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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, 2023
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
ryderlogoeverbetterwtma61.jpg
RYDER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Florida    59-0739250
(State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.)
2333 Ponce de Leon Blvd., Suite 700
    (305) 500-3726
Coral Gables, Florida 33134
(Address of principal executive offices, including zip code)    (Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of exchange on which registered
Ryder System, Inc. Common Stock ($0.50 par value)    RNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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, a smaller reporting company, or an emerging growth 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 filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b).
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, 2023 was $3.8 billion. The number of shares of Ryder System, Inc. Common Stock outstanding at January 31, 2024 was 43,913,498.
Documents Incorporated by Reference into this Report    Part of Form 10-K into which Document is Incorporated
Ryder System, Inc. 2023 Proxy Statement
    Part III
 




RYDER SYSTEM, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
 
  Page No.  
 

i


PART I
ITEM 1. BUSINESS
OVERVIEW
Ryder System, Inc. (Ryder) is a leading provider of outsourced logistics and transportation services with significant growth opportunities from secular trends and large addressable markets. We provide supply chain, dedicated transportation, and commercial fleet management solutions. We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing that includes our contractual maintenance offering, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides fully integrated port-to-door logistics solutions, including distribution management, dedicated transportation, transportation management, freight brokerage, e-commerce fulfillment, last-mile delivery, contract packaging, and contract manufacturing in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, 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.
In the beginning of 2022, we announced our intention to exit our lower return FMS Europe (primarily United Kingdom (U.K.)) business. We completed the shutdown of operations as well as the sale of the remaining vehicles and properties in 2023.

Segment Graphs.jpg
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FMS revenue includes eliminations
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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 or alternative services from other third-party vendors. Our customer base includes enterprises operating in a variety of industries as shown below:
549755866752
Further information on our business and business segments are presented in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report.
MISSION AND STRATEGY
Ryder's mission is to responsibly deliver innovative supply chain and transportation solutions that are reliable, safe and efficient, enabling our customers to deliver on their promises. Companies performing their own logistics and transportation services face increasing challenges of dynamic supply chains, disruptive technologies, labor shortages, and increased vehicle cost and complexity. Our strategy is to accelerate growth in our less capital intensive supply chain and dedicated businesses guided by our balanced growth strategy, and grow our fleet management business at or above targeted returns. We aim to achieve this by focusing on companies either internally managing their supply chain services or outsourcing their needs to other providers. We are also focused on delivering positive free cash flow over the freight cycles and returning capital to shareholders. The balanced growth strategy focuses on three transformative objectives: (i) de-risk and optimize the model, (ii) enhance returns and free cash flow, and (iii) drive long-term profitable growth. This strategy is supported by:

leveraging secular trends that favor the decision to outsource logistics and transportation services, such as dynamic supply chains, labor constraints, increased cost and complexity, supply chain disruptions, government regulations, e-commerce, and disruptive technologies;
growing earnings from our contractual businesses;
offering innovative products, solutions and support services to create and strengthen customer relationships;
delivering operational excellence through continuous productivity and process improvements;
attracting, developing and retaining the best talent;
deploying technology to accelerate growth while improving operational efficiencies; and
executing our disciplined capital allocation priorities that include investing in organic growth, pursuing targeted acquisitions and investments, and returning capital to shareholders.

INDUSTRY AND OPERATIONS
Fleet Management Solutions
Value Proposition
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 vehicle rental; contract or transactional maintenance
2


services; digital and technology support services that optimize asset performance, compliance, safety; and comprehensive 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 facilities or through our digital channel. FMS also provides vehicles and maintenance, fuel and other services for vehicles used in our SCS and DTS businesses.
Market Trends
The U.S. commercial fleet market is estimated to include 10 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 being leased or rented from third parties, including Ryder1. The companies that privately own their fleets generally provide all or a portion of the fleet management services for themselves rather than outsourcing those services to third parties such as Ryder.
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 complex and expensive, requiring companies to spend a significant amount of time and money implementing new technology, diagnostics, retooling and training. Companies must also manage global supply chain disruptions and labor issues, such as a limited supply of commercial vehicles and a shortage of mechanics and qualified truck drivers. Maintenance and other vehicle operational processes have also become more costly as a result of increased regulation and active enforcement efforts by federal and state governments. In addition, volatility in the used vehicle sales market, fluctuating energy prices, and alternative fuel technologies have and will continue to make it difficult for businesses to predict and manage fleet costs. We believe these trends increase the value of our product offering and will increasingly lead privately held fleets to outsource.
Operations
In 2023, our global FMS business accounted for 44% of our consolidated revenue.
U.S.  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. As of December 31, 2023, we had 559 operating locations, excluding ancillary storage locations, in 49 states, the District of Columbia and Puerto Rico. Our operating locations serve multiple customers and have maintenance facilities that 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 158 customer locations, which primarily provide vehicle maintenance solely for that customer's fleet.
Canada. As of December 31, 2023, we had 28 operating locations throughout seven Canadian provinces. We also operate 14 maintenance facilities on-site at customer properties in Canada.

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 coverage to on-demand, or pay-as-you-go, maintenance.
Our ChoiceLease customers receive the following benefits:
Competitive Prices as we are able to leverage our vehicle buying power for the benefit of our customers. 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.
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.
Preventative and Flexible Maintenance Programs based on vehicle type and time or mileage intervals that are cost-effective and designed to reduce vehicle downtime.

_________________________
(1)U.S. Fleet as of September 2023, Class 3-8, IHS Markit Ltd.
3


Access to Lease Vehicles as we are able to leverage our original equipment manufacturer (OEM) relationships to secure access to vehicles.
No Vehicle Residual Risk Exposure as we typically retain vehicle residual risk exposure.
Optional Fleet Support Services, including our fuel services; safety services such as 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); physical damage insurance coverage extension under our existing insurance policies and related insurance services; environmental services.
Digital Fleet Management Platform as access to RyderGyde™ on ryder.com®, our customer-facing platform that enables fleet managers and drivers to engage with our services in a digital way.
For the year ended December 31, 2023, ChoiceLease revenue accounted for 54% of our FMS total revenue.
Commercial Rental.    We offer rental vehicles to 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) to handle seasonal increases in their business or discrete projects. 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. 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, 2023, commercial rental revenue accounted for 20% of our FMS total revenue.
SelectCare.    Through our SelectCare product, we provide maintenance services to customers who choose not to lease some or all of their vehicles from us. Our SelectCare customers have the opportunity to utilize 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. 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 or through our mobile service vehicles.
We may also offer our lease and maintenance customers additional maintenance and repair services, as needed, that are not included in contractual agreements, such as services 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.
In 2023, we launched Torque by Ryder® in select markets, a pay-as-you-go retail mobile maintenance solution and digital platform that enables all fleet owners and managers to order maintenance with an expert technician anytime, anywhere, with no long term contract.
For the year ended December 31, 2023, SelectCare revenue accounted for 12% 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, 2023:
  U.S.CanadaTotal
 VehiclesCustomersVehiclesCustomersVehiclesCustomers
ChoiceLease130,30010,4008,6001,200138,90011,600
Commercial rental (1)
34,40023,7002,0003,00036,40026,700
SelectCare (2)
48,2001,7003,40020051,6001,900
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(1)Commercial rental customers represent those who rented a vehicle more than three days during the year and include 5,400 ChoiceLease customers.
(2)Our SelectCare customers include approximately 1,000 ChoiceLease customers.

Fuel Services.    We provide our FMS customers with access to diesel fuel at competitive prices at 415 of our maintenance facilities across the U.S. 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, 2023, fuel services revenue accounted for 14% of our FMS total revenue.
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Used Vehicles.    We primarily sell our used vehicles from our 57 retail sales centers throughout the U.S. and Canada (12 of which are co-located at an FMS shop), at our branch locations and through our website at www.ryder.com/used-trucks. Typically, before we offer used vehicles for sale, our technicians ensure that the vehicles are Ryder Certified™, which means that they have passed a comprehensive, multi-point performance inspection based on specifications formulated through our maintenance program; Ryder DOT Verified™, which are fully inspected to be compliant with Department of Transportation (DOT) standards with some wear and tear; or Ryder As-Is vehicles. Given our focus on maximizing sales proceeds, we primarily sell our used vehicles through our retail channel, which allows us to leverage our maintenance expertise and strong brand reputation to realize higher sales proceeds than in the wholesale market. 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, and the age and condition of the vehicle at the time of its disposal. In recent years, the general state of the used vehicle sales market has been particularly volatile. In 2023, pricing in the used vehicle market declined from the historical highs of the prior year, reflecting softer economic conditions and higher market inventories. We have used vehicle inventory of 8,000 vehicles, in line with our long-term target range of 7,000-9,000.
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 vehicles. This strategy revolves around the following interrelated goals and priorities:
drive fleet growth that maximizes our return on investment by (1) successfully implementing sales and marketing initiatives designed to encourage private fleet operators and for-hire carriers to outsource all or some portion of their fleet management needs to us, (2) reducing costs through operational efficiencies, including long-term maintenance initiatives, and (3) offering innovative products, solutions and support services that will create and strengthen new and existing customer relationships;
deliver a consistent, industry-leading and cost-effective lease and maintenance program to our customers through continued process improvement, productivity initiatives, and technology improvements, which also help us attract new customers; and
optimize asset utilization and management, particularly with respect to our rental fleet, used vehicle operations and maintenance facility infrastructure.
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 options, and service reliability and quality. 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.

