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 during 2025, compared with 2024. A detailed discussion of the year 2024 compared with 2023 is not included herein and can be found in the MD&A section in our 2024 Annual Report on Form 10-K, filed with the SEC on February 12, 2025, which is incorporated herein by reference.
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.
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, commercial rental and vehicle maintenance services; (2) Supply Chain Solutions (SCS), which provides fully integrated logistics solutions; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions, 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.
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.
2025 HIGHLIGHTS
• Diluted EPS from continuing operations of $11.99, up 8% from prior year
• Comparable EPS (a non-GAAP measure) from continuing operations of $12.92, up 8% from prior year, reflecting higher contractual earnings across all business segments, as well as share repurchases, partially offset by lower used vehicle sales and rental results
• Adjusted Return on Equity (ROE) (a non-GAAP measure) of 17%, compared to 16% in prior year
• Total revenue of $12.7 billion, consistent with prior year
• Operating revenue (a non-GAAP measure) of $10.4 billion, up 1%, primarily reflecting contractual revenue growth in SCS and FMS
• Net cash provided by operating activities from continuing operations of $2.6 billion and free cash flow (a non-GAAP measure) of $946 million
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Trends
During 2025, the strength and resiliency of our transformed business model as well as consistent execution of strategic initiatives delivered earnings growth and helped mitigate the impact of weak market conditions on used vehicle sales and commercial rental demand. The continued execution of our strategic initiatives focused on lease pricing, maintenance cost savings, acquisitions synergies and optimization of our Omnichannel network drove contractual earnings growth in all business segments.
We continue to benefit from favorable long-term secular trends in logistics and transportation solutions; however, we are experiencing near-term revenue growth headwinds that reflect the extended freight downturn and overall economic uncertainty. These favorable secular trends and the value our solutions bring to our customers remain strong and provide long-term revenue and earnings growth opportunities for all of our business segments. Our balanced growth strategy provides a solid foundation for ongoing contractual earnings growth while also positioning us to benefit from a cycle upturn. In 2026, we are well positioned for growth in SCS as we achieved record sales in 2025. In FMS and DTS, we expect contractual sales trends to improve as freight markets normalize.
While we are experiencing positive momentum in our businesses, other unknown effects from inflationary cost pressures, regulatory uncertainty, labor interruptions, introduction of tariffs and taxes, and the continued higher interest rate environment may negatively impact demand for our business, financial results, and significant judgments and estimates.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS SUMMARY
Change
(Dollars in millions, except per share amounts)
Total revenue
Operating revenue (1)
Earnings from continuing operations before income taxes (EBT)
Comparable EBT (1)
Earnings from continuing operations
Comparable earnings from continuing operations (1)
Comparable EBITDA (1)
Earnings per common share (EPS) — Diluted
Continuing operations
Comparable (1)
Cash dividend per share
Book value per share (2)
Total debt
Total shareholders’ equity
Debt to equity
Adjusted return on equity (1)
Net cash provided by operating activities from continuing operations
Free cash flow (1)
Total capital expenditures (3)
(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 2025, total revenue was $12.7 billion, consistent with prior year. Operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) increased 1% to $10.4 billion, primarily reflecting contractual revenue growth in SCS and FMS.
EBT increased to $685 million and comparable EBT (a non-GAAP measure) increased to $730 million, primarily due to higher contractual earnings, partially offset by lower used vehicle sales and rental results reflecting weaker market conditions.
FULL YEAR CONSOLIDATED RESULTS
Services
Change
(Dollars in millions)
Services revenue
Cost of services
Gross margin
Gross margin %
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 in 2025, remained consistent with prior year as new business and higher customer volumes in SCS was largely offset by lost business in DTS.
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, lease expense, insurance and maintenance costs. Cost of services in 2025 remained consistent with the prior year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Services gross margin and gross margin as a percentage remained consistent in 2025.
Lease & Related Maintenance and Rental
Change
(Dollars in millions)
Lease & related maintenance and rental revenue
Cost of lease & related maintenance and rental
Gross margin
Gross margin %
Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenue increased 1% in 2025, reflecting ChoiceLease revenue growth, partially offset by lower rental demand.
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 1% in 2025, primarily reflecting lower maintenance costs and a smaller lease and rental fleet.
Lease & related maintenance and rental gross margin and gross margin as a percentage of revenue increased primarily due to higher ChoiceLease pricing and maintenance cost-savings initiatives.
Fuel Services
Change
(Dollars in millions)
Fuel services revenue
Cost of fuel services
Gross margin
Gross margin %
Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue decreased 11% in 2025, primarily reflecting lower fuel costs passed through to customers and 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 11% in 2025, reflecting lower fuel costs and fewer gallons sold.
Fuel services gross margin remained consistent and gross margin as a percentage of revenue increased in 2025. 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 as a percentage of revenue was positively impacted by these price change dynamics in 2025.
Selling, General and Administrative Expenses
Change
(Dollars in millions)
Selling, general and administrative expenses (SG&A)
Percentage of total revenue
SG&A expenses decreased 1% primarily reflecting lower travel expenses and acquisition synergies, partially offset by higher medical costs. SG&A expenses as a percentage of total revenue remained at 12% in 2025.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Non-Operating Pension Costs, net
Change
(Dollars in millions)
Non-operating pension costs, net
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. Refer to Note 19, "Employee Benefit Plans" for further discussion.
Used Vehicle Sales, net
Change
(Dollars in millions)
Used vehicle sales, net
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"). Used vehicle sales, net decreased in 2025, due to lower pricing and volume, reflecting weaker market conditions, and lower retail sales mix.
Average proceeds per unit decreased in 2025 from the prior year. The following table presents the average used vehicle proceeds per unit changes, using constant currency, compared with the prior year:
Proceeds per unit change (1)
Tractors
Trucks
(1) Represents percentage change compared to prior year period in average sales proceeds on used vehicle sales using constant currency.
Interest Expense
Change
(Dollars in millions)
Interest expense
Effective interest rate
Interest expense increased 5% in 2025, reflecting higher average debt and higher interest rates on newer issuances compared to maturing debt.
Miscellaneous Income, net
Change
(Dollars in millions)
Miscellaneous income, net
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 income, net decreased in 2025, primarily due to prior year gain on the sale of assets and insurance recoveries.
Currency Translation Adjustment Loss
Change
(Dollars in millions)
Currency translation adjustment loss
NM - Denotes Not Meaningful throughout the MD&A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Restructuring and Other Items, net
Change
(Dollars in millions)
Restructuring and other items, net
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)
Provision for income taxes
Effective tax rate on continuing operations
Comparable tax rate on continuing operations (1)
(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.
