R 10-Q Quarterly Report Sept. 30, 2022

RYDER SYSTEM INC

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r-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 1-4364

RYDER SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Florida

59-0739250

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11690 N.W. 105th Street

Miami,

Florida

33178

( 305 ) 500-3726

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ryder System, Inc. Common Stock ($0.50 par value)	R	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of shares of Ryder System, Inc. Common Stock outstanding at September 30, 2022, was 50,251,092 .

RYDER SYSTEM, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS



		Page No.

PART I . FINANCIAL INFORMATION

ITEM 1 .	Financial Statements (unaudited)

	Condensed Consolidated Statements of Earnings	1

	Condensed Consolidated Statements of Comprehensive Income	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated Statements of Shareholders' Equity	5

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2 .	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

ITEM 3 .	Quantitative and Qualitative Disclosures About Market Risk	49

ITEM 4 .	Controls and Procedures	49

PART II . OTHER INFORMATION

ITEM 1 .	Legal Proceedings	50

ITEM 1A .	Risk Factors	50

ITEM 2 .	Unregistered Sales of Equity Securities and Use of Proceeds	50







ITEM 6 .	Exhibits	51

SIGNATURE		52

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited)


	Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share amounts)	2022		2021		2022		2021

Lease & related maintenance and rental revenue	$	1,044,547	$	1,013,968	$	3,119,136	$	2,941,084
Services revenue	1,811,134		1,320,761		5,258,258		3,762,389
Fuel services revenue	179,783		124,320		545,594		359,435
Total revenue	3,035,464		2,459,049		8,922,988		7,062,908

Cost of lease & related maintenance and rental	691,030		719,150		2,077,765		2,151,738
Cost of services	1,545,764		1,161,889		4,512,594		3,251,696
Cost of fuel services	179,716		124,347		539,887		356,506

Selling, general and administrative expenses	349,611		287,971		1,052,307		866,362
Non-operating pension costs, net	2,647		( 148 )		8,015		( 530 )
Used vehicle sales, net	( 113,485 )		( 69,303 )		( 356,045 )		( 149,788 )
Interest expense	57,802		53,752		165,490		162,613
Miscellaneous income, net	( 8,494 )		( 5,952 )		( 22,696 )		( 55,198 )
Restructuring and other items, net	( 3,331 )		4,137		21,225		22,463
	2,701,260		2,275,843		7,998,542		6,605,862

Earnings from continuing operations before income taxes	334,204		183,206		924,446		457,046
Provision for income taxes	87,784		44,547		261,862		117,235
Earnings from continuing operations	246,420		138,659		662,584		339,811
Loss from discontinued operations, net of tax	( 425 )		( 605 )		( 1,602 )		( 1,827 )
Net earnings	$	245,995	$	138,054	$	660,982	$	337,984

Earnings (loss) per common share — Basic
Continuing operations	$	4.92	$	2.64	$	13.12	$	6.46
Discontinued operations	( 0.01 )		( 0.01 )		( 0.03 )		( 0.03 )
Net earnings	$	4.91	$	2.63	$	13.09	$	6.43

Earnings (loss) per common share — Diluted
Continuing operations	$	4.82	$	2.58	$	12.86	$	6.33
Discontinued operations	( 0.01 )		( 0.01 )		( 0.03 )		( 0.03 )
Net earnings	$	4.82	$	2.57	$	12.82	$	6.30

See accompanying notes to condensed consolidated financial statements.

Note: EPS amounts may not be additive due to rounding.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Net earnings	$	245,995	$	138,054	$	660,982	$	337,984

Other comprehensive (loss) income:








Changes in cumulative translation adjustment and unrealized gains from cash flow hedges	( 54,307 )		( 24,232 )		( 96,377 )		( 5,741 )

Amortization of pension and postretirement items	5,141		6,974		15,849		20,941

Income tax expense related to amortization of pension and postretirement items	( 1,155 )		( 1,541 )		( 3,556 )		( 4,512 )
Amortization of pension and postretirement items, net of taxes	3,986		5,433		12,293		16,429


Change in net actuarial loss and prior service cost	—		—		1,805		116
Income tax expense related to change in net actuarial loss and prior service cost	—		—		( 473 )		( 80 )
Change in net actuarial loss and prior service cost, net of taxes	—		—		1,332		36

Other comprehensive (loss) income, net of taxes	( 50,321 )		( 18,799 )		( 82,752 )		10,724

Comprehensive income	$	195,674	$	119,255	$	578,230	$	348,708

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(In thousands, except share amounts)	September 30, 2022		December 31, 2021

Assets:
Current assets:
Cash and cash equivalents	$	456,291	$	233,961
Receivables, net	1,620,837		1,464,737
Inventories	78,515		68,677
Prepaid expenses and other current assets	183,048		693,239
Total current assets	2,338,691		2,460,614
Revenue earning equipment, net	8,273,608		8,323,039
Operating property and equipment, net of accumulated depreciation of $ 1,342,564 and $ 1,273,637	1,117,568		984,978
Goodwill	867,756		570,905
Intangible assets, net	298,495		170,205
Sales-type leases and other assets	1,602,911		1,324,582
Total assets	$	14,499,029	$	13,834,323

Liabilities and shareholders’ equity:
Current liabilities:
Short-term debt and current portion of long-term debt	$	1,049,109	$	1,333,363
Accounts payable	876,083		747,898
Accrued expenses and other current liabilities	1,276,495		1,119,602
Total current liabilities	3,201,687		3,200,863
Long-term debt	5,285,033		5,246,306
Other non-current liabilities	1,509,329		1,314,404
Deferred income taxes	1,492,219		1,274,804
Total liabilities	11,488,268		11,036,377

Commitments and contingencies (Note 16)
Shareholders’ equity:
Preferred stock, no par value per share — authorized, 3,800,917 ; none outstanding, September 30, 2022 and December 31, 2021	—		—
Common stock, $ 0.50 par value per share — authorized, 400,000,000 ; outstanding, September 30, 2022 — 50,251,092 and December 31, 2021 — 53,789,036	25,126		26,896
Additional paid-in capital	1,227,019		1,194,334
Retained earnings	2,530,609		2,265,957
Accumulated other comprehensive loss	( 771,993 )		( 689,241 )
Total shareholders’ equity	3,010,761		2,797,946
Total liabilities and shareholders’ equity	$	14,499,029	$	13,834,323

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine months ended September 30,
(In thousands)	2022		2021

Cash flows from operating activities from continuing operations:
Net earnings	$	660,982	$	337,984
Less: Loss from discontinued operations, net of tax	( 1,602 )		( 1,827 )
Earnings from continuing operations	662,584		339,811
Depreciation expense	1,275,309		1,349,239

Used vehicle sales, net	( 356,045 )		( 149,788 )
Amortization expense and other non-cash charges, net	78,055		12,787
Non-cash lease expense	143,170		70,477
Non-operating pension costs, net and share-based compensation expense	41,985		35,469
Deferred income tax expense	186,295		86,199
Collections on sales-type leases	99,038		99,305
Changes in operating assets and liabilities:
Receivables	( 142,082 )		( 160,454 )
Inventories	( 10,148 )		( 5,650 )
Prepaid expenses and other assets	( 34,082 )		( 91,147 )
Accounts payable	( 8,366 )		119,144
Accrued expenses and other non-current liabilities	( 149,299 )		( 20,501 )
Net cash provided by operating activities from continuing operations	1,786,414		1,684,891

Cash flows from investing activities from continuing operations:
Purchases of property and revenue earning equipment	( 1,916,704 )		( 1,427,684 )
Sales of revenue earning equipment	922,489		516,466
Sales of operating property and equipment	53,838		54,606
Acquisitions, net of cash acquired	( 448,078 )		—


Other investing activities	37,226		( 4,298 )
Net cash used in investing activities from continuing operations	( 1,351,229 )		( 860,910 )

Cash flows from financing activities from continuing operations:
Net borrowings (repayments) of commercial paper and other	311,040		( 97,048 )
Debt proceeds	1,005,696		—
Debt repayments	( 1,511,375 )		( 543,345 )
Dividends on common stock	( 93,880 )		( 91,296 )
Common stock issued	( 6,029 )		23,650
Common stock repurchased	( 300,280 )		( 56,652 )


Other financing activities	( 5,560 )		( 3,363 )
Net cash used in financing activities from continuing operations	( 600,388 )		( 768,054 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	( 51,574 )		( 4,590 )
(Decrease) increase in cash, cash equivalents and restricted cash from continuing operations	( 216,777 )		51,337
Net cash (used) provided by operating activities from discontinued operations	( 257 )		105
(Decrease) increase in cash, cash equivalents, and restricted cash	( 217,034 )		51,442
Cash, cash equivalents, and restricted cash at beginning of period	673,325		151,294
Cash, cash equivalents, and restricted cash at end of period	$	456,291	$	202,736

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)


	Three months ended September 30, 2022
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In thousands, except share amounts)	Amount		Shares	Par								Total

Balance as of July 1, 2022	$	—	51,194,660	$	25,597	$	1,148,835	$	2,379,800	$	( 721,672 )	$	2,832,560

Comprehensive income	—		—	—		—		245,995		( 50,321 )		195,674
Common stock dividends declared —$ 0.62 per share	—		—	—		—		( 31,927 )		—		( 31,927 )
Common stock issued under employee stock award and stock purchase plans and other (1) (2)	—		32,392	16		2,982		—		—		2,998

Common stock repurchases	—		( 975,960 )	( 487 )		63,746		( 63,259 )		—		—
Share-based compensation	—		—	—		11,456		—		—		11,456
Balance as of September 30, 2022	$	—	50,251,092	$	25,126	$	1,227,019	$	2,530,609	$	( 771,993 )	$	3,010,761


	Three months ended September 30, 2021
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In thousands, except share amounts)	Amount		Shares	Par								Total

Balance as of July 1, 2021	$	—	53,773,599	$	26,886	$	1,163,267	$	2,015,743	$	( 787,682 )	$	2,418,214

Comprehensive income	—		—	—		—		138,054		( 18,799 )		119,255
Common stock dividends declared —$ 0.58 per share	—		—	—		—		( 31,947 )		—		( 31,947 )
Common stock issued under employee stock option and stock purchase plans and other (1) (2)	—		16,957	9		3,089		—		—		3,098

Common stock repurchases	—		( 97,293 )	( 49 )		( 1,994 )		( 5,631 )		—		( 7,674 )
Share-based compensation	—		—	—		12,705		—		—		12,705
Balance as of September 30, 2021	$	—	53,693,263	$	26,846	$	1,177,067	$	2,116,219	$	( 806,481 )	$	2,513,651

(1) Net of common shares delivered as payment for the exercise price or to satisfy the holders' withholding tax liability upon exercise of options

(2) Represents open-market transactions of common shares by the trustee of our deferred compensation plans

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)


	Nine months ended September 30, 2022
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In thousands, except share amounts)	Amount		Shares	Par								Total

Balance as of January 1, 2022	$	—	53,789,036	$	26,896	$	1,194,334	$	2,265,957	$	( 689,241 )	$	2,797,946

Comprehensive income	—		—	—		—		660,982		( 82,752 )		578,230
Common stock dividends declared —$ 1.78 per share	—		—	—		—		( 93,076 )		—		( 93,076 )
Common stock purchased under employee stock option and stock purchase plans and other (1) (2)	—		490,286	245		( 6,274 )		—		—		( 6,029 )

Common stock repurchases	—		( 4,028,230 )	( 2,015 )		4,989		( 303,254 )		—		( 300,280 )
Share-based compensation	—		—	—		33,970		—		—		33,970
Balance as of September 30, 2022	$	—	50,251,092	$	25,126	$	1,227,019	$	2,530,609	$	( 771,993 )	$	3,010,761


	Nine months ended September 30, 2021
	Preferred Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
(In thousands, except share amounts)	Amount		Shares	Par								Total

Balance as of January 1, 2021	$	—	53,732,033	$	26,866	$	1,132,954	$	1,912,942	$	( 817,205 )	$	2,255,557
Comprehensive income	—		—	—		—		337,984		10,724		348,708
Common stock dividends declared —$ 1.70 per share	—		—	—		—		( 93,611 )		—		( 93,611 )
Common stock issued under employee stock option and stock purchase plans and other (1) (2)	—		696,524	348		23,302		—		—		23,650

Common stock repurchases	—		( 735,294 )	( 368 )		( 15,188 )		( 41,096 )		—		( 56,652 )
Share-based compensation	—		—	—		35,999		—		—		35,999

Balance as of September 30, 2021	$	—	53,693,263	$	26,846	$	1,177,067	$	2,116,219	$	( 806,481 )	$	2,513,651

(1) Net of common shares delivered as payment for the exercise price or to satisfy the holders' withholding tax liability upon exercise of options

(2) Represents open-market transactions of common shares by the trustee of our deferred compensation plans

See accompanying notes to condensed consolidated financial statements.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. GENERAL

Interim Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Ryder System, Inc. (Ryder) and all entities in which Ryder has a controlling voting interest (subsidiaries) and variable interest entities (VIE) required to be consolidated in accordance with generally accepted accounting principles in the United States (GAAP). The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the accounting policies described in our 2021 Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements and notes thereto. The year-end condensed balance sheet data was derived from our audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair statement have been included and the disclosures herein are adequate. The operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. Certain prior period amounts have been reclassified to conform with the current period presentation. We included "Other operating expenses" together with "Selling, general and administrative expenses" in the unaudited Condensed Consolidated Statement of Earnings. In the three and nine months ended September 30, 2021, we previously reported certain costs in "Cost of lease & related maintenance and rental" and "Cost of services" that should have been included in the "Cost of fuel services" within the unaudited Condensed Consolidated Statement of Earnings. These costs were not material to any financial statement line item and we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial statements.