Supply Chain Solutions
Value Proposition
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. Our business is organized by industry vertical (omnichannel retail (includes retail, technology, last mile and e-commerce), automotive, consumer packaged goods (CPG), and industrial and other (includes healthcare)) to enable our teams to focus on the specific needs of their customers. Our SCS product offerings provide port-to-door solutions including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, and last mile. These offerings are supported by our continued investments in a variety of information technology and engineering solutions that can be provided independently or as an integrated solution to optimize supply chain effectiveness. Key aspects of our value proposition are our operational execution, industry expertise, and customer-facing visibility platform, which are important differentiators in the marketplace.
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Market Trends
Logistics spending in our key target markets in North America was approximately $2.7 trillion, of which $388 billion was outsourced2. Outsourced logistics is a market with significant growth opportunity. More sophisticated, cost-effective and reliable supply chain practices are required as supply chains expand and become more complex and susceptible to global disruptions. For example, we believe secular trends continue to accelerate demand for supply chain resiliency, outsourcing, e-commerce fulfillment and final mile delivery of big and bulky goods, and a movement towards onshoring and nearshoring of manufacturing and supply chain operations. 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, 2023, our global SCS business accounted for 41% of our consolidated revenue, and our customer accounts and warehousing square footage were as follows:
December 31, 2023
(Square footage in millions)
Customer AccountsNumber of Warehouses
Square Footage (1)
SCS
United States750 236 92 
Foreign (2)
163 51 9 
Total913 287 101 
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(1)Includes Ryder leased and owned, and Ryder managed.
(2)Includes 15 managed warehouses in Mexico.
In the U.S., SCS customer accounts are mostly large enterprises that maintain large, complex supply chains. Most of our core SCS business operations are strategically located to maximize efficiencies and reduce costs. We also centralize 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. In Mexico, our operations offer a full range of SCS services, which are often highly integrated with our distribution and transportation operations, and manage approximately 20,900 border crossings each month between the U.S. and Mexico. Our Canadian operations are highly coordinated with their U.S. and Mexico counterparts and manage approximately 6,000 border crossings each month.
SCS Product Offerings
Distribution Management.    Our SCS business offers a wide range of services relating to a customer’s distribution operations, such as designing a customer’s distribution network; managing distribution facilities; 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 plants and final assembly; and providing shipments to customer distribution centers or end customer delivery points, including support for e-commerce fulfillment networks. Additional value-added services, such as light assembly of components into defined units, packaging and refurbishment, are also offered to our customers. For the year ended December 31, 2023, distribution management solutions accounted for approximately 35% of our SCS revenue.








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(2)Armstrong & Associates - Transition: Soft Landing at a New level, Latest Third Party Logistics Market Results and Predictions for 2023, July 2023
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Dedicated Transportation.    Dedicated transportation services are offered as part of an integrated supply chain solution to our customers with a high degree of specialization and a combination of outside carriers, equipment, professional drivers and dedicated services. Our dedicated transportation services offering is designed to increase our customers' competitive position, improve risk management and integrate their transportation needs with their overall supply chain. As part of our dedicated transportation services, we also offer 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 our customers to mitigate labor challenges associated with maintaining a private fleet of vehicles, such as driver recruitment and turnover, and government regulation, including hours of service regulations, DOT audits and workers' compensation. Dedicated transportation 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, 2023, approximately 32% of our SCS revenue was related to dedicated transportation services.
Transportation Management and Brokerage.    Our SCS business offers freight transportation, transportation management, and brokerage services relating to all aspects of a customer’s transportation network, including 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, and also includes rate negotiation, freight bill audits and payment services. In addition, our SCS business provides customers with brokerage services designed to provide prequalified trucking capacity in North America. For the year ended December 31, 2023, we purchased or executed $10.0 billion in freight moves on our customers' behalf, including $173 million in brokerage services. For the year ended December 31, 2023, transportation management solutions accounted for 10% of our SCS revenue.
E-commerce and Last Mile. Our e-commerce and last mile services offer omnichannel delivery with two-day delivery across the entire U.S. and one-day delivery across the majority of the U.S. Our e-commerce and last mile services are provided through a network of over 106 sites strategically located throughout the U.S. These sites may be owned or leased by us, our customers or our agents. For our e-commerce customers, we receive, pick, pack, and ship smaller items via parcel carriers to the end consumer’s home or through our carrier networks to our customer’s warehouse or retail stores. For our last mile customers, we receive, assemble, and prepare big and bulky items through a third-party agent network for final delivery to the end consumer. Consumers can then choose from multiple levels of delivery services, including minor installation of the item and disposal of the replaced item. We use proprietary scheduling Ryder View 2.0 software for maximum efficiency that optimizes routes and allows customers to select their appointment time. For the year ended December 31, 2023, our e-commerce and last mile services accounted for 19% of our SCS revenue.
Contract Packaging and Contract Manufacturing. On November 1, 2023, we acquired all the outstanding equity of IFS Holdings, LLC, a holding company for Impact Fulfillment Services, LLC (IFS), for an approximate purchase price of $255 million. IFS specializes in contract packaging, contract manufacturing and warehousing, for some of the largest and best-known consumer brands in the U.S., primarily in the consumer packaged goods, retail, and healthcare industries. The acquisition is included within the consumer packaged goods industry vertical in our SCS business segment. For the year ended December 31, 2023, our contract packaging and contract manufacturing services and other services accounted for 4% 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:
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, such as RyderShare™, a real-time collaborative visibility tool showing all goods moving across the supply chain;
create a culture of innovation and collaboration to provide solutions to meet our clients' needs;
focus consistently on network optimization and continuous improvement;
execute on targeted sales and marketing growth strategies; and
expand customer relationships to include fast growing offerings in e-commerce fulfillment and last mile.
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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 product offerings and industries. We also compete against other companies on specific service offerings (for example, in transportation management, distribution management or dedicated transportation) 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, we combine equipment, maintenance, professional drivers, engineering, administrative services and additional services, including routing and scheduling, fleet sizing, safety, regulatory compliance, risk management, and technology and communication systems support 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. This solution allows us to mitigate 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 market was estimated to be $29 billion3 from an addressable market of approximately $660 billion4. This market is affected by many of the same trends that impact our FMS business. 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 offering an attractive alternative to private fleet and driver management. There continues to be significant pressure on the availability of qualified truck drivers, and shippers continue to seek dedicated capacity from quality transportation and logistics providers, which makes our offering attractive to potential customers. 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, 2023, our DTS business accounted for 15% of our consolidated revenue. As of December 31, 2023, we had 189 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 a highly engineered transportation solution with specialized services. DTS accounts typically operate in a limited geographic area, and, therefore, most of the professional 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 the vehicles used in DTS solutions.






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(3)Armstrong & Associates - A Roaring 2021: Demand Drives 3PLs to the Best Growth and M&A Year on Record, July 2022.
(4)Addressable market as of June 2023, Class 3-8, IHS Markit Ltd. (formerly RL Polk) & Ryder Internal Estimates.
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In order to customize a 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 Strategic Investment
On February 1, 2024, we acquired all the outstanding equity of CLH Parent Corporation (Cardinal Logistics) for a purchase price of $290 million. Cardinal Logistics is a leading customized dedicated contract carrier in North America, providing dedicated fleets and professional drivers, as well as complementary freight brokerage services, last-mile delivery and contract logistics services. Cardinal Logistics primarily serves the consumer packaged goods, omnichannel retail, automotive, and industrial verticals. This acquisition increases our scale and network density and further advances our strategy to accelerate growth in dedicated. The transaction is expected to add approximately $1 billion in annualized total revenue.
DTS Business Strategy
Our DTS business strategy is to offer services to customers who need specific vehicles, specialized handling, dedicated capacity, or integrated transportation services. This strategy revolves around the following interrelated goals and priorities:
increase market share to provide more specialized services with customers across industries, including customers in the retail, metals and mining, energy and utility, consumer product goods, construction, and food and beverage industries;
develop innovative solutions and capabilities that drive value for our customers, such as RyderShare™, a real-time collaborative visibility tool showing all goods moving across the supply chain;
utilize the support 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;
improve competitiveness in the non-specialized and non-integrated customer segments, including dedicated capacity solutions;
focus consistently on network optimization and continuous improvement; and
recruit and retain professional drivers.
Competition
Our DTS business segment competes with other dedicated providers to furnish highly engineered solutions, often involving specialized handling or service requirements. To a lesser extent, DTS competes with truckload carriers providing dedicated solutions for standard freight. 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. As an alternative to using our services, companies may choose to internally manage their own private fleets, or obtain similar or alternative services from other third-party vendors. We are able to differentiate our DTS product offering by leveraging our FMS vehicles and maintenance services 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.
CYCLICALITY
Our 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
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increasing the diversity of our customer base and strengthening our long-term business relationships with our customers. Although we believe these efforts help mitigate the immediate impact of an economic downturn, customers are often unwilling to commit to a full service lease or long-term supply chain and dedicated contracts during a protracted or severe economic downturn. 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. 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.
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 (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, and the Food and Drug Administration (FDA) and United States Department of Agriculture (USDA), which regulate foodstuffs and other products for human consumption. In addition, 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 or states relating to carbon emissions controls and reporting, engine exhaust emissions, drivers’ hours of service, wage and hour requirements, employee and independent contractor classification, security, including data privacy and cybersecurity, and ergonomics.

