 20XX calendar year, as specified in the Stock Option Award Notification (the “Notification”)
for the Option which references these terms and conditions. Certain terms of the Option, including the number of
Shares subject to the Option, the exercise price, the vesting schedule and the expiration date, are set forth in the
Notification. The terms and conditions contained herein may be amended by the Compensation Committee of the
Company’s Board of Directors (the “Committee”) as permitted by the Plan. Capitalized terms used herein and not
defined shall have the meaning ascribed to such terms in the Plan or in the Notification.
1.
2.
3.
4.
General. The Option represents the right to purchase Shares on the terms and conditions set forth
herein, in the Notification and the Plan, the applicable terms, conditions and other provisions of
which are incorporated by reference herein. A copy of the Plan and the documents that constitute
the “Prospectus” for the Plan under the Securities Act of 1933 have been made available to the
Participant prior to or along with delivery of the Notification. In the event there is an express
conflict between the provisions of the Plan and those set forth in these terms and conditions, the
terms and conditions of the Plan shall govern.
Exercisability of Option. Subject to Sections 4 and 5 below, the Option shall vest and become
exercisable pursuant to the vesting schedule set forth in the Notification and shall remain
exercisable until the expiration date set forth in the Notification, or such other expiration date
designated by the Committee pursuant to Section 7 of the Plan (the “Expiration Date”).
Exercise Procedures. The Option, to the extent exercisable, may be exercised by delivering to the
Company’s stock administrator, notice of intent to exercise in the manner designated by the stock
administrator on behalf of the Company which may vary based on the Participant’s position with
the Company. Payment of the aggregate exercise price and applicable withholding taxes shall be
made in the manner, consistent with the Plan and these terms and conditions, designated by the
stock administrator on behalf of the Company.
Termination of Option; Forfeiture. Notwithstanding the vesting and expiration dates set forth in
the Notification, the Option will terminate upon or following the termination of the Participant’s
employment with the Company and its Subsidiaries as described below. Except as otherwise
provided in Section 4(d) and 5(a) below, upon the Participant’s termination of employment for
any reason, the unvested portion of the Option will immediately terminate. For purposes of these
terms and conditions, a Participant shall not be deemed to have terminated his or her employment
with the Company and its Subsidiaries if he or she is then employed by the Company or another
Subsidiary without a break in service.
(a)
Resignation by the Participant or Termination by the Company or a Subsidiary other than
for Cause: Except as otherwise provided in this Section 4 or Section 5(b) below, the vested
portion of the Option will terminate at 12:01 a.m. on the 91st day following the Participant’s
last day of employment (but not later than the Expiration Date), provided that if the
Participant dies during such 90 day period, such portion of the Option will terminate no
earlier than 12:01 a.m. on the first anniversary of the date of death (but not later than the
Expiration Date) and provided further that, if, upon such termination, the Participant is
entitled to severance benefits in the form of salary continuation, then the vested portion
of the Option will terminate at 12:01 a.m. on the 91st day following the date that salary
continuation is no longer payable to the Participant (but not later than the Expiration Date).
Notwithstanding the foregoing, if the Participant is terminated by the Company or a
Subsidiary without Cause and is subsequently re-employed by the Company or a
Subsidiary prior to 12:01 a.m. on the 91st day following the later of (i) the last day of
employment or (ii) if applicable, the date that salary continuation is no longer payable to
the Participant, but in either case, not later than the Expiration Date, then the vested, but
unexercised, portion of the Options will remain exercisable until the Expiration Date,
unless terminated earlier pursuant hereto.
In the event that the Participant voluntarily terminates his or her employment with the
Company or a Subsidiary and is subsequently re-employed by the Company or a Subsidiary
prior to 12:01 a.m. on the 91st day following the Participant’s last day of employment (but
not later than the Expiration Date), then the vested, but unexercised, portion of the Options
will remain exercisable until the Expiration Date, unless terminated earlier pursuant hereto.
(b)
(c)
(d)
(e)
Retirement: If a Participant’s employment terminates for any reason (other than for Cause,
death or Disability) at a time when he or she is eligible for Retirement, then the vested
portion of the Option will terminate upon the Expiration Date.
Termination due to Death: If a Participant’s employment terminates on account of the
Participant’s death, the vested portion of the Option will expire upon the Expiration Date.
Following the Participant’s death, the right to exercise such vested portion will pass to the
Participant’s Beneficiary.
Termination due to Disability: If a Participant’s employment terminates on account of the
Participant’s Disability, the unvested portion of the Option that would otherwise have
become vested during the three years following Disability will continue to vest as
scheduled (without regard to subsequent status changes). The vested portion of the Option,
including the portion that becomes vested pursuant to the preceding sentence, will expire
upon the Expiration Date.
Termination for Cause: Notwithstanding the foregoing provisions of this Section 4, the
entire Option, including the vested portion, will terminate immediately upon the
Participant’s termination of employment for Cause. To the extent the Participant exercised
any portion of the Option during the one year period immediately prior to the date of such
2
termination of employment for Cause, the Company shall have the right to reclaim and
receive from the Participant all Shares delivered to the Participant upon such exercise, or
to the extent the Participant has transferred such Shares, the after-tax equivalent value
thereof (as of the date the Shares were transferred by the Participant) in cash, and in each
case upon receipt thereof, the Company shall return the exercise price paid by the
Participant.
(f)
Proscribed Activity: If, during the Proscribed Period but prior to a Change of Control, the
Participant engages in a Proscribed Activity, then any portion of the Option still outstanding
shall terminate and the Company shall have the right to reclaim and receive from the
Participant all Shares delivered to the Participant upon the exercise of the Option during
the one year period immediately prior to, or at any time following, the date of the
Participant’s termination of employment, or to the extent the Participant has transferred
such Shares, the after-tax equivalent value thereof (as of the date the Shares were
transferred by the Participant) in cash, and in each case upon receipt thereof, the Company
shall return the exercise price paid by the Participant.
5.
Change of Control.
(a)
(b)
(c)
Treatment of the Option: In the event of a Change of Control, the Committee may take
such actions with respect to the Option as it deems appropriate pursuant to the Plan;
provided that if the Option continues in effect after a Change of Control and the
Participant’s employment is terminated by the Company without Cause, the Participant
terminates employment for Good Reason, or the Participant’s employment is terminated
on account of death, Disability or Retirement, in each case, upon or within 24 months
following the Change of Control, any unvested portion of the Option shall become fully
vested upon such termination of employment.
Option Termination: Notwithstanding anything contained herein to the contrary and except
as otherwise determined by the Committee prior to a Change of Control in accordance
with Section 7 or 8 of the Plan, in the event of a Change of Control, any portion of the
Option which is vested as of the Change of Control or becomes vested upon or following
the Change of Control (whether pursuant to this Section 5 or otherwise) shall remain
outstanding until the Expiration Date, but subject to earlier termination under the
circumstances described in Sections 4(e) and (f) above.