We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing and leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, e-commerce, last mile and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S. that includes dedicated vehicles, drivers, management, and administrative support. Dedicated transportation services provided as part of an operationally integrated, multi-service, supply chain solution to SCS customers are primarily reported in the SCS business segment. In February 2022, we announced our intentions to exit the FMS United Kingdom (U.K.) business. We expect to complete the exit of the FMS U.K. business by mid-2023.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848). This update provides optional expedients for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or other rates discontinued at the end of 2021 because of reference rate reform. The update is effective for all transactions from March 12, 2020 through December 31, 2022. We intend to apply this guidance if relevant contracts that include LIBOR or other discontinued rates are modified through December 31, 2022. We continuously evaluate the potential impact on our consolidated financial position, results of operations, and cash flows.

3. SEGMENT REPORTING

Our primary measurement of segment financial performance, defined as segment "Earnings from continuing operations before income taxes" (EBT), includes an allocation of costs from Central Support Services (CSS) and excludes Non-operating pension costs, net and certain other items as discussed in Note 15, "Other Items Impacting Comparability." 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.

Table of Contents

RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

The following table sets forth financial information for each of our segments and provides a reconciliation between segment EBT and earnings from continuing operations before income taxes:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Revenue:
Fleet Management Solutions:
ChoiceLease	$	791,156	$	799,557	$	2,396,075	$	2,399,477

Commercial rental	349,550		300,640		1,003,380		790,618
SelectCare and other	162,520		147,384		492,878		450,272
Fuel services and ChoiceLease liability insurance (1)	278,644		188,759		839,860		539,699

Fleet Management Solutions	1,581,870		1,436,340		4,732,193		4,180,066
Supply Chain Solutions	1,206,508		802,357		3,469,008		2,284,687
Dedicated Transportation Solutions	454,328		380,357		1,329,504		1,055,575
Eliminations (2)	( 207,242 )		( 160,005 )		( 607,717 )		( 457,420 )
Total revenue	$	3,035,464	$	2,459,049	$	8,922,988	$	7,062,908

Earnings from continuing operations before income taxes:
Fleet Management Solutions	$	265,301	$	186,391	$	798,822	$	408,244
Supply Chain Solutions	63,974		22,161		150,833		96,159
Dedicated Transportation Solutions	28,150		11,324		71,517		37,468
Eliminations	( 28,007 )		( 21,065 )		( 83,771 )		( 52,525 )
	329,418		198,811		937,401		489,346
Unallocated Central Support Services	( 21,041 )		( 17,027 )		( 60,813 )		( 53,323 )
Non-operating pension costs, net (3)	( 2,647 )		148		( 8,015 )		530
Other items impacting comparability, net (4)	28,474		1,274		55,873		20,493
Earnings from continuing operations before income taxes	$	334,204	$	183,206	$	924,446	$	457,046

————————————

(1) In the first quarter of 2021, we completed the previously announced exit of the extension of our liability insurance coverage for ChoiceLease customers.

(2) Represents the elimination of intercompany revenue in our FMS business segment.

(3) Refer to Note 14, "Employee Benefit Plans," for a discussion on this item.

(4) Refer to Note 15, "Other Items Impacting Comparability," for a discussion of items excluded from our primary measure of segment performance.

The following table sets forth the capital expenditures paid for each of our segments:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Fleet Management Solutions	$	655,734	$	498,099	$	1,767,573	$	1,369,681
Supply Chain Solutions	58,820		21,224		124,395		44,204
Dedicated Transportation Solutions	251		299		1,705		861
Central Support Services	6,887		3,664		23,031		12,938
Purchases of property and revenue earning equipment	$	721,692	$	523,286	$	1,916,704	$	1,427,684

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

4. REVENUE

The following tables present our revenue recognized by primary geographical market in our reportable business segments and by industry for SCS. Refer to Note 3, "Segment Reporting," for the disaggregation of our revenue by major products/service lines.

Primary Geographical Markets


	Three months ended September 30, 2022
(In thousands)	FMS		SCS		DTS		Eliminations		Total

United States	$	1,478,831	$	1,077,669	$	454,328	$	( 196,820 )	$	2,814,008
Canada	80,140		61,338		—		( 9,913 )		131,565
Europe (1)	22,899		—		—		—		22,899
Mexico	—		67,501		—		( 509 )		66,992
Total revenue	$	1,581,870	$	1,206,508	$	454,328	$	( 207,242 )	$	3,035,464

(1) Refer to Note 15, "Other Items Impacting Comparability" for further information on the exit of the FMS U.K. business.


	Three months ended September 30, 2021
(In thousands)	FMS		SCS		DTS		Eliminations		Total

United States	$	1,295,617	$	689,180	$	380,357	$	( 152,014 )	$	2,213,140
Canada	76,361		57,085		—		( 7,991 )		125,455
Europe	64,362		—		—		—		64,362
Mexico	—		56,092		—		—		56,092

Total revenue	$	1,436,340	$	802,357	$	380,357	$	( 160,005 )	$	2,459,049


	Nine months ended September 30, 2022
(In thousands)	FMS		SCS		DTS		Eliminations		Total

United States	$	4,351,413	$	3,089,087	$	1,329,504	$	( 576,952 )	$	8,193,052
Canada	239,262		190,049		—		( 30,256 )		399,055
Europe (1)	141,518		—		—		—		141,518
Mexico	—		189,872		—		( 509 )		189,363
Total revenue	$	4,732,193	$	3,469,008	$	1,329,504	$	( 607,717 )	$	8,922,988

(1) Refer to Note 15, "Other Items Impacting Comparability" for further information on the exit of the FMS U.K. business.

	Nine months ended September 30, 2021
(In thousands)	FMS		SCS		DTS		Eliminations		Total

United States	$	3,756,851	$	1,952,193	$	1,055,575	$	( 436,793 )	$	6,327,826
Canada	223,623		171,908		—		( 20,627 )		374,904
Europe	199,592		—		—		—		199,592
Mexico	—		160,586		—		—		160,586
Total revenue	$	4,180,066	$	2,284,687	$	1,055,575	$	( 457,420 )	$	7,062,908

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(unaudited)

Industry

Our SCS business segment included revenue from the below industries:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Consumer packaged goods and retail	$	565,822	$	316,876	$	1,604,521	$	876,362
Automotive	391,929		303,923		1,134,659		882,977
Technology and healthcare	131,379		103,387		380,990		310,422
Industrial and other	117,378		78,171		348,838		214,926
Total SCS revenue	$	1,206,508	$	802,357	$	3,469,008	$	2,284,687

Lease & Related Maintenance and Rental Revenue

The non-lease revenue from maintenance services related to our FMS business is recognized in "Lease & related maintenance and rental revenue" in the Condensed Consolidated Statements of Earnings. For the three months ended September 30, 2022 and 2021, we recognized $ 250 million and $ 255 million, respectively. For the nine months ended September 30, 2022 and 2021, we recognized $ 769 million and $ 765 million, respectively.

Deferred Revenue

The following table includes the changes in deferred revenue due to the collection and deferral of cash or the satisfaction of our performance obligation under the contract:


	Nine months ended September 30,
(In thousands)	2022		2021

Balance as of beginning of period	$	593,442	$	629,739
Recognized as revenue during period from beginning balance	( 306,615 )		( 147,944 )
Consideration deferred during period, net	234,847		115,562
Foreign currency translation adjustment and other	28,886		( 418 )
Balance as of end of period	$	550,560	$	596,939

Contracted Not Recognized Revenue

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized (contracted not recognized revenue). Contracted not recognized revenue primarily includes deferred revenue and amounts for full service ChoiceLease maintenance revenue that will be recognized as revenue in future periods as we provide maintenance services to our customers. Contracted not recognized revenue excludes (1) variable consideration as it is not included in the transaction price consideration allocated at contract inception; (2) revenue from our lease component of our ChoiceLease product and commercial rental product; (3) revenue from contracts with an original duration of one year or less, including SelectCare contracts; and (4) revenue from SCS, DTS and other contracts where there are remaining performance obligations when we have the right to invoice but the revenue to be recognized in the future corresponds directly with the value delivered to the customer. Contracted not recognized revenue was $ 2.3 billion as of September 30, 2022.

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(unaudited)

5. RECEIVABLES, NET


(In thousands)	September 30, 2022		December 31, 2021

Trade receivables	$	1,473,328	$	1,280,766
Sales-type lease receivables	117,618		148,134
Other, primarily warranty and insurance receivables	67,692		67,141
	1,658,638		1,496,041
Allowance for credit losses and other	( 37,801 )		( 31,304 )
Receivables, net	$	1,620,837	$	1,464,737

The following table provides a reconciliation of our allowance for credit losses and other:


	Nine months ended September 30,
(In thousands)	2022		2021


Balance as of beginning of period	$	31,304	$	43,024
Changes to provisions for credit losses	21,704		( 5,097 )
Write-offs and other	( 15,207 )		( 11,320 )
Balance as of end of period	$	37,801	$	26,607

6. REVENUE EARNING EQUIPMENT, NET


	Estimated Useful Lives (In Years)	September 30, 2022						December 31, 2021
(Dollars in thousands)		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net

Held for use:
Trucks	3 — 7	$	5,320,696	$	( 2,095,515 )	$	3,225,181	$	5,223,127	$	( 2,055,135 )	$	3,167,992
Tractors	4 — 7.5	7,213,401		( 3,171,471 )		4,041,930		7,256,002		( 3,059,206 )		4,196,796
Trailers and other	9.5 — 12	1,566,071		( 670,291 )		895,780		1,780,487		( 868,820 )		911,667
Held for sale		357,838		( 247,121 )		110,717		209,506		( 162,922 )		46,584
Total		$	14,458,006	$	( 6,184,398 )	$	8,273,608	$	14,469,122	$	( 6,146,083 )	$	8,323,039

Residual Value Estimate Changes

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue earning equipment for the purposes of recording depreciation expense. Reductions in estimated residual values or useful lives will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is based on vehicle class (i.e., 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. 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; driver shortages; customer requirements and preferences; and changes in underlying assumption factors. We have disciplines related to the management and maintenance of our vehicles designed to manage the risk associated with the residual values of our revenue earning equipment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

The following table provides a summary of incremental depreciation expense that has been recorded related to our previous residual value estimate changes as well as used vehicle sales results (rounded to the closest million):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Depreciation expense related to estimate changes	$	50	$	76	$	147	$	239

Used vehicle sales, net (1)	( 113 )		( 69 )		( 356 )		( 150 )

————————————————

(1) Used vehicle sales, net for the third quarter and nine months ended September 30, 2022, included $ 15 million and $ 43 million, respectively, of gains on sales of vehicles in the U.K. Refer to Note 15, "Other Items Impacting Comparability"

Used Vehicle S ales and Valuation Adjustments

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value, which we refer to as "valuation adjustments," are recognized at the time they are deemed to meet the held for sale criteria and are presented within "Used vehicle sales, net" in the Condensed Consolidated Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for each class of similar assets and vehicle condition, if available, or third-party market pricing. In addition, we also consider expected declines in market prices when valuing the vehicles held for sale, as well as forecasted sales channel mix (retail/wholesale).

The following table presents revenue earning equipment held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:


					Losses from Valuation Adjustments
					Three months ended September 30,				Nine months ended September 30,
(In thousands)	September 30, 2022		December 31, 2021		2022		2021		2022		2021

Revenue earning equipment held for sale (1) :

Trucks	$	838	$	931	$	925	$	1,224	$	1,911	$	2,798
Tractors	1,671		1,485		972		2,177		3,424		2,836
Trailers and other	594		1,309		396		1,161		882		5,036
Total assets at fair value	$	3,103	$	3,725	$	2,293	$	4,562	$	6,217	$	10,670

————————————

(1) Reflects only the portion where net book values exceeded fair values and valuation adjustments were recorded. The net book value of assets held for sale that were less than fair value was $ 108 million and $ 43 million as of September 30, 2022 and December 31, 2021, respectively.