Our effective tax rate from continuing operations was 26.8% in 2025 as compared to 26.0% in the prior year, and our comparable tax rate on continuing operations was 26.0% in 2025 compared to 25.7% in the prior year. The increases in tax rates were primarily due to discrete tax benefits in 2024. Refer to Note 11, “Income Taxes” in the Notes to Consolidated Financial Statements for a discussion of changes in our provision for income taxes and effective tax rate from continuing operations.
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)
Revenue:
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Total
Operating Revenue: (1)
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Total
Earnings from continuing operations before income taxes:
Fleet Management Solutions
Supply Chain Solutions
Dedicated Transportation Solutions
Eliminations
Unallocated Central Support Services
Intangible amortization expense (2)
Non-operating pension costs, net (3)
Other items impacting comparability, net (4)
Earnings from continuing operations before income taxes
(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 segment "Earnings from continuing operations before income taxes" (Segment 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 significant items that are not representative of our business operations and vary from period to period 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 information technology, finance, marketing, human resources, legal, and safety.
The objective of the Segment 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
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to SCS and DTS customers (Equipment Contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation (presented as “Eliminations”).
The following table sets forth the benefit from Equipment Contribution included in Segment EBT for our SCS and DTS business segments:
Change
(Dollars in millions)
Equipment Contribution:
Supply Chain Solutions
Dedicated Transportation Solutions
Total
Fleet Management Solutions
Change
(Dollars in millions)
ChoiceLease
Commercial rental (1)
SelectCare and other
Fuel services revenue
FMS total revenue
FMS operating revenue (2)
FMS EBT
FMS EBT as a % of FMS total revenue
(20) bps
(240) bps
FMS EBT as a % of FMS operating revenue (2)
(30) bps
(310) bps
(1) During 2025, 2024 and 2023, rental revenue from lease customers in place of a lease vehicle represented 29%, 31%, and 34% of commercial rental revenue, respectively.
(2) 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 1% in 2025, due to lower fuel services revenue, reflecting lower fuel costs passed through to customers and fewer gallons sold. FMS operating revenue was relatively consistent in 2025, primarily reflecting higher ChoiceLease revenue largely offset by weaker rental demand.
FMS EBT decreased 3% in 2025, reflecting lower gains on used vehicle sales due to lower pricing and number of vehicles sold and weaker commercial rental demand, partially offset by higher ChoiceLease performance and benefits from maintenance cost savings initiatives. Lower gains on used vehicles sales reflect a 15% and 11% decrease in used truck and tractor pricing, respectively. Rental power fleet utilization remained consistent at 70% compared to prior year. The average commercial rental power active fleet was 7% smaller in 2025 compared to prior year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our 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
End of period vehicle count
By type:
Trucks (1)
Tractors (2)
Trailers and other (3)
Total
By ownership:
Owned
Leased
Total
By product line:
ChoiceLease
Commercial rental
Service vehicles and other
Held for sale
Total
Customer vehicles under SelectCare contracts (4)
Average vehicle count
By product line:
ChoiceLease
Commercial rental
Service vehicles and other
Held for sale
Total
Customer vehicles under SelectCare contracts (4)
Customer vehicles under SelectCare on-demand (5)
Total vehicles serviced
(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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides information on our active ChoiceLease fleet (number of units rounded to nearest hundred) and our commercial rental power fleet (excludes trailers):
Change
Active ChoiceLease fleet
End of period vehicle count (1)
Full year average vehicle count (1)
Commercial rental statistics
Commercial rental utilization - power fleet (2)
— bps
(500) bps
(1) Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units.
(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
Change
(Dollars in millions)
Omnichannel retail
Automotive
Consumer packaged goods
Industrial and other
Subcontracted transportation and fuel
SCS total revenue
SCS operating revenue (1)
SCS EBT
SCS EBT as a % of SCS total revenue
20 bps
160 bps
SCS EBT as a % of SCS operating revenue (1)
30 bps
200 bps
End of period vehicle count:
Power vehicles
Trailers
Total
(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.
SCS total revenue increased 3% primarily as a result of higher operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation), which increased 3% driven by new business and higher customer volumes.
SCS EBT increased 7% in 2025, primarily reflecting operating revenue growth and improved performance from optimization of our omnichannel retail network partially offset by lost business and extended customer plant shutdowns in automotive during the fourth quarter.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Dedicated Transportation Solutions
Change
(Dollars in millions)
DTS total revenue
DTS operating revenue (1)
DTS EBT
DTS EBT as a % of DTS total revenue
90 bps
(170) bps
DTS EBT as a % of DTS operating revenue (1)
90 bps
(260) bps
End of period vehicle count:
Power vehicles
Trailers
Total
(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.
DTS total revenue decreased in 2025, due to lower subcontracted transportation and fuel costs passed through to customers and lower operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation revenues). DTS operating revenue decreased 2% in 2025, primarily due to lower fleet count reflecting the prolonged freight market downturn.
DTS EBT increased 12% in 2025, reflecting acquisition synergies and prior year integration costs, partially offset by lower operating revenue.
Central Support Services
Change
(Dollars in millions)
Total CSS
Allocation of CSS to business segments
Unallocated CSS
Total CSS costs increased 5% in 2025, primarily due to higher incentive compensation and marketing costs. Unallocated CSS increased 16% in 2025, primarily due to incentive compensation, higher information technology costs and the prior year gain on the sale of assets.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL RESOURCES AND LIQUIDITY
Cash Flows
The following is a summary of our cash flows from continuing operations:
(In millions)
Net cash provided by (used in) :
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net change in cash, cash equivalents, and restricted cash
(In millions)
Net cash provided by operating activities from continuing operations
Earnings from continuing operations
Non-cash and other, net
Currency translation adjustment loss
Collections on sales-type leases
Changes in operating assets and liabilities
Net cash provided by operating activities from continuing operations
Net cash provided by operating activities from continuing operations was $2.6 billion in 2025, compared with $2.3 billion in 2024, primarily reflecting lower income tax payments and working capital needs. Net cash used in investing activities from continuing operations decreased to $1.7 billion in 2025 compared with $2.4 billion in 2024, primarily reflecting lower capital expenditures and the prior year acquisition of Cardinal Logistics. Net cash used in financing activities from continuing operations was $912 million in 2025, compared to net cash provided by financing activities from continuing operations of $153 million in 2024, primarily reflecting lower borrowing needs.