Termination of Employment Prior to a Change of Control: For purposes of this Section 5,
the term Option shall refer only to those Options that are outstanding at the time of the
Change of Control and not to any unvested Options that have terminated pursuant to
Section 4 above, provided that, if (i) the Participant’s employment was terminated by the
Company other than for Cause or Disability during the 12 month period prior to the Change
of Control, (ii) during such 12 month period, the Participant does not engage in a Proscribed
Activity, and (iii) the Committee determines, in its sole and absolute discretion, that the
decision related to such termination was made in contemplation of the Change of Control,
within 30 days following the Change of Control, with respect to any portion of the Option
which the Participant forfeited upon the Participant’s termination of employment, the
Participant shall receive a lump sum cash payment per Share equal to the excess, if any,
of the Fair Market Value of a Share on the date that the Change of Control occurs, over
the exercise price per Share subject to the Option. In addition, in the event that a
3
Participant’s employment terminates on account of Disability prior to a Change of Control,
any portion of the Option which is unvested and outstanding as of the Change of Control
and would otherwise vest during the three years following Disability in accordance with
Section 4(d) above shall become fully vested upon the Change of Control.
6.
U.S. Federal, State and Local Income Withholding. The Participant is solely responsible for the
satisfaction of all taxes that may arise in connection with the Option, and the Option may not be
exercised unless the Participant makes arrangements satisfactory to the Company to ensure that
its withholding tax obligations will be satisfied. At the time of taxation, the Company shall have
the right to deduct from other compensation or from amounts payable with respect to the Option,
including by withholding Shares otherwise issuable upon the exercise of the Option, an amount
equal to the federal (including FICA), state and local income and payroll taxes and other amounts
as may be required by law to be withheld with respect to the Option. Notwithstanding the foregoing,
the Company may satisfy any tax obligations it may have in any other jurisdiction outside the U.S.
in any manner it deems, in its sole and absolute discretion, to be necessary or appropriate.
7.
Definitions.
(a)
“Proscribed Activity” means any of the following:
(i)
(ii)
(iii)
the Participant’s breach or violation of (A) any written agreement between the
Participant and the Company or any of its Subsidiaries, including any agreement
and/or
relating
nondisparagement, to the extent such agreements are enforceable under applicable
law, or (B) any legal obligation it may have to the Company;
noncompetition,
nonsolicitation
nondisclosure,
to
the Participant’s direct or indirect unauthorized use or disclosure of confidential
information or trade secrets of the Company or any Subsidiary, including, but not
limited to, such matters as costs, profits, markets, sales, products, product lines,
key personnel, pricing policies, operational methods, customers, customer
requirements, suppliers, plans for future developments, and other business affairs
and methods and other information not readily available to the public;
the Participant’s direct or indirect engaging or becoming a partner, director, officer,
principal, employee, consultant, investor, creditor or stockholder in/for any
business, proprietorship, association, firm or corporation not owned or controlled
by the Company or its Subsidiaries which is engaged or proposes to engage in a
business competitive directly or indirectly with the business conducted by the
Company or its Subsidiaries in any geographic area where such business of the
Company or its Subsidiaries is conducted, provided that the Participant’s
investment in 1% or less of the outstanding capital stock of any corporation whose
stock is listed on a national securities exchange shall not be treated as a Proscribed
Activity;
(iv)
the Participant’s direct or indirect, either on the Participant’s own account or for
any person, firm or company, soliciting, interfering with or inducing, or attempting
to induce, any employee of the Company or any of its Subsidiaries to leave his or
her employment or to breach his or her employment agreement;
4
(v)
(vi)
(vii)
the Participant’s direct or indirect taking away, interfering with relations with,
diverting or attempting to divert from the Company or any Subsidiary any business
with any customer of the Company or any Subsidiary, including (A) any customer
that has been solicited or serviced by the Company within one year prior to the
date of termination of the Participant’s employment with the Company and (B)
any customer with which the Participant has had contact or association, or which
was under the supervision of the Participant, or the identity of which was learned
by the Participant as a result of the Participant’s employment with the Company;
following the Participant’s termination of employment, the Participant’s making
of any remarks disparaging the conduct or character of the Company or any of its
Subsidiaries, or their current or former agents, employees, officers, directors,
successors or assigns; or
the Participant’s failure to cooperate with the Company or any Subsidiary, for no
additional compensation (other than reimbursement of expenses), in any litigation
or administrative proceedings involving any matters with which the Participant
was involved during the Participant’s employment with the Company or any
Subsidiary.
Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits
the Participant from initiating communications directly with, responding to any inquiries
from, providing testimony before, providing confidential information to, reporting
possible violations of law or regulation to, or from filing a claim or assisting with an
investigation directly with, a self-regulatory authority or a government agency or entity,
including the U.S. Equal Employment Opportunity Commission, the Department of Labor,
the National Labor Relations Board, the Department of Justice, the Securities and
Exchange Commission, Congress, and any agency Inspector General (collectively, the
“Regulators”), or from making other disclosures that are protected under the whistleblower
provisions of state or federal law or regulation. The Participant does not need the prior
authorization of the Company to engage in such communications with the Regulators,
respond to such inquiries from the Regulators, provide confidential information or
documents to the Regulators, or make any such reports or disclosures to the Regulators.
The Participant is not required to notify the Company that the Participant has engaged in
such communications with the Regulators.
If the Participant primarily provides services in California, subsection (iii) above shall not
apply to the Participant and subsection (v) above shall apply to the Participant only to the
extent that the Participant uses or discloses confidential information of the Company or
any if its Subsidiaries in performing such Proscribed Activity and to the extent permitted
by applicable law.
(b)
“Proscribed Period” means the period beginning on the date of termination of the
Participant’s employment and ending on the later of (A) the one year anniversary of such
termination date or (B) if the Participant is entitled to severance benefits in the form of
salary continuation, the date on which salary continuation is no longer payable to the
Participant.
(c)
“Retirement” means termination of employment for any reason (other than for Cause or
by reason of death or Disability) upon or following attainment of age 55 and completion
5
of 5 years of service, or upon or following attainment of age 65 without regard to years
of service; provided that, Retirement shall not be deemed to occur unless such termination
of service constitutes a separation from service, as defined by Section 409A of the Code.
8.
9.
10.
Company Policies. The Option and any Shares or cash delivered pursuant to the Option shall be
subject to all applicable clawback or recoupment policies, share trading policies, share holding
and other policies that may be implemented by the Company’s Board of Directors from time to
time.
Other Benefits. No amount accrued or paid under this Award shall be deemed compensation for
purposes of computing a Participant’s benefits under any retirement plan of the Company or its
Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect
under which the availability or amount of benefits is related to the Participant’s level of
compensation.
Defend Trade Secrets Act Notice. Participants are hereby notified that the immunity provisions
in Section 1833 of title 18 of the United States Code provide that an individual cannot be held
criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade
secret that is made (i) in confidence to federal, state or local government officials, either directly
or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected
violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other
proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for
reporting a suspected violation of law (and the trade secret may be used in the court proceedings
for such lawsuit) as long as any document containing the trade secret is filed under seal and the
trade secret is not disclosed except pursuant to court order.