The components of Used vehicle sales, net were as follows:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Gains on vehicle sales, net	$	( 115,778 )	$	( 73,865 )	$	( 362,262 )	$	( 160,458 )
Losses from valuation adjustments	2,293		4,562		6,217		10,670
Used vehicle sales, net	$	( 113,485 )	$	( 69,303 )	$	( 356,045 )	$	( 149,788 )

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

7. ACCRUED EXPENSES AND OTHER LIABILITIES


	September 30, 2022						December 31, 2021
(In thousands)	Accrued Expenses		Non-Current Liabilities		Total		Accrued Expenses		Non-Current Liabilities		Total

Salaries and wages	$	231,285	$	—	$	231,285	$	210,350	$	—	$	210,350




Insurance obligations (1)	184,874		316,726		501,600		186,449		311,209		497,658




Operating taxes	193,269		—		193,269		165,680		—		165,680


Deposits, mainly from customers	120,760		—		120,760		94,547		—		94,547
Operating lease liabilities	176,907		471,403		648,310		100,232		255,573		355,805
Deferred revenue (2)	179,153		371,407		550,560		182,785		410,657		593,442


Other	190,247		349,793		540,040		179,559		336,965		516,524
Total	$	1,276,495	$	1,509,329	$	2,785,824	$	1,119,602	$	1,314,404	$	2,434,006

————————————

(1) Insurance obligations primarily represent self-insured claim liabilities.

(2) Refer to Note 4, "Revenue," for additional information.

8. INCOME TAXES

Effective Tax Rate

Our effective income tax rate from continuing operations for the third quarter of 2022 was 26.3 % as compared to 24.3 % in the third quarter of 2021, and 28.3 % in the nine months ended September 30, 2022, as compared to 25.7 % in the nine months ended September 30, 2021. The increase in the effective tax rate for both periods was due to incremental U.S. tax on higher foreign earnings related to the exit of our U.K. FMS business as well as a shift in the mix of earnings subject to tax in different jurisdictions.

Deferred Income Taxes

We assess the realizability of our deferred tax assets each reporting period, considering both positive and negative evidence on realizability, and record a valuation allowance to the extent it is determined that they are not more-likely-than-not to be realizable. During the third quarter of 2022, the consideration of all of the evidence led to the determination that the deferred tax assets in the U.K. were more-likely-than-not to be realizable, and therefore, the full valuation allowance on the U.K. deferred tax assets of $ 8 million was released.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

9. LEASES

Leases as Lessor

The components of lease income were as follows:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Operating leases
Lease income related to ChoiceLease	$	367,009	$	383,669	$	1,127,391	$	1,159,930
Lease income related to commercial rental (1)	332,568		287,612		955,927		752,994

Sales-type leases

Interest income related to net investment in leases	$	11,986	$	10,925	$	32,941	$	36,380




Variable lease income excluding commercial rental (1)	$	80,688	$	75,621	$	226,030	$	219,743

————————————

(1) Lease income related to commercial rental includes both fixed and variable lease income. Variable income is approximately 15 % to 25 % of total commercial rental income based on management's internal estimates.

The components of net investment in sales-type leases, which are included in "Receivables, net" and "Sales-type leases and other assets" in the Condensed Consolidated Balance Sheets, were as follows:


(In thousands)	September 30, 2022		December 31, 2021

Net investment in the lease — lease payment receivable	$	537,090	$	583,008
Net investment in the lease — unguaranteed residual value in assets	36,789		46,740

	573,879		629,748
Estimated loss allowance	( 3,245 )		( 3,705 )
Total	$	570,634	$	626,043

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(unaudited)

10. DEBT


	Weighted Average Interest Rate
(Dollars in thousands)	September 30, 2022	Maturities	September 30, 2022		December 31, 2021





Debt:
U.S. commercial paper	2.94 %	2026	$	849,269	$	531,157
Canadian commercial paper	— %	2026	—		7,087
Trade receivables financing program	3.56 %	2023	50,000		—
Global revolving credit facility	— %	2026	—		—
Unsecured U.S. obligations	3.41 %	2024	200,000		200,000
Unsecured U.S. notes — Medium-term notes (1)	3.58 %	2023-2027	4,700,106		5,149,893
Unsecured foreign obligations	2.88 %	2024	50,000		140,265
Asset-backed U.S. obligations (2)	2.80 %	2022-2029	466,013		526,712
Finance lease obligations and other		2022-2031	38,539		44,595
			6,353,926		6,599,709
Debt issuance costs and original issue discounts			( 19,784 )		( 20,040 )
Total debt			6,334,142		6,579,669
Short-term debt and current portion of long-term debt			( 1,049,109 )		( 1,333,363 )
Long-term debt			$	5,285,033	$	5,246,306

————————————

(1) Includes the impact from the fair market values of hedging instruments on our notes, which was $ 50 million as of September 30, 2022, and no t material as of December 31, 2021, and was included in "Other non-current liabilities" within the unaudited Condensed Consolidated Balance Sheets. The notional amount of the executed interest rate swaps designated as fair value hedges was $ 500 million and $ 450 million as of September 30, 2022 and December 31, 2021, respectively.

(2) Asset-backed U.S. obligations are related to financing transactions backed by a portion of our revenue earning equipment.

The fair value of total debt (excluding finance lease and asset-backed U.S. obligations) was approximately $ 5.8 billion and $ 6.2 billion as of September 30, 2022 and December 31, 2021. For publicly-traded debt, estimates of fair value were based on market prices. For other debt, fair value was estimated based on a model-driven approach using rates currently available to us for debt with similar terms and remaining maturities. The fair value measurements of our publicly-traded debt and our other debt were classified within Level 2 of the fair value hierarchy.

As of September 30, 2022, there was $ 551 million available under the global revolving credit facility. In order to maintain availability of funding, we must maintain a ratio of debt to consolidated net worth of less than or equal to 300 %, as defined in the credit facility agreement. As of September 30, 2022, the ratio was 157 %.

We had letters of credit and surety bonds outstanding of $ 542 million and $ 456 million as of September 30, 2022 and December 31, 2021, respectively, which primarily guarantee the payment of insurance claims.

As of September 30, 2022, the available proceeds under the trade receivables financing program were $ 174 million. In May 2022, we extended the maturity of the trade receivables financing program to expire in May 2023.

In September 2022, we received $ 54 million from a financing transaction backed by a portion of our revenue earning equipment. The proceeds from the transaction were used for general corporate purposes. We provided end of term guarantees for the residual value of the revenue earning equipment in the transaction. The transaction proceeds, along with the end of term residual value guarantees, have been included within "asset-backed U.S. obligations" in the preceding table.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

11. SHARE REPURCHASE PROGRAMS

In September 2022, we completed our $ 300 million accelerated share repurchase program. This program was authorized by our board of directors in February 2022, and at that time, we repurchased and retired an initial share amount of approximately 3 million. The final settlement occurred in September 2022, resulting in the delivery and retirement of approximately 1 million additional shares. The number of shares ultimately repurchased and retired was based on the average of Ryder's daily volume-weighted average price per share of common stock during a repurchase period, less a discount. The average price paid for all of the shares delivered and retired under the accelerated share purchase agreement was $ 74.47 per share.

We maintain two additional share repurchase programs. The first program grants management discretion to repurchase up to 2.0 million shares of common stock over a period of two years , commencing October 14, 2021 and expiring October 14, 2023 (the "2021 Discretionary Program"). The 2021 Discretionary Program is designed to provide management with capital structure flexibility while concurrently managing objectives related to balance sheet leverage, acquisition opportunities, and shareholder returns. The second program authorizes management to repurchase up to 2.5 million shares of common stock, issued to employees under the company's employee stock plans since September 1, 2021 (the "2021 Anti-Dilutive Program"). The 2021 Anti-Dilutive Program is designed to mitigate the dilutive impact of shares issued under the company's employee stock plans. The 2021 Anti-Dilutive Program commenced October 14, 2021 and expires October 14, 2023. Share repurchases under both programs can be made from time to time using the company's working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of quality acquisitions and stock price. During the nine months ended September 30, 2022 , we did no t repurchase any shares under these programs . During the nine months ended September 30, 2021, we repurchased and retired approximately 0.7 million shares for $ 57 million under the 2019 anti-dilutive program.

12. ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive (loss) income presents a measure of all changes in shareholders’ equity except for changes resulting from transactions with shareholders in their capacity as shareholders. The following summary sets forth the components of Accumulated other comprehensive loss, net of tax:


	Nine months ended September 30,
(In thousands)		2022		2021

Cumulative translation adjustments		$	( 264,598 )	$	( 157,446 )
Net actuarial loss and prior service cost		( 515,069 )		( 638,575 )
Unrealized gain (loss) from cash flow hedges		7,674		( 10,460 )

Accumulated other comprehensive loss		$	( 771,993 )	$	( 806,481 )

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(unaudited)

13. EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per common share from continuing operations:


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Earnings per share — Basic:
Earnings from continuing operations	$	246,420	$	138,659	$	662,584	$	339,811
Less: Distributed and undistributed earnings allocated to unvested stock	( 1,330 )		( 662 )		( 3,433 )		( 1,599 )
Earnings from continuing operations available to common shareholders	$	245,091	$	137,997	$	659,151	338,212

Weighted average common shares outstanding	49,806		52,322		50,252		52,330

Earnings from continuing operations per common share — Basic	$	4.92	$	2.64	$	13.12	$	6.46


Earnings per share — Diluted:
Earnings from continuing operations	$	246,420	$	138,659	$	662,584	$	339,811
Less: Distributed and undistributed earnings allocated to unvested stock	—		( 650 )		( 3,374 )		( 1,575 )
Earnings from continuing operations available to common shareholders — Diluted	$	246,420	$	138,009	$	659,210	$	338,236

Weighted average common shares outstanding — Basic	49,806		52,322		50,252		52,330
Effect of dilutive equity awards	1,267		1,192		1,026		1,090
Weighted average common shares outstanding — Diluted	51,073		53,514		51,278		53,419

Earnings from continuing operations per common share — Diluted	$	4.82	$	2.58	$	12.86	$	6.33

Anti-dilutive equity awards not included in diluted EPS	726		406		752		774

————————————

Note: Amounts may not be additive due to rounding.

14. EMPLOYEE BENEFIT PLANS

Components of net pension expense for defined benefit pension plans were as follows:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021


Company-administered plans:
Service cost	$	196	$	276	$	634	$	824
Interest cost	15,653		14,496		47,262		43,514

Expected return on plan assets	( 18,264 )		( 21,702 )		( 55,330 )		( 65,187 )



Amortization of net actuarial loss and prior service cost	5,187		7,056		15,958		21,184



Net pension expense	$	2,772	$	126	$	8,524	$	335

Company-administered plans:
U.S.	$	3,323	$	2,227	$	9,970	$	6,680
Non-U.S.	( 551 )		( 2,101 )		( 1,446 )		( 6,345 )


Net pension expense	$	2,772	$	126	$	8,524	$	335

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

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. During the nine months ended September 30, 2022, we contributed $ 19 million to our pension plans. We do not expect additional contributions to our pension plans for the year 2022. We also maintain other postretirement benefit plans that are not reflected in the table above as the amount of postretirement benefit expense for such plans was not material for any period presented.

15. OTHER ITEMS IMPACTING COMPARABILITY

Our primary measure of segment performance as shown in Note 3, "Segment Reporting," excludes certain items we do not believe are representative of the ongoing operations of the segment. Excluding these items from our segment measure of performance allows for better year over year comparison:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Restructuring and other, net	$	( 3,331 )	$	4,137	$	21,225	$	9,742
ERP implementation costs	—		—		—		12,721

Restructuring and other items, net	( 3,331 )		4,137		21,225		22,463
Gains on sale of U.K. revenue earning equipment	( 14,938 )		—		( 43,309 )		—
Gains on sale of U.K. properties	( 10,205 )		( 5,411 )		( 33,789 )		( 42,179 )

ChoiceLease liability insurance revenue (1)	—		—		—		( 777 )
Other items impacting comparability, net	$	( 28,474 )	$	( 1,274 )	$	( 55,873 )	$	( 20,493 )

————————————

(1) Refer to Note 3, "Segment Reporting," for additional information.

Note: Amounts may not be additive due to rounding.

During the three and nine months ended September 30, 2022 and 2021, other items impacting comparability included:

• Restructuring and other, net — For the third quarter of 2022, this item primarily included the recovery of $ 14 million related to the pursuit of a discrete commercial claim, partially offset by professional fees incurred to pursue the claim of approximately $ 9 million and U.K. severance costs as part of our plan to exit the FMS U.K. business of $ 2 million. For the nine months ended September 30, 2022, this item primarily included $ 20 million of professional fees related to the pursuit of a discrete commercial claim, partially offset by a recovery towards the full claim of $ 14 million. The nine months ended September 30, 2022, also included $ 9 million of U.K. severance costs as part of our plan to exit the FMS U.K. business and $ 5 million of transaction costs related to the acquisition of PLG Investments I, LLC. (Whiplash). In February 2022, we announced our intention to exit the FMS U.K. business and we expect to complete the exit plan by mid-2023. For the three and nine months ended September 30, 2021, this item primarily included professional fees related to the pursuit of a discrete commercial claim.