Additional information about the regulations that we are subject to can be found in Item 1A. "Risk Factors" in this Annual Report on Form 10-K.
HUMAN CAPITAL
We strive to create a high-performance culture that embraces diverse perspectives and experiences and ensures that all of our employees have opportunities to develop the skills they need to grow and excel in their fields. Human capital management is a priority for our executives and board of directors. We are committed to identifying and developing the talent necessary for our long-term success throughout all levels of our organization, including our front-line employees interacting with our customers or behind-the-scenes supporting our field teams. We have a robust talent and succession planning process and have established programs to support the development of our talent pipeline for critical roles in our organization. Annually, we conduct a robust review with the leadership team focusing on high performing and high potential talent, diverse talent and the succession plan for our critical roles.

We also recognize that it is important to develop our future leaders. We provide a variety of resources to help our employees build and develop their skills, including online development resources as well as individual development opportunities and projects for key talent. Additionally, we have leadership development resources for our future leaders as they continue to develop their skills. We invest in our employees by offering comprehensive health, welfare and retirement programs, along with wellness programs and well-being initiatives.

In addition, we provide our professional drivers, technicians and warehouse workers with on-going training opportunities. For example, we pair our professional drivers with certified driver trainers during onboarding and provide position and customer-specific training. Our technicians also receive both online and in-person training and we collaborate with our OEMs to ensure our technicians possess the knowledge and skills necessary to service our customers. Our warehouse workers also receive regular safety and compliance training that is specific to their location.

At December 31, 2023, we had approximately 47,500 full-time employees in North America. We currently employ approximately 10,800 professional drivers and 4,800 technicians. We have approximately 31,300 hourly employees in the U.S.,
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approximately 3,700 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 98 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. Refer to Item 1A. Risk Factors for further information regarding risk associated with our human capital and the attraction, development, and retention of personnel.
Safety

Our safety culture is founded upon a core commitment to the safety, health and well-being of our employees, customers and the community. 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 have created and implemented policies, processes and training programs to minimize safety events, and we review and monitor our performance closely. Our safety organization team oversees our overall safety strategy and consists of three divisions: Safety Standards & Technology, Field Safety Solutions, and U.S. Department of Transportation Compliance. Together, our safety organization manages our safety policies, technologies and training, all field safety processes, risks assessments, safety site investigations and regulatory compliance activities, among other things.

We deploy relevant vehicle safety systems in the vehicles we operate, including active brake assistance, lane departure warning systems, adaptive cruise control and stability control, 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 video event recorders. Driver training is also a key component of our safety program. We use certified driver trainers to on-board and train our professional drivers. Proactive injury and crash prevention and remedial training are also delivered regularly online to each employee through a highly interactive lesson platform. Our technicians also receive both online and in-person training to enable them to continuously improve their maintenance skills to ensure we are servicing our customers in compliance with best-in-line safety measures. We provide annual training to warehouse employees on safe cutting, trailer securement, proper lifting/material handling techniques, and equipment safety along with regular OSHA training. Our proprietary, web-based safety management system, Ryder SafetyNet, delivers monthly proactive safety programs as well as safety compliance tasks tailored to every location and helps measure safety activity effectiveness across the organization.

The safety policies and procedures in place 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.

The safety of our customers is also paramount at Ryder. Safety support is provided to customers through Ryder Fleet Risk Services (FRS). FRS helps customers navigate the increasingly complex industry landscape through customized consultation, innovative solutions, and best-in-class safety programs.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
NamePositionCurrent Position SincePrior Business ExperienceAge
Robert E. SanchezChair and Chief Executive Officer2013
President and Chief Operating Officer from February 2012 to December 2012. President, Global FMS from September 2010 to February 2012. Executive Vice President and Chief Financial Officer from October 2007 to September 2010. Executive Vice President of Operations, U.S. FMS from October 2005 to October 2007. Senior Vice President and Chief Information Officer from January 2003 to October 2005.
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John J. DiezExecutive Vice President and Chief Financial Officer2021
President, Global FMS from August 2019 to May 2021. President of DTS from March 2015 to August 2019. Senior Vice President of Ryder Dedicated from March 2014 to February 2015. Senior Vice President of Asset Management from January 2011 to February 2014.
53
Thomas M. HavensPresident, Fleet Management Solutions2021
Senior Vice President and Global Chief of Operations for FMS from November 2012 to May 2021. Vice President and General Manager for FMS in Canada from September 2011 to November 2012.
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J. Steven SensingPresident, Supply Chain Solutions and Dedicated Transportation Solutions2015
Vice President and General Manager of the Hi-Tech and Healthcare industry groups for SCS from February 2007 to February 2015.
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Steve W. MartinExecutive Vice President, Dedicated Transportation Solution
2024
Senior Vice President, Dedicated Transportation Solutions from August 2019 to February 2024. Vice President and General Manager of the Automotive, Aerospace and Industrial vertical from February 2017 to August 2019. Vice President, Dedicated Transportation Services - East from February 2012 to February 2017. Vice President for Supply Chain Excellence from February 2009 to February 2012.
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Robert D. FatovicExecutive Vice President, Chief Legal Officer and Corporate Secretary2012
Executive Vice President, General Counsel and Secretary from June 2004 to July 2012. Senior Vice President, U.S. Supply Chain Operations, Hi-Tech and Consumer Industries from December 2002 to May 2004. Vice President and Deputy General Counsel from May 2000 to December 2002.
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Karen M. JonesExecutive Vice President and Chief Marketing Officer2014
Senior Vice President and Chief Marketing Officer from September 2013 to October 2014.
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Francisco LopezExecutive Vice President and Chief Human Resources Officer2018
Chief Human Resources Officer February 2016 to February 2018. Senior Vice President, Global Human Resources Operations from July 2013 to February 2016.
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Sanford J. Hodes
Senior Vice President and Chief Procurement and Corporate Development Officer2022
Senior Vice President and Deputy General Counsel and Safety, Health, and Security from February 2011 to October 2022.
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Rajeev Ravindran Executive Vice President and Chief Information Officer2018
Chief Information Officer and Group Vice President at JM Enterprises from 2012 to January 2018.
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Cristina Gallo-AquinoSenior Vice President, Controller and Principal Accounting Officer2020
Vice President and Chief Financial Officer, Global FMS from August 2015 to August 2020. Vice President and Controller from September 2010 to August 2015.
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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.
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 investors.ryder.com. Upon request to our Investor Relations page on our website, 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 are not currently known to us or that we currently deem immaterial, could materially affect 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.

Business and Operating Risks

Decreased customer demand for transportation services due to adverse economic conditions, competition or other factors has impacted and could in the future adversely impact our business and operating results.

The transportation industry is highly cyclical and susceptible to trends in economic activity. Our business relies on the strength of our customers' businesses and their level of confidence in current and future economic conditions. In our FMS business, vehicles are leased or rented to customers that transport goods commercially, hence, the demand for our products and services is directly tied to the production and sale of goods by our customers, and more generally, the health of the North American economy. In our SCS and DTS businesses, our logistics and transportation services are tied to the demand of our customers' goods. If demand for our customers' products declines, our customers may experience a decline in volumes, which may impact our financial results. As a result, our business may begin to slow before overall market slowdowns, at the point of customer uncertainty, and may recover later than overall market recoveries, as our customers may continue to feel uncertain about future market conditions. If uncertainty around macroeconomic conditions and the transportation and logistics industries increase, such as due to recessionary conditions, unexpected interest rate fluctuations or inflationary pressures, our future growth prospects, business and results of operations could be materially adversely affected.

Among our services and product offerings, demand for used vehicles, rental, and longer-term contractual services are particularly susceptible to changes in economic and market conditions. For example, in a weak or volatile economy (such as during an economic recession or downturn), our customers may not need additional vehicles, may experience reduced shipping needs, or are often unwilling to commit or unable to fulfill long-term contracts. Accordingly, any sustained weakness in demand or a protracted economic downturn can negatively impact performance and operating results in used vehicle sales, rental and longer-term contractual services across our business segments.

We bear the risk that we will not be able to resell our used vehicles at a price at or above their residual value estimates.

To determine the residual value estimates and useful life of our vehicle fleet, management is required to make judgments about future events that are subject to risks and uncertainties outside of their control. While we regularly review and update our outlook for the used vehicle market, as management believes appropriate, the used vehicle pricing market has historically been subject to significant pricing volatility. Despite management's best estimates, we may be unable to accurately forecast the residual value of our vehicle fleet or accurately and timely adjust our residual estimates to better align with future market conditions at the end of a vehicle's useful life. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; wholesale market prices; customer requirements and preferences; and changes in underlying assumption factors.