The following table shows the components of our free cash flow (a non-GAAP measure):
(In millions)
Net cash provided by operating activities from continuing operations
Sales of revenue earning equipment (1)
Sales of operating property and equipment (1)
Other (1)
Total cash generated (2)
Purchases of property and revenue earning equipment (1)
Free cash flow (2)
(1) Included in cash flows from investing activities.
(2) Non-GAAP financial measures. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in this table. Refer to the “Non-GAAP Financial Measures” section of this MD&A for the reasons why management believes these measures are important to investors.
Free cash flow (a non-GAAP measure) increased to $946 million in 2025 from $133 million in 2024, primarily reflecting reduced capital expenditures and higher cash from operating activities.
Net cash provided by operating activities from continuing operations is expected to increase to approximately $2.7 billion in 2026. We expect free cash flow (a non-GAAP measure) to decrease to approximately $800 million reflecting higher investments in the ChoiceLease fleet, partially offset by higher cash generated.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Purchase Obligations
The majority of our purchase obligations are pay-as-you-go transactions made in the ordinary course of business. Purchase obligations include agreements to purchase goods or services that are legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed minimum or variable price provisions; and the approximate timing of the transaction. Any amounts for which we are liable under purchase orders for goods and services received are reflected in the Consolidated Balance Sheets as “Accounts payable” and “Accrued expenses and other current liabilities.” In addition, we reflect obligations with settlements that are greater than twelve months from the balance sheet date, as "Other non-current liabilities," including operating lease liabilities. The most significant purchase obligations relate to the purchase of revenue earning equipment.
Capital expenditures generally represent the purchase of revenue earning equipment (trucks, tractors and trailers) within our FMS segment. These expenditures primarily support the ChoiceLease and commercial rental product lines. The level of capital required to support the ChoiceLease product line varies based on customer contract signings for replacement vehicles and growth. These contracts are long-term agreements that result in predictable cash flows typically over three to seven years for trucks and tractors and ten years for trailers. We utilize capital for the purchase of vehicles in our commercial rental product line to replenish and expand the fleet available for shorter-term use by contractual or occasional customers. Operating property and equipment expenditures primarily relate to spending on items such as vehicle maintenance facilities and equipment, computer and telecommunications equipment, investments in technologies, and warehouse facilities and equipment.
The following is a summary of capital expenditures:
(In millions)
Revenue earning equipment:
ChoiceLease
Commercial rental
Operating property and equipment
Gross capital expenditures (1)
Changes in accounts payable related to purchases of property and revenue earning equipment
Cash paid for purchases of property and revenue earning equipment
(1) Excludes $78 million, $46 million and $26 million in 2025, 2024 and 2023, respectively, in assets held under finance leases resulting from new or the extension of existing finance leases and other additions.
Gross capital expenditures decreased to $2.1 billion in 2025, reflecting reduced investments in the ChoiceLease and rental vehicles. We expect gross capital expenditures to increase to approximately $2.4 billion in 2026, reflecting higher investments in the lease fleet.
Other Obligations and Commitments
The following table provides other material cash requirements from contractual obligations and commitments and the related reference in the Notes to Consolidated Financial Statements for further information:
Description
Reference
Reference Title
Insurance obligations (primarily self-insurance)
Note 10
Accrued Expenses and Other Liabilities
Operating leases
Note 12
Leases
Debt
Note 13
Debt
Employee benefit plans
Note 19
Employee Benefit Plans
We believe that our operating cash flows and access to the debt markets, as further discussed in "Financing and Other Funding Transactions" below, are sufficient to meet our contractual obligations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Off-Balance Sheet Arrangements
Guarantees. Refer to Note 14, “Guarantees,” in the Notes to Consolidated Financial Statements for a discussion of our agreements involving guarantees.
Financing and Other Funding Transactions
We utilize external capital primarily to support working capital needs and growth in our asset-based product lines. The variety of financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements, and bank credit facilities. Our principal sources of financing are issuances of unsecured commercial paper and medium-term notes.
As of December 31, 2025, cash and equivalents totaled $198 million and approximately $139 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries.
In 2025, we repatriated $40 million of current year earnings from our Canada subsidiaries with minimal tax cost. In 2024, we repatriated $14 million of current year earnings from our Mexico subsidiary with minimal tax cost. As of December 31, 2025, we continue to consider our U.K. earnings to no longer be indefinitely reinvested and determined that there was no impact to deferred taxes. We consider the undistributed earnings of our Mexico subsidiary generated through 2023 to be indefinitely reinvested. As of 2024, we no longer assert that the current year earnings of our Mexico subsidiary are indefinitely reinvested. We consider the undistributed earnings of our Canada subsidiary generated through 2024 to be indefinitely reinvested. During 2025, we no longer assert that current year earnings of our Canada subsidiary are indefinitely reinvested. The estimated taxes associated with the repatriation of these earnings are not material. Our remaining foreign jurisdictions are indefinitely reinvested.
We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, volatility or disruption in the public unsecured debt market or the commercial paper market may impair our ability to access these markets on terms commercially acceptable to us. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements or by seeking other funding sources.
In February 2025, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 5.00%, and maturing on March 15, 2030. In May 2025, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 4.85%, and maturing on June 15, 2030. In November 2025, we issued an unsecured medium-term note with aggregate principal amount of $300 million, bearing annual interest of 4.30%, and maturing on December 1, 2030.
In April 2025, we amended and restated our corporate revolving credit facility, which supports U.S. and Canadian commercial paper programs, with a syndicate of eleven incumbent lending institutions. The facility's committed borrowing capacity was increased to $1.6 billion and it now expires in April 2030. The credit facility is primarily used for general corporate purposes and can also be used to issue up to $150 million in letters of credit. As of December 31, 2025, there were no letters of credit outstanding against the facility.
In April 2025, we extended the trade receivables financing facility until April 2026. In September 2025, we amended this credit facility to permit an increase in borrowing capacity of up to $200 million for a maximum borrowing of $500 million, subject to lender approval. As of December 31, 2025, this credit facility's borrowing capacity was $300 million.
Refer to Note 13, “Debt,” in the Notes to Consolidated Financial Statements for information around the revolving credit facility, the trade receivables financing program, issuance of medium-term notes under our shelf registration statement, asset-backed financing obligations and debt maturities.
Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings. These ratings are inten ded to provide guidance to investors in determining the credit risk associated with our particular securities based on current information obtained by the rating agencies from us or from other sources. Ratings are not recommendations to buy, sell or hold our debt securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Lower ratings generally result in higher borrowing costs, as well as reduced access to unsecured capital markets. A significant downgrade below investment grade of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on alternative funding sources. A significant downgrade below investment grade would not affect our ability to borrow amounts under our revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our debt ratings and rating outlooks as of December 31, 2025 were as follows:
Rating Summary
Short-term
Long-term
Long-term Outlook
Standard & Poor’s Ratings Services
BBB+
Stable
Moody’s Investors Service
Baa2
Positive
Fitch Ratings
BBB+
Stable
As of December 31, 2025, we had the following amounts available to fund operations under the following facilities:
(In millions)
Revolving credit facility
Trade receivables financing program
Total
In accordance with our funding philosophy, we generally attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our vehicle assets. We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreements) was 18% as of December 31, 2025 and 2024.
Our debt to equity ratios were 250% as of December 31, 2025 and 2024. The debt to equity ratio represents total debt divided by total equity.
Pension Information
Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for background and further information regarding our company-sponsored defined benefit retirement plans.
During 2025, total pension contributions were $66 million, which primarily related to a prefunding of future required pension contributions, compared with $56 million in 2024. We estimate total 2026 required contributions to our pension plans to be approximately $10 million. The present value of estimated global pension contributions that will be required over the next 5 years totals approximately $24 million (pre-tax). Changes in interest rates and the market value of the assets held by the plans could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and required contributions in future years. The ultimate amount of contributions is also dependent upon the requirements of applicable laws and regulations.
Due to the underfunded status of our defined benefit plans, we had an accumulated net pension equity charge (after-tax) of $575 million and $597 million as of December 31, 2025 and 2024, respectively. The funded status of our defined benefit pension plans increased to 94% in 2025 from 91% in 2024, primarily due to contributions made during 2025.
We expect 2026 defined benefit pension expense to decrease to $35 million. See the “Critical Accounting Estimates — Pension Assumptions” section for further discussion on pension accounting estimates.
Income Tax Cash Obligations
During 2025, total income taxes paid were $52 million. In the future, our income tax cash obligations may increase. Taxable income and cash taxes payable may be impacted by a variety of factors, including (i) the amount of book income generated in each jurisdiction, (ii) total capital expenditures, (iii) the reversal of our deferred tax liability, (iv) remaining net operating losses, (v) the availability of U.S. federal bonus depreciation, and (vi) the impact of any changes in U.S., state and foreign income tax laws. While it is likely that our income tax cash obligations may increase at some point in the future, we cannot reasonably estimate the timing or impact of these factors.
Share Repurchase Programs and Cash Dividends
Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs. In 2025, we returned a total of $664 million of capital to our shareholders through share repurchases of $519 million and cash dividends of $145 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cash dividend payments to shareholders of common stock were $145 million, $135 million, and $128 million in 2025, 2024, and 2023, respectively. In 2025, 2024, and 2023, our annualized dividend was $3.44, $3.04, and $2.66 per share of common stock, respectively. During 2025, we increased our annualized dividend rate 12% to $3.64 per share of common stock.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (U.S. GAAP) requires us to make estimates and assumptions. Our significant accounting policies are described in the Notes to Consolidated Financial Statements. Certain of these policies require the application of subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates and assumptions are based on historical experience, changes in the business environment, and other factors that we believe to be reasonable under the circumstances. Different estimates that could have been applied in the current period or changes in the accounting estimates that are reasonably likely can result in a material impact on our financial condition and operating results in the current and future periods. We review the development, selection and disclosure of these critical accounting estimates with Ryder’s Audit Committee on an annual basis.
The following discussion, which should be read in conjunction with the descriptions in the Notes to Consolidated Financial Statements, is furnished for additional insight into certain accounting estimates that we consider to be critical.
Vehicle Residual Values. At the time we acquire a vehicle, we estimate the residual value at the end of its useful life. These estimates determine the depreciation that will be recognized evenly (straight-line) over the vehicle’s useful life and are intended to minimize losses or to record the best estimate of fair value at the end of a vehicle's useful life. At the end of its useful life or termination of the lease, the equipment is either sold to a third party or purchased by the lessee, in which case we may record a gain or loss for the difference between the estimated residual value and the sale price.
We periodically review and adjust, as appropriate, the estimated residual values of existing revenue earning equipment for the purposes of recording depreciation expense as described in Note 6, “Revenue Earning Equipment, Net" in the Notes to Consolidated Financial Statements. Based on the results of our analysis, we may adjust the estimated residual values of certain classes of our revenue earning equipment each year. Reductions in estimated residual values will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual values will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the estimated residual values of revenue earning equipment is based on vehicle class (generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. Effective January 1, 2025, we made an immaterial adjustment to certain vehicles' estimated residual values based on this review. In 2024 and 2023, we did not adjust the estimated residual values of existing revenue earning equipment. Effective January 1, 2026, we expect to reduce the estimated residual values for certain tractors based on our review. These updates will not have a material impact to annual depreciation expense.
Depreciation Sensitivity
Based on our fleet of revenue earning equipment as of December 31, 2025, a hypothetical 10% reduction in estimated residual values would increase depreciation expense over the remaining life of our fleet by approximately $340 million. The current residual value estimates of our total fleet are at historically low levels. Our estimates reflect anticipated market conditions and are intended to reduce the probability of losses or need for additional depreciation during a potential cyclical downturn.
While we believe that the carrying values and estimated sales proceeds for revenue earning equipment are reasonable, we cannot guarantee that if economic conditions deteriorate or future sales proceeds are adversely impacted, we will not realize losses on sales or be required to further reduce our residual value estimates. 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. As a result, future residual value estimates and resulting depreciation expense are subject to change based upon changes in these factors.
Revenue Recognition . We generate revenue primarily through contracts with customers to lease, rent and maintain revenue earning equipment and to provide logistics management and dedicated transportation services. We enter into contracts that can include various combinations of services, which are generally capable of being distinct and accounted for as separate performance obligations. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are determined, the contract has commercial substance, and collectibility of consideration
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
is probable. We generally recognize revenue over time as we provide the promised services to our customers in an amount we expect to receive in exchange for those products or services.