• Gains on sale of U.K. revenue earning equipment and properties — For the three and nine months ended September 30, 2022, we recorded gains on the sale of U.K. revenue earning equipment and properties as part of our plan to exit the FMS U.K. business. We recorded gains on sale of U.K. properties for the three and nine months ended September 30, 2021, primarily for certain FMS properties in the U.K. that were restructured as part of cost reduction activities in prior periods. The gains on sale of U.K. revenue earning equipment are reflected within "Used vehicle sales, net" and the gains on sale of U.K. properties are reflected within "Miscellaneous income, net" in our Condensed Consolidated Statements of Earnings.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

The following table summarizes the activities within, and components of, restructuring liabilities for 2022:


(In thousands)	Nine months ended September 30, 2022

Balance as of beginning of period	$	10,484
Workforce reduction charges	$	6,721
Utilization (1)	$	( 6,026 )
Balance as of end of period (2)	$	11,179

_________________

(1) Principally represents cash payments.

(2) Included in "Accrued expenses and other current liabilities" in the Condensed Consolidated Balance Sheets.

16. CONTINGENCIES AND OTHER MATTERS

We are a party to various claims, complaints and proceedings arising in the ordinary course of our continuing business operations including those relating to commercial and employment claims, environmental matters, risk management matters (e.g., vehicle liability, workers’ compensation, etc.), and administrative assessments primarily associated with operating taxes. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. We believe that the resolution of these claims, complaints and legal proceedings will not have a material effect on our Condensed Consolidated Financial Statements.

Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing currently available information. Although we will continue to reassess our estimated liability based on future developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and actual results may vary from our current estimates.

Securities Litigation Relating to Residual Value Estimates

On May 20, 2020, a putative class action on behalf of purchasers of our securities who purchased or otherwise acquired their securities between July 23, 2015 and February 13, 2020, inclusive (Class Period), was commenced against Ryder and certain of our current and former officers in the U.S. District Court for the Southern District of Florida (the "Securities Class Action"). The complaint alleges, among other things, that the defendants misrepresented Ryder’s depreciation policy and residual value estimates for its vehicles during the Class Period in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seeks to recover, among other things, unspecified compensatory damages and attorneys' fees and costs. On August 3, 2020, the State of Alaska, Alaska Permanent Fund, the City of Fort Lauderdale General Employees’ Retirement System, and the City of Plantation Police Officers Pension Fund were appointed lead plaintiffs. On October 5, 2020, the lead plaintiffs filed an amended complaint. On December 4, 2020, Ryder and the other named defendants in the case filed a Motion to Dismiss the amended complaint. On May 12, 2022, the court denied the defendants' motion to dismiss. The court entered a case management schedule on June 27, 2022, which, among other things, provides that discovery shall be completed by October 2023 and the commencement of trial in June 2024.

As previously disclosed, between June 2020 and February 2, 2021, five shareholder derivative complaints were filed purportedly on behalf of Ryder against us as nominal defendant and certain of our current and former officers and our current directors. The complaints are generally based on allegations set forth in the Securities Class Action complaint and allege breach of fiduciary duties, unjust enrichment, and waste of corporate assets. The plaintiffs, on our behalf, are seeking an award of monetary damages and restitution to us, improvements in our corporate governance and internal procedures, and legal fees. Three of these derivative complaints were filed in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, which were then consolidated into a single action (the "State Action"). Two of the complaints were filed in U.S. District Court for the Southern District of Florida (the "Federal Actions", and together with the State Action, the "Derivative Cases"). All of the Derivative Cases were stayed (stopped) pending the resolution of the motion to dismiss the Securities Class Action described in the paragraph above. On July 18, 2022 the Federal Actions were further stayed pending the final resolution of the State Action. On July 26, 2022, the State Action was further stayed until the conclusion of summary judgment proceedings in the Securities Class Action (except that certain discovery would be permitted).

We believe the claims asserted in the complaints are without merit and intend to defend against them vigorously.

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

17. SUPPLEMENTAL CASH FLOW INFORMATION


	Nine months ended September 30,
(In thousands)	2022		2021

Interest paid	$	157,039	$	155,358
Income taxes paid	$	96,061	$	21,177



Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$	133,434	$	70,047

Right-of-use assets obtained in exchange for lease obligations:
Finance leases	$	5,112	$	12,480
Operating leases	$	228,660	$	71,555



Capital expenditures acquired but not yet paid	$	292,259	$	176,907

18. ACQUISITIONS

On January 1, 2022, we acquired all the outstanding equity of PLG Investments I, LLC (Whiplash), a leading national provider of omnichannel fulfillment and logistics services for an approximate purchase price of $ 483 million. The acq uisition is included in our SCS business segment, and will expand our e-commerce and omnichannel fulfillment network.

The following table provides the preliminary purchase price allocation of the fair value of the assets and liabilities for Whiplash as of the acquisition date:


(In thousands)	January 1, 2022
Assets:
Receivables, net	$	78,765
Goodwill	280,615
Customer relationships and other intangible assets	157,400
Other assets, primarily operating lease right-of-use assets	241,646
Total assets	758,426

Liabilities:
Accrued expenses and other current liabilities	78,948
Other liabilities, primarily operating lease liabilities	196,709
Net assets acquired	$	482,769

The excess of the purchase consideration over the aggregate estimated fair values of identifiable assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized reflects anticipated supply chain services growth opportunities and expected synergies of combining Whiplash with our business. None of the goodwill is deductible for income tax purposes. Customer relationship intangible assets are expected to be amortized over 13 years. The purchase price included $ 439 million of restricted cash placed in escrow and the remaining amount classified as a deposit as of December 31, 2021. These amounts were recorded in "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheet as of December 31, 2021. The cash paid from escrow during the first quarter of 2022 is reflected in " Acquisitions, net of cash acquired " in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2022 .

We believe that we have sufficient information to provide a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. The purchase price allocation excludes certain items to be resolved post-closing with the seller, which

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RYDER SYSTEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)

may result in add itional adjustments to the final purchase price. Therefore, the provisional measurements of estimated fair values reflected are subject to change. We expect to finalize the valuation and complete the purchase consideration allocation no later than December 31, 2022.

For the nine months ended September 30, 2022, we paid $ 27 million, net of cash acquired, related to other business combinations, which resulted in additions to goodwill and intangible assets of $ 20 million and $ 2 million, respectively.

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ITEM 2. 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 the unaudited Condensed Consolidated Financial Statements and notes thereto included under Item 1, as well as our audited Consolidated Financial Statements and notes thereto and related MD&A included in the 2021 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform with the current period presentation. We included "Other operating expenses" together with "Selling, general and administrative expenses" in the unaudited Condensed Consolidated Statement of Earnings. In the three and nine months ended September 30, 2021, we previously reported certain costs in "Cost of lease & related maintenance and rental" and "Cost of services" that should have been included in the "Cost of fuel services" within the unaudited Condensed Consolidated Statement of Earnings. These costs were not material to any financial statement line item and we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial statements.

OVERVIEW

General

We operate in highly competitive markets. Our customers select us based on numerous factors including service quality, price, technology and service offerings. As an alternative to using our services, customers may choose to provide these services for themselves, or may choose to obtain similar or alternative services from other third-party vendors. Our customer base includes enterprises operating in a variety of industries including food and beverage service, transportation and logistics, retail and consumer goods, automotive, industrial, housing, technology, and business and personal services.

Business Trends

In the three and nine months ended September 30, 2022, supply chain disruptions and labor shortage challenges contributed to, and continue to contribute to increased demand for our services as companies seek long-term outsourcing solutions. In addition, the limited supply of vehicles available in the market contributed to robust demand and pricing for our rental and used vehicles.

In our Fleet Management Solutions (FMS) business, the used vehicle sales and rental market have benefited from strong demand and pricing trends, resulting in higher year over year performance in both of these areas. Used vehicle market conditions remain strong despite a decline in sequential used vehicle pricing. We anticipate that the historically strong used vehicle sales environment will continue to decline this year, with slower freight growth partially offset by ongoing tight market capacity. We have benefited from market acceptance for higher lease rates on new and renewing leases, resulting in improved portfolio returns and North America ChoiceLease fleet growth. If the limited supply of vehicles continues for an extended period, we will likely continue to experience benefits in rental and used vehicle pricing and overall demand; however, we may experience limited rental and lease fleet growth from OEM delivery delays and lower used vehicle sales volumes due to limited used vehicle inventory.

In our Supply Chain Solutions (SCS) business, we are seeing strong outsourcing trends in warehousing and distribution, as well as in e-commerce fulfillment and last mile delivery of big and bulky items. We continue to experience a significant level of new contract wins in SCS and Dedicated Transportation Solutions (DTS), which combined with recent acquisitions, contributed to significant revenue growth. Our previously announced acquisitions are performing well and above expectations and provide us with enhanced capabilities in fast-growing e-commerce fulfillment and in multi-client warehousing. During the latter half of 2021 and first half of 2022, labor shortages resulted in higher labor costs across all of our business segments, particularly our DTS and SCS segments. The DTS and SCS pricing adjustments and cost recovery initiatives helped DTS and SCS return to their target earnings levels in the third quarter.

While we are experiencing positive momentum in our businesses, other unknown effects from extended higher fuel prices, inflationary cost pressures, prolonged labor shortages, extended disruptions in vehicle and vehicle part production and rising interest rates may negatively impact demand for our business, financial results, and significant judgments and estimates.

SELECTED OPERATING PERFORMANCE ITEMS

• Total revenue of $3.0 billion and operating revenue (a non-GAAP measure) of $2.3 billion for third quarter of 2022 increased 23% and 18%, respectively as compared to prior year, reflecting revenue growth across all business segments and SCS acquisitions

• Diluted EPS from continuing operations of $4.82 in the third quarter of 2022 versus $2.58 in prior year, reflecting significantly higher earnings in FMS and improved performance in SCS and DTS

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

• Comparable EPS (a non-GAAP measure) from continuing operations of $4.45 in the third quarter of 2022 versus $2.55 in prior year

• Adjusted Return on Equity (ROE) (a non-GAAP measure) of 30.0% in the third quarter of 2022

• Net cash provided by operating activities from continuing operations of $1.8 billion and free cash flow (a non-GAAP measure) of $887 million in the third quarter of 2022

The following discussion provides a summary of financial highlights that are discussed in more detail throughout our MD&A and within the Notes to Condensed Consolidated Financial Statements:


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands, except per share)	2022		2021		2022		2021		Three Months	Nine Months

Total revenue	$	3,035,464	$	2,459,049	$	8,922,988	$	7,062,908	23%	26%
Operating revenue (1)	2,346,942		1,982,855		6,869,635		5,723,038		18%	20%

Earnings from continuing operations before income taxes (EBT)	$	334,204	$	183,206	$	924,446	$	457,046	82%	102%
Comparable EBT (1)	308,377		181,784		876,588		436,023		70%	101%
Earnings from continuing operations	246,420		138,659		662,584		339,811		78%	95%
Comparable earnings from continuing operations (1)	227,315		137,458		641,158		324,786		65%	97%
Net earnings	245,995		138,054		660,982		337,984		78%	96%
Comparable EBITDA (1)	696,975		611,721		2,032,134		1,803,191		14%	13%

Earnings per common share (EPS) — Diluted
Continuing operations	$	4.82	$	2.58	$	12.86	$	6.33	87%	103%
Comparable (1)	4.45		2.55		12.44		6.05		75%	106%
Net earnings	4.82		2.57		12.82		6.30		88%	103%

(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.

Total revenue increased 23% in the third quarter of 2022 and 26% for the nine months ended September 30, 2022. Operating revenue (a non-GAAP measure excluding fuel, subcontracted transportation and ChoiceLease liability insurance revenue) increas ed 18% in the third quarter of 2022 and 20% i n the nine months ended September 30, 2022. The increases in total and operating revenue for both the third quarter and nine months ended September 30, 2022, were primarily due to higher revenue across all of our business segments and the SCS acquisitions of PLG Investments I, LLC (Whiplash) and Midwest Warehouse & Distribution System (Midwest). Total revenue in both periods also increased from higher subcontracted transportation and fuel revenue.

EBT and comparable EBT (a non-GAAP measure) increased to $334 million and $308 million, respectively, in the third quarter of 2022 from $183 million and $182 million, respectively, in the prior year period. For the nine months ended September 30, 2022, EBT and comparable EBT (a non-GAAP measure) increased to $924 million and $877 million, respectively, as compared to $457 million and $436 million, respectively in the prior year period. The increases in both periods were primarily due to higher gains on used vehicles sold in North America, higher commercial rental results and a declining impact of depreciation expense from prior residual value estimate changes. The increase in the third quarter was also driven by higher results in SCS and DTS.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

CONSOLIDATED RESULTS

Lease & Related Maintenance and Rental


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Lease & related maintenance and rental revenue	$	1,044,547	$	1,013,968	$	3,119,136	$	2,941,084	3%	6%
Cost of lease & related maintenance and rental	691,030		719,150		2,077,765		2,151,738		(4)%	(3)%
Gross margin	$	353,517	$	294,818	$	1,041,371	$	789,346	20%	32%
Gross margin %	34%		29%		33%		27%

Lease & related maintenance and rental revenue represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenue increased 3% in the third quarter of 2022 and 6% for the nine months ended September 30, 2022, primarily driven by increases in commercial rental pricing and 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 Condensed Consolidated Statements of Earnings. Cost of lease & related maintenance and rental decreased 4% in the third quarter of 2022 and 3% for the nine months ended September 30, 2022, primarily due to declining depreciation expense impacts from prior residual value estimate changes.