Any material decrease in residual value estimates could have a material adverse impact on our financial results. In the past, we have realized losses on sales of used vehicles at the end of a vehicle's useful life when our residual value estimates were above used vehicle market prices due to rapidly changing market conditions. In addition, when we have materially decreased residual value estimates, our earnings over the vehicle's remaining useful life have decreased due to an increase in depreciation expense. Alternatively, we may realize gains on sales of used vehicles at the end of a vehicle's useful life when our residual value estimates are below used vehicle market prices. While management determines residual value estimates with the goal of minimizing losses on sales of used vehicles or to record the best estimate of fair value at the end of a vehicle's useful life, there is no assurance our residual value estimates will be at or below used vehicle market sales.

For a detailed discussion on our accounting policies and assumptions relating to depreciation and residual values, please see "Critical Accounting Estimates - Residual Value Estimates and Depreciation" in Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Disruptions in global supply chains have impacted, and may continue to impact, our business, results of operations and financial condition.

Our business is highly susceptible to disruptions in global supply chains as services are directly tied to the production and sale of goods. Disruptions in global supply chains have impacted each of our business segments as the supply and demand of commercial vehicles directly impacts our FMS business, and the production and supply of certain goods impacts the businesses of our customers in SCS and DTS, and therefore our own business.

For example, when COVID-19 measures prohibited many of our customers from continuing their operations, our business was initially adversely impacted because we experienced lower demand for commercial rental and used vehicles in our FMS business and reduced volumes in our SCS business. To the extent that customers are prohibited from continuing or are unable to continue their operations, whether due to measures implemented in response to a public health or safety crisis or to labor strikes, our business and results of operations may be adversely affected. On the other hand, when global supply chain disruptions caused a semiconductor shortage, we experienced a significant increase in demand for rental and used vehicles, as well as lease, due to the limited supply of commercial vehicles. However, we may experience limited rental and lease fleet growth and have a limited inventory of used vehicles for sale during an extended period of limited supply of commercial vehicles. After a period of limited commercial vehicle supply, if OEMs then produce an oversupply of new commercial vehicles, our FMS business may experience reduced rental demand and used vehicle sales in the future. In addition, when global supply chains have been disrupted, we have experienced increased inflationary pressures that increased costs in certain areas like payroll and third-party services.

Overall, the extent to which future supply chain disruptions impact our business, operations and financial results will depend on numerous factors that are difficult to accurately predict. Depending on the circumstances of a particular supply chain disruption, economic and commercial activity may be impacted, and, as a result, we may again experience slowdowns, reduced demand and a negative impact to a portion of our earnings.

Our profitability has been and could in the future 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 offered through FMS, 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:

with respect to our SCS contracts, the scope of services, production volumes, operational efficiencies, the mix of fixed versus variable costs, market wages, availability of labor, productivity, inflation, interest rates and other factors;
with respect to our DTS contracts, market wages, availability of labor, equipment costs, insurance rates, inflation, interest rates, and other operating factors; and
with respect to our ChoiceLease and SelectCare contracts, residual value estimates (ChoiceLease only) and maintenance costs (including inflation and interest rates), as well as other factors.

If we are incorrect in our operational 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. Although these contracts include indexed price escalation clauses or permit 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. 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 invalid. As a result, if we do not accurately predict our costs to execute SCS or DTS contracts, it could result in a significant decrease in revenue or loss that could adversely affect our operating results and financial

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, which may result in higher depreciation or losses on vehicle sales. In addition,
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overcapacity could result in lower revenues and higher costs and have an adverse impact on profitability. Undercapacity could impact our ability to reliably provide rental vehicles to our customers and may negatively affect our reputation. 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 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. While we are actively engaged in deploying emerging technology and developing strategic alliances and new products, we cannot be certain that our initiatives will be successful or timely, and our failure to effectively implement any initiative could have an adverse impact on our financial condition or results of operations.

For example, new concepts are currently under development for advanced electric vehicles, autonomous or semi-autonomous self-driving vehicles and connected vehicle platforms. There is also a rapidly growing demand for e-commerce services, last-mile home delivery, and asset- and freight-sharing services. In addition, there may be other innovations that could impact the transportation, trucking, and supply chain and logistics industries, such as machine learning and artificial intelligence, as well as other technologies we cannot yet foresee. Our inability to quickly adapt to and adopt innovations desired by our customers may result in a significant loss of demand for our service offerings. 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, we provide a driver as part of an integrated, full service customer solution. Moreover, 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. In addition, the timing of when we have to adopt new technologies may be affected by changes in the political or regulatory environment, which could further increase our investment costs, operating complexity, and our ability to offer such technologies to our customers in the jurisdictions in which we operate.

Failure to maintain, upgrade and consolidate our information technology networks, or maintain adequate controls over such technology systems, could adversely affect us.

Our success depends on the functionality of information technology systems to support our business and service offerings. When outages, system failures or delays in timely access to data occur in our information technology systems that support key business processes, for example our financial reporting and service offerings, our business may be adversely impacted. In addition, extended delays or cost overruns in securing, developing, managing and otherwise implementing technology solutions to support our business may delay and possibly prevent us from realizing the projected benefits of these solutions. Any failure to develop or maintain effective controls, including the risk of human error or misconduct, or to adequately monitor and control access to data in our systems, may result in our financial reporting being unreliable or cause us to fail to meet our reporting obligations. Further, any deficiencies found in the technology system we use to support our controls or any difficulties encountered in their implementation or improvement may also adversely affect our financial reporting.

We are continuously upgrading and consolidating our information technology systems by enhancing or replacing legacy systems. When we acquire new businesses, we also have to integrate those acquired systems to our network. These activities subject us to additional costs and risks, including disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, impairment of our ability to provide our services, retention of sufficiently skilled personnel to implement and operate the new systems, and other costs and risks. Our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or any increased productivity.

We face risks related to cybersecurity attacks and other breaches of our systems and information technology.

We depend on the integrity of our information and 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 and accurate as it may include sensitive customer information, confidential customer transaction data, employee records, and key financial and operational results and statistics. While we maintain an information security program that consists of industry standard safeguards and controls to help safeguard our confidential information, including security training and compliance protocols, we cannot prevent or mitigate all data breaches or cyberattacks. Threats to network and data security are becoming increasingly diverse and sophisticated, with attacks increasing in frequency (especially with the shift to remote work environments), scope and potential harm.

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We have experienced cybersecurity threats and breaches targeting our information technology systems and networks and those of our third-party providers. Although, to date, these incidents have not had a material impact on our financial condition or results of operations, future events could expose us to these risks. Moreover, these types of events could also expose us, our vendors, or our customers to loss or misuse of such information and restrict or prevent operations or financial reporting for a period of time. Depending on the type and scope of the intrusion or cybersecurity attack, we could face litigation or other potential liability and harm to 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 and customer relationships, and our reputation.

In addition, some of our software applications are utilized by third parties who provide outsourced administrative functions. Such third parties may have access to confidential information that is critical to our business operations and services. While our information security program includes enhanced controls to monitor third-party providers' security programs, these third parties are subject to their own data breaches, cyberattacks and other events or actions that could damage, disrupt or close down their networks or systems, which in turn may adversely impact our performance capabilities. Moreover, weaknesses in vendor management or third-party controls could expose us, our vendors, or our customers to additional cybersecurity risks. Also, efforts to prevent, detect and mitigate data breaches and cyberattacks subject us to additional costs.

Regulatory authorities continue to focus on how companies collect, process, use, store, share and transmit personal data. Privacy security laws and regulations 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.

We may fail to establish sufficient insurance reserves to adequately cover workers' compensation and vehicle liabilities.

We are substantially 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 in the United States, actuarial techniques and best practices, any projection of losses concerning workers' compensation and vehicle coverage is subject to a considerable degree of variability. The causes of this variability include litigation trends, claim settlement patterns, rising medical and other costs, as well as 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 related expenses may be covered by traditional insurance and excess insurance we have 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.

Strategic Risks

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:

our inability to obtain expected customer retention levels or profitability;
customers may choose to provide the services we provide for themselves;
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;
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;
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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, for example, reductions in our debt rating or stock price volatility could have a significant impact on our competitive position.

Failure to execute our business strategy, explore strategic transactions, and develop, market and deliver high-quality services that meet customer expectations may cause our revenue and earnings to suffer.

Our balanced growth strategy focuses on de-risking and optimizing the business model, enhancing returns and free cash flow, and driving long-term profitable growth, including by moving clients to outsource their logistics and transportation needs and thereby expand the market for our services, among other factors. We seek to execute our strategy by providing innovative solutions, operational excellence, top customer service, superior talent and best-in-class information technology, while also attempting to mitigate risks to the business. Failure to execute our business strategy may negatively impact our ability to continue to create long-term shareholder value and may result in stock price volatility.

To successfully execute on this strategy, we must continue to focus on developing innovative solutions that meet both 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.