6
EXHIBIT 10.38
PERFORMANCE-BASED RESTRICTED STOCK RIGHTS
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
20XX TERMS AND CONDITIONS
The following terms and conditions apply to the 20XX performance-based restricted stock rights (the
“PBRSRs”) granted by Ryder System, Inc. (the “Company”) under the Ryder System, Inc. 2019 Equity and
Incentive Compensation Plan (the “Plan”), as specified in the Performance-Based Restricted Stock Right
Award Notification (the “Notification”) which references these terms and conditions. Certain terms of the
PBRSRs, including the number of Shares underlying the PBRSRs, are set forth in Schedule A and in the
Notification. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall
administer the PBRSRs in accordance with the Plan. Capitalized terms used herein and not defined shall
have the meaning ascribed to such terms in the Plan or in Schedule A or the Notification.
1. General. Each PBRSR represents the right to receive one Share on a future date based upon
the attainment of certain financial performance goals and continued employment, on the terms
and conditions set forth in Schedule A, in the Notification and in the Plan, the applicable terms,
conditions and other provisions of which are incorporated by reference herein (collectively, the
“Award Documents”). A copy of the Plan and the documents that constitute the “Prospectus”
for the Plan under the Securities Act of 1933 have been made available to the Participant prior
to or along with delivery of the Notification. In the event there is an express conflict between
the provisions of the Plan and those set forth in any other Award Document, the terms and
conditions of the Plan shall govern.
The terms and conditions contained herein may be amended by the Committee as permitted by
the Plan; none of the terms and conditions of the PBRSRs may be amended or waived without
the prior approval of the Committee. Any amendment or waiver not approved by the Committee
will be void and have no force or effect. Any employee or officer of the Company who authorizes
any such amendment or waiver without the prior approval of the Committee will be subject to
disciplinary action up to and including forfeiture of his or her PBRSRs and/or termination of
employment (unless otherwise prohibited by law). All decisions and determinations made by
the Committee relating to the PBRSRs shall be final and binding on the Participant, his or her
beneficiaries and any other person having or claiming an interest under the Plan.
2. Financial Performance Goals.
The financial performance goals (the “Performance Goals”) applicable to the Award are set forth
in Schedule A.
3. Delivery of Shares. Provided that the Participant remained continuously employed through the
end of the Performance Period (but subject to Sections 4 and 5 below), the number of Shares
equal to the number of Accrued PBRSRs, net of the number of Shares necessary to satisfy
applicable withholding taxes, will be transferred to an account held in the name of the Participant
by the Company’s independent stock plan administrator and the Participant will receive notice
of such transfer together with all relevant account details. Such transfer will occur in 20XX as
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soon as practicable after the Committee has determined the Company’s relative attainment with
respect to the Performance Goals after the conclusion of the Performance Period, provided that
in no event shall the transfer be made after March 15, 20XX. As used herein, the term
“Performance Period” shall mean the period from January 1, 20XX through December 31, 20XX.
4. Termination of the PBRSRs; Forfeiture. The PBRSRs will be cancelled upon the termination
of the Participant’s employment with the Company and its Subsidiaries as described below.
(a)
(b)
(c)
Resignation by the Participant or Termination by the Company or a Subsidiary: Except
as provided in subsection (b) or Section 5 below, upon any termination of a Participant’s
employment with the Company and its Subsidiaries prior to the end of the Performance
Period, all outstanding PBRSRs will be forfeited and the Participant will not have any
right to delivery of Shares. In addition, even if a Participant remains employed through
the end of the Performance Period, if the Participant’s employment is subsequently
terminated by the Company or a Subsidiary for Cause, the right to any undelivered
Shares shall be forfeited, and the Company shall have the right to reclaim and receive
from the Participant any Shares delivered to the Participant pursuant to Section 3 within
the one year period before the date of the Participant’s termination of employment, or
to the extent the Participant has transferred such Shares, the equivalent after-tax value
thereof (as of the date the Shares were transferred by the Participant) in cash.
Termination by reason of Death, Disability or Retirement: Except as otherwise provided
in Section 5 below, if a Participant’s employment terminates due to death, Disability or
Retirement prior to the end of the Performance Period, the Participant (or his or her
Beneficiary, in the event of death) will be entitled to receive a pro-rata number of Shares
that would have been delivered pursuant to Section 3, had the Participant remained
employed through the end of the Performance Period, based on the number of days
during the Performance Period that the Participant is considered to be an active employee
as determined by the Company, payable at the time and manner specified in Section 3
above.
Proscribed Activity: If, during the Proscribed Period but prior to a Change of Control,
the Participant engages in a Proscribed Activity, then the Company shall have the right
to reclaim and receive from the Participant all Shares delivered to the Participant
pursuant to Section 3 during the one year period immediately prior to, or at any time
following, the date of the Participant’s termination of employment, or to the extent the
Participant has transferred such Shares, the after-tax equivalent value thereof (as of the
date the Shares were transferred by the Participant) in cash.
5. Change of Control. Notwithstanding anything contained herein to the contrary, in the event of
a Change of Control during the Performance Period, unless otherwise determined by the
Committee prior to the Change of Control, each Participant shall be entitled to delivery of a
number of Shares equal to the COC Share Amount (as defined below) (such Shares, the “COC
Shares”); provided that, except as set forth in subsections (c) and (d) below, the Participant
remains actively employed through the last day of the Performance Period. Except as set forth
in subsections (c) and (d) below, the COC Shares shall be delivered at the time and manner
specified in Section 3 above.
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(a)
(b)
(c)
(d)
(e)
Calculation of the COC Share Amount. In the event of a Change of Control during
the Performance Period, the Performance Period shall end, and the COC Share
Amount shall be determined as of the date of the Change of Control. The COC
Share Amount shall be equal to the greater of the Accrued PBRSRs for the
Performance Period (measured as though the last day of the Performance Period
was the date immediately preceding the date of the Change of Control) or one-
hundred percent (100%) of the PBRSR Award.
Form of Payment. The Committee may determine that the COC Shares shall be (i)
converted to and payable in units with respect to shares or other equity interests of
the acquiring company or its parent or (ii) payable in cash based on the Fair Market
Value of the COC Shares as of the Change of Control.
Termination without Cause or for Good Reason. If the Participant’s employment
is terminated by the Company without Cause or the Participant terminates
employment for Good Reason, prior to the end of the Performance Period and upon
or within 24 months following a Change of Control, the COC Shares shall be
delivered in a lump sum within 60 days following the Participant’s employment
termination date, subject to Section 9.17 of the Plan; provided that such Change of
Control constitutes a change “in ownership” or “effective control” or a change in
the “ownership of a substantial portion of the assets” of the Company under Section
409A of the Code and the rulings and regulations issued thereunder (any such
transaction, a “409A Compliant COC”). In the event that such Change of Control
does not constitute a 409A Compliant COC (any such transaction, a “Non-409A
Compliant COC”), the COC Shares will be delivered to the Participant at the time
and manner specified in Section 3 above.