Lease & related maintenance and rental gross margin increased in the third quarter of 2022 and for the nine months ended September 30, 2022, primarily due to higher commercial rental pricing and utilization, a declining impact of depreciation expense from prior residual value estimate changes and higher ChoiceLease pricing.

Services


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Services revenue	$	1,811,134	$	1,320,761	$	5,258,258	$	3,762,389	37%	40%
Cost of services	1,545,764		1,161,889		4,512,594		3,251,696		33%	39%
Gross margin	$	265,370	$	158,872	$	745,664	$	510,693	67%	46%
Gross margin %	15%		12%		14%		14%

Services revenue represents all the revenue associated with our SCS and DTS business segments, as well as SelectCare and fleet support services associated with our FMS business segment. Services revenue increased 37% in the third quarter of 2022 and 40% for the nine months ended September 30, 2022, due to increases in revenue in SCS and DTS driven by growth from acquisitions, higher volumes, new business, and higher pricing. Prior year volumes in SCS were negatively impacted from supply chain disruptions, primarily in the automotive industry.

Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs and maintenance costs. Cost of services increased 33% in the third quarter and 39% for the nine months ended September 30, 2022, primarily due to the growth in revenue and higher subcontracted transportation and labor costs in SCS and DTS.

Services gross margin increased 67% in the third quarter of 2022 and increased 46% for the nine months ended September 30, 2022, due to higher pricing, new business, growth from acquisitions and increased volumes. Services gross margin as a percentage of revenue increased in the third quarter of 2022, due to pricing adjustments and cost-recovery efforts and remained consistent for the nine months ended September 30, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Fuel


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Fuel services revenue	$	179,783	$	124,320	$	545,594	$	359,435	45%	52%
Cost of fuel services	179,716		124,347		539,887		356,506		45%	51%
Gross margin	$	67	$	(27)	$	5,707	$	2,929	NM	95%
Gross margin %	—%		—%		1%		1%

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue increased 45% in the third quarter of 2022 and 52% for the nine months ended September 30, 2022, primarily reflecting higher fuel prices passed through to customers.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services increased 45% in the third quarter of 2022 and 51% for the nine months ended September 30, 2022, as a result of higher fuel prices.

Fuel services gross margin and gross margin as a percentage of revenue remained relatively breakeven in the third quarter of 2022 and remained at 1% for the nine months ended September 30, 2022, compared to prior year. 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 for the third quarter of 2022 and nine months ended September 30, 2022, was not significantly impacted by these price change dynamics as fuel prices fluctuated during the period.

Selling, General and Administrative Expenses


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Selling, general and administrative expenses (SG&A)	$	349,611	$	287,971	$	1,052,307	$	866,362	21%	21%
Percentage of total revenue	12%		12%		12%		12%

SG&A expenses increased 21% in the third quarter and nine months ended September 30, 2022. The increase in both periods is mainly due to higher incentive-based compensation costs, amortization of intangibles from the Whiplash and Midwest acquisitions, and higher bad debt and travel expense. The increase in SG&A expenses for the nine months ended September 30, 2022, also included increased strategic investments in information technology. SG&A expenses as a percentage of total revenue remained flat at 12% for the third quarter of 2022 and for the nine months ended September 30, 2022.

Non-Operating Pension Costs, net


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Non-operating pension costs, net	$	2,647	$	(148)	$	8,015	$	(530)	NM	NM

_______________________________

NM - Denotes Not Meaningful throughout the MD&A

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. The non-operating pension costs, net increased due to lower return on assets from a shift in mix of assets and higher interest expense from a higher discount rate partially offset by lower amortization expense.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Used Vehicle Sales, net


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Used vehicle sales, net	$	(113,485)	$	(69,303)	$	(356,045)	$	(149,788)	64%	138%

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 values (referred to as "valuation adjustments"). Used vehicle sales, net increased in the third quarter of 2022 and nine months ended September 30, 2022, due to higher proceeds per unit on sales of used vehicles. Used vehicle sales, net for the three and nine months ended September 30, 2022, includes gains associated with the exit of the U.K. of $15 million and $43 million, respectively. Refer to Note 15, "Other Items Impacting Comparability" for further details.

Average proceeds per unit increased in the third quarter of 2022 and for the nine months ended September 30, 2022. The following table presents the average used vehicle pricing changes for North America compared to the prior year:


	Proceeds per unit change 2022/2021 (1)
	Three Months	Nine Months
Tractors	14%	72%
Trucks	26%	69%

————————————

(1) Represents percentage change compared to prior year period in average sales proceeds on used vehicle sales using constant currency.

Interest expense


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Interest expense	$	57,802	$	53,752	$	165,490	$	162,613	8%	2%
Effective interest rate	3.6%		3.5%		3.4%		3.4%

Interest expense in the third quarter of 2022 increased 8% from the prior year and increased 2% for the nine months ended September 30, 2022, reflecting higher average outstanding debt in both periods and a higher fixed debt interest rate, partially offset by a higher mix of variable rate debt at lower interest rates.

Miscellaneous income, net


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Miscellaneous income, net	$	(8,494)	$	(5,952)	$	(22,696)	$	(55,198)	43%	(59)%

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 was $8 million in the third quarter of 2022 compared to $6 million in the prior year period, primarily reflecting higher gains on sales of properties partially offset by lower investment income. Miscellaneous income, net was $23 million for the nine months ended September 30, 2022, compared to $55 million in the prior year period, primarily due to lower investment income and higher gains on sale of properties in the prior year.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Restructuring and other items, net


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Restructuring and other items, net	$	(3,331)	$	4,137	$	21,225	$	22,463	NM	(6)%

Refer to Note 15, "Other Items Impacting Comparability" in the Notes to Condensed Consolidated Financial Statements for a discussion of restructuring charges and other items.

Provision for income taxes


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Provision for income taxes	$	87,784	$	44,547	$	261,862	$	117,235	97%	123%
Effective tax rate on continuing operations	26.3%		24.3%		28.3%		25.7%
Comparable tax rate on continuing operations (1)	26.3%		24.4%		26.9%		25.5%

————————————

Refer to our discussion of changes in our provision for income taxes and effective tax rate from continuing operations in Note 8, "Income Taxes."

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

OPERATING RESULTS BY BUSINESS SEGMENT


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Revenue:
Fleet Management Solutions	$	1,581,870	$	1,436,340	$	4,732,193	$	4,180,066	10%	13%
Supply Chain Solutions	1,206,508		802,357		3,469,008		2,284,687		50%	52%
Dedicated Transportation Solutions	454,328		380,357		1,329,504		1,055,575		19%	26%
Eliminations	(207,242)		(160,005)		(607,717)		(457,420)		(30)%	(33)%
Total	$	3,035,464	$	2,459,049	$	8,922,988	$	7,062,908	23%	26%
Operating Revenue: (1)
Fleet Management Solutions	$	1,303,226	$	1,247,581	$	3,892,333	$	3,640,367	4%	7%
Supply Chain Solutions	834,878		559,290		2,371,399		1,596,446		49%	49%
Dedicated Transportation Solutions	317,027		271,557		919,046		764,245		17%	20%
Eliminations	(108,189)		(95,573)		(313,143)		(278,020)		(13)%	(13)%
Total	$	2,346,942	$	1,982,855	$	6,869,635	$	5,723,038	18%	20%

Earnings from continuing operations before income taxes:
Fleet Management Solutions	$	265,301	$	186,391	$	798,822	$	408,244	42%	96%
Supply Chain Solutions	63,974		22,161		150,833		96,159		189%	57%
Dedicated Transportation Solutions	28,150		11,324		71,517		37,468		149%	91%
Eliminations	(28,007)		(21,065)		(83,771)		(52,525)		33%	59%
	329,418		198,811		937,401		489,346		66%	92%
Unallocated Central Support Services	(21,041)		(17,027)		(60,813)		(53,323)		24%	14%
Non-operating pension costs, net (2)	(2,647)		148		(8,015)		530		NM	NM
Other items impacting comparability, net (3)	28,474		1,274		55,873		20,493		NM	NM
Earnings from continuing operations before income taxes	$	334,204	$	183,206	$	924,446	$	457,046	82%	102%

————————————

(2) Refer to Note 14, "Employee Benefit Plans," for a discussion on this item.

(3) Refer to Note 15, "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" (EBT), which includes an allocation of Central Support Services (CSS), and excludes Non-operating pension costs, net and certain other items as discussed in Note 15, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated Financial Statements. CSS represents those costs incurred to support all business segments, including finance and procurement, corporate services, human resources, information technology, public affairs, legal, marketing, and corporate communications.

The objective of the EBT measurement is to provide clarity on the profitability of each 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.

Our FMS segment leases revenue earning equipment and also provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments. Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to SCS and

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

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 benefits from equipment contribution included in EBT for our SCS and DTS business segments:


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

Equipment Contribution:
Supply Chain Solutions	$	11,912	$	8,794	$	33,113	$	21,839	35%	52%
Dedicated Transportation Solutions	16,095		12,271		50,658		30,686		31%	65%
Total	$	28,007	$	21,065	$	83,771	$	52,525	33%	59%

The increase in SCS and DTS equipment contribution in the third quarter of 2022 and in the nine months ended September 30, 2022, is primarily related to higher proceeds on sales of used vehicles, fleet growth and increased fuel margins due to rapid fluctuations in fuel prices.

Items excluded from our segment EBT measure and their classification within our Condensed Consolidated Statements of Earnings are as follows ( in thousands ):


		Three months ended September 30,				Nine months ended September 30,
Description	Classification	2022		2021		2022		2021

Restructuring and other, net (1)	Restructuring and other items, net	$	3,331	$	(4,137)	$	(21,225)	$	(9,742)

ERP implementation costs (1)	Restructuring and other items, net	—		—		—		(12,721)



Gains on sale of U.K. revenue earning equipment (1)	Used vehicles sales, net	14,938		—		43,309		—
Gains on sale of U.K. properties (1)	Miscellaneous income, net	10,205		5,411		33,789		42,179
ChoiceLease liability insurance revenue (1)	Revenue	—		—		—		777
Other items impacting comparability, net		28,474		1,274		55,873		20,493
Non-operating pension costs, net (2)	Non-operating pension costs	(2,647)		148		(8,015)		530
		$	25,827	$	1,422	$	47,858	$	21,023

———————————

(1) Refer to Note 15, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated Financial Statements for additional information.

(2) Includes 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Fleet Management Solutions


	Three months ended September 30,				Nine months ended September 30,					Change 2022/2021
(Dollars in thousands)	2022		2021		2022			2021		Three Months	Nine Months

ChoiceLease	$	791,156	$	799,557	$	2,396,075		$	2,399,477	(1)%	—%

Commercial rental (1)	349,550		300,640		1,003,380			790,618		16%	27%
SelectCare and other	162,520		147,384		492,878			450,272		10%	9%
Fuel services and ChoiceLease liability insurance (2)	278,644		188,759		839,860			539,699		48%	56%

FMS total revenue	$	1,581,870	$	1,436,340	$	4,732,193		$	4,180,066	10%	13%

FMS operating revenue (3)	$	1,303,226	$	1,247,581	$	3,892,333		$	3,640,367	4%	7%

FMS EBT	$	265,301	$	186,391	$	798,822		$	408,244	42%	96%

FMS EBT as a % of FMS total revenue	16.8%		13.0%		16.9%			9.8%		380 bps	710 bps

FMS EBT as a % of FMS operating revenue (3)	20.4%		14.9%		20.5%			11.2%		550 bps	930 bps

					Twelve months ended September 30,					Change 2022/2021
					2022			2021
FMS EBT as a % of FMS total revenue					16.9		%	8.5%		840 bps
FMS EBT as a % of FMS operating revenue (3)					20.3		%	9.7%		1,060 bps

————————————

(1) For the three months ended September 30, 2022 and 2021, rental revenue from lease customers in place of a lease vehicle represented 33% and 30% of commercial rental revenue, respectively. For the nine months ended September 30, 2022 and 2021, rental revenue from lease customers in place of a lease vehicle represented 33% and 30% of commercial rental revenue, respectively.

(2) In the first quarter of 2021, we completed the previously announced exit of the extension of our liability insurance coverage for ChoiceLease customers.