We offer a full service lease as well as a lease with more flexible maintenance options under our ChoiceLease product line in our FMS business segment, which are marketed, priced and managed as bundled products that include the equipment lease, maintenance and other related services. Our ChoiceLease product line includes the lease of a vehicle (lease component) and maintenance and other services (non-lease component). Contract consideration is allocated between the lease and non-lease components based on management's best estimate of the relative stand-alone selling price of each component. We do not sell the components of our ChoiceLease product offering on a stand-alone basis, therefore significant judgment is required to determine the stand-alone selling prices of the lease and maintenance components in order to allocate the consideration on a relative stand-alone selling price basis.
For the lease component, we estimate the stand-alone selling price using the projected cash outflows related to the underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return considering the weighted average cost of capital. For the non-lease component of the contract, we estimate the stand-alone selling price of the maintenance component using an expected cost-plus margin approach. The expected costs are based on our historical costs of providing maintenance services in our ChoiceLease arrangements. The margin is based on the historical margin percentages for our full service maintenance contracts in the SelectCare product line, as the maintenance performance obligation in those contracts is similar to maintenance in our ChoiceLease arrangements. Full service maintenance arrangements in SelectCare are priced based on targeted margin percentages for new and used vehicles by type of vehicle (trucks, tractors, and trailers), considering the fixed and variable costs of providing maintenance services.
We recognize maintenance revenue using an input method, consistent with the estimated pattern of the costs to maintain the underlying vehicles. This generally results in the recognition of a contract liability for the portion of the customer's billings allocated to the maintenance service component of the agreement. The non-lease revenue from maintenance services related to our ChoiceLease product is recognized in "Lease & related maintenance and rental revenue" in the Consolidated Statements of Earnings. We recognized $1.0 billion in 2025, $972 million in 2024 and $963 million in 2023.
The stand-alone price for both the lease and non-lease components could vary in the future based on both external market conditions and our pricing strategies as a result of the market conditions.
Pension Assumptions. We apply actuarial methods to determine the annual net periodic pension expense and pension plan liabilities on an annual basis, or on an interim basis if there is an event, such as a curtailment, requiring remeasurement. Each December, we review actual experience compared with the assumptions used and make adjustments to our assumptions, if warranted. In determining our annual estimate of periodic pension cost, we are required to make an evaluation of critical factors such as discount rate, expected long-term rate of return on assets, retirement rate and mortality. Discount rates are based upon a duration analysis of expected benefit payments and the equivalent average yield for high quality corporate fixed income investments as of our annual measurement date at December 31. In order to estimate the discount rate relevant to our plan, we use models that match projected benefits payments of our primary plans to interest payments and maturities from a hypothetical portfolio of high quality corporate bonds. Long-term rate of return assumptions are based on a review of our asset allocation strategy and long-term expected asset returns. Investment management and other fees paid using plan assets are factored into the determination of asset return assumptions.
Assumptions as to mortality of the participants in our pension plan is a key estimate in measuring the expected payments participants may receive over their lifetime, and therefore the amount of expense we will recognize. We update our mortality assumptions as deemed necessary by taking into consideration relevant actuarial studies as they become available as well as reassessing our own historical experience. Disclosure of the significant assumptions used in arriving at the 2025 net pension expense is presented in Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements.
As part of our strategy to manage future pension costs and net funded status volatility, we regularly assess our pension investment strategy. Our U.S. pension investment policy and strategy seek to reduce the effects of future volatility on the fair value of our pension assets relative to our pension liabilities by achieving attractive risk-adjusted returns that will balance the liquidity requirements of the plans’ liabilities while striving to minimize the risk of significant funded status deterioration. As the funded status of the plan improves, we (1) gradually increase the liability hedging portfolio, which consists of high quality, fixed income securities and (2) reduce our allocation of equity investments. The composition of our U.S. pension assets was 13% equity securities and alternative assets, 86% fixed income securities and 1% cash as of December 31, 2025. In 2026, our long-term expected rate of return assumption (net of fees) for our primary U.S. plan will be 5.90%.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Accounting guidance applicable to pension plans does not require immediate recognition of the effects of a deviation between these assumptions and actual experience or the revision of an estimate. This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and included in “Accumulated other comprehensive loss.” We had a pre-tax accumulated actuarial loss of $753 million and $777 million as of December 31, 2025 and 2024, respectively. To the extent the amount of cumulative actuarial gains and losses exceed 10% of the greater of the benefit obligation or plan assets, the excess amount is primarily amortized over the average remaining life expectancy of participants. As of December 31, 2025, the amount of the actuarial loss subject to amortization in 2026 and future years is $591 million. In 2026, we expect to amortize $31 million of net actuarial loss as a component of pension expense. The effect on years beyond 2026 will depend substantially upon the actual experience of our plans in future years.
A sensitivity analysis of 2026 net pension expense to changes in key underlying assumptions for our primary plan, the U.S. pension plan, is presented below:
Assumed Rate
Change
Impact on 2026 Net Pension Expense
Effect on
December 31, 2025
Projected Benefit Obligation
Expected long-term rate of return on assets
+/- $3 million
Discount rate
+/- $26 million
Self-Insurance Obligations. The majority of our self-insurance relates to vehicle liability and workers’ compensation. We use a variety of statistical and actuarial methods that are widely used and accepted in the insurance industry to estimate amounts for claims that have been reported but not paid and claims incurred but not reported. In applying these methods and assessing their results, we consider such factors as frequency and severity of claims, claim development and payment patterns, and changes in the nature of our business, among others. Such factors are analyzed for each of our business segments. Our estimates may be impacted by such factors as increases in the market price for medical services, unpredictability of the size of jury awards and limitations inherent in the estimation process. We recognized a charge of $3 million in 2025, a benefit of $15 million in 2024 and a benefit of $17 million in 2023 from the de velopment of estimated prior years' self-insured loss reserves. Based on self-insurance accruals at December 31, 2025, a 5% change in actuarial claim estimates would increase operating expense in 2026 by $25 million. Refer to Note 10, “Accrued Expenses and Other Liabilities,” in the Notes to Consolidated Financial Statements for changes to the self-insurance accruals during the year.
Goodwill. We assess goodwill for impairment, as described in Note 1, “Summary of Significant Accounting Policies — Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements, on an annual basis or more often if deemed necessary. As of December 31, 2025, total goodwill was $1.2 billion. To determine whether goodwill is impaired, we are required to assess the fair value of each reporting unit and compare it to its carrying value. A reporting unit is a component of an operating segment for which discrete financial information is available and management regularly reviews its operating performance.