Termination due to Death, Disability or Retirement. If a Participant’s employment
terminates due to death, Disability or Retirement prior to the end of the Performance
Period and upon or within 24 months following a Change of Control, the Participant
(or his or her Beneficiary, in the event of death) will be entitled to receive the COC
Shares, which shall be delivered in a lump sum within 60 days following the
Participant’s employment termination date, subject to Section 9.17 of the Plan;
provided that, the COC Shares will be delivered to the Participant at the time and
manner specified in Section 3 above if the Change of Control is a Non-409A
Compliant COC. If such termination occurs more than 24 months following a
Change of Control, the COC Payment Amount will be pro-rated, based on the
number of days during the Performance Period that the Participant is considered to
be an active employee, as determined by the Company, and will be paid at the time
and manner specified in Section 3 above.
Termination Prior to a Change of Control. To the extent (i) a Participant’s
employment was terminated by the Company other than for Cause or Disability
within the 12 months prior to the date on which the Change of Control occurred,
(ii) during such 12 month period the Participant did not engage in a Proscribed
Activity, and (iii) the Committee determines, in its sole and absolute discretion, that
the decision related to such termination was made in contemplation of the Change
of Control, then upon the Change of Control, the Participant will become entitled
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to a cash payment equal to the product of: the Fair Market Value of a Share on the
date of the Change of Control and the COC Share Amount. In the event of a 409A
Compliant COC, such cash payment will be made in a lump sum within 60 days
following the date on which the Change of Control occurs. In the event of a
Non-409A Compliant COC, the cash payment will be paid to the Participant at the
time and manner specified in Section 3 above. In the event that a Participant’s
termination of employment by the Company under this Section 5(e) also meets the
requirements of Retirement, this Section 5(e) shall supersede Section 4(b) above.
6. Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights
of a shareholder of the Company with respect to Shares subject to the PBRSRs until such Shares
are actually delivered to the Participant. At the time Shares are delivered to the Participant
pursuant to Section 3 or Section 5, as applicable, the Company will make a cash payment equal
to the product of (i) the number of Accrued PBRSRs or the COC Share Amount, if applicable,
and (ii) the aggregate dividends paid on a Share during the Performance Period.
7. U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the
satisfaction of all taxes that may arise in connection with the PBRSRs. At the time of taxation,
the Company shall have the right to deduct from other compensation or from amounts payable
with respect to the PBRSRs, including by withholding Shares otherwise issuable upon settlement
of the PBRSRs (as determined by the Company in its sole discretion), an amount equal to the
federal (including FICA), state and local income and payroll taxes and other amounts as may
be required by law to be withheld with respect to the PBRSRs. The Company intends to satisfy
this withholding obligation by reducing the number of Shares and/or cash to be delivered to the
Participant under this Agreement in an amount sufficient to satisfy the withholding obligations
due (based on the Fair Market Value of the Shares for the related PBRSRs). Notwithstanding
the foregoing, the Company may satisfy any tax obligations it may have in any other jurisdiction
outside of the U.S. in any manner it deems, in its sole and absolute discretion, to be necessary
or appropriate.
8. Section 409A. The PBRSRs are intended to comply with Section 409A of the Code or an
exemption, and delivery of Shares and other payments pursuant to the PBRSRs may only be
made upon an event and in a manner permitted by Section 409A, to the extent applicable. The
PBRSRs shall be administered consistent with Section 9.17 of the Plan.
9. Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the
Company or by any shareholder against any past, present, or future member of the Board of
Directors, officer, or employee of the Company arising out of or in connection with the PBRSRs
or the Award Documents, must be brought within three years from the date of the act or omission
in respect of which such right of action arises. The PBRSRs and the Award Documents shall be
governed by the laws of the State of Florida, without giving effect to principles of conflict of
laws, and construed accordingly.
10. No Employment Right. Neither the grant of the PBRSRs nor any action taken hereunder shall
be construed as giving any employee or any Participant any right to be retained in the employ
of the Company. The Company is under no obligation to grant PBRSRs hereunder. Nothing
contained in the Award Documents shall limit or affect in any manner or degree the normal and
usual powers of management, exercised by the officers and the Board of Directors or committees
thereof, to change the duties or the character of employment of any employee of the Company
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or to remove the individual from the employment of the Company at any time, all of which
rights and powers are expressly reserved.
11. No Assignment. A Participant’s rights and interest under the PBRSRs may not be assigned or
transferred, except as otherwise provided herein, and any attempted assignment or transfer shall
be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation
under the PBRSRs or the Award Documents.
12. Unfunded Plan. Any Shares or other amounts owed under the PBRSRs shall be unfunded. The
Company shall not be required to establish any special or separate fund, or to make any other
segregation of assets, to assure delivery or payment of any earned amounts.
13. Company Policies. Any amounts paid under the PBRSRs are considered “incentive
compensation” under the Company’s Recoupment Policy, in effect from time to time. The
PBRSRs and any Shares or cash paid pursuant to the PBRSRs shall be subject to all applicable
clawback or recoupment policies, share trading policies, share holding and other policies that
may be implemented by the Company’s Board of Directors from time to time.
14. Definitions.
(a)
(b)
(c)
“Accrual Percentage” means the percentage of the PBRSRs that accrues at the end
of the Performance Period pursuant to Section 2 based on the Company’s attainment
of the Performance Goals or as described in Section 5.
“Accrued PBRSRs” means the Accrual Percentage for the Performance Period times
one hundred percent (100%) of the PBRSR Award.
“Performance Period” means the period from January 1, 20XX through December
31, 20XX.
(d)
“Proscribed Activity” means any of the following:
(i)
(ii)
the Participant’s breach of any written agreement between the Participant
and the Company or any of its Subsidiaries, including any agreement
to nondisclosure, noncompetition, nonsolicitation and/or
relating
nondisparagement, to the extent such agreements are enforceable under
applicable law;
the Participant’s direct or indirect unauthorized use or disclosure of
confidential information or trade secrets of the Company or any Subsidiary,
including, but not limited to, such matters as costs, profits, markets, sales,
products, product lines, key personnel, pricing policies, operational
methods, customers, customer requirements, suppliers, plans for future
developments, and other business affairs and methods and other information
not readily available to the public;
(iii)
the Participant’s direct or indirect engaging or becoming a partner, director,
officer, principal, employee, consultant, investor, creditor or stockholder
in/for any business, proprietorship, association, firm or corporation not
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owned or controlled by the Company or its Subsidiaries which is engaged
or proposes to engage in a business competitive directly or indirectly with
the business conducted by the Company or its Subsidiaries in any
geographic area where such business of the Company or its Subsidiaries is
conducted, provided that the Participant’s investment in 1% or less of the
outstanding capital stock of any corporation whose stock is listed on a
national securities exchange shall not be treated as a Proscribed Activity;
the Participant’s direct or indirect, either on the Participant’s own account
or for any person, firm or company, soliciting, interfering with or inducing,
or attempting to induce, any employee of the Company or any of its
Subsidiaries to leave his or her employment or to breach his or her
employment agreement;
the Participant’s direct or indirect taking away, interfering with relations
with, diverting or attempting to divert from the Company or any Subsidiary
any business with any customer of the Company or any Subsidiary,
including (A) any customer that has been solicited or serviced by the
Company within one year prior to the date of termination of Participant’s
employment with the Company and (B) any customer with which the
Participant has had contact or association, or which was under the
supervision of Participant, or the identity of which was learned by the
Participant as a result of Participant’s employment with the Company;
following the Participant’s termination of employment, the Participant’s
making of any remarks disparaging the conduct or character of the Company
or any of its Subsidiaries, or their current or former agents, employees,
officers, directors, successors or assigns; or
the Participant’s failure to cooperate with the Company or any Subsidiary,
for no additional compensation (other than reimbursement of expenses), in
any litigation or administrative proceedings involving any matters with
which the Participant was involved during the Participant’s employment
with the Company or any Subsidiary.