In furtherance of our strategy, we routinely evaluate opportunities and may enter into agreements for possible strategic transactions, including acquisitions, partnerships or divestitures. 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 from the acquisition or strategic transaction and could adversely impact our financial condition or results of operations. For example, in 2023 we completed an acquisition that expanded our contract packaging, contract manufacturing and warehousing capabilities; however, if we fail to properly integrate that business, there is a risk that the acquisition will not add the forecasted revenue to SCS or provide the expected incremental growth to earnings.

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 and the vehicle 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 OEMs in our FMS business. Some of our OEMs 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, has and could in the future 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. Although we believe we have alternative sources of supply for the equipment and other supplies used in our business, termination or significant alteration of our relationship with any of our key suppliers could have a material adverse effect on our business, financial condition or results of operations in the unlikely event that we were unable to obtain adequate equipment or supplies from other sources in a timely manner or at all.

We derive a significant portion of our SCS and DTS revenue from a limited number of customers.

In our SCS and DTS businesses a limited number of customers account for a significant portion of revenue. Although we maintain multiple service contracts with each of these large customers, the loss of or reduction in business from one or more of these large customers could have a material adverse effect on our business, results of operations and financial condition. While we continue to focus our efforts on diversifying our customer and carrier base, we may not be successful in doing so. During
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2023, sales to our top ten SCS customers accounted for about 40% of our SCS total revenue and about 35% of our SCS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation). Our top ten DTS customers accounted for about 40% of DTS total revenue and about 35% of DTS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation).

We are also subject to credit risk associated with the concentration of our accounts receivable from our SCS and DTS customers. We have had to take an asset impairment charge in the past when one of our SCS customers filed for bankruptcy, which adversely impacted our operating results. If one or more of our customers were to become bankrupt, insolvent or otherwise were unable to pay for the services we provide, 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 SCS customers operate in cyclical or seasonal industries, or operate in industries, such as the food and beverage industry, that may be impacted by unanticipated weather, growing conditions (such as drought, insects or disease), natural disasters, pandemics, and other conditions over which we have no control. Because of the concentration of customers in our SCS business, a downturn in our customers' 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.

Human Capital

If we are unable to mitigate labor shortage challenges, our financial results may continue to be negatively impacted.

We have experienced high labor costs due to labor shortage challenges across all of our business segments, particularly our DTS and SCS segments. These higher labor costs as well as higher subcontracted transportation costs have negatively impacted our earnings in both DTS and SCS. If labor shortages continue for an extended period of time, our earnings may be further adversely impacted.

Professional Drivers. We hire professional drivers primarily for our SCS and DTS business segments. There is significant competition for qualified professional drivers in the transportation industry. Additionally, interventions and enforcement under the CSA program may shrink the industry's pool of professional drivers as those drivers with unfavorable scores may no longer be eligible to drive for us. As a result of driver shortages, we have, and in the future could continue to be required to, increase driver compensation, let trucks sit idle, use outside driver agencies and subcontracted transportation carriers, 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.

Management and Other Key Personnel. The foundation to our success is developing a skilled and diverse workforce that is motivated and committed to providing our customers with extraordinary service. If we fail to recruit, retain and motivate our employees in senior management and other key roles such as technology and supply chain management, or fail to preserve company culture, then we may not be able to execute on our strategy and grow our business as planned.

In addition, we are committed to creating a positive and collaborative work environment throughout our organization. If we do not, or are perceived not to, have such a work environment, our reputation or ability to recruit and retain talent may be adversely impacted. Moreover, our current employees may terminate their employment with us at any time with minimal advance notice, and we are experiencing increased competition for talent that is making it more difficult for us to retain the employees we have and to recruit new employees. In addition, we are facing increased regulatory and compliance requirements that further decrease the pool of available candidates.

A significant labor dispute involving us, our vendors, or one or more of our customers, or that could otherwise affect our operations, may result in strikes, work stoppages or substantially higher labor costs.

We have approximately 3,700 employees in the U.S. that are organized by labor unions whose wages and benefits are governed by 98 labor agreements that are renegotiated periodically. Disputes with regard to the terms of these agreements or our potential inability to negotiate acceptable contracts with these unions in the future could result in, among other things, a material work stoppage, slowdown or strike by the affected employees. If our workers were to engage in a work stoppage,
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strike or other slowdown, other employees were to become unionized, or the terms and conditions in future labor agreements were renegotiated, we could experience significant business disruptions or higher operating costs, which could have an adverse effect on our financial position, results of operations or cash flows. Moreover, a current or future labor dispute involving our vendors or customers, or that could otherwise affect our operations, could affect our business, financial condition or results of operations.

Environmental, Climate and Weather Risks

Our business may be affected by global climate change and legal, regulatory or other market responses to such change.

Global, federal, state and local legislative and regulatory efforts to address the effects of global warming and climate change have affected and will likely continue to affect our businesses. For example, federal, state and local governments are considering or implementing environmental disclosure requirements, emission reduction (e.g., greenhouse gas and nitrogen dioxide) regulatory requirements and related taxes, zero-emission vehicle mandates and other increased compliance requirements. These and other similar efforts 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.

For instance, a regulatory mandate for the use of zero-emission vehicles or ban of diesel- or gasoline-powered vehicles could reduce the resale value and demand for our vehicles as well as the demand for maintenance services in FMS and offerings in our SCS and DTS businesses. In addition, in the U.S., compliance with environmental regulations and the associated potential cost is complicated by the fact that states are following different approaches to the regulation of climate change. As a result, we cannot predict the ultimate effect on our operating results or cost structure until the timing, scope and extent of any such regulations become known.

On the other hand, even absent any such regulation, increased awareness on the impact of climate change and any adverse publicity about emissions by the transportation industries could accelerate the adoption of new technology and potentially decrease customer demands for some of our services and used vehicles if consumers change their purchasing behaviors in response to the effects of climate change.

Severe weather or other natural occurrences could result in significant business interruptions and expenditures in excess of available insurance coverage.

Our business is more susceptible to severe weather and other natural occurrences as we operate a capital-intensive business with a large number of vehicles and need to access roads and warehouses in order to service our customers. Severe weather may negatively affect our operations as it may damage our vehicles and facilities and prohibit our workforce from servicing our customers. In addition, fuel costs may rise and other significant business interruptions could occur. Insurance to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, and may not be sufficient to cover all of our damages or may not be available at commercially reasonable rates.

Legal and Regulatory Risks

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 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, cyber 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 and reduced capacity limits 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.

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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 U.S., the Department of Transportation (DOT), as well as local, state and other federal agencies exercise broad powers over our motor carrier operations, safety and the treatment and disposal of waste materials. We are also subject to environmental laws and regulations imposed by the EPA, including requirements related to exhaust emissions, as well as regulations imposed by the Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA). Given the size of our employee base, we are also subject to health and safety laws imposed by OSHA, as well as those imposed by state and local authorities. In addition, we must also comply with domestic and international laws and regulations related to tax. We are further subject to anti-bribery, anti-corruption, and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and Office of Foreign Assets Control (OFAC) restrictions.

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. For example, the DOT, through the Federal Motor Carrier Safety Administration (FMCSA), periodically conducts compliance reviews 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, compliance and enforcement initiatives implemented by the FMCSA related to driver time, fitness and safety may shrink the industry's pool of qualified professional drivers. With respect to our international operations in Canada and Mexico, we are subject to local laws and regulatory requirements, including tax and anti-bribery laws, which vary significantly from country to country. Our failure to comply with each of these laws may expose us to legal liability, fines or other penalties.

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 or regulations, 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, and the loss of operating authority and restrictions on our operations. For example, compliance with new laws or regulations related to employee and independent contractor classification may cause us to incur additional exposure under federal and state tax and employment laws. Similarly, compliance with new environmental laws or regulations may also impose new restrictions on our business or require us to take certain actions that may increase our costs and adversely affect our business.

We may also fail to ensure that companies we acquire, that may not have historically maintained internal compliance controls, risk mitigation processes, or policies or procedures, comply with regulatory and legal requirements consistent with our standards. Moreover, 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, fraud or a breach of data privacy laws.

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, taxes imposed on the purchase, sale and lease of goods and services, such as sales, excise, property, value-added tax, fuel, environmental and other taxes, and taxes imposed on multinational corporations. 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, our financial condition, results of operations and cash flows could be adversely affected. In addition, 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 and our tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions. Our operating results could be adversely affected by changes in the effective tax rate as a result of a change in a variety of factors, including the mix of earnings in countries with differing statutory tax rates and changes in our overall profitability.

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From time to time we are also under audit by tax authorities in different jurisdictions with regards to income tax and indirect tax matters. 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.



General Risk Factors

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 businesses 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;
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;
fluctuations in inflation and interest rates;
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 to 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.

Volatility in assumptions, discount rates 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. As of December 31, 2023, the aggregate projected benefit obligations of our global defined pension plans was $1.9 billion, and the plan assets of our global defined benefit pension plans was $1.6 billion. The funded status of the plans, equal to the difference between the present value of plan obligations and assets, 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.

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
21


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, including misconduct, fraud or other improper activities, 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 and Instagram, amongst others, 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.