We assess goodwill for impairment on October 1st of each year or more often if deemed necessary. In evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether further impairment testing is necessary, such as macroeconomic conditions, changes in our industry and the markets in which we operate, and our market capitalization as well as our reporting units' historical and expected future financial performance. If we conclude that it is more likely than not that a reporting unit's fair value is less than its carrying value or we bypass the optional qualitative assessment, recoverability is assessed by comparing the fair value of the reporting unit with its carrying amount. If a reporting unit's carrying value exceeds its fair value, we will measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
For quantitative tests, we estimate the fair value of the reporting units using a combination of both a market and income approach. Under the market approach, we use a selection of comparable publicly-traded companies that correspond to the reporting unit to derive a market-based multiple. Under the income approach, the fair value of the reporting unit is estimated based on the discounted present value of the projected future cash flows. Rates used to discount cash flows are dependent upon interest rates and the cost of capital based on our industry and capital structure, adjusted for equity and size risk premiums based on market capitalization. Estimates of future cash flows are dependent on our knowledge and experience about past and current events and significant judgments and assumptions about conditions we expect to exist, including revenue growth rates, margins, long-term growth rates, capital requirements, proceeds from the sale of used vehicles, the ability to utilize our tax net
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
operating losses, and the discount rate. Our estimates of cash flows are also based on historical and future operating performance, economic conditions and actions we expect to take. In addition to these factors, our SCS and DTS reporting units are dependent on several key customers or industry sectors.
In making our assessments of fair value, we rely on our knowledge and experience about past and current events and assumptions about conditions we expect to exist in the future. These assumptions are based on a number of factors, including future operating performance, economic conditions, actions we expect to take and present value techniques. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future. We conduct additional sensitivity analyses to assess the risk for potential impairment based upon changes in the key assumptions in our goodwill valuation test, including long-term growth rates and discount rates.
On October 1, 2025, we completed our annual goodwill impairment test for all reporting units and determined that the fair values more likely than not exceeded their respective carrying values for each reporting unit. We conducted qualitative analyses for all reporting units.
Income Taxes. Our overall tax position is complex and requires careful analysis by management to estimate the expected realization of income tax assets and liabilities.
Tax regulations can require items to be included in the tax return at different times than the items are reflected in the financial statements. As a result, the effective tax rate reflected in the financial statements can be different than that reported in the tax return. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the tax return in future years for which we have already recognized the tax benefit in the financial statements. Deferred tax assets were $677 million and $728 million as of December 31, 2025 and 2024, respectively. We recognize a valuation allowance against deferred tax assets to reduce such assets to amounts expected to be realized. As of December 31, 2025 and 2024, the deferred tax valuation allowance was $14 million and $12 million, respectively. In determining the required level of valuation allowance, we consider whether it is more likely than not that all or some portion of deferred tax assets will not be realized. This assessment is based on management’s expectations as to whether sufficient taxable income of an appropriate character will be realized within tax carryback and carryforward periods. Our assessment involves estimates and assumptions about matters that are inherently uncertain, and unanticipated events or circumstances could cause actual results to differ from these estimates. Should we change our estimate of the amount of deferred tax assets that we would be to realize, an adjustment to the valuation allowance would result in an increase or decrease to the provision for income taxes in the period such a change in estimate was made.
As part of our calculation of the provision for income taxes, we determine whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. We accrue the largest amount of the benefit that has a cumulative probability of greater than 50% of being sustained. These accruals require management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary materially from these estimates.
A number of years may elapse before a particular matter for which we have established a reserve is audited and finally resolved. The number of years exposed to audit due to open statutes varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the “more likely than not” recognition threshold would be recognized in our income tax expense in the first interim period when the uncertainty is resolved under any one of the following conditions: (1) the tax position has been determined to be “more likely than not” of being sustained, (2) the tax position, amount and/or timing is ultimately settled through negotiation or litigation, or (3) the statutes of limitations for the tax position has expired. Refer to Note 11, “Income Taxes,” in the Notes to Consolidated Financial Statements for further discussion.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 2, “Recent Accounting Pronouncements,” in the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.
NON-GAAP FINANCIAL MEASURES
Non-GAAP Financial Measures. This Annual Report on Form 10-K includes information extracted from consolidated financial information that is not required by U.S. GAAP to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures” as defined by SEC rules. Non-GAAP financial measures should be
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
considered in addition to, but not as a substitute for or superior to, other measures of financial performance or liquidity prepared in accordance with U.S. GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section or in the MD&A above. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.
Specifically, we refer to the following non-GAAP financial measures in this Form 10-K:
Non-GAAP Financial Measure
Comparable GAAP Measure
Operating Revenue Measures:
Operating Revenue
Total Revenue
FMS Operating Revenue
FMS Total Revenue
SCS Operating Revenue
SCS Total Revenue
DTS Operating Revenue
DTS Total Revenue
FMS EBT as a % of FMS Operating Revenue
FMS EBT as a % of FMS Total Revenue
SCS EBT as a % of SCS Operating Revenue
SCS EBT as a % of SCS Total Revenue
DTS EBT as a % of DTS Operating Revenue
DTS EBT as a % of DTS Total Revenue
Comparable Earnings Measures:
Comparable Earnings Before Income Tax
Earnings Before Income Tax
Comparable Earnings
Earnings from Continuing Operations
Comparable Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA)
Net Earnings
Comparable EPS
EPS from Continuing Operations
Comparable Tax Rate
Effective Tax Rate from Continuing Operations
Adjusted Return on Equity (ROE)
Not Applicable. However, non-GAAP elements of the
calculation have been reconciled to the corresponding
GAAP measures. A numerical reconciliation of net
earnings to adjusted net earnings and average
shareholders' equity to adjusted average equity is
provided in the following reconciliations.
Cash Flow Measures:
Total Cash Generated and Free Cash Flow
Cash Provided by Operating Activities from Continuing Operations
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that presentation of each non-GAAP financial measure provides useful information to investors.
Operating Revenue Measures:
Operating Revenue
FMS Operating Revenue
SCS Operating Revenue
DTS Operating Revenue
FMS EBT as a % of FMS Operating Revenue
SCS EBT as a % of SCS Operating Revenue
DTS EBT as a % of DTS Operating Revenue
Operating revenue is defined as total revenue for Ryder or each business segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted transportation. We use operating revenue to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, SCS EBT and DTS EBT, our primary measures of segment performance, are not non-GAAP measures.
Fuel : We exclude FMS, SCS and DTS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers. Fuel revenue is impacted by fluctuations in market fuel prices and the costs are largely a pass-through to our customers, resulting in minimal changes in our profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by rapid changes in market fuel prices during a short period of time, as customer pricing for fuel services is established based on current market fuel costs.