(3) Non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures" section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

FMS total revenue increased 10% in the third quarter of 2022 and 13% for the nine months ended September 30, 2022, due to higher operating revenue (a non-GAAP measure excluding fuel and ChoiceLease liability insurance revenue) and higher fuel service revenue primarily reflecting higher fuel prices passed through to customers. FMS operating revenue increased 4% in the third quarter and 7% for the nine months ended September 30, 2022, primarily driven by increases in commercial rental pricing and demand, despite a 4% and 2% negative impact from the wind down of the UK business for the third quarter and nine months ended September 30, 2022, respectively.

FMS EBT in the third quarter of 2022 increased to $265 million from $186 million in the prior year period. FMS EBT in the nine months ended September 30, 2022, increased to $799 million from $408 million in the prior year period. FMS EBT increased primarily from higher used vehicle sales and rental results reflecting benefits from tight truck capacity and initiatives to improve returns in these areas. Increased gains on used vehicles sold and a declining impact of depreciation expense from prior vehicle residual value estimate changes contributed $55 million and $255 million for the three and nine months ended September 30, 2022, respectively, in higher year-over-year earnings. Used vehicle pricing increased from the prior year for both trucks and tractors. Used vehicle inventory levels increased to 4,700 vehicles due to increased U.K. inventory related to our exit plan, but remains below the target range of 7,000 - 9,000 vehicles. Commercial rental results benefited from 7% increased power fleet pricing in the third quarter and nine months ended September 30, 2022, and strong power fleet utilization. Rental power fleet utilization of 83% in the third quarter of 2022 was consistent with the prior period and increased to 83% from 79% i n the nine months ended September 30, 2022, compared to the prior period.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Our global fleet of owned and leased revenue earning equipment and SelectCare vehicles, including vehicles under on-demand maintenance, is summarized as follows (number of units rounded to the nearest hundred):


				Change
	September 30, 2022	December 31, 2021	September 30, 2021	Sept 2022/ Dec 2021	Sept 2022/ Sept 2021
End of period vehicle count
By type:
Trucks (1)	74,500	75,100	75,000	(1)%	(1)%
Tractors (2)	69,500	70,700	71,900	(2)%	(3)%
Trailers and other (3)	40,900	43,500	43,800	(6)%	(7)%

Total	184,900	189,300	190,700	(2)%	(3)%

By product line:
ChoiceLease	136,200	143,900	144,700	(5)%	(6)%
Commercial rental	41,900	40,700	40,300	3%	4%
Service vehicles and other	2,100	2,200	2,200	(5)%	(5)%
	180,200	186,800	187,200	(4)%	(4)%
Held for sale	4,700	2,500	3,500	88%	34%
Total	184,900	189,300	190,700	(2)%	(3)%



Customer vehicles under SelectCare contracts (4)	56,000	54,500	53,900	3%	4%


Quarterly average vehicle count
By product line:
ChoiceLease	137,400	144,500	145,200	(5)%	(5)%
Commercial rental	41,700	40,400	39,400	3%	6%
Service vehicles and other	2,100	2,200	2,300	(5)%	(9)%
	181,200	187,100	186,900	(3)%	(3)%
Held for sale	4,100	2,700	3,900	52%	5%
Total	185,300	189,800	190,800	(2)%	(3)%




Customer vehicles under SelectCare contracts (4)	55,800	54,200	53,400	3%	4%
Customer vehicles under SelectCare on-demand (5)	6,300	6,300	6,000	—%	5%
Total vehicles serviced	247,400	250,300	250,200	(1)%	(1)%

———————————

(1) Generally comprised of Class 1 through Class 7 type vehicles with a Gross Vehicle Weight (GVW) up to 33,000 pounds.

(2) Generally comprised of over the road on highway tractors and are primarily comprised of Class 8 type vehicles with a GVW of over 33,000 pounds.

(3) Generally comprised of dry, flatbed and refrigerated type trailers.

(4) Excludes customer vehicles under SelectCare on-demand contracts.

(5) Comprised of the number of unique vehicles serviced under on-demand maintenance agreements for the quarterly periods. 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: Quarterly amounts were computed using a 6-point average based on monthly information.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following table provides information on our North America active ChoiceLease fleet (number of units rounded to nearest hundred) and our global commercial rental power fleet (excludes trailers):


							Change
	September 30, 2022		December 31, 2021		September 30, 2021		Sept 2022/ Dec 2021	Sept 2022/ Sept 2021
Active ChoiceLease fleet
End of period vehicle count (1)	129,100		128,900		129,200		—%	—%

Quarterly average vehicle count (1)	128,800		129,200		129,300		—%	—%

Commercial rental statistics



Quarterly commercial rental utilization - power fleet (2)	83.2	%	85.2	%	82.8	%	(200) bps	40	bps
Year-to-date commercial rental utilization - power fleet (2)	83.1	%	80.4	%	78.7	%	270 bps	440	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


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months
Consumer packaged goods and retail	$	444,198	$	263,659	$	1,262,717	$	717,936	68%	76%
Automotive	226,244		167,856		638,268		519,577		35%	23%
Technology and healthcare	77,426		60,807		221,675		173,041		27%	28%
Industrial and other	87,010		66,968		248,739		185,892		30%	34%
Subcontracted transportation and fuel	371,630		243,067		1,097,609		688,241		53%	59%

SCS total revenue	$	1,206,508	$	802,357	$	3,469,008	$	2,284,687	50%	52%

SCS operating revenue (1)	$	834,878	$	559,290	$	2,371,399	$	1,596,446	49%	49%

SCS EBT	$	63,974	$	22,161	$	150,833	$	96,159	189%	57%
SCS EBT as a % of SCS total revenue	5.3%		2.8%		4.3%		4.2%		250 bps	10 bps
SCS EBT as a % of SCS operating revenue (1)	7.7%		4.0%		6.4%		6.0%		370 bps	40 bps

Memo:
End of period fleet count	12,500		10,500		12,500		10,500		19%	19%

					Twelve months ended September 30,				Change 2022/2021
					2022		2021
SCS EBT as a % of SCS total revenue					4.0%		4.3%		(30) bps
SCS EBT as a % of SCS operating revenue (1)					5.8%		6.2%		(40) bps

————————————

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following table summarizes the components of the change in revenue on a percentage basis versus the prior year:


	Three months ended September 30, 2022				Nine months ended September 30, 2022
	Total		Operating (1)		Total		Operating (1)
Organic, including price and volume	24	%	23	%	26	%	23	%
Acquisition	24		26		24		26

Fuel	2		—		2		—

Net increase	50	%	49	%	52	%	49	%

————————————

SCS total revenue increased 50% in the third quarter of 2022 and 52% in the nine months ended September 30, 2022, primarily as a result of higher operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation). SCS operating revenue increased 49% in both the third quarter of 2022 and for the nine months ended September 30, 2022, primarily due to the acquisitions of Whiplash and Midwest and strong revenue growth in all industry verticals from new business, higher volumes and increased pricing. Higher volumes include the prior year impact of supply chain disruptions. Operating revenue organically grew 23% for the third quarter of 2022 and for the nine months ended September 30, 2022.

SCS EBT increased 189% in the third quarter of 2022 and 57% for the nine months ended September 30, 2022, primarily due to higher pricing and cost-recovery initiatives and new business. SCS EBT comparisons also benefited from the impact of supply chain disruptions in the prior year and acquisitions. The positive impact of acquisitions included non-cash amortization expense of $6 million and $22 million during the three and nine months ended September 30, 2022, respectively.

Dedicated Transportation Solutions


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months

DTS total revenue	$	454,328	$	380,357	$	1,329,504	$	1,055,575	19%	26%

DTS operating revenue (1)	$	317,027	$	271,557	$	919,046	$	764,245	17%	20%




DTS EBT	$	28,150	$	11,324	$	71,517	$	37,468	149%	91%
DTS EBT as a % of DTS total revenue	6.2%		3.0%		5.4%		3.5%		320 bps	190 bps

DTS EBT as a % of DTS operating revenue (1)	8.9%		4.2%		7.8%		4.9%		470 bps	290 bps

Memo:


End of period fleet count	11,400		10,800		11,400		10,800		6%	6%

					Twelve months ended September 30,				Change 2022/2021
					2022		2021
DTS EBT as a % of DTS total revenue					4.8%		3.9%		90 bps
DTS EBT as a % of DTS operating revenue (1)					6.9%		5.3%		160 bps

————————————

DTS total revenue increased 19% in the third quarter of 2022 and 26% for the nine months ended September 30, 2022, primarily due to higher operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation). DTS operating

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

revenue increased 17% in the third quarter of 2022 and 20% in the nine months ended September 30, 2022, primarily due to higher pricing and new business.

DTS EBT increased 149% in third quarter of 2022 and 91% for the nine months ended September 30, 2022, primarily due to higher pricing as well as new business.

Central Support Services


	Three months ended September 30,				Nine months ended September 30,				Change 2022/2021
(Dollars in thousands)	2022		2021		2022		2021		Three Months	Nine Months








Total CSS	108,863		90,507		312,950		272,649		20%	15%
Allocation of CSS to business segments	(87,822)		(73,480)		(252,137)		(219,326)		20%	15%
Unallocated CSS	$	21,041	$	17,027	$	60,813	$	53,323	24%	14%

Total CSS costs increased 20% and 15%in the third quarter and nine months ended September 30, 2022, respectively, due to strategic investments in marketing and technology, increased incentive-based compensation costs and professional fees. Unallocated CSS costs increased 24% in the third quarter of 2022, primarily reflecting increased incentive-based compensation costs and professional fees. Unallocated CSS costs increased 14% for the nine months ended September 30, 2022, primarily reflecting increased professional fees.

FINANCIAL RESOURCES AND LIQUIDITY

Cash Flows

The following is a summary of our cash flows from continuing operations:


	Nine months ended September 30,
(In thousands)	2022		2021

Net cash provided by (used in):
Operating activities	$	1,786,414	$	1,684,891
Investing activities	(1,351,229)		(860,910)
Financing activities	(600,388)		(768,054)
Effect of exchange rate changes on cash	(51,574)		(4,590)
Net change in cash, cash equivalents, and restricted cash	$	(216,777)	$	51,337

	Nine months ended September 30,
(In thousands)	2022		2021
Net cash provided by operating activities
Earnings from continuing operations	$	662,584	$	339,811
Non-cash and other, net	1,368,769		1,404,383
Collections on sales-type leases	99,038		99,305
Changes in operating assets and liabilities	(343,977)		(158,608)



Cash flows from operating activities from continuing operations	$	1,786,414	$	1,684,891

Cash provided by operating activities of $1.8 billion for the nine months ended September 30, 2022, was driven by higher earnings, partially offset by higher working capital needs. For the nine months ended September 30, 2022, the increase in working capital needs was primarily attributed to a decrease in accounts payable due to the timing of payments, as well as changes in other liabilities. Cash used in investing activities increased to $1.4 billion for the nine months ended September 30, 2022, compared with $861 million in 2021, primarily due to the acquisition of Whiplash and an increase in cash paid for capital expenditures partially offset by higher proceeds from the sale of revenue earning equipment. Cash used in financing activities decreased to $600 million for the nine months ended September 30, 2022 compared to $768 million in 2021, due to higher debt borrowing needs partially offset by increased debt repayments and common stock repurchases.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following table shows our free cash flow computation:


	Nine months ended September 30,
(In thousands)	2022		2021

Net cash provided by operating activities	$	1,786,414	$	1,684,891
Sales of revenue earning equipment (1)	922,489		516,466

Sales of operating property and equipment (1)	53,838		54,606


Other (1)	40,475		691
Total cash generated (2)	2,803,216		2,256,654
Purchases of property and revenue earning equipment (1)	(1,916,704)		(1,427,684)
Free cash flow (2)	$	886,512	$	828,970

————————————

(1) Included in cash flows from investing activities.

(2) Non-GAAP financial measure. 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 this measure is important to investors.

Free cash flow (a non-GAAP measure) increased to $887 million for the nine months ended September 30, 2022, from $829 million in 2021, primarily due to higher proceeds from the sale of revenue earning equipment, including the sale of U.K. vehicles related to our exit plan, partially offset by an increase in cash paid for capital expenditures.

The following table provides a summary of gross capital expenditures:


	Nine months ended September 30,
(In thousands)	2022		2021

Revenue earning equipment:
ChoiceLease	$	1,316,605	$	807,490
Commercial rental	491,968		582,757
	1,808,573		1,390,247
Operating property and equipment	223,848		105,639
Gross capital expenditures	2,032,421		1,495,886
Changes to liabilities related to purchases of property and revenue earning equipment	(115,717)		(68,202)
Cash paid for purchases of property and revenue earning equipment	$	1,916,704	$	1,427,684

Gross capital expenditures increased to $2.0 billion for the nine months ended September 30, 2022, primarily reflecting higher planned investments in the ChoiceLease fleet.

Financing and Other Funding Transactions

We utilize external capital primarily to support working capital needs and growth in our asset-based product lines. The variety of financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements, and bank credit facilities. Our principal sources of financing are issuances of unsecured commercial paper and medium-term notes.

