SEGMENT REPORTING

Our operating segments are aggregated into reportable business segments based upon similar economic characteristics, products, services, customers and delivery methods. We report our financial performance in three business segments: (1) FMS, which provides leasing, commercial rental and maintenance of trucks, tractors and trailers to customers principally in the U.S., Canada and the U.K.; (2) DTS, which provides vehicles and drivers as part of a dedicated transportation solution in the U.S.; and (3) SCS, which provides comprehensive supply chain solutions including distribution and transportation services in North America and Singapore. Dedicated transportation services provided as part of an integrated, multi-service, supply chain solution to SCS customers are reported in the SCS business segment.

Our primary measurement of segment financial performance, defined as segment “Earnings Before Tax” (EBT) from continuing operations, includes an allocation of Central Support Services (CSS) and excludes non-operating pension costs and the restructuring and other items, net discussed in Note 16, "Other Items Impacting Comparability." CSS represents those costs incurred to support all business segments, including human resources, finance, corporate services, public affairs, information technology, health and safety, legal, marketing and corporate communications. The objective of the EBT measurement is to provide clarity on the profitability of each segment and, ultimately, to hold leadership of each segment accountable for their allocated share of CSS costs. Certain costs are considered to be overhead not attributable to any segment and remain unallocated in CSS. Included among the unallocated overhead remaining within CSS are the costs for investor relations, public affairs and certain executive compensation. CSS costs attributable to the business segments are predominantly allocated to FMS, DTS and SCS as follows:

•Finance, corporate services, and health and safety — allocated based upon estimated and planned resource utilization;

•Human resources — individual costs within this category are allocated under various methods, including allocation based on estimated utilization and number of personnel supported;

•Information technology — principally allocated based upon utilization-related metrics such as number of users or minutes of CPU time. Customer-related project costs and expenses are allocated to the business segment responsible for the project; and

•Other — represents legal and other centralized costs and expenses including certain share-based incentive compensation costs. Expenses, where allocated, are based primarily on the number of personnel supported.

Our FMS segment leases revenue earning equipment and provides fuel, maintenance and other ancillary services to the DTS and SCS segments. Inter-segment revenue and EBT are accounted for at rates similar to those executed with third parties. EBT related to inter-segment equipment and services billed to DTS and SCS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated (presented as “Eliminations”).

The following tables set forth financial information for each of our segments and provide a reconciliation between segment EBT and earnings from continuing operations before income taxes for the three and six months ended June 30, 2018 and 2017. 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. Prior period segment EBT amounts have been reclassified to conform to the current period presentation. These reclassifications were immaterial to the financial statements taken as a whole.



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the three months ended June 30, 2018
Revenue from external customers	$	1,154,192	330,622	604,524	—		2,089,338
Inter-segment revenue	141,261		—	—	(141,261	)	—
Total revenue	$	1,295,453	330,622	604,524	(141,261	)	2,089,338

Segment EBT	$	72,876	18,452	37,715	(15,309	)	113,734
Unallocated CSS							(10,978		)
Non-operating pension costs⁽¹⁾							(858		)
Restructuring and other items, net ⁽²⁾							(3,615		)
Earnings from continuing operations before income taxes							$	98,283

Segment capital expenditures paid⁽³⁾	$	735,695	393	16,323	—		752,411
Unallocated CSS capital expenditures paid							6,146
Capital expenditures paid							$	758,557


For the three months ended June 30, 2017
Revenue from external customers	$	1,049,878	272,446	465,704	—		1,788,028
Inter-segment revenue	113,701		—	—	(113,701	)	—
Total revenue	$	1,163,579	272,446	465,704	(113,701	)	1,788,028

Segment EBT	$	68,120	14,817	26,059	(12,373	)	96,623
Unallocated CSS							(11,756		)
Non-operating pension costs⁽¹⁾							(6,587		)
Restructuring and other items, net ⁽²⁾							2,574
Earnings from continuing operations before income taxes							$	80,854

Segment capital expenditures paid ⁽³⁾	$	480,340	343	7,136	—		487,819
Unallocated CSS capital expenditures paid							6,094
Capital expenditures paid							$	493,913

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(1)	Non-operating pension costs include the amortization of net actuarial loss and prior service costs, interest costs and expected return on plan assets.


(2)	See Note 16, "Other Items Impacting Comparability," for additional information.


(3)	Excludes revenue earning equipment acquired under capital leases.



	FMS		DTS	SCS	Eliminations		Total
	(In thousands)
For the six months ended June 30, 2018
Revenue from external customers	$	2,263,982	629,592	1,099,231	—		3,992,805
Inter-segment revenue	274,050		—	—	(274,050	)	—
Total revenue	$	2,538,032	629,592	1,099,231	(274,050	)	3,992,805

Segment EBT	122,698		31,504	63,918	(28,581	)	189,539

Unallocated CSS							(21,667		)
Non-operating pension costs⁽¹⁾							(2,080		)
Restructuring and other items, net ⁽²⁾							(19,409		)
Earnings from continuing operations before income taxes							$	146,383

Segment capital expenditures paid⁽³⁾	$	1,381,064	642	28,616	—		1,410,322
Unallocated CSS capital expenditures paid							10,979
Capital expenditures paid							$	1,421,301


For the six months ended June 30, 2017
Revenue from external customers	$	2,068,618	539,076	917,317	—		3,525,011
Inter-segment revenue	227,431		—	—	(227,431	)	—
Total revenue	$	2,296,049	539,076	917,317	(227,431	)	3,525,011

Segment EBT	$	120,397	26,100	54,095	(23,589	)	177,003
Unallocated CSS							(21,979		)
Non-operating pension costs⁽¹⁾							(13,917		)
Restructuring and other items, net ⁽²⁾							369
Earnings from continuing operations before income taxes							$	141,476

Segment capital expenditures paid ⁽³⁾	$	824,695	1,111	18,134	—		843,940
Unallocated CSS capital expenditures paid							11,312
Capital expenditures paid							$	855,252

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(1)	Non-operating pension costs include the amortization of net actuarial loss and prior service costs, interest costs and expected return on plan assets.


(2)	See Note 16, Other Items Impacting Comparability," for additional information.


(3)	Excludes revenue earning equipment acquired under capital leases.