Subcontracted transportation: We exclude subcontracted transportation from the calculation of our operating revenue measures, as these costs are also typically a pass-through to our customers and, therefore, carrier rate fluctuations result in minimal changes to our profitability. While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS.
Comparable Earnings Measures:
Comparable Earnings before Income Taxes (EBT)
Comparable Earnings
Comparable Earnings per Diluted Common Share (EPS)
Comparable Tax Rate
Adjusted Return on Equity (ROE)
Comparable EBT, Comparable Earnings and Comparable EPS are defined, respectively, as GAAP EBT, earnings and EPS, all from continuing operations, excluding (1) non-operating pension costs, net and (2) other items impacting comparability (as further described below). We believe these non-GAAP measures provide useful information to investors and allow for better year-over-year comparison of operating performance.
Non-operating pension costs, net: Our comparable earnings measures exclude non-operating pension costs, net, which include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. We exclude non-operating pension costs, net because we consider these to be impacted by financial market performance and outside the operational performance of our business.
Other Items Impacting Comparability: Our comparable and adjusted earnings measures also exclude other significant items that are not representative of our business operations and vary from period to period.
Comparable Tax Rate is computed using the same methodology as the GAAP provision for income taxes. Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related.
Adjusted ROE is defined as adjusted net earnings divided by adjusted average shareholders' equity and represents the rate of return on shareholders' investment. Other items impacting comparability described above are excluded, as applicable, from the calculation of adjusted net earnings and adjusted average shareholders' equity. We also exclude any significant charges for pension settlements or curtailments from the calculation of adjusted net earnings. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
Comparable EBITDA is defined as net earnings, first adjusted to exclude discontinued operations and the following items, all from continuing operations: (1) non-operating pension costs, net and (2) other items impacting comparability (in each of (1) and (2), as defined in comparable earnings measures immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) intangible amortization.
We believe comparable EBITDA provides investors with useful information, as it is a standard measure commonly reported and widely used by investors and other interested parties to measure financial performance and our ability to service debt and meet our payment obligations. We believe that the inclusion of comparable EBITDA also provides consistency in financial reporting and aids investors in performing meaningful comparisons of past, present and future operating results. Our presentation of comparable EBITDA may not be comparable to similarly-titled measures used by other companies.
Comparable EBITDA should not be considered a substitute for, or superior to, the measures of financial performance determined in accordance with GAAP.
Cash Flow Measures:
Total Cash Generated
Free Cash Flow
We consider total cash generated and free cash flow to be important measures of comparative operating performance, as our principal sources of operating liquidity are cash from operations and proceeds from the sale of revenue earning equipment.
Total Cash Generated is defined as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment, (3) net cash provided by the sale of operating property and equipment and (4) other cash inflows from investing activities. We believe total cash generated is an important measure of total cash flows generated from our ongoing business activities.
Free Cash Flow is defined as the net amount of cash generated from operating activities and investing activities (excluding acquisitions) from continuing operations. We calculate free cash flow as the sum of (1) net cash provided by operating activities, (2) net cash provided by the sale of revenue earning equipment and operating property and equipment, and (3) other cash inflows from investing activities, less (4) purchases of property and revenue earning equipment. We believe free cash flow provides investors with an important perspective on the cash available for debt service and for shareholders, after making capital investments required to support ongoing business operations. Our calculation of free cash flow may be different from the calculation used by other companies and, therefore, comparability may be limited.
* See Total Cash Generated and Free Cash Flow reconciliations in the Financial Resources and Liquidity section of Management's Discussion and Analysis.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides a reconciliation of GAAP Earnings from continuing operations before income taxes (EBT), Earnings from continuing operations, and Earnings from continuing operations per common share — Diluted (Diluted EPS) to comparable EBT, comparable earnings and comparable EPS, respectively. Certain items included in EBT, Earnings from continuing operations and Diluted EPS have been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures. The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated Financial Statements:
Continuing Operations
(In millions, except per share amounts)
EBT
Non-operating pension costs, net (1)
Acquisition costs
FMS U.K. business exit
Currency translation adjustment loss
Other, net
Comparable EBT
Earnings
Non-operating pension costs, net (1)
Acquisition costs
FMS U.K. business exit
Currency translation adjustment loss
Other, net (2)
Comparable Earnings
Diluted EPS
Non-operating pension costs, net (1)
Acquisition costs
FMS U.K. business exit
Currency translation adjustment loss
Other, net (2)
Comparable EPS
(1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
(2) In 2025, includes the income tax effects of other items impacting comparability and non-recurring income tax adjustments. Refer to Note 20, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additio nal information.
The following table provides a reconciliation of the effective tax rate to the comparable tax rate:
Effective tax rate on continuing operations (1)
Tax adjustments and income tax effects of non-GAAP adjustments (2)
Comparable tax rate on continuing operations (1)
(1) The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, found on the previous table.
(2) Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides a reconciliation of Net earnings to comparable EBITDA:
(In millions)
Net earnings
Loss from discontinued operations, net of tax
Provision for income taxes
EBT
Non-operating pension costs, net (1)
Acquisition costs (2)
FMS U.K. business exit (2)
Currency translation adjustment loss (2)
Other, net (2)
Comparable EBT
Interest expense
Depreciation
Used vehicle sales, net (3)
Intangible amortization
Comparable EBITDA
(1) Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.
(2) Refer to the table above in the Full Year Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Consolidated Statements of Earnings and Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
(3) Refer to Note 6,"Revenue Earning Equipment, net," in the Notes to Consolidated Financial Statements for additional information.
The following table provides a reconciliation of total revenue to operating revenue:
(In millions)
Total revenue
Subcontracted transportation revenue
Fuel
Operating revenue
The following table provides a reconciliation of FMS total revenue to FMS operating revenue:
(In millions)
FMS total revenue
Fuel revenue
FMS operating revenue
FMS EBT
FMS EBT as a % of FMS total revenue
FMS EBT as a % of FMS operating revenue
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides a reconciliation of SCS total revenue to SCS operating revenue:
Years ended December 31,
(In millions)
SCS total revenue
Subcontracted transportation
Fuel
SCS operating revenue
SCS EBT
SCS EBT as a % of SCS total revenue
SCS EBT as a % of SCS operating revenue
The following table provides a reconciliation of DTS total revenue to DTS operating revenue:
Years ended December 31,
(In millions)
DTS total revenue
Subcontracted transportation
Fuel
DTS operating revenue
DTS EBT
DTS EBT as a % of DTS total revenue
DTS EBT as a % of DTS operating revenue
The following tables provide numerical reconciliations of Net earnings to adjusted net earnings and average shareholders' equity to adjusted average shareholders' equity, and of the non-GAAP elements used to calculate the adjusted return on equity (Adjusted ROE) to the corresponding GAAP measures:
(In millions)
Net earnings
Other items impacting comparability, net (1)
Tax impact (2)
Adjusted net earnings
Average shareholders’ equity
Average adjustments to shareholders’ equity (3)
Adjusted average shareholders’ equity
Adjusted ROE (4)
(1) Refer to Note 20, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.