Cash and cash equivalents totaled $456 million as of September 30, 2022 . As of September 30, 2022, approximatel y $395 million was held outside the U.S. and is available to fund operations. We have historically asserted our intent to permanently reinvest foreign earnings outside of the U.S. In 2021, we reevaluated our historic assertion with respect to our U.K. and Germany operations and no longer consider these earnings to be indefinitely reinvested. The deferred tax liability recorded on the U.K. and Germany undistributed earnings is not material. In October 2022, we repatriated $282 million of foreign earnings from the U.K. We intend to continue to permanen tly reinvest the earnings of our remaining foreign subsidiaries indefinitely.

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

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

future. However, volatility or disruption in the public unsecured debt market or the commercial paper market may impair our ability to access these markets or secure 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 2022, we issued an aggregate principal amount of $450 million unsecured medium terms notes that mature on March 1, 2027. The notes bear interest at a rate of 2.85% per year. In May 2022, we issued an aggregate principal amount of $300 million unsecured medium terms notes that mature on June 15, 2027. The notes bear interest at a rate of 4.30% per year. Refer to Note 10 , " Debt ," in the Notes to Condensed Consolidated Financial Statements for additional information on our global revolving credit facility, trade receivables financing program, medium-term notes, and asset-backed financing obligations.

Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings. These ratings are intended to provide guidance to 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 of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on alternative funding sources. A significant downgrade would not affect our ability to borrow amounts under our global revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.

Our debt ratings and rating outlooks as of September 30, 2022, were as follows:

Rating Summary

Short-term

Short-term Outlook

Long-term

Long-term Outlook

Standard & Poor’s Ratings Services

—

BBB

Positive

Moody’s Investors Service

Stable

Baa2

Stable

Fitch Ratings

—

BBB+

Stable

DBRS

R-1 (Low)

Stable

A (Low)

Stable

As of September 30, 2022, we had the following amounts available to fund operations under the following facilities:


	(In millions)

Global revolving credit facility	$	551
Trade receivables financing program	$	174

In accordance with our funding philosophy, we attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our vehicle assets. We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% va riable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreeme nts) was 22% and 16% as of September 30, 2022 and December 31, 2021, respectively.

Our debt to equity ratio was 210% and 235% as of September 30, 2022 and December 31, 2021, respectively. The debt to equity ratio represents total debt divided by total equity. The decrease in the debt to equity ratio from year-end 2021 primarily reflects increased earnings as well as a reduction in debt obligations from free cash flow partially offset by higher share repurchases.

Share Repurchases and Cash Dividends

In September 2022, we completed our $300 million accelerated share repurchase program. This program was authorized by our board of directors in February 2022, and at that time, we repurchased and retired an initial share amount of approximately 3 million. The final settlement occurred in September 2022, resulting in the delivery and retirement of approximately 1 million additional shares. The number of shares ultimately repurchased and retired was based on the average of Ryder's daily volume-weighted average price per share of common stock during a repurchase period, less a discount. The average price paid for all of the shares delivered and retired under the accelerated share purchase agreement was $74.47 per share.

Refer to Note 11, "Share Repurchase Programs," in the Notes to Condensed Consolidated Financial Statements for a discussion on our share repurchase programs.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

In October 2022 and 2021, our board of directors declared a quarterly cash dividend of $0.62 and $0.58 per share of common stock, respectively. The cash dividend of $0.62 per share of common stock in October 2022, increased by approximately 7% compared to the cash dividend declared in October 2021. The dividends were paid during the fourth quarter of each respective year.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 2, "Recent Accounting Pronouncements," in the Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes information extracted from c ondensed consolidated financial information, but not required by generally accepted accounting principles in the United States (GAAP) to be presented in the financial statements. Certain elements of this information are considered "non-GAAP financial measures" as defined by SEC rules. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance or liquidity prepared in accordance with GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Specifically, we refer to the following non-GAAP financial measures in this Form 10-Q:


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

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that the 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 System, Inc. or each business segment (FMS, SCS and DTS) excluding any (1) fuel and (2) subcontracted transportation, as well as (3) revenue from our ChoiceLease liability insurance program which was discontinued in early 2020. We believe operating revenue provides useful information to investors as we use it to evaluate the operating performance of our core businesses and as a measure of sales activity at the consolidated level for Ryder System, Inc., as well as for each of our business segments. We also use segment EBT as a percentage of segment operating revenue for each business segment for the same reason. Note: FMS EBT, SCS EBT and DTS EBT, our primary measures of segment performance, are not non-GAAP measures. Fuel : We exclude FMS, SCS and DTS fuel from the calculation of our operating revenue measures, as fuel is an ancillary service that we provide our customers. 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 services are also typically a pass-through to our customers and, therefore, fluctuations result in minimal changes to our profitability. While our SCS and DTS business segments subcontract certain transportation services to third party providers, our FMS business segment does not engage in subcontracted transportation and, therefore, this item is not applicable to FMS. ChoiceLease liability insurance: We exclude ChoiceLease liability insurance as we announced our plan in the first quarter of 2020 to exit the extension of our liability insurance coverage for ChoiceLease customers. The exit of this program was completed in the first quarter of 2021. We are excluding the revenue associated with this program for better comparability of our on-going operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)


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 comparable earnings 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 as detailed in the reconciliation table below. These other significant items vary from period to period and, in some periods, there may be no such significant items. 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 net earnings and average shareholders' equity. We use adjusted ROE as an internal measure of how effectively we use the owned capital invested in our operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)


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) any other items that are not representative of our business operations (these items are the same items that are excluded from comparable earnings measures for the relevant periods as described immediately above) and then adjusted further for (1) interest expense, (2) income taxes, (3) depreciation, (4) used vehicle sales results and (5) amortization. We believe comparable EBITDA provides investors with useful information, as it is a standard measure commonly reported and widely used by analysts, investors and other interested parties to measure financial performance and our ability to service debt and meet our payment obligations. In addition, we believe that the inclusion of comparable EBITDA provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. Other companies may calculate comparable EBITDA differently; therefore, our presentation of comparable EBITDA may not be comparable to similarly-titled measures used by other companies. Comparable EBITDA should not be considered as an alternative to net earnings, earnings from continuing operations before income taxes or earnings from continuing operations determined in accordance with GAAP, as an indicator of the Company’s operating performance, as an alternative to cash flows from operating activities (determined in accordance with GAAP), as an indicator of cash flows, or as a measure of liquidity.
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 changes in restricted cash and 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.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following table provides a reconciliation of GAAP earnings before taxes (EBT), earnings from continuing operations, and earnings per diluted share (Diluted EPS) from continuing operations to comparable EBT, comparable earnings and comparable EPS. Certain items included in EBT, earnings and diluted EPS from continuing operations have been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures. The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Condensed Consolidated Financial Statements:


	Continuing Operations
	Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share amounts)	2022		2021		2022		2021

EBT	$	334,204	$	183,206	$	924,446	$	457,046
Non-operating pension costs, net	2,647		(148)		8,015		(530)
Restructuring and other, net (1)	(3,331)		4,137		21,225		9,742
ERP implementation costs (1)	—		—		—		12,721




Gains on sale of U.K. revenue earning equipment (1)	(14,938)		—		(43,309)		—
Gains on sale of U.K. properties (1)	(10,205)		(5,411)		(33,789)		(42,179)





ChoiceLease liability insurance revenue (1)	—		—		—		(777)
Comparable EBT	$	308,377	$	181,784	$	876,588	$	436,023

Earnings from continuing operations	$	246,420	$	138,659	$	662,584	$	339,811
Non-operating pension costs, net	1,696		(858)		5,087		(2,644)
Restructuring and other, net (including ChoiceLease liability insurance results) (1)	(3,004)		3,696		21,950		9,480
ERP implementation costs (1)	—		—		—		9,444
Gains on sale of U.K. revenue earning equipment (1)	(14,938)		—		(43,309)		—
Gains on sale of U.K. properties (1)	(10,097)		(4,063)		(33,677)		(32,062)




Tax adjustments, net (2)	7,238		24		28,523		757
Comparable Earnings	$	227,315	$	137,458	$	641,158	$	324,786

Diluted EPS	$	4.82	$	2.58	$	12.86	$	6.33
Non-operating pension costs, net	0.03		(0.02)		0.10		(0.05)
Restructuring and other, net (including ChoiceLease liability insurance results) (1)	(0.05)		0.07		0.43		0.18
ERP implementation costs (1)	—		—		—		0.18



Gains on sale of U.K. revenue earning equipment (1)	(0.29)		—		(0.84)		—
Gains on sale of U.K. properties (1)	(0.20)		(0.08)		(0.66)		(0.60)





Tax adjustments, net (2)	0.14		—		0.55		0.01
Comparable EPS	$	4.45	$	2.55	$	12.44	$	6.05

————————————

(1) Refer to Note 15, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated Financial Statements for additional information.

(2) Adjustments include the global tax impact related to gains on sales of U.K. revenue earning equipment and properties as well as the release of the valuation allowance on U.K. deferred tax assets in the third quarter and nine months ended September 30, 2022 , and expiring state net operating losses in the third quarter and nine months ended September 30, 2021.

Note: Amounts may not be additive due to rounding.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following table provides a reconciliation of the effective tax rate to the comparable tax rate:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021







Effective tax rate on continuing operations (1)	26.3	%	24.3	%	28.3	%	25.7	%
Tax adjustments and income tax effects of non-GAAP adjustments (2)	—	%	0.1	%	(1.4)	%	(0.2)	%
Comparable tax rate on continuing operations (1)	26.3	%	24.4	%	26.9	%	25.5	%

————————————

(1) The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, respectively, found on the previous page.

(2) Refer to the table above for more information on tax adjustments. Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related.

The following table provides a reconciliation of earnings to comparable EBITDA:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Net earnings	$	245,995	$	138,054	$	660,982	$	337,984
Loss from discontinued operations, net of tax	425		605		1,602		1,827
Provision for income taxes	87,784		44,547		261,862		117,235
EBT	334,204		183,206		924,446		457,046
Non-operating pension costs, net	2,647		(148)		8,015		(530)
Other items impacting comparability, net (1)	(28,474)		(1,274)		(55,873)		(20,493)
Comparable EBT	308,377		181,784		876,588		436,023
Interest expense	57,802		53,752		165,490		162,613
Depreciation	421,080		443,819		1,275,309		1,349,239
Used vehicle sales, net (2)	(98,547)		(69,303)		(312,737)		(149,788)
Amortization	8,263		1,669		27,484		5,104
Comparable EBITDA	$	696,975	$	611,721	$	2,032,134	$	1,803,191

————————————

(1) Refer to the table above in the Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Condensed Consolidated Statements of Earnings and Note 15,"Other Items Impacting Comparability" in the Notes to Condensed Consolidated Financial Statements for additional information.

(2) Refer to Note 6, "Revenue Earning Equipment, net," in the Notes to Condensed Consolidated Financial Statements for additional information.

The following table provides a reconciliation of total revenue to operating revenue:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Total revenue	$	3,035,464	$	2,459,049	$	8,922,988	$	7,062,908
Subcontracted transportation and fuel	(688,522)		(476,194)		(2,053,353)		(1,339,093)
ChoiceLease liability insurance revenue (1)	—		—		—		(777)
Operating revenue	$	2,346,942	$	1,982,855	$	6,869,635	$	5,723,038

————————————

(1) In the first quarter of 2021, we completed the previously announced exit of the extension of our liability insurance coverage for ChoiceLease customers.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following table provides a reconciliation of FMS total revenue to FMS operating revenue:


	Three months ended September 30,				Nine months ended September 30,				Twelve months ended September 30,
(Dollars in thousands)	2022		2021		2022		2021		2022		2021

FMS total revenue	$	1,581,870	$	1,436,340	$	4,732,193	$	4,180,066	$	6,231,075	$	5,514,902
Fuel services and ChoiceLease liability insurance (1)	(278,644)		(188,759)		(839,860)		(539,699)		(1,038,578)		(681,384)
FMS operating revenue	$	1,303,226	$	1,247,581	$	3,892,333	$	3,640,367	$	5,192,497	$	4,833,518

FMS EBT	$	265,301	$	186,391	$	798,822	$	408,244	$	1,053,668	$	468,444
FMS EBT as a % of FMS total revenue	16.8%		13.0%		16.9%		9.8%		16.9%		8.5%
FMS EBT as a % of FMS operating revenue	20.4%		14.9%		20.5%		11.2%		20.3%		9.7%

————————————

(1) In the first quarter of 2021, we completed the previously announced exit of the extension of our liability insurance coverage for ChoiceLease customers.