(iv)
(v)
(vi)
(vii)
Notwithstanding the foregoing, nothing in these terms and conditions restricts or
prohibits the Participant from initiating communications directly with, responding
to any inquiries from, providing testimony before, providing confidential
information to, reporting possible violations of law or regulation to, or from filing
a claim or assisting with an investigation directly with, a self-regulatory authority
or a government agency or entity, including the U.S. Equal Employment Opportunity
Commission, the Department of Labor, the National Labor Relations Board, the
Department of Justice, the Securities and Exchange Commission, Congress, and
any agency Inspector General (collectively, the “Regulators”), or from making other
disclosures that are protected under the whistleblower provisions of state or federal
law or regulation. The Participant does not need the prior authorization of the
Company to engage in such communications with the Regulators, respond to such
inquiries from the Regulators, provide confidential information or documents to the
Regulators, or make any such reports or disclosures to the Regulators. The
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Participant is not required to notify the Company that the Participant has engaged
in such communications with the Regulators.
If the Participant primarily provides services in California, subsection (iii) above
shall not apply to the Participant and subsection (v) above shall apply to the
Participant only to the extent that the Participant uses or discloses confidential
information of the Company or any of its Subsidiaries in performing such Proscribed
Activity and to the extent permitted by applicable law.
(e)
(f)
“Proscribed Period” means the period beginning on the date of termination of
Participant’s employment and ending on the later of (i) the one year anniversary of
such termination date or (ii) if the Participant is entitled to severance benefits in the
form of salary continuation, the date on which salary continuation is no longer
payable to the Participant.
“Retirement” means termination of employment for any reason (other than for Cause
or by reason of death or Disability) upon or following attainment of age 55 and
completion of 5 years of service, or upon or following attainment of age 65 without
regard to years of service; provided that, Retirement shall not be deemed to occur
unless such termination of service constitutes a separation from service, as defined
by Section 409A of the Code.
(g)
“Performance Period” means the period from January 1, 20XX through December
31, 20XX.
13. Other Benefits. No amount accrued or paid under the PBRSRs shall be deemed compensation
for purposes of computing a Participant’s benefits under any retirement plan of the Company
or its Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in
effect under which the availability or amount of benefits is related to the Participant’s level of
compensation.
14. Defend Trade Secrets Act Notice. Participants are hereby notified that the immunity provisions
in Section 1833 of title 18 of the United States Code provide that an individual cannot be held
criminally or civilly liable under any federal or state trade secret law for any disclosure of a
trade secret that is made (i) in confidence to federal, state or local government officials, either
directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating
a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit
or other proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation
for reporting a suspected violation of law (and the trade secret may be used in the court
proceedings for such lawsuit) as long as any document containing the trade secret is filed under
seal and the trade secret is not disclosed except pursuant to court order.
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EXHIBIT 10.39
RESTRICTED STOCK RIGHTS
ISSUED UNDER
RYDER SYSTEM, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
20XX TERMS AND CONDITIONS
The following terms and conditions apply to the Restricted Stock Rights (the “RSRs”) granted in 20XX by Ryder
System, Inc. (the “Company”) under the Ryder System, Inc. 2019 Equity and Incentive Compensation Plan (the
“Plan”), as specified in the Restricted Stock Rights Award Notification (the “Notification”) for the RSRs which
references these terms and conditions. Certain terms of the RSRs, including the number of Shares underlying the
RSRs, are set forth in the Notification. The Compensation Committee of the Company’s Board of Directors (the
“Committee”) shall administer the RSRs in accordance with the Plan. Capitalized terms used herein and not defined
shall have the meaning ascribed to such terms in the Plan or in the Notification.
1.
2.
General. Each RSR represents the right to receive one Share on a future date, on the terms and
conditions set forth herein, in the Notification and the Plan, the applicable terms, conditions and
other provisions of which are incorporated by reference herein (collectively, the “Award
Documents”). A copy of the Plan and the documents that constitute the “Prospectus” for the Plan
under the Securities Act of 1933 have been made available to the Participant prior to or along with
delivery of the Notification. In the event there is an express conflict between the provisions of
the Plan and those set forth in any other Award Document, the terms and conditions of the Plan
shall govern.
The terms and conditions contained herein may be amended by the Committee as permitted by
the Plan; none of the terms and conditions of the RSRs may be amended or waived without the
prior approval of the Committee. Any amendment or waiver not approved by the Committee will
be void and have no force or effect. Any employee or officer of the Company who authorizes any
such amendment or waiver without the prior approval of the Committee will be subject to
disciplinary action up to and including forfeiture of his or her RSRs and/or termination of
employment (unless otherwise prohibited by law). All decisions and determinations made by the
Committee relating to the RSRs shall be final and binding on the Participant, his or her beneficiaries
and any other person having or claiming an interest under the Plan.
Delivery of Shares. Subject to Sections 3 and 4 below, the RSRs will vest pursuant to the vesting
schedule set forth in the Notification, provided the Participant is, on the relevant vesting date, and
has been from the date of grant of the RSRs to the relevant vesting date, continuously employed
by the Company or one of its Subsidiaries. For purposes of these terms and conditions, the
Participant shall not be deemed to have terminated his or her employment with the Company and
its Subsidiaries if he or she is then employed by the Company or another Subsidiary without a
break in service.
Upon vesting, the Shares subject to the vested RSRs will be transferred to an account held in the
name of the Participant by the Company’s independent stock plan administrator and the Participant
will receive notice of such transfer together with all relevant account details.
3.
Termination of RSRs; Forfeiture. The RSRs will be cancelled upon or following the termination
of the Participant’s employment with the Company and its Subsidiaries as described below.
(a)
(b)
(c)
Resignation by the Participant or Termination by the Company or a Subsidiary: Except
as otherwise provided in subsection (b) or Section 4 below, all outstanding RSRs will be
forfeited and the Participant will not have any right to delivery of Shares that did not vest
prior to such termination. If the Participant’s employment is terminated by the Company
or a Subsidiary for Cause, then the Company shall have the right to reclaim and receive
from the Participant any Shares delivered to the Participant pursuant to Section 2 within
the one year period before the date of the Participant’s termination of employment, or to
the extent the Participant has transferred such Shares, the equivalent after-tax value thereof
(as of the date the Shares were transferred by the Participant) in cash.