(2) Includes income taxes on discontinued operations.
(3) Represents the impact of Other items impacting comparability, net of tax, to equity for the respective period.
(4) Adjusted ROE is calculated by dividing Adjusted net earnings by Adjusted average shareholders' equity.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides a reconciliation of forecasted net cash provided by operating activities to forecasted total cash generated and forecasted free cash flow (a non-GAAP measure) for 2026:
(In millions)
Forecast 2026
Net cash provided by operating activities from continuing operations
Proceeds from sales of property and revenue earning equipment (1)
Total cash generated
Purchases of property and revenue earning equipment (1)
Forecasted free cash flow
(1) Included in cash flows from investing activities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Annual Report contains forward-looking statements including statements regarding:
• our expectations regarding used vehicle sales and commercial rental;
• our expectations with respect to the freight cycle and market conditions, including general economic uncertainty;
• our expectations with respect to demand for outsourced logistics and the impacts of outsourcing and other secular trends in our SCS and DTS business segments and on our business and financial results;
• our expectations regarding the supply of vehicles and vehicle parts and its effect on pricing and demand;
• our expectations regarding the impact of labor shortages and interruptions and subcontracted transportation costs;
• our expectations regarding ChoiceLease revenue and earnings;
• our expectations in our SCS and DTS business segments related to revenue, earnings growth and contract sales activity;
• our expectations of cash flow from operating activities, free cash flow and full-year guidance;
• the adequacy of our accounting estimates and reserves for goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, the valuation of our pension plans, allowance for credit losses, and self-insurance loss reserves;
• the adequacy of our fair value estimates of publicly traded debt and other debt;
• our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources;
• our expected level of use and availability of outside funding sources, anticipated future payments under debt and lease agreements, and risk of losses resulting from counterparty default under hedging and derivative agreements;
• our ability to meet our objectives with the share repurchase programs;
• the anticipated impact of fuel and energy prices, interest rate movements, and exchange rate fluctuations;
• our expectations as to return on pension plan assets and future pension expense;
• our expectations regarding the scope and anticipated outcomes with respect to certain claims, proceedings and lawsuits;
• our ability to access commercial paper and other available debt financing in the capital markets;
• our expectations regarding the benefits from our strategic investments and initiatives, including our maintenance and lease pricing initiatives;
• our expectations regarding acquisitions;
• the anticipated impact of tariffs and inflationary pressures;
• our expectations of the long-term residual values of revenue earnings equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a potential cyclical downturn or changes to the estimated useful lives; and
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• our expectations regarding U.S. federal, state and foreign tax positions and the realizability of deferred tax assets and changes in foreign tax rates.
These statements, as well as other forward-looking statements contained in this Annual Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors, among others, include the following:
• Market Conditions:
◦ Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services and products, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets.
◦ Decreases in freight demand which would impact both our transactional and variable-based contractual business.
◦ Changes in our customers' operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services and products.
◦ Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions.
◦ Volatility in customer volumes and shifting customer demand in the industries we service.
◦ Changes in current financial, tax or other regulatory requirements, such as tariffs, trade restrictions or trade agreements, that could negatively impact our financial and operating results.
◦ Financial institution disruptions and geopolitical events or conflicts.
• Competition:
◦ Advances in technology may impact demand for our services or may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.
◦ Competition from other service providers, some of which have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves.
◦ Continued consolidation in the markets where we operate which may create large competitors with greater financial resources.
◦ Our inability to maintain current pricing levels due to economic conditions, demand for services, customer acceptance or competition.
• Profitability:
◦ Lower than expected sales volumes or customer retention levels.
◦ Decreases in commercial rental fleet utilization and pricing.
◦ Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail versus wholesale sales.
◦ Loss of key customers in our SCS and DTS business segments.
◦ Decreases in volume in our omnichannel retail vertical.
◦ Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis.
◦ The inability of our information technology systems to provide timely and accurate access to data.
◦ The inability of our information security program to safeguard our and our stakeholders' data.
◦ Sudden changes in market fuel prices and fuel shortages.
◦ Higher prices for vehicles, diesel engines and fuel as a result of new regulations or inflationary pressures.
◦ Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives.
◦ Lower than expected revenue growth due to production delays at our automotive SCS customers and supply chain disruptions.
◦ The inability of an original equipment manufacturer or supplier to provide vehicles or vehicle components as originally scheduled.
◦ Our inability to successfully execute our strategic returns and asset management initiatives, maintain our fleet at normalized levels and right-size our fleet in line with demand.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
◦ Our key assumptions and pricing structure, including any assumptions made with respect to inflation, of our SCS and DTS contracts prove to be inaccurate.
◦ Increased unionizing, labor strikes and work stoppages.
◦ Difficulties in attracting and retaining qualified professional drivers due to labor shortages influenced by FMCSA regulatory requirements, including English proficiency standards for non-domiciled commercial drivers, that may result in higher labor costs and turnover rates.
◦ Difficulties in attracting and retaining warehouse associates and technicians due to labor shortages, which may result in higher costs to procure technicians and higher turnover rates affecting our customers.
◦ Our inability to manage our cost structure.
◦ Our inability to limit our exposure for customer claims.
◦ Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions.
◦ Business interruptions or expenditures due to severe weather or other natural occurrences.
• Financing Concerns:
◦ Higher borrowing costs.
◦ Increased inflationary pressures.
◦ Unanticipated interest rate and currency exchange rate fluctuations.
◦ Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates.
◦ Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit.
• Accounting Matters:
◦ Reductions in residual values or useful lives of revenue earning equipment.
◦ Increases in compensation levels, retirement rate and mortality resulting in higher pension expense.
◦ Changes in accounting rules, assumptions and accruals.
• Other risks detailed from time to time in our SEC filings, including in "Item 1A. Risk Factors" of this Annual Report.
New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this Annual Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise.