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 FMS business is highly capital intensive, and its profitability could be adversely affected if we are unable to obtain sufficient capital to fund its operations. In general, we rely in large part upon global credit and financial markets to fund our operations and contractual commitments as well as to refinance existing debt. These markets can experience high levels of volatility, and our access to capital could be constrained for extended periods. Our ability to raise capital may be materially reduced 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.

As of December 31, 2023, we had $7.2 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 business could experience a material adverse effect on our operating results or we could face difficulty in implementing our long-term strategy.

Future acts of terrorism or war, or regulatory changes to combat the risk of terrorism or war may cause significant disruptions in our operations.

Transportation assets such as our fleet of vehicles and other infrastructure and information technology systems remain a target for terrorist activities. Terrorist attacks, along with any government response to those attacks, may adversely affect our financial condition, results of operations or liquidity. Regulations adopted by federal, state or local governmental bodies, including the Office of Foreign Assets Control (OFAC), that impact the transportation industry, including checkpoints and travel restrictions on large trucks, could disrupt or impede the timing of our operations or cause us to incur increased expenses in order to continue meeting customer requirements. 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 1C. CYBERSECURITY
Our cybersecurity program is designed to protect the integrity of our information and the proper functioning and availability of the information systems that help operate our business. We utilize the National Institute of Standards and Technology’s Cybersecurity Framework (NIST CSF) to inform our cybersecurity program and maintain International Organization for Standardization 27001 (ISO 27001) certification. We have created and implemented processes that assess, identify, respond to and manage cybersecurity threats and incidents, and we oversee these processes to minimize the occurrence and impact of any unauthorized access, disruption or use of our information or that of our customers. We have a robust set of information security policies related to encryption of data, anti-virus, firewalls, multi-factor authentication, training of employees, as well as incident response capabilities designed to proactively identify risks and mitigate attacks and unauthorized access attempts to our systems, amongst other measures.
Our cybersecurity program is evaluated by both our management and board of directors. Our Chief Information Officer supervises our cybersecurity program, and our Chief Information Security Officer (CISO) manages its daily operation. Our CISO has over two decades of experience in the cybersecurity and risk management fields, including over 15 years of experience leading cybersecurity oversight, as well as various industry-recognized certifications, such as the Certified Information Systems Security Professional and Auditors certifications. The CISO provides quarterly reports to the audit committee of our board of directors, which is responsible for overseeing cybersecurity and information technology and
22


notifying the board of directors of any significant risks or updates. These reports may include updates on our enterprise-wide cybersecurity strategy, policies, processes and standards, as well as potential cybersecurity or information technology risks and threats. Our cybersecurity program is also evaluated at least annually by external experts, and the results of those reviews are reported to our leadership team and the board of directors. Cybersecurity risk is also evaluated as an enterprise-wide risk via our enterprise risk management program, which is reviewed by our leadership team and the board of directors. All employees are required to complete semiannual cybersecurity trainings and have access to more frequent cybersecurity trainings through online simulations. We also require employees in certain roles to complete additional role-based, specialized cybersecurity trainings.
While we have experienced cybersecurity threats and breaches targeting our information technology systems and networks and those of our third-party providers, to date, these incidents have not had a material impact on our financial condition or results of operations. In the event of a cybersecurity incident, we assess whether such incident had a material impact, and in certain cases, such assessment is reviewed by our leadership team, including the Chief Executive Officer, outside legal advisors and other third-party advisors. Refer to Item 1A. Risk Factors for further information regarding risk related to cybersecurity attacks and other breaches of our systems and information technology.


ITEM 2. PROPERTIES
Our properties consist primarily of vehicle maintenance and repair facilities, warehouses and other real estate and improvements.
We maintain 634 FMS properties in the U.S., Puerto Rico and Canada; we own 454 of these and lease the remaining properties. Our FMS properties are primarily comprised of maintenance facilities generally including a shop for preventive maintenance and repairs, a service island for fueling, safety inspections and preliminary maintenance checks, used vehicle retail sales centers, and in many cases, a commercial rental vehicle counter.
Additionally, we manage 172 on-site maintenance facilities, located at customer locations.
We also maintain 292 locations in the U.S., Canada and Mexico in connection with our SCS business. Almost all of our SCS locations are leased and generally include a warehouse and administrative offices. Our Mexico locations may also include repair shops.
Additionally, we maintain 12 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. Refer to Note 21, "Contingencies and Other Matters", for additional information regarding our legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
23


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.” As of January 31, 2024, there were 4,877 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, 2018 to December 31, 2023.
Performance Graph 2023 v2.jpg
The stock performance graph assumes for comparison that the value of our common stock and of each index was $100 on December 31, 2018, and that all dividends were reinvested. Past performance is not necessarily an indicator of future result

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, 2023:

Total 
Number
of Shares
Purchased
Average 
Price
Paid per
Share
Total Number 
of Shares 
Purchased as
Part of Publicly Announced Programs (1)
Aggregate Maximum
Number of Shares That 
May Yet Be Purchased
Under the Discretionary
and Anti-Dilutive
Programs (1)
October 1 through October 31, 2023129,129 $100.33 92,342 3,907,658 
November 1 through November 30, 2023437,540 105.19 437,540 3,470,118 
December 1 through December 31, 2023277 108.66  3,470,118 
Total566,946 $104.08 529,882 
______________________
(1)We currently maintain two share repurchase programs approved by our board of directors in October 2023. Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs. Share repurchases under both programs can be made from time to time using our working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of quality acquisitions and stock price.
ITEM 6. [RESERVED]
24

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 Part II, Item 8 of this Annual Report on Form 10-K. The following MD&A describes the principal factors affecting our results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates.
Our results of operations and financial condition are influenced by a number of factors including: macroeconomic and other market conditions, including pricing and demand; used vehicle sales; customer contracting activity and retention; maintenance costs; residual value estimate changes; currency exchange rate fluctuations; customer preferences; inflation; fuel and energy prices; insurance costs; interest rates; labor costs; unemployment levels; tax rates; changes in accounting or regulatory requirements; and cybersecurity attacks. This MD&A includes certain forward-looking statements that 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. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the business under Part I, Item 1A. "Risk Factors” and "Special Note Regarding Forward-Looking Statements" sections included in this Annual Report.
Certain prior period amounts have been reclassified to conform with the current period presentation. In the first quarter of 2023, we revised our primary measurement of segment financial performance to exclude intangible amortization expense. This change did not have a material impact to segment results.
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.

OVERVIEW
General
Ryder is a leading logistics and transportation company. We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing that includes our contractual maintenance offering, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides fully integrated port-to-door logistics solutions, including distribution management, dedicated transportation, transportation management, freight brokerage, e-commerce fulfillment, last-mile delivery, contract packaging, and contract manufacturing in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, 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.
In 2022, we announced our intention to exit our lower return FMS Europe (primarily United Kingdom (U.K.)) business. We completed the shutdown of operations as well as the sale of the remaining vehicles and properties in 2023, generating cash proceeds of $394 million and recording gains of $95 million from the beginning of 2022 through 2023. As a result of the shutdown, we reclassified $188 million ($183 million, net of tax) of cumulative currency translation adjustment charges from "Accumulated other comprehensive loss" in our Consolidated Balance Sheet into a one-time, non-cash charge in the second quarter of 2023 in our Consolidated Statements of Earnings. The currency translation adjustment loss had no impact on our consolidated financial position or cash flows. Refer to Note 16, "Accumulated Other Comprehensive Loss" for a discussion on the currency translation adjustment loss.
Further information on our business and business segments are presented in Part I, Item 1, "Business", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report.




25

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2023 HIGHLIGHTS COMPARED WITH 2022

Diluted EPS from continuing operations of $8.73 in 2023, which includes a non-cash currency translation adjustment loss related to the FMS U.K. business exit of $3.93, versus $16.96 in prior year
Comparable EPS (a non-GAAP measure) from continuing operations of $12.95 in 2023 versus $16.37 in prior year, reflecting weaker market conditions in used vehicle sales and rental, partially offset by strong DTS and SCS results
Adjusted Return on Equity (ROE) (a non-GAAP measure) of 19% in 2023, compared to 29% in prior year
Total revenue of $11.8 billion compared to $12.0 billion in 2022
Operating revenue (a non-GAAP measure) of $9.5 billion, up 2%
Full-year 2023 net cash provided by operating activities from continuing operations of $2.4 billion and free cash flow (a non-GAAP measure) of negative $54 million
Business Trends
During 2023, market conditions for our used vehicle sales and commercial rental continued to weaken. We continue to benefit, though, from favorable secular trends in logistics and transportation solutions including supply chain disruptions. These secular trends, along with successful management of initiatives to increase long-term returns, are driving operating revenue growth and benefiting earnings in our SCS and DTS business segments.
In our FMS North America business, used vehicle pricing declined from the historical highs in the prior year and rental utilization was 75% during 2023, as compared to a record 83% in the prior year. We anticipate that market conditions, including a slower freight environment will remain weak in the first half of 2024 for used vehicle sales and rental with gradual improvements expected in the second half of 2024. ChoiceLease vehicle fleet grew during 2023, and included the redeployment of units from our rental fleet into new ChoiceLease contracts in order to maintain optimal rental utilization and provide immediate availability to our lease customers. Our lease pricing initiatives are delivering improved portfolio returns and we expect to realize incremental earnings benefits as our remaining portfolio is renewed at higher returns. In addition, our maintenance cost savings initiatives continue to benefit earnings.
In our SCS business, strong outsourcing trends in warehousing and distribution continue. New contract wins, increased volumes, particularly in the automotive industry vertical, higher pricing and the acquisition of IFS Holdings, LLC, a holding company for Impact Fulfillment Services, LLC (IFS) drove operating revenue (a non-GAAP measure) growth in SCS in 2023. Pricing adjustments and cost recovery initiatives benefited earnings in both SCS and DTS. Profitability in SCS was negatively impacted by weaker volume trends and lost business in the omnichannel retail vertical. During 2023, DTS contract sales activity slowed, consistent with a softer freight environment. However, DTS profitability was at the high end of our target range for 2023. We expect DTS revenue in 2024 to significantly benefit from the acquisition of CLH Parent Corporation (Cardinal Logistics).
While we are experiencing positive momentum in our businesses, other unknown effects from extended higher fuel prices, inflationary cost pressures, labor interruptions, extended disruptions in vehicle and vehicle part production and the higher rising interest rate environment may negatively impact demand for our business, financial results, and significant judgments and estimates.