Termination by Reason of Death, Disability or Retirement: Except as otherwise provided
in Section 4 below, a prorated portion of the RSRs shall vest, calculated as follows: (A)
the total number of RSRs awarded, multiplied by a fraction (and rounded down to the
nearest whole Share), the numerator of which shall be the number of days from the date
of grant of the RSRs to the date of death, Disability or Retirement, as the case may be,
and the denominator of which shall be the number of days from the date of grant of the
RSRs to the last scheduled vesting date for the RSRs set forth in the Notification, less (B)
the number of RSRs already vested at the time of the Participant’s death, Disability or
Retirement, as the case may be. Shares equal to the prorated number of RSRs that so vest
will be delivered to the Participant (or his or her Beneficiary, in the event of death) within
60 days following the date of death, Disability or Retirement, as the case may be, subject
to Section 9.17 of the Plan.
Proscribed Activity: If, during the Proscribed Period but prior to a Change of Control, the
Participant engages in a Proscribed Activity, then the Company shall have the right to
reclaim and receive from the Participant all Shares delivered to the Participant pursuant
to Section 2 during the one year period immediately prior to, or at any time following, the
date of the Participant’s termination of employment, or to the extent the Participant has
transferred such Shares, the after-tax equivalent value thereof (as of the date the Shares
were transferred by the Participant) in cash.
4.
Change of Control. In the event of a Change of Control, the RSRs shall become payable as
described in this Section 4, provided that the Committee may take such other actions with respect
to the RSRs as it deems appropriate pursuant to Section 7 and 8 of the Plan.
(a)
(b)
(c)
Form of Payment: The Committee may determine that the unvested RSRs will be (i)
converted to and payable in units with respect to shares or other equity interests of the
acquiring company or its parent or (ii) payable in cash based on the Fair Market Value of
the RSRs as of the date of the Change of Control.
Continued Employment: If the Participant continues in employment with the Company
or one of its Subsidiaries through each applicable vesting date following the Change of
Control, the RSRs will vest pursuant to the vesting schedule set forth in the Notification.
Termination without Cause, for Good Reason or on Account of Death, Disability or
Retirement. If the Participant’s employment is terminated by the Company without Cause,
the Participant terminates employment for Good Reason, or the Participant’s employment
terminates on account of death, Disability or Retirement, in each case, upon or within 24
months following a Change of Control and prior to the last vesting date set forth in the
Notification, any unvested RSRs shall become fully vested upon such termination of
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(d)
employment and shall be paid within 60 days following the date of such termination,
subject to Section 9.17 of the Plan.
Termination Prior to a Change of Control: To the extent (i) a Participant’s employment
was terminated by the Company other than for Cause or Disability within the 12 months
prior to the date on which the Change of Control occurred, (ii) during such 12 month
period the Participant did not engage in a Proscribed Activity, and (iii) the Committee
determines, in its sole and absolute discretion, that the decision related to such termination
was made in contemplation of the Change of Control, then upon the Change of Control,
the Participant will become entitled to a cash payment equal to the product of: the Fair
Market Value of a Share on the date of the Change of Control and the number of Shares
to which the Participant would otherwise have been entitled if the Participant’s employment
had continued until the date of the Change of Control and the Participant’s employment
had been terminated as described in subsection (c) above as of such date. In the event that
the Change of Control constitutes a change “in ownership” or “effective control” or a
change in the “ownership of a substantial portion of the assets” of the Company under
Section 409A of the Code and the rulings and regulations issued thereunder (any such
transaction, a “409A Compliant COC”), such cash payment will be made in a lump sum
within 60 days following the date on which the Change of Control occurs. In the event
such Change of Control does not constitute a 409A Compliant COC (any such transaction,
a “Non-409A Compliant COC”), the cash payment will be distributed to the Participant
on the first anniversary of the Participant’s separation from service.
Rights as a Shareholder; Dividend Equivalent Rights. The Participant will not have the rights of
a shareholder of the Company with respect to Shares subject to the RSRs until such Shares are
actually delivered to the Participant. If and when Shares are delivered to the Participant pursuant
to Section 2, 3 or 4, as applicable, the Company will make a cash payment equal to the product of
(i) the number of Shares delivered, and (ii) the aggregate dividends paid on a Share during the
period from the date of grant of the award until the date the Shares are delivered.
U.S. Federal, State and Local Income Taxes. The Participant is solely responsible for the
satisfaction of all taxes generally that may arise in connection with the RSRs. At the time of
taxation, the Company shall have the right to deduct from other compensation or from amounts
payable with respect to the RSRs, including by withholding Shares otherwise issuable upon
settlement of the RSRs an amount equal to the federal (including FICA), state and local income
and payroll taxes required by law to be withheld with respect to the RSRs. The Company intends
to satisfy this withholding obligation by reducing the number of Shares and/or cash that are to be
delivered to the Participant under this Agreement in an amount sufficient to satisfy the withholding
obligations due (based on the Fair Market Value of the Shares for the related RSRs).
Notwithstanding the foregoing, the Company may satisfy any tax obligations it may have in any
jurisdiction outside the U.S. in any manner it deems, in its sole and absolute discretion, to be
necessary or appropriate.
Section 409A. The RSRs are intended to comply with Section 409A of the Code or an exemption,
and delivery of Shares and other payments pursuant to the RSRs may only be made upon an event
and in a manner permitted by Section 409A, to the extent applicable. The RSRs shall be
administered consistent with Section 9.17 of the Plan.
Statute of Limitations and Conflicts of Laws. All rights of action by, or on behalf of the Company
or by any shareholder against any past, present, or future member of the Board of Directors, officer,
or employee of the Company arising out of or in connection with the RSRs or the Award Documents,
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5.
6.
7.
8.
must be brought within three years from the date of the act or omission in respect of which such
right of action arises. The RSRs and the Award Documents shall be governed by the laws of the
State of Florida, without giving effect to principles of conflict of laws, and construed accordingly.
No Employment Right. Neither the grant of the RSRs nor any action taken hereunder shall be
construed as giving any employee or any Participant any right to be retained in the employ of the
Company. The Company is under no obligation to grant RSRs hereunder. Nothing contained in
the Award Documents shall limit or affect in any manner or degree the normal and usual powers
of management, exercised by the officers and the Board of Directors or committees thereof, to
change the duties or the character of employment of any employee of the Company or to remove
the individual from the employment of the Company at any time, all of which rights and powers
are expressly reserved.
No Assignment. A Participant’s rights and interest under the RSRs may not be assigned or
transferred, except as otherwise provided herein, and any attempted assignment or transfer shall
be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation
under the RSRs or the Award Documents.
Unfunded Plan. Any shares or other amounts owed under the RSRs shall be unfunded. The
Company shall not be required to establish any special or separate fund, or to make any other
segregation of assets, to assure delivery or payment of any earned amounts.