The following table provides a reconciliation of SCS total revenue to SCS operating revenue:


	Three months ended September 30,				Nine months ended September 30,				Twelve months ended September 30,
(Dollars in thousands)	2022		2021		2022		2021		2022		2021

SCS total revenue	$	1,206,508	$	802,357	$	3,469,008	$	2,284,687	$	4,339,119	$	2,995,927
Subcontracted transportation and fuel	(371,630)		(243,067)		(1,097,609)		(688,241)		(1,353,650)		(893,771)
SCS operating revenue	$	834,878	$	559,290	$	2,371,399	$	1,596,446	$	2,985,469	$	2,102,156

SCS EBT	$	63,974	$	22,161	$	150,833	$	96,159	$	172,025	$	130,310
SCS EBT as a % of SCS total revenue	5.3%		2.8%		4.3%		4.2%		4.0%		4.3%
SCS EBT as a % of SCS operating revenue	7.7%		4.0%		6.4%		6.0%		5.8%		6.2%

The following table provides a reconciliation of DTS total revenue to DTS operating revenue:


	Three months ended September 30,				Nine months ended September 30,				Twelve months ended September 30,
(Dollars in thousands)	2022		2021		2022		2021		2022		2021

DTS total revenue	$	454,328	$	380,357	$	1,329,504	$	1,055,575	$	1,731,117	$	1,356,437
Subcontracted transportation and fuel	(137,301)		(108,800)		(410,458)		(291,330)		(521,392)		(361,190)
DTS operating revenue	$	317,027	$	271,557	$	919,046	$	764,245	$	1,209,725	$	995,247

DTS EBT	$	28,150	$	11,324	$	71,517	$	37,468	$	83,107	$	52,769
DTS EBT as a % of DTS total revenue	6.2%		3.0%		5.4%		3.5%		4.8%		3.9%
DTS EBT as a % of DTS operating revenue	8.9%		4.2%		7.8%		4.9%		6.9%		5.3%

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

The following tables provide numerical reconciliations of net earnings to adjusted net earnings and average shareholders' equity to adjusted average shareholders' equity (Adjusted ROE), and of the non-GAAP elements used to calculate the adjusted return on equity to the corresponding GAAP measures:


	Twelve months ended September 30,
(Dollars in thousands)	2022		2021

Net earnings	$	842,289	$	363,525
Other items impacting comparability, net (1)	(45,817)		2,720
Income taxes (2)	315,649		114,795
Adjusted earnings before income taxes	1,112,121		481,040
Adjusted income taxes (3)	(287,576)		(112,321)
Adjusted net earnings	$	824,545	$	368,719

Average shareholders’ equity	$	2,760,652	$	2,323,529
Average adjustments to shareholders’ equity (4)	(8,512)		30,229
Adjusted average shareholders’ equity	$	2,752,140	$	2,353,758

Adjusted return on equity (5)	30.0%		15.7%

————————————

(1) Refer to the table below for a composition of Other items impacting comparability, net for the 12-month rolling period

(2) Includes income taxes on discontinued operations

(3) Represents provision for income taxes plus income taxes on other items impacting comparability

(4) Represents the impact of other items impacting comparability, net of tax, to equity for the respective period

(5) Adjusted return on equity is calculated by dividing Adjusted net earnings into Adjusted average shareholders' equity


	Twelve months ended September 30,
(In thousands)	2022		2021

Restructuring and other, net	$	31,138	$	20,578
ERP implementation costs	(6)		19,863
Gains on sale of U.K. revenue earning equipment (1)	(43,309)		—
Gains on sale of U.K. properties (1)	(33,641)		(43,864)
Early redemption of medium-term notes	—		8,999
ChoiceLease liability insurance revenue	—		(2,856)
Other items impacting comparability, net	$	(45,818)	$	2,720

————————————

(1) Refer to Note 15, "Other Items Impacting Comparability," in the Notes to Condensed Consolidated Financial Statements for additional information.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words "believe," "expect," "intend," "estimate," "anticipate," "will," "may," "could," "should" or similar expressions. This Quarterly Report contains forward-looking statements including statements regarding:

• our expectations with respect to the ongoing effects of the COVID-19 pandemic or any future variants, including the global supply chain disruption on our business and financial results;

• our expectations regarding the effects of OEM delivery delays, including vehicles and vehicle parts;

• the cyclical nature of the industries in which we compete;

• our expectations regarding supply and demand of vehicles and its effect on pricing;

• our expectations of the long-term residual values of revenue earning equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a potential cyclical downturn;

• the expected pricing for used vehicles and sales channel mix;

• our expectations of cash flow from operating activities, free cash flow, and capital expenditures;

• 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, and allowance for credit losses;

• 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;

• our expectations regarding future activity under discretionary share repurchase programs;

• the anticipated impact of fuel price and exchange rate fluctuations;

• our expectations as to return on pension plan assets, future pension expense and estimated contributions;

• our expectations regarding the scope and anticipated outcomes with respect to certain claims, proceedings and lawsuits;

• our ability to access commercial paper and other available debt financing in the capital markets;

• our expectations regarding the benefits from our strategic investments, including Whiplash;

• our expectations regarding the benefits of our pricing adjustments with respect to labor shortage costs in SCS and DTS;

• our expectations regarding the exit of the FMS U.K. business;

• our expectations regarding the achievement of our return on equity improvement initiatives;

• our expectations regarding the diminishing impact of prior residual value estimate changes on return on equity improvement;

• our expectations regarding the labor shortages impact on labor and subcontracted transportation costs;

• our expectations regarding the U.S. federal, state and foreign tax positions and realizability of deferred tax assets;

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

• our expectations regarding the finalized valuation and purchase price consideration allocation for the acquisition of Whiplash;

• the anticipated impact of inflationary pressures; and

• the anticipated impact of recent accounting pronouncements.

These statements, as well as other forward-looking statements contained in this Quarterly Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors, include the following:

• Market Conditions:

◦ Changes in general economic and financial conditions, including extended higher fuel prices, inflationary cost pressures, prolonged labor shortages, extended disruptions in vehicle and vehicle part production and rising interest rates, nationally or globally, 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 that 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 serviced by our SCS business.

◦ Changes in current financial, tax or regulatory requirements that could negatively impact our financial results.

◦ Ongoing developments related to geopolitical events, including the ongoing armed conflict between Russia and Ukraine, and its impact on the global economy and our business.

• Competition:

◦ Advances in technology may impact demand for our services or may require increased investments to remain competitive.

◦ Competition from other service providers, who may have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves.

◦ Continued consolidation in the markets in which we operate, which may create large competitors with greater financial resources.

◦ Our inability to maintain current pricing levels due to economic conditions, demand for services, customer acceptance or competition.

• Profitability:

◦ Our inability to obtain adequate profit margins for our services.

◦ Lower than expected sales volumes or customer retention levels.

◦ Unexpected costs related to the exit of the FMS U.K. business or unexpectedly low returns on sales of U.K. assets.

◦ Our inability to successfully integrate recent acquisitions in a cost efficient manner, or at all.

◦ 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

◦ Loss of key customers in our SCS and DTS business segments.

◦ Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis.

◦ The inability of our legacy information technology systems to provide timely access to data.

◦ Sudden changes in fuel prices and fuel shortages.

◦ Higher prices for vehicles, diesel engines and fuel as a result of new regulations or inflationary cost 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, primarily related to the worldwide semiconductor supply shortage.

◦ The inability of an original equipment manufacturer or supplier to provide vehicles or components, primarily related to the worldwide semiconductor supply shortage.

◦ 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.

◦ Our key assumptions and pricing structure of our SCS and DTS contracts prove to be inaccurate.

◦ Increased unionizing, labor strikes and work stoppages.

◦ Difficulties in attracting and retaining drivers and technicians due to driver and technician shortages, which may result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers.

◦ Our inability to manage our cost structure.

◦ Our inability to limit our exposure for customer claims.

◦ Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions.

◦ Business interruptions or expenditures due to severe weather or natural occurrences.

• Financing Concerns:

◦ Higher borrowing costs.

◦ Unanticipated or increasing interest rate and currency exchange rate fluctuations.

◦ Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates.

◦ Withdrawal liability as a result of our participation in multi-employer plans.

◦ Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit.

• Accounting Matters:

◦ Reductions in residual values or useful lives of revenue earning equipment.

◦ Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory changes affecting pension estimates, accruals and expenses.

◦ Changes in accounting rules, assumptions and accruals.

• Other risks detailed from time to time in our SEC filings including our 2021 Annual Report on Form 10-K and in "Item 1A.-Risk Factors" of this Quarterly Report.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS — (Continued)

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, we cannot provide assurance 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 Quarterly Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to Ryder’s exposures to market risks since December 31, 2021. Please refer to the 2021 Annual Report on Form 10-K for a complete discussion of Ryder’s exposures to market risks.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the third quarter of 2022, we carried out an evaluation, under the supervision and with the participation of management, including Ryder’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the third quarter of 2022, Ryder’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Control over Financial Reporting

During the nine months ended September 30, 2022, there were no changes in Ryder's internal control over financial reporting that have materially affected or are reasonably likely to materially affect such internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please refer to Note 16, "Contingencies and Other Matters," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

To our knowledge and except to the extent additional factual information disclosed in this Quarterly Report on Form 10-Q relates to such risk factors, there have been no material changes in the risk factors described in "Item 1A. Risk Factors" in our Form 10-K for the year ended December 31, 2021, filed with the SEC on February 17, 2022. Our operations could also be affected by additional risk factors that are not presently known to us or by factors that we currently consider not material to our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to purchases we made of our common stock during the three months ended September 30, 2022:


(Dollars in thousands, except per share)	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares That May Yet Be Purchased Under the Discretionary and Anti-Dilutive Programs (2)	Maximum Number of Dollars That May Yet Be Purchased Under the Accelerated Share Repurchase Program (3)
July 1 through July 31, 2022	23	$	75.10	—	4,500,000	$	65,272
August 1 through August 31, 2022	—	—		—	4,500,000	$	65,272
September 1 through September 30, 2022	976,130	67.98		975,960	4,500,000	$	—
Total	976,153	$	67.98	975,960

————————————

(1) During the three months ended September 30, 2022, we purchased an aggregate of 193 shares of our common stock in employee-related transactions. Employee-related transactions may include: (i) shares of common stock withheld as payment for the exercise price of options exercised or to satisfy the tax withholding liability associated with our share-based compensation programs and (ii) open-market purchases by the trustee of Ryder’s deferred compensation plans relating to investments by employees in our stock, one of the investment options available under the plans.

(2) In October 2021, our board of directors authorized two new share repurchase programs. The first program grants management discretion to repurchase up to 2.0 million shares of common stock over a period of two years, commencing on October 14, 2021 and expiring on October 14, 2023 (the "2021 Discretionary Program"). The 2021 Discretionary Program is designed to provide management with capital structure flexibility while concurrently managing objectives related to balance sheet leverage, acquisition opportunities, and shareholder returns. The second program authorizes management to repurchase up to 2.5 million shares of common stock, issued to employees under the company's employee stock plans since September 1, 2021 (the "2021 Anti-Dilutive Program"). The 2021 Anti-Dilutive Program is designed to mitigate the dilutive impact of shares issued under the company's employee stock plans. The 2021 Anti-Dilutive Repurchase Program commenced on October 14, 2021 and expires on October 14, 2023. Share repurchases under both programs can be made from time to time using the company's working capital and a variety of methods, including open-market transactions and trading plans established pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual number of shares repurchased are subject to market conditions, legal requirements and other factors, including balance sheet leverage, availability of quality acquisitions and stock price.

(3) In September 2022, we completed our $300 million accelerated share repurchase program. This program was authorized by our board of directors in February 2022, and at that time, we repurchased and retired an initial share amount of approximately 3 million. The final settlement occurred in September 2022, resulting in the delivery and retirement of approximately 1 million additional shares. The number of shares ultimately repurchased and retired was based on the average of Ryder's daily volume-weighted average price per share of common stock during a repurchase period, less a discount. The average price paid for all of the shares delivered and retired under the ASR was $74.47 per share. Refer to Note 11, "Share Repurchase Programs," in the Notes to Condensed Consolidated Financial Statements for a discussion on our share repurchase programs.

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ITEM 6. EXHIBITS


Exhibit Number						Description

31.1						Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2						Certification of John J. Diez pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32						Certification of Robert E. Sanchez and John J. Diez pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C Section 1350
101.INS						XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		RYDER SYSTEM, INC.
		(Registrant)

Date:	October 26, 2022	By:	/s/ JOHN J. DIEZ
			John J. Diez
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	October 26, 2022	By:	/s/ CRISTINA GALLO-AQUINO
			Cristina Gallo-Aquino
			Senior Vice President and Controller
			(Principal Accounting Officer)

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

Exhibits

31.1 Certification of Robert E. Sanchez pursuant to Rule 13a-14(a) or Rule 15d-14(a) 31.2 Certification of John J. Diez pursuant to Rule 13a-14(a) or Rule 15d-14(a) 32 Certification of Robert E. Sanchez and John J. Diez pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C Section 1350

Supplier name	Ticker
The Boeing Company	BA
Caterpillar Inc.	CAT
Deere & Company	DE
Ford Motor Company	F
Garmin Ltd.	GRMN
Honda Motor Co., Ltd.	HMC
General Dynamics Corporation	GD
General Motors Company	GM

R 10-Q Quarter ended Sept. 30, 2022

Exhibits