26

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS SUMMARY
  Change
(Dollars in millions, except per share amounts)2023202220212023/20222022/2021
Total revenue$11,783 $12,011 $9,663 (2)%24%
Operating revenue (1)
9,497 9,280 7,828 2%19%
Earnings from continuing operations before income taxes (EBT)$618 $1,216 $693 (49)%75%
Comparable EBT (1)
815 1,144 682 (29)%68%
Earnings from continuing operations406 863 522 (53)%65%
Comparable earnings from continuing operations (1)
602 833 515 (28)%62%
Comparable EBITDA (1)
2,665 2,722 2,433 (2)%12%
Earnings per common share (EPS) — Diluted
Continuing operations$8.73 $16.96 $9.70 (49)%75%
Comparable (1)
12.95 16.37 9.58 (21)%71%
Cash dividend per share$2.66 $2.40 $2.28 11%5%
Book value per share (2)
69.91 63.45 52.02 10%22%
Total debt7,114 6,352 6,580 12%(3)%
Total shareholders’ equity3,069 2,937 2,798 4%5%
Debt to equity232 %216 %235 %
Adjusted return on equity (1)
19 %29 %21 %
Net cash provided by operating activities from continuing operations$2,353 $2,310 $2,175 
Free cash flow (1)
(54)921 1,057 
Total capital expenditures (3)
3,279 2,652 2,012 
____________________
(1)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.
(2)Book value per share is calculated using Total shareholders’ equity divided by common shares outstanding.
(3)Includes capital expenditures that have been accrued, but not yet paid.
In 2023, total revenue decreased 2% to $11.8 billion, reflecting lower fuel and subcontracted transportation costs passed through to customers, partially offset by higher operating revenue. Operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 2% to $9.5 billion, primarily reflecting SCS organic and acquisition revenue growth and DTS revenue growth partially offset by lower commercial rental revenue in FMS and the exit of the FMS U.K. business.
EBT and comparable EBT (a non-GAAP measure) decreased to $618 million and $815 million, respectively, from $1.2 billion and $1.1 billion, respectively, primarily due to lower gains on used vehicles sold and decreased commercial rental results in FMS, partially offset by higher earnings in DTS and SCS. EBT in 2023, also reflects a one-time, non-cash $188 million currency translation adjustment loss related to the FMS U.K. exit.

FULL YEAR CONSOLIDATED RESULTS
Lease & Related Maintenance and Rental
  Change
(Dollars in millions)2023202220212023/20222022/2021
Lease & related maintenance and rental revenue$3,937 $4,174 $3,995 (6)%4%
Cost of lease & related maintenance and rental2,684 2,774 2,884 (3)%(4)%
Gross margin$1,253 $1,400 $1,111 (11)%26%
Gross margin %32%34%28%
Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenue decreased 6% in 2023, reflecting lower commercial rental demand and a 3% negative impact from the exit of the FMS U.K. business.
27

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cost of lease & related maintenance and rental represents the direct costs related to Lease & related maintenance and rental revenue 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 decreased 3% in 2023 primarily reflecting the exit of the FMS U.K. business and lower operating costs on a 4% smaller average commercial rental fleet.
Lease & related maintenance and rental gross margin decreased due to lower commercial rental demand. Lease & related maintenance and rental gross margin as a percentage of revenue decreased to 32% primarily due to lower commercial rental demand and utilization.
Services
  Change
(Dollars in millions)2023202220212023/20222022/2021
Services revenue$7,297 $7,118 $5,181 3%37%
Cost of services6,266 6,153 4,503 2%37%
Gross margin$1,031 $965 $678 7%42%
Gross margin %14%14%13%
Services revenue represents all the revenues associated with our SCS and DTS business segments, including subcontracted transportation and fuel, as well as SelectCare and fleet support services associated with our FMS business segment. Services revenue increased 3% in 2023, due to SCS and DTS increased pricing, new business and higher volumes, as well as higher pricing in SelectCare, partially offset by lower subcontracted transportation and fuel costs passed through to customers. The acquisition of IFS in the fourth quarter of 2023 and businesses acquired within the SCS segment in the second half of 2022, also contributed to revenue growth.
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 2% in 2023, primarily reflecting higher revenue, partially offset by lower subcontracted transportation and fuel costs.
Services gross margin increased in 2023, due to higher pricing in SCS and DTS.
Fuel Services
  Change
(Dollars in millions)2023202220212023/20222022/2021
Fuel services revenue$549 $719 $487 (24)%48%
Cost of fuel services534 694 474 (23)%46%
Gross margin$15 $25 $13 (40)%92%
Gross margin %3 %%%
Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 24% in 2023, primarily reflecting lower fuel prices passed through to customers and to a much lesser extent fewer gallons sold.
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 23% in 2023 as a result of lower fuel prices and fewer gallons sold.
Fuel services gross margin decreased to $15 million and gross margin as a percentage of revenue remained unchanged at 3% in 2023. 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 current market fuel costs. Fuel services gross margin was not significantly impacted by these price change dynamics in 2023.

28

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling, General and Administrative Expenses
    Change
(Dollars in millions)2023202220212023/20222022/2021
Selling, general and administrative expenses (SG&A)$1,421$1,415$1,187—%19%
Percentage of total revenue12 %12 %12 %
SG&A expenses remained at $1.4 billion and SG&A expenses as a percentage of total revenue remained at 12% in 2023, as strategic investments in information technology were offset by lower bad debt expense.
Non-Operating Pension Costs, net
    Change
(Dollars in millions)2023202220212023/20222022/2021
Non-operating pension costs, net$40 $11 $(1)NMNM
Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. Non-operating pension costs, net increased due to higher interest expense from a higher discount rate partially offset by an increase in expected return on plan assets.
Used Vehicle Sales, net
  Change
(Dollars in millions)2023202220212023/20222022/2021
Used vehicle sales, net$(196)$(450)$(257)(56)%75%
Used vehicle sales, net includes gains or 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"). The decrease in used vehicle sales in 2023 was due to lower proceeds per unit of sales of used vehicles partially offset by higher volumes compared to the prior year. Used vehicle sales, net in 2022, includes $49 million gains associated with the exit of the FMS U.K. business.
Average proceeds per unit decreased in 2023 from the prior year. The following table presents the average used vehicle proceeds per unit changes, using constant currency, compared with the prior year:
2023/20222022/2021
Tractors(37)%43%
Trucks(28)%51%
Interest Expense
    Change
(Dollars in millions)2023202220212023/20222022/2021
Interest expense$296$228$21430%7%
Effective interest rate4.4%3.5%3.2%
Interest expense increased 30% in 2023, primarily reflecting lower fixed-rate interest maturing debt being replaced with new issuances at higher market interest rates to fund increased capital spending in FMS, as well as higher short-term variable interest rates.
Miscellaneous Income, net
Change
(Dollars in millions)2023202220212023/20222022/2021
Miscellaneous income, net$(47)$(32)$(66)47%(52)%
Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income, gains on sales of operating property, foreign currency transaction remeasurement and other non-operating items. Miscellaneous
29