Company Policies. The RSRs and any cash or Shares delivered pursuant to the RSRs shall be
subject to all applicable clawback or recoupment policies, share trading policies, share holding
and other policies that may be implemented by the Company’s Board of Directors from time to
time.
9.
10.
11.
12.
13.
Definitions.
(a)
“Proscribed Activity” means any of the following:
(i)
(ii)
(iii)
the Participant’s breach of any written agreement between the Participant and the
Company or any of its Subsidiaries, including any agreement relating to
nondisclosure, noncompetition, nonsolicitation and/or nondisparagement, to the
extent such agreements are enforceable under applicable law;
the Participant’s direct or indirect unauthorized use or disclosure of confidential
information or trade secrets of the Company or any Subsidiary, including, but not
limited to, such matters as costs, profits, markets, sales, products, product lines,
key personnel, pricing policies, operational methods, customers, customer
requirements, suppliers, plans for future developments, and other business affairs
and methods and other information not readily available to the public;
the Participant’s direct or indirect engaging or becoming a partner, director, officer,
principal, employee, consultant, investor, creditor or stockholder in/for any
business, proprietorship, association, firm or corporation not owned or controlled
by the Company or its Subsidiaries which is engaged or proposes to engage in a
business competitive directly or indirectly with the business conducted by the
Company or its Subsidiaries in any geographic area where such business of the
Company or its Subsidiaries is conducted, provided that the Participant’s
investment in 1% or less of the outstanding capital stock of any corporation whose
4
(iv)
(v)
(vi)
(vii)
stock is listed on a national securities exchange shall not be treated as a Proscribed
Activity;
the Participant’s direct or indirect, either on the Participant’s own account or for
any person, firm or company, soliciting, interfering with or inducing, or attempting
to induce, any employee of the Company or any of its Subsidiaries to leave his or
her employment or to breach his or her employment agreement;
the Participant’s direct or indirect taking away, interfering with relations with,
diverting or attempting to divert from the Company or any Subsidiary any business
with any customer of the Company or any Subsidiary, including (A) any customer
that has been solicited or serviced by the Company within one year prior to the
date of termination of Participant’s employment with the Company and (B) any
customer with which the Participant has had contact or association, or which was
under the supervision of Participant, or the identity of which was learned by the
Participant as a result of Participant’s employment with the Company;
following the Participant’s termination of employment, the Participant’s making
of any remarks disparaging the conduct or character of the Company or any of its
Subsidiaries, or their current or former agents, employees, officers, directors,
successors or assigns; or
the Participant’s failure to cooperate with the Company or any Subsidiary, for no
additional compensation (other than reimbursement of expenses), in any litigation
or administrative proceedings involving any matters with which the Participant
was involved during the Participant’s employment with the Company or any
Subsidiary.
Notwithstanding the foregoing, nothing in these terms and conditions restricts or prohibits
the Participant from initiating communications directly with, responding to any inquiries
from, providing testimony before, providing confidential information to, reporting
possible violations of law or regulation to, or from filing a claim or assisting with an
investigation directly with, a self-regulatory authority or a government agency or entity,
including the U.S. Equal Employment Opportunity Commission, the Department of Labor,
the National Labor Relations Board, the Department of Justice, the Securities and
Exchange Commission, Congress, and any agency Inspector General (collectively, the
“Regulators”), or from making other disclosures that are protected under the whistleblower
provisions of state or federal law or regulation. The Participant does not need the prior
authorization of the Company to engage in such communications with the Regulators,
respond to such inquiries from the Regulators, provide confidential information or
documents to the Regulators, or make any such reports or disclosures to the Regulators.
The Participant is not required to notify the Company that the Participant has engaged in
such communications with the Regulators.
If the Participant primarily provides services in California, subsection (iii) above shall not
apply to the Participant and subsection (v) above shall apply to the Participant only to the
extent that the Participant uses or discloses confidential information of the Company or
any of its Subsidiaries in performing such Proscribed Activity and to the extent permitted
by applicable law.
5
(b)
(c)
“Proscribed Period” means the period beginning on the date of termination of Participant’s
employment and ending on the later of (A) the one year anniversary of such termination
date or (B) if the Participant is entitled to severance benefits in the form of salary
continuation, the date on which salary continuation is no longer payable to the Participant.
“Retirement” means termination of employment for any reason (other than for Cause or
by reason of death or Disability) upon or following attainment of age 55 and completion
of 5 years of service, or upon or following attainment of age 65 without regard to years
of service; provided that, Retirement shall not be deemed to occur unless such termination
of service constitutes a separation from service, as defined by Section 409A of the Code.
Other Benefits. No amount accrued or paid under the RSRs shall be deemed compensation for
purposes of computing a Participant’s benefits under any retirement plan of the Company or its
Subsidiaries, nor affect any benefits under any other benefit plan now or subsequently in effect
under which the availability or amount of benefits is related to the Participant’s level of
compensation.
Defend Trade Secrets Act Notice. Participants are hereby notified that the immunity provisions
in Section 1833 of title 18 of the United States Code provide that an individual cannot be held
criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade
secret that is made (i) in confidence to federal, state or local government officials, either directly
or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected
violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other
proceeding, or (iii) to the Participant’s attorney in connection with a lawsuit for retaliation for
reporting a suspected violation of law (and the trade secret may be used in the court proceedings
for such lawsuit) as long as any document containing the trade secret is filed under seal and the
trade secret is not disclosed except pursuant to court order
12.
13.
6
EXHIBIT 21.1
The following list sets forth (i) all subsidiaries of Ryder System, Inc. at December 31, 2019, (ii) the state or
country of incorporation or organization of each subsidiary, and (iii) the names under which certain subsidiaries do
business.
Name of Subsidiary
State or Country of
Incorporation or Organization
3241290 Nova Scotia Company
Associated Ryder Capital Services, Inc.
CRTS Logistica Automotiva S.A.
Euroway Vehicle Contracts Limited
Euroway Vehicle Engineering Limited
Euroway Vehicle Management Limited
Euroway Vehicle Rental Limited
Far East Freight, Inc.
Hill Hire Limited
Laromark Intermediate Holding Corporation
Network Vehicle Central, Inc.
Road Master, Limited
RSI Holding B.V.
RSI Purchase Corp.
RTI Argentina S.A.
RTRC Finance LP
RTR Holdings (B.V.I.) Limited
RTR Leasing I, Inc.
RTR Leasing II, Inc.
RTR Next Gen Sales, LLC
Ryder Argentina S.A.
Ryder Ascent Logistics Pte Ltd.
Ryder Asia Pacific Holdings B.V.
Ryder Capital (Barbados) SRL
Ryder Canadian Financing US LLC
Ryder Capital Ireland Holdings II LLC
Ryder Capital Luxembourg Limited, S.A.R.L.
Ryder Capital S. de R.L. de C.V.
Ryder Capital UK Holdings LLP
Ryder CRSA Logistics (HK) Limited
Ryder de Mexico S. de R.L. de C.V.
Ryder Dedicated Logistics, Inc.
Ryder Deutschland GmbH
Ryder Distribution Services Limited
Ryder do Brasil Ltda.
Ryder Energy Distribution Corporation
Ryder Europe B.V.
Ryder Fleet Products, Inc.
Ryder Freight Brokerage, Inc.
Ryder Fuel Services, LLC
Canada
Florida
Brazil
England
England
England
England
Florida
England
Delaware
Florida
Bermuda
Netherlands
Delaware
Argentina
Canada
British Virgin Islands
Delaware
Delaware
Florida
Argentina
Singapore
Netherlands
Barbados
Delaware
Delaware
England
Mexico
England
Hong Kong
Mexico
Delaware
Germany
England
Brazil
Florida
Netherlands
Tennessee
Delaware
Florida
Ryder Funding LP
Ryder Funding II LP
Ryder Global Services, LLC
Ryder Holdings Mexico One S. de R.L. de C.V.
Ryder Holdings Mexico Two S. de R.L. de C.V.
Ryder Holdings Mexico Three S. de R.L. de C.V.
Ryder Integrated Logistics, Inc.(1)
Ryder Integrated Logistics of California Contractors, LLC
Ryder Integrated Logistics of Texas, LLC
Ryder International Acquisition Corp.
Ryder International Holdings LLC
Ryder International, Inc.
Ryder International UK Holdings LP
Ryder Last Mile (California) LLC
Ryder Last Mile, Inc.
Ryder Limited
Ryder Logistica Ltda.
Ryder Logistics (Shanghai) Co., Ltd.
Ryder Mauritius Holdings, Ltd.
Ryder Mexican Holding B.V.
Ryder Mexicana, S. de R.L. de C.V.
Ryder Offshore Holdings III LLC
Ryder Pension Fund Limited
Ryder Puerto Rico, Inc.
Ryder Purchasing LLC
Ryder Receivable Funding III, L.L.C.
Ryder Risk Solutions, LLC
Ryder Services Corporation.(2)
Ryder Servicios do Brasil Ltda.
Ryder Soluciones S. de R.L. de C.V.
Ryder Singapore Pte Ltd.
Ryder System Holdings (UK) Limited
Ryder Thailand I, LLC
Ryder Thailand II, LLC
Ryder Truck Rental Holdings Canada Ltd.
Ryder Truck Rental, Inc.(3)
Ryder Truck Rental I LLC
Ryder Truck Rental II LLC
Ryder Truck Rental III LLC
Ryder Truck Rental IV LLC
Ryder Truck Rental I LP
Ryder Truck Rental II LP
Ryder Truck Rental Canada Ltd.(4)
Ryder Truck Rental LT
Ryder Vehicle Sales, LLC
Sistemas Logisticos Sigma S.A.
Delaware
Delaware
Florida
Mexico
Mexico
Mexico
Delaware
Delaware
Texas
Florida
Delaware
Florida
England
Delaware
California
England
Brazil
China
Mauritius
Netherlands
Mexico
Delaware
England
Delaware
Delaware
Delaware
Florida
Florida
Brazil
Mexico
Singapore
England
Florida
Florida
Canada
Florida
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Canada
Delaware
Florida
Argentina
Tandem Transport, L.P.
Translados Americano S. de R.L. de C.V.
____________________
Georgia
Mexico
(1)
(2)
(3)
Florida: d/b/a UniRyder
Delaware: d/b/a Ryder
Ohio and Texas: d/b/a Ryder Claims Services Corporation
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia,
Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah,
Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming: d/b/a Ryder Transportation Services
Maryland and Virginia: d/b/a Ryder/Jacobs
Michigan: d/b/a Atlas Trucking, Inc.
Michigan: d/b/a Ryder Atlas of Western Michigan
Texas: d/b/a DSC Truck Services
(4)
French Name: Location de Camions Ryder du Canada Ltee.
Canadian Provinces: d/b/a Ryder Integrated Logistics,
Ryder Dedicated Logistics,
Ryder Canada
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-19515, No.
333-26653, No. 333-69628, No. 333-108364, No. 333-124828, No. 333-134113, No. 333-153123, No. 333-177285, No.
333-181396, No. 333-211206, No. 333-212138, No. 333-230765 and No. 333-231208) and on Form S-3 (No. 333-224056, No.
333-209536, No. 333-186486 and No. 033-58667) of Ryder System, Inc. of our report dated February 27, 2020 relating to the
financial statements and financial statement schedule and the effectiveness of internal control over financial reporting, which
appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Miami, Florida
February 27, 2020
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being directors of Ryder System, Inc., a Florida
corporation, hereby constitutes and appoints Robert D. Fatovic, Alena S. Brenner and Indira Sordo, and each of them, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for the undersigned and in his or
her name, place and stead, in any and all capacities, to sign the Ryder System, Inc. Form 10-K (Annual Report pursuant to the
Securities Exchange Act of 1934) for the fiscal year ended December 31, 2019 (the “Form 10-K”), and any and all amendments
thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission and with the New York Stock Exchange and any other stock exchange on which the Company's
common stock is listed, granting unto each said attorney-in-fact and agent full power and authority to perform every act
requisite and necessary to be done in connection with the execution and filing of the Form 10-K and any and all amendments
thereto, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying all that each said
attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
This Power of Attorney may be signed in any number of counterparts, each of which shall constitute an original and all of
which, taken together, shall constitute one Power of Attorney.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand effective the 7th day of February,
2020.
/s/ Robert J. Eck
Robert J. Eck
/s/ Robert A. Hagemann
Robert A Hagemann
/s/ Michael F. Hilton
Michael F. Hilton
/s/ Luis P. Nieto, Jr.
Luis P. Nieto, Jr.
/s/ Tamara L. Lundgren
Tamara L. Lundgren
/s/ Dmitri L. Stockton
Dmitri L. Stockton
/s/ David G. Nord
David G. Nord
/s/ Abbie J. Smith
Abbie J. Smith
/s/ E. Follin Smith
E. Follin Smith
/s/ Hansel E. Tookes II
Hansel E. Tookes, II
I, Robert E. Sanchez, certify that:
EXHIBIT 31.1
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Ryder System, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 27, 2020
/s/ Robert E. Sanchez
Robert E. Sanchez
President and Chief Executive Officer
I, Scott T. Parker, certify that:
EXHIBIT 31.2
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Ryder System, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 27, 2020
/s/ Scott T. Parker
Scott T. Parker
Executive Vice President and Chief Financial Officer
EXHIBIT 32
CERTIFICATION
In connection with the Annual Report of Ryder System, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert E.
Sanchez, President and Chief Executive Officer of the Company, and Scott T. Parker, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Robert E. Sanchez
Robert E. Sanchez
President and Chief Executive Officer
February 27, 2020
/s/ Scott T. Parker
Scott T. Parker
Executive Vice President and Chief Financial Officer
February 27, 2020
BR783549-0320-10K