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
income, net was $47 million in 2023 as compared to $32 million in the prior year, primarily due to higher investment income on securities used to fund certain benefit plans partially offset by higher gains on sales of U.K. properties in the prior year.
Currency Translation Adjustment Loss
Change
(Dollars in millions)2023202220212023/20222022/2021
Currency translation adjustment loss$188 $— $— NMNM
Refer to Note 16, "Accumulated Other Comprehensive Loss" for a discussion on the currency translation adjustment loss.
Restructuring and Other Items, net
Change
(Dollars in millions)2023202220212023/20222022/2021
Restructuring and other items, net$(21)$$32 NMNM
Refer to Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for a discussion of restructuring charges and other items.
Provision for Income Taxes
  Change    
(Dollars in millions)2023202220212023/20222022/2021
Provision for income taxes$212 $353 $171 (40)%106%
Effective tax rate on continuing operations34.3 %29.1 %24.7 %
Comparable tax rate on continuing operations (1)
26.1 %27.2 %24.5 %
_______________
(1) Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.
Provision for income taxes decreased to $212 million in 2023 due to lower earnings partially offset by a higher effective tax rate. Our effective tax rate from continuing operations was 34.3% as compared to 29.1% in the prior year. The increase in the effective rate was due to a one-time, nondeductible cumulative currency translation adjustment loss related to the completion of the exit of the FMS U.K. business in 2023. Our comparable tax rate on continuing operations was 26.1% as compared to 27.2% in the prior year. Refer to our discussion of changes in our provision for income taxes and effective tax rate from continuing operations in Note 11, “Income Taxes” in the Notes to Consolidated Financial Statements.
30

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FULL YEAR OPERATING RESULTS BY BUSINESS SEGMENT
 
  Change
(Dollars in millions)2023202220212023/20222022/2021
Revenue:
Fleet Management Solutions$5,930 $6,327 $5,680 (6)%11%
Supply Chain Solutions4,875 4,720 3,155 3%50%
Dedicated Transportation Solutions1,785 1,786 1,457 —%23%
Eliminations(807)(822)(629)2%(31)%
Total$11,783 $12,011 $9,663 (2)%24%
Operating Revenue: (1)
Fleet Management Solutions$5,053 $5,213 $4,941 (3)%6%
Supply Chain Solutions3,625 3,254 2,211 11%47%
Dedicated Transportation Solutions1,298 1,239 1,055 5%17%
Eliminations(479)(426)(379)(12)%(12)%
Total$9,497 $9,280 $7,828 2%19%
Earnings from continuing operations before income taxes:
Fleet Management Solutions$665 $1,057 $665 (37)%59%
Supply Chain Solutions231 218 123 6%77%
Dedicated Transportation Solutions121 103 49 18%110%
Eliminations(95)(114)(78)17%(46)%
922 1,264 759 (27)%(67)%
Unallocated Central Support Services(72)(83)(69)(13)%(20)%
Intangible amortization expense (2)
(35)(37)(8)4%(363)%
Non-operating pension costs, net (3)
(40)(11)NMNM
Other items impacting comparability, net (4)
(157)83 10 NMNM
Earnings from continuing operations before income taxes$618 $1,216 $693 (49)%75%
  ______________________
(1)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.
(2)Refer to Note 9, "Intangible Assets, Net," for a discussion on this item.
(3)Refer to Note 19, "Employee Benefit Plans," for a discussion on this item.
(4)Refer to Note 20, "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 income taxes" (EBT), which includes an allocation of costs from Central Support Services (CSS) and excludes Non-operating pension costs, net, intangible amortization expense, and certain other items as discussed in Note 20, “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. Refer to Note 3, “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.
Our FMS segment leases revenue earning equipment and provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments. Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to SCS and
31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DTS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation (presented as “Eliminations”). 
The following table sets forth the benefit from equipment contribution included in EBT for our SCS and DTS business segments:
Change
(Dollars in millions)2023202220212023/20222022/2021
Equipment Contribution:
Supply Chain Solutions$43 $46 $33  (7)% 39%
Dedicated Transportation Solutions52 68 45  (24)% 51%
Total$95 $114 $78  (17)% 46%
In 2023, the decrease in DTS and SCS equipment contribution was related to lower gains on sales of used vehicles. The decrease in DTS was also due to lower fuel prices passed through to customers.

Fleet Management Solutions
 Change
(Dollars in millions)2023202220212023/20222022/2021
ChoiceLease$3,181 $3,101 $3,064 3%1%
Commercial rental (1)
1,178 1,338 1,077 (12)%24%
SelectCare and other694 624 538 11%16%
FMS Europe (2)
 150 262 (100)%(43)%
Fuel services revenue
877 1,114 739 (21)%51%
FMS total revenue$5,930 $6,327 $5,680 (6)%11%
FMS operating revenue (3)
$5,053 $5,213 $4,941 (3)%6%
FMS EBT$665 $1,057 $665 (37)%59%
FMS EBT as a % of FMS total revenue11.2%16.7%11.7%(550) bps500 bps
FMS EBT as a % of FMS operating revenue (3)
13.2%20.3%13.5%(710) bps680 bps
_______________ 
(1)For the years ended December 31, 2023, 2022, and 2021 rental revenue from lease customers in place of a lease vehicle represented 34%, 33%, and 30% of commercial rental revenue, respectively.
(2)Refer to Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additional information.
(3)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

FMS total revenue decreased 6% to $5.9 billion in 2023 primarily due to lower fuel costs passed through to customers and lower operating revenue (a non-GAAP measure excluding fuel services revenue). FMS operating revenue decreased 3% to $5.1 billion in 2023 reflecting lower rental demand and the exit of the U.K. business, partially offset by higher ChoiceLease and SelectCare revenue.
FMS EBT decreased 37% in 2023, reflecting lower gains on used vehicle sales and lower commercial rental results. Lower gains on used vehicles sold reflect a 28% and 37% decrease in used truck and tractor pricing, respectively, partially offset by higher volumes. Used vehicle inventory levels increased to 8,000 vehicles, but remains within the target range of 7,000 - 9,000 vehicles. Rental power fleet utilization decreased to 75% from a record 83% in 2022. The average power fleet was 4% smaller in 2023.
32

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our North America 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):
    Change
  2023202220212023/20222022/2021
End of period vehicle count
By type:
Trucks (1)
75,600 72,100 68,900 5%5%
Tractors (2)
69,000 69,300 68,700 —%1%
Trailers and other (3)
40,800 41,200 38,700 (1)%6%
Total185,400 182,600 176,300 2%4%
By product line:
ChoiceLease138,900 134,600 133,300 3%1%
Commercial rental36,400 41,800 38,700 (13)%8%
Service vehicles and other2,100 2,100 2,000 —%5%
177,400 178,500 174,000 (1)%3%
Held for sale8,000 4,100 2,300 95%78%
Total185,400 182,600 176,300 2%4%
Memo: U.K. Vehicle Count 1,000 13,000 (100)%(92)%
Customer vehicles under SelectCare contracts (4)
51,600 54,600 53,400 (5)%2%
Average vehicle count
By product line:
ChoiceLease137,800 134,000 135,200 3%(1)%
Commercial rental39,300 40,800 35,700 (4)%14%
Service vehicles and other2,000 2,000 2,000 —%—%
179,100 176,800 172,900 1%2%
Held for sale6,500 3,400 4,500 91%(24)%
Total185,600 180,200 177,400 3%2%
Customer vehicles under SelectCare contracts (4)
52,700 54,800 51,800 (4)%6%
Customer vehicles under SelectCare on-demand (5)
10,600 15,400 15,700 (31)%(2)%
Total vehicles serviced248,900 250,400 244,900 (1)%2%
_______________ 
(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 over 33,000 pounds.
(3)Generally comprised of dry, flatbed and refrigerated type trailers.
(4)Excludes customer vehicles under SelectCare on-demand contracts.
(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 count may have been serviced more than one time during the respective period.

Note: Average vehicle counts were computed using a 24-point average based on monthly information.


33

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides information on our North America active ChoiceLease fleet (number of units rounded to nearest hundred) and our commercial rental power fleet (excludes trailers):
Change
2023202220212023/20222022/2021
Active ChoiceLease fleet
End of period vehicle count (1)
129,800128,400128,900 1% —%
Full year average vehicle count (1)
129,800128,700129,900 1%(1)%
Commercial rental statistics
Commercial rental utilization - power fleet (2)
75 %83 %80 %(800) bps300 bps
_______________
(1)Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning (NYE) or no longer earning units (NLE). 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. 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.
(2)Rental utilization is calculated using the number of days units are rented divided by the number of days units are available to rent based on the days in the calendar year.


Supply Chain Solutions
In 2023, we introduced the omnichannel retail industry vertical to provide better visibility to the revenue mix following recent acquisitions and organic growth. This new vertical includes retail, e-commerce, last mile services, and technology.
  Change
(Dollars in millions)2023202220212023/20222022/2021
Omnichannel retail
$1,207 $1,215 $627 (1)%94%
Automotive1,061 870 693 22%26%
Consumer packaged goods
926 806 629 15%28%
Industrial and other431 363 262 19%39%
Subcontracted transportation and fuel1,250 1,466 944 (15)%55%
SCS total revenue$4,875 $4,720 $3,155 3%50%
SCS operating revenue (1)
$3,625 $3,254 $2,211 11%47%
SCS EBT$231 $218 $123 6%77%
SCS EBT as a % of SCS total revenue4.7%4.6%3.9%10 bps70 bps
SCS EBT as a % of SCS operating revenue (1)
6.4%6.7%5.6%(30) bps110 bps
End of period vehicle count:
 
Power vehicles
4,200 4,200 3,700 —%14%
Trailers
9,600 8,900 7,000 8%27%
Total13,800 13,100 10,700